Transcripts For BLOOMBERG Bloomberg Surveillance 20170626

Numbers from germany higher than atected, Business Confidence 115. 1, estimated 114. 5. Global stocks advancing. Nestle is the one we are watching. It did spark a rally in european dan loeb looking at the company. The other one im looking out for is intesa. Lets get straight to bloomberg first word news. The u. K. Prime minister due to meet the leader of dup. Also, theresa will publish details how she intends to protect European Union nationals living in britain. David davis has said that in said britain will fight any demands. Are secretary of tate says qat will find it difficult to meet demands from of the Rex Tillerson said they could be a basis for talks. The list of demands includes shutting al jazeera, cutting back ties with iran, and ending turkeys military presence. Pakistan, more than 150 killed after a tanker exploded. Officials said dozens more are in critical condition. Villagers had gathered to collect leaking fuel. The final round of election showed a resurgence in for former Prime Minister silvio berlusconi. Candidates showed backing and an independent candidate. They made significant setbacks for the ruling democratic party. Spacex has launched its ninth rocket, topping last years total. The lift off from vandenberg in california follows another launch on friday. It is caring 10 satellites for iridium communications. It is the first time spacex has sent two rockets into orbit in such a short time. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine thank you. Italy has approved emergency ,ules for two ailing banks mobilizing as much as 17 billion euros. On friday, the European Central bank declared the lenders failing or likely to fail and said both would be wound up under italian solvency rules. Is there a better alternative the pointdecree from of view is supporting families, the banks, the some favors, the stability of the Financial System . I wish that people who criticize me would tell me what a better alternative could be, because frankly i dont see it. Francine for more, lets bring in our bloomberg managing editor for finance and head of multiasset at royal Asset Management. Thank you for joining us. Break it down for us. This is a complex deal that was done last minute. It was. They have been working on this for quite some time. These are two banks that tried to go public just several years ago. Exploredvenues were unsuccessfully, including trying , so this is a 17 billion euros split. The good assets will be taken over by italys secondlargest bank. The bad assets will be slowly unwound. Questions over the banking unit and the rules that were sidestepped to allow this intervention. Francine i have a chart that tells you the story for these two banks. These are nonperforming loans to total loan ratio for the two banks. The main controversy is around the eu rules and the role of this good bank . Thats right. The italian state is putting the banksaving deemed were not too big to fall under the European Union rules, but were going to be dealt with under a tight insolvency law. Under italian solvency law. The liquidity would have continued at a steep pace throughout the last few months. Francine how do you see all this . Is this the beginning of the end because this could go badly or is this the beginning of a better place . Thing is that this is a legacy issue from the banksial crisis, so these have been zombie banks for quite some time. This is a way of winding them up. Made ist that was just is set thatecedent state aid is not meant to be allowed, but the rules have been twisted here in order to allow italy to put this money forward Something Like 5 billion euros of state aid is and 12 billion euros of loan guarantees. Managed to structure it in such a way that the senior bondholders have been protected, but the questions will be asked about whether this is a big country being treated differently from small countries. Is it different because it is the moms and pops of this world . This is the backbone of the , thehier Italian Economy myriad of small and Medium Enterprises could have been affected by a disorderly resolution, but it is not dissimilar to spain. Santander was covering the capital gap that the state is now covering. Francine who are the winners and losers . The market is telling us that intesa is a winner. Theyre getting good assets for free. They are expanding their Balance Sheet and expanding into the region that is the backbone of the small and medium sized enterprises. Francine would you go back . It anynt think there is. Ajor impact on strategy what happens next . The deal has the European Union backing. There will be questions as to otheremains of the lenders in italy struggling with capital raising. Francine thank you so much. With surveillance. Plenty coming up. Deploys 3. 5 billion in his biggest bet ever, shares jump. Prime minister may will give theity, but will it move dial in negotiations . We will discuss that next. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine this is bloomberg surveillance. Takata has filed for bankruptcy protection in the u. S. And japan. The filing listed more than 10 billion in liabilities. A russian billionaires Investment Vehicle has reached a deal to buy one of the Largest Health Food Retailers in europe. T will pay 1. 8 billion pounds the payroll securities fraud trial is set to begin today. He came to public attention after raising the price of a life saving drug by 5000 . He has been free on bail and has taken to social media to make strongly worded statements about members of congress that criticize his decision. That is the Bloomberg Business flash. Francine nestle is in the s thirdrs of dan loeb point. The fund in tens to encourage management to pursue change with a greater sense of urgency by selling its 23 stake in loreal. Thank you for joining us. We do have a new management in charge. He has said he will pressure them, but give them enough time to do more . Actionrly he wants some faster than new ceo of nestle took over this year. He already signaled he was going to move to change the company. He is a new ceo who comes to nestle from the health care industry, so clearly there is a shift. Why are European Food Companies Targeted at the moment . They have lacked in performance and have not rewarded shareholders as much as shareholders would like them to. Fended off a hostile bid from kraft heinz not too long ago, then moved to improve shareholder return and would put some underperforming businesses up for sale. Francine this is nestle stock. Compared tog at 11 peers, 4 , over the past two years. We calculated it on a blended ford pricetoearnings. Do you own any . In terms of Food Companies and defensive generally come they are quite high multiples relative the market. This is nestle versus its own sector. Element tod proxy the ownership we have of these sectors. What is interesting is the last 12 months or so has seen strong inflation rising bond yields, which has been a challenge to the sectors. The tailwind is picking up and you could find multiples go up as bond yields go down. Francine what can they do to defend themselves . They can review their portfolios. Nestle has gone about that with mark schneider. Unilever is doing that more aggressively. They can do buybacks and other things to boost returns. Spreads or the confectionery business up for sale. That may be the best response. Youcine trevor, how do view the fact there is an activist investor now . Can you say the industry in the europe will be targeted by activist investors and what does it mean for shareholders . In thenot involved analysis of individual battles, but you are starting to see capital being deployed to unlock value. If you look at the relative performance of european stocks versus u. S. Stocks, it has been a disaster story for the last 3040 years, plus the fact the european economy is doing better. Many people are thinking maybe that will unlock value. Francine why have these companies been such poor performers . Part of it is the european economy. Part of it is the fact that consumers are turning away from big food in some areas, this sugary, salty food, and so there is a big challenge for these companies that have legacy products in their portfolios. Moving to get healthier and slimmeddown, but it is a long process with these brands they have invested in over the years to keep them performing. Francine they are kind of emergingmarket companies, arent they . They so much sell so much to the emerging markets . Thats true. There is quite a significant emerging market exposure there. An ideal environment would be rolling bond yields, rising commodity prices, a bit of dollar weakness. We have had some of those things over the past few years. There are individual companies not keeping up. Francine european companies, you like them better . We do. The political story was the big thing this year, and the u. K. Has negotiated that. There are lots of reasons why people are moving in. Also, the european economy tends to like the rest of the world. Europe is playing catchup. We dont believe it will be a permanent outperformance. And china slow down, europe will cool off as well. We believe that will happen next year. Francine gdp or they cant stabilize the economy . Look at chinese Business Confidence, it has been dropping. Chinese Interest Rates have been rising. Once we get the Party Congress out of the way, you will get more focus again on reform and monetary tightening, so i think we have had 12 months that you can look at as pump priming. After that, we get back to a slowed down china where bonds can do quite well, but stocks will have a few challenges. Francine interesting. Thank you so much. Up next, Central Banks in focus. Mario draghi speaks in portugal today. We will have the details next. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Inncine i Francine Lacqua london. Mario draghi will speak in portugal later today. John williams has made the case for more Interest Rate rises. He said he expects inflation to rise to the 2 target next year as unemployment edges lower. Viewsmments suggest his are in line with those of janet yellen. When you look at Central Banks and we talk about Balance Sheets in the second, but if you are a fed washer, you have to take simple bets you believe the economy is strong or the labor market is Strong Enough to push ,nd collation up automatically is that right . Yes. The economy is growing Strong Enough for the Unemployment Rate to drop. In 20082009, but wage growth is very muted, so 2 two. 5 wage growth, where as it was double that level in 2007. You are seeing muted wage growth , and Central Banks have to make a call as to whether something has changed. Yellen seems to be on the side that says we need to reload and raise it Interest Rates. Is no compelling evidence they need to raise rates rapidly. If global inflation starts to ebb, you may find some of this pressure goes away for a while. Francine what are they worried about . They dont have enough ammunition when the next crisis hits . Wage inflation kicking in and becoming a trend. Phillips curve argument that no unemployment creates Wage Inflation, but it is a process that can take quite a long time, so i think the fed is worried that Interest Rates are too low and they have left nolate, but there are still signs of late cycle excesses in the labor market that would say they need to be in a hurry about it. Francine what do you worry about the most in terms of Balance Sheets . , the ecb inboj yellow. The japanese are doing something quite special here. They are trying to create inflation and going through an experiment of pushing harder and harder until they get inflation to come through. Market, they have parttime workers, lots of structural changes, which means wages are not picking up the way they would like to see. On the other side, we are wanting Wage Inflation to pick up because they are trying to get nominal growth to a level so that they can erode government debt. It makes a lot of sense, but it is a highstakes game. Francine thank you so much. Next, the brexit battle as theresa may lace out her plans for eu citizens as david davis says he is ready to fight over the role of the European Courts. Plenty of details next. We would do that next. This is bloomberg. Frances you are watching bloomberg surveillance. Lets get to first word news. The u. S. Secretary of state has said qatar will find it hard theeet the demands to end crisis p Rex Tillerson said they could be a basis for talks. The list of demands includes shutting the Al Jazeera Network and ending turkeys military network in the process. Than 150 people have been killed after a take or exploded. Dozens more are condition. Leakinged to collect fuel after a tanker overturned. Firefighters are battling blazes utah. Ifornia and in southern california, a wild fire out after a car crashed. Officials said Better Weather conditions have limited the growth of a wildfire may utah. In utah. Re in support for silvio berlusconi. An independent candidate is. D in its ninth launched rocket of the year. Follows another launch from friday. The craft is carrying 10 iridiumes for communication. It is the first time they have sent two rockets into orbit in such a short period. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Theresa may will give her plans for the use of People Living in the u. K. Further talkshold with Arlene Foster this morning. For more on this, we are joined by Simon Kennedy and jonathan portis. Greentham. R thank you for joining us. It is a 15 page document. It will pad out what her willsal on friday david push back their demands. He calls it the fight going forward. Out there be readers wanting to know with these rights are, how far she is willing to go. Of can read this as a test how she wants these talks to be. Francine how hard does she want these talks to be . It was one of her original red lines, not just on this one, but on a range of issues. The eu proposals would say that. The british proposals will not. That is going to be an issue. The second Sticking Point is the , they would ensure citizens kept their existing rights. Would take some of those rights away from them. They care about a few things, the border and the hardness between the border between the two islands. She needs to be on board by thursday. The dup leverage. Francine we have the you deal, how would this play out . Euro pound, primarily. Cable, you have the big swings in the u. S. Dollar, which pollute the picture a little bit. Scenarios atave this stage. Cane are lots of ways it break up. There will be done to know where people may think there will be a breakdown in talks. There will be moments where it sells off. Alternatives. One as we move in the single mpset, which is what most in the labour and conservative party want despite their leadership. In that case, the pound ought to strengthen. Lifted allakness votes and gave people strong returns last year. The pound is quite strong. Asset returns end up being quite weak. Strong or weak is theresa may at the moment . It is unclear what her tone and language suggested last week. She is weaker than she was before the election. What that means for the talks is unclear. We are in a position where she may want to make those compromises, but eu leaders may say we are not sure you have the political strength to deliver this. Why should we make the compromises . That is what worried me that theresa mays weakness means it will be more difficult for her to make the concessions she needs to make a decent deal. Francine is she going to go soon or is impossible to tell . It looks like she will hold on for a while. The potential leadership candidates, there is a comic about it. They probably want some stability. Of blood, if a hint were in the water, the sharks would calm. The tories are known for taking the labour party dont to kill off the leader if they see their own future is in peril. Does she need a soft brexit to stay in power . We dont know what the bounceback you could argue there is a majority in parliament for making the compromises needed for a softer brexit. On the other hand, she may be held hostage to the hardline who doon the brexit wing not want to see compromise on , such as the role of the European Court of justice. We also have the fiveyear fixed on parliament act. Limpe on in this. It will be messy for quite a few years. Francine what does this mean for the boe . The probability of a u. K. Hike y the bank of england. I find it hard they will hike with this political difficulty in the background. October, you get past october, inflation starts to come down. Find it hard they would hike. Markets dont really buy that. Worryne how much do you about the u. K. Consumer . Wage growth is falling like this and inflation going the other side. I would be worried. We have had a strong period since the referendum. Consumer confidence held up after the referendum. The medium to longterm implications are sinking into business at the time consumers suffer the hit from inflation. Are doing well because of sterling weakness and the eurozone doing better than a year ago. I would still be worried about the domestic u. K. Economy. Francine thank you for joining us. Up next, we check in on the markets. A positive day of trading in europe. This is bloomberg. Francine this is bloomberg surveillance. Mark the nato banker trumping centsmping above 100 s today. Under local law rather than eu law, the decision sparing senior bondholders. They suffered losses, of course. Good assets for one euro. That is the big banking deal. Lenders. The two as troy 1 . In perspective, the mpl, the total ratio, it is 18 . Italy has a nonperforming low. Nestle is the big story today. Amassing a 3 billion stake in nestle, targeting in its encouraging nestle to sell its stake in loreal. It puts a spotlight on the chief executive, arch schnider. The stock price lagging behind other consumer giants in recent years. Unilever. Line, year yield is going to go to 2 . It is at 1 now. Francine thank you. Italy has approved rules for two , mobilizing as much as 17 billion euros to liquidate lenders. Both would wind up under italian insolvency rules. Jonathan portes. For joining us, chris. What does this tell us about how lenient the commission and eu are when it comes to bailing in and what does it mean for italian banks . The bail and malls makes sense. Everyone agrees it is a way to go forward. You have to get to a starting point before you can apply those across the marketplace. There are problems around seeing is olders and the eu where they can say from now on, it is mailings and this is what we will see. Francine what surprised you . There has not been a carve out. Perhaps that is surprising. The bottom line is, think about went took over bear stearns and washington mutual. It was finding someone who could do it. Francine this goes back to the. Eed for Banking Union there is little appetite for across the board. Banking rescues have to take into account local politics and local conditions. This one clearly does. Not smooth or straight. This does not necessarily reflect a permanent step back. The object is in brussels and frankfurt is we are going to get there. Francine do you think we are going to get there . It is like looking at where we are in brexit at the moment. Closer. Etting there is an appetite for it. There is an issue around different practices in different countries. One of the problems we talked about was italy policy italys laws. It is whether anyone balks at those issues. Francine this looks like a different deal to what we had about 10 days ago. Capital, they bought a bad bank. What does this tell you about the deal with the banks . You have to treat everything domestically . Domestic politics dictates the fact that they were not willing to bail in the senior bondholders. Thestic politics dictate fact all in the good loans went to and the bad loans have been split off. That is not as clean as one would like it. Slowly and painfully, working through the legacy of a dysfunctional Banking System. I do not think that would mean they would get here in the end. Francine you are saying we are over the italian bank hurdle or is it too soon to call it victory . Who is next . Genoabased bank. There is a lot of work to do. Keeps hoping we get to that point. Look at spain. Are popularel was one of the best banks. Francine do you look at the german lenders to see . I dont think german lenders are as spot as the italians are. The italian market the German Market can do with a good shakeup. That has more political issues because of the strength of the regions. The key thing for the central bank is they want to move to the situation where bailings are the norm. This is one more step towards getting there. I heard one commentator saying it is about making the voters happy, but there are pensions in those senior bonds. Francine thank you. Only have a headline crossing the terminal. The u. K. Government and the e dup will agree on a deal by lunchtime today. Is something we need to keep an eye on. It may move eurodollar a touch. This is what we are looking at. Global stocks advancing. Nestle is up. This is bloomberg. S iscine Jonathan Porte with us. We had the headline breaking on the bbc, saying the u. K. Government and the dup deal is expected by lunchtime. What are you looking at . Jonathan the main element of the deal will be money. Is, what does it mean for the rest of the u. K. . The amount money going to Northern Ireland will not be that much. More money for scotland and wales. Either give scotland more money, which will have an impact on public finances, or tell scottish conservatives, you have a deal that gives ireland more money, but not a deal for scotland. Backbenchers there she wants to keep happy . Treasury is worried for the potential this deal has to unpick the consensus for austerity across the conservative party as a whole. Not ahundred million is big deal. If this means the treasury finds and inlt to reduce england. It is going to be tough. Francine do you think the a vote one was also antiausterity and how does that change the composition . A significant part of the vote was antiausterity. It was not the only thing, but in a lot of the economically part of northern areas, it was a general feeling we have been left behind. France, thed in vote went in four different directions. We want to try to reboot a division in europe, which is won with. N francine thank you for joining us. Surveillance continues in the next hour. We will be talking with Rupert Harrison. This is bloomberg. Francine a rome to the rescue. Italy shores up two venetian banks. Brexit barter Prime Minister may hopes to close a deal with the dup this week. Good morning. This is bloomberg surveillance. Tom, happy monday. It is interesting. We have politics, activism, and brexit. News flow this morning. Getting wound up in washington for the Health Care Bill vote. Week. See that later this it looks like it will be an eventful week. Francine it will. First, lets get to first word news. Italy has carried out its biggest bank rescue. Will spend as much as 19 million to shore up two banks. Theresa may outlines her plans for safeguarding the plans for eu citizens living in the u. K. David davis says the government will fight any demand eu courts should have power in the u. K. U. S. , Mitch Mcconnell faces the risk of an embarrassing defeat over the obamacare bill. At least five republican bigtors are demanding changes to the legislation. He cannot afford to lose more than two votes. Trump will highlight the growing Energy Dominance this week. He will discuss the opportunity to sell more coal to europe and asia. Global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries around the world. This is bloomberg. Tom lets focus on europe. With oil with a bounce american oil. A little bit of steepness now. Quietea of the vix, a vix. My chart will be on that. Dollar peso, a stronger mexican peso. Francine i am looking at stocks. A tiny rally in europe. Climbing for a Third Straight session. Tom let me go here. I have not done this in a wild. This is a fitted moving average. The vix going back 25 years. What is interesting within the quiet, here is the record quiet within the 1990s. The further excitement here, the financial crisis. Trend down where we are below where we were in the 90s. Francine this is a simple chart. For our radio listeners, we will push these out on social media. Shows you the nonperforming loans are massive. If you have a chart like this, it shows you banks are not sustainable. Investors are trying to figure out how this is cobbled together. If you have a better solution, he has been telling reporters they should have let him know earlier. The u. K. , looking for solutions. Theresa may giving details of her strategy. 15 pages of details will be published alongside the announcement ahead of this, may is expected to meet with Arlene Foster. Now, Rupert Harrison. Great to have your insight into what is going on in u. K. Politics. The uncertainty last in the u. K. Parliament. We are into this phase in the negotiations where it is a normal negotiation. You have a proposal and noises about how it is not enough, but it is in the right range. These look like normal negotiations. The government has to push through eight brexit bills. That is where the uncertainty lies, are we going to get to a point in 18 months time . Dont have the legislation to do brexit. Francine is the tone harsher than we thought . Does it mean we heard from david davis, it will be a tough three months of negotiation . You always hear it is going to be tough. I thought this was a generous offer. Where there is flexibility on fairlydes, this is positive. The issue is in parliament. Tom how much does the Parliament Support Prime Minister may right now . It looks like she will have a formal majority. Theresa may will remain Prime Minister for as long as they want her to remain Prime Minister. When it comes to individual votes, in the house of commons, you only need a few rebels to. Verturn specific votes this repeal bill will take vast number of regulations and put them into law. Each one could be a flashpoint. You have the house of lords, which feels emboldened by the election result. They can make life more difficult. Tom these cells buried convention, if you have a Hung Parliament gets involved. It is a big deal. The convention says if somebody has something in its manifesto, the lords can ask the house of commons to think again. Was dependent on a government winning a majority in the elections. The house of lords feels emboldened they have not won a majority. The end, this increases the tail risks in both directions. Get an accidental brexit where you dont have legislation end upe, or you could with a government forced to part the u. K. Because the alternative is so disruptive. Francine what they want is money and investments. This is something you were telling me a day after the snap elections. Where does this lead the government to give money to the rest . You are going to get lots of clever ways the treasury will try to get money to Northern Ireland in a way that does not imply money going to scotland and wales through one offs, corporation tax. That is probably what is taking time to get sorted. The treasury does not want to 2 in Northern Ireland. Francine thank you. The two we speak about the two venetian banks. This is bloomberg. Investor dan loeb is making his biggest bet ever. His hedge phone hedge fund has taken a stock and nestle. Growthar, nestles cell fell to the lowest pace in at least a decade. Has filed for bankruptcy protection. They folded under liability for millions every called airbags linked to more than one dozen deaths. A russian man has offered to buy holland then bear it. The chain is owned by carlyle group. Francine italy will commit as much as 17 billion euros to clean up two banks in its region. The state was given permission to wind down two banks with state money on friday. Shares are trading higher this morning. Partner ate founding an investment group. On with us, Rupert Harrison. David, thank you for joining us. The deal seems to because of together quickly. What is important to bring to context, the average european to utilize about 8 of gdp shore its Banking System. Much higher in the u. K. Italy and france used zero. Bank,will pay for the about 1 of gdp, nothing theared to the 8 in european average. Much higher elsewhere. The is happening here, is a 1 cost to the taxpayer, but as i said, you stop mentioning italian banking crisis. We should have done this five or six years ago. They should have acted before. One bank acquired their loans. The italian banks get all of the ugly stuff. How do you view the Banking Union . Is it dead in the water. Popolare, in terms of capacity of making earnings, with some bad loans. Real estate is rising in spain. In the case of the other, you , they areranchises losing money. The situation is different. The Banking Union is not dead in the water, it is a work in process. Italy committed about 60 billion euros through the esm to shore up the Banking Industry in ireland, spain, portugal and greece and has used zero in theirs. It is coming to any and d thanks to the ecb. Tom the Banking Union may be can survive. Analysis, it is about a 103 billion equivalent to the United States. Gdp, 6 10all part of of a percent, which is under 1 . Arent there a number of banks behind these transactions . Ofthe concentration nonperforming loans is in four banks. Taxpayerll cost to the as approved by the commission will end up being 1 of gdp. You can say why italy has not done it in 2011, 2009, 2 this is 10, 2011, 2012, a very fair question. I dont have an answer. It makes no sense. We should have done it then. Pretend. Nd and the bill is higher than it would have been. Bottom line, 1 of gdp. In the big scheme of things, there are more important issues than 1 of gdp. You have theff and stronger system. The number two banks are investable, strong, profitable, very wellfunded. Francine was this the best deal the Italian Government can do . It is best for shortterm. Regulator and resolution mechanism were meant to be no more bailouts. Issues and resolution issues are political. We have had senior bondholders protected. Longterm, this is this is a nee for further integration in the eurozone. You think why do i want to going tod if rules are get stretched. That is the longerterm impact. Tom thank you so much. Other guest coming up. Rupert harrison with us, as well. We will continue. Much to talk about. A discussion on the american economy. William lee will join us. From london and new york, this is bloomberg. We have data showing german Business Confidence servers to a record high in june. This comes after they increased the cost for germany. Joining us now, is still on set with us, Rupert Harrison. How do you explain the euphoria in confidence for german businesses . Conditions have been good for some time. Interest rates continue to be low. There are forces pushing the domestic demand. The export side is relatively new. Is explainingn this record high in the index. Like all votes rising. It seems to be optimistic. Has the German Economy reached escape velocity . This is optimistic. We are not yet in a situation where there is a true boom. What is missing is increasing prices. D otherwise, it is strong. Francine will a stronger euro hurt sentiment . Again. That will a stronger euro hurt sentiment in germany significantly . I do not think so. The euro would have to be stronger to have an impact on the euro export industry. It does not change so much. Are notxports pricesensitive. 4 wouldse of 2 , 3 , not matter much. Francine thank you. Rupert data is strong. We have had a runner of strong data from europe. Key risk is nominal income growth. There is a vulnerability as we have this tailwind from lower prices. Whether there is a vulnerability in the absence of higher wages and higher nominal income growth. Flash pmis come out. Francine we are looking at live pictures of downing street where theresa may is meeting the dup leader. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. Tthats why at comcast,t to be connected 24 7. 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 surveillance right now for your monday briefing, your news, heres emma. Emma indias Prime Minister ets President Trump at the white house today. The visit will allow the two leaders to build a personal people expect a breakthrough on issues such as immigration. The Prime Minister is likely to vetoes e president on for technology workers. N pakistan, the death toll has risen to 157 in a fuel truck fires. To the scene ed when the truck crashed. They were collecting the spilled fuel when the wreck engulfing people in flames. U. S. Secretary of state rex some son is criticizing demands sued sandrabe its allies are making of qatar. Tillerson says they would be and ifficult to meet urged the country to start negotiating. The saudiled bloc has told down Aljazeera Tv Network and contact with islamic groups such as the and remove erhood turkish groups from the country. And Federal Reserve policymaker John Williams is making the of further gradual Interest Rate hikes. In sydney, the San Francisco expects dent said he inflation to rise to the 2 arget next year, and the feds intention to stop reducing its bond holings. The goal here is really just very gradually, ease ff the kind of still husband to the economy, keep it growing a little bit above trend, but it go too far and try to get normalization interest from elp, keep that going too fast. Officials have argued for a hike to see if inflation is actually heading higher. Day, news 24 hours a powered by more than 2700 journalists and analysts in 120 countries. Im emma chandra, this is bloomberg. Tom, francine . Thank you so much. Back in april 2016, the founder yo company, for example, was one of the but people that a f the impact vote for britain to leave the e. U. Would have on both their prospects of the future startups. Yesterday the brexit secretary he will pretty sure be able to get a free trade deal with the e. U. In ing us now on set here london is simon, yo company founder, and Rupert Harrison is with us. Always a pleasure to speak with you. What do you make of this ssible free trade with the. U. . Simon whats interesting is were about to send a bunch of lawyers in to do the negotiation, and i wonder how actually going to work out. My experience in negotiation is hat you have to have a topline vision, and whats people have a topline vision, you can do something. Doing is em to be trying to sort the finesse details out the next two years no vision. Ive always had a negotiation of two things. One, you have to have a meeting the top about how the new britain could interact th europe and actually bring something to europe and be the hong kong of europe or whatever it is we want to do. Secondly, to have an exit plan if you like. The back all it alternative to a negotiated agreement. If it doesnt work out, this is going to do. Francine but first of all, on the vision, who should you look vision . Theresa may didnt do very well in the election. Who does she listen to . A pity, isnt it . We live in a political system where we kick the hell out of and f our politicians, then ask them to sort of, you know, to lead the way. Actually, i think theresa may is a very capable person, and i ink shes had, you know, shes made a few mistakes in the last few weeks, and perhaps power to keep he on going with it. But yes, we need somebody. I think the mack ron thing is very interesting. You know, theres a young guy, ather like us. Theres a lot of dvent words in business for businessmen, and , the area i eneurs come from. French people said over the eekend, whats the move with macron . Theres a whole country behind him. Could you imagine if we were behind our leaders . Saying earlier we need leaders who are authentic. We, the people, also need to be to d the people, trying support people. We have businesses where you y to, you know, knock your leaders down, were not going to get very far. Brexit look like . If we get the perfect brexit operator, a business whats the best outcome, the est yo brexit . Simon my entrepreneurial friends and i, you know, were business. With i suppose if youre a car manufacturer and youre heading t with the thought of paying 10 tax on your exports into europe, maybe thats a bit different. To us, what are we paying, , 3 difference in tax . That could be affected by the value of the pound. Doesnt make a lot of difference. Is normal for all of us, and were out there looking for new markets in the rest of in orld, as well as europe. I think probably the most mportant thing for us, certainly in the restaurant business, or the hospitality talent. , is we have so we have a free flow of talent, the best people in the orld who want to come over here. London is a fantastic place to live, so people are very attracted to living in london. Thats a big plus for us, so we should attract talent. Tom line up seven random of ervative members parliament, and they have a cup of coffee with mr. Woodroffe. About the politics of all it all for the politicians . Does anybody care about yo this yo that . I think if you actually took nservative befrpbls, most of them would agree with simon in private, but they might find it difficult to say so in public. Thats the difference between the kind of business negotiation, where you can do and this in private negotiation, where the biggest problem is the people at the top do probably know what the up is roughly going to end looking like. Its just very, very difficult to communicate that to your constituencies back home, so you have to kind of go through some of the theater in there. Get i think whats very interesting, sigh machines confidence of getting on with the job is actually reflected u. K. Data. The were very focused on the uncertainty. But if you look at Business Investment intentions in the thee bounced back a long way since the referendum, and a lot of use, for sectors now, the uncertainty is actually not that great. They know theyre not going to be in the market. Not going to re be in the customs union, and unless youre particularly affected, particularly some of services or those integrated supply chains in autos, it is basically business as usual. So i think some of the economic pessimism is a little bit overdone, and i think we have some of the theater when it comes to how protracted these negotiations eem. Francine are you pessimistic about the future . Is it on inflation . Pointing to some of the business indicators. Uld they actually fall off a cliff, or is it more nuanced . Simon of course im optimistic. Glass half full, as most entrepreneurs are. You know, we have an enormous in this country especially of being entrepreneurial. If you go back to the 18th century, we go right out and things. Right up into the 1960s, weve always reinvent ourselves. Were very clever. I always said of brexit, and i did vote to stay in, but ive going to be s fine either way. Its just going to work out. Certainly for all of us. Big business thing is a different thing, and that in ously does affect people the economy. But in our world, as i say, im always optimistic. I think we heard the purse of creativity in this country. On ine if somebody landed earth and said words, and they said somebody in the top right of the atlantic, you know, wee got it, and all we have to do is sort of let to be it. Free rupert i agree, basically this will be ok, we will probably a deal, life will go on. I think some of the gloom is overdone, but at the same time, price. A you know, there is definitely going to be a drag on investment. There will be a price to pay on inancial services. There will be some price to pay n terms of talent. Rancine but inflation, right . Its short term, and the bank of england has said theyll it could gh it, but become ugly inflation if there re tariffs or not . Rupert if there are tariffs, yeah, you could get a further impact. Expect to see largescale tariffs, particularly on goods. Not a good outcome for anyone. You have to believe in this negotiation that it can at bad outcomes. Francine tom . Ok, very quick last word, we ot mixed up in our communications. How do you see london changing over brexit . Simon i see enormous change ahead. Macron is a big indicator. That i think digital politics will happen in the next few years. Voting online. If you hang around politicians, what they always say is whats he temperature of the company, whats the people want . Dont want to put my faith in one party. I want an actual individual. Speaking simon is about politics, and you can see the Prime Minister, theresa may, live from downing street, with arlene ands foster, as they continue with their negotiations. Expecting something the today. I think theyre going to talk hour half. Out an tom did you medicate rupert . Francine yeah, hes here. On. s why we have him insight on what they should offer. Thank you so much, simon, yo company founder, and Rupert Harrison, Portfolio Manager ins stays with us. Coming up, a conversation with j j chairman and c. E. O. Thats coming up at 7 30 a. M. In w york, 12 30 p. M. London. Theyll talk about inflation. This is bloomberg. Francine bloomberg surveillance with francine and tom from london and new ork. Nestle shares jumping this morning after a investor billion stake in the group through his Third Point Hedge Fund. It now owns about 40 million europes biggest company. Thats according to an investor letter released on sunday. The nestle position adds a loeb, better known for his campaigns in the u. S. And japan. Joining to us discuss this, fanner, team ic leader for european consumer news, still with us rupert multiasset ckrock strategies porlte manager. Eric, thank you so much for joining us. Irst of all, we have new management in place at nestle. Do we know if dan loeb will act them time to get their in order and to continue with what theyve announced . Get im guessing hell time, but want quick action as well. This is a company that has loeb standards. He wants the new c. E. O. , mark hneider, has already announced hes going to do some things, like possibly sell the u. S. Confection air business, step to what loeb wants, but hes probably going to want more. This is the nestle premium. Nestle stock is trading at an 11 premium versus peers. The yellow line is the average 4 premium. His is over the past two years, but on the blended forward price to earnings basis. We will push this out for radio right now. Eric, why have a lot of these companies actually underperformed when you look at companies . N food eric these are Big Companies with a lot of legacy businesses. Things businesses in like chocolate, sweets that Consumers Want healthier lifestyles. Companies that have a sort of brand providence, a story behind hem. Theyre a little bit cynical about big food t. Has a tough to hoe. Tom eric, i look at this deal, nd its really fascinating its a low singledigit revenue grower. I get it. Theres nice margins down below. Its done 10 , 9 per year for the last 10 or 20 years. Well run, etty ginormous company. Whats a guy with a 1. 3 exposure going to do . Mr. Loebs leverage other than to get on the a craft carrier and be little guy out there on the ircraft carrier . Eric one thing he specifically wants is a sale of the stake that nestle has in loreal. Stake, and kind of a Chain Reaction issue with other stakes that french have kind of wound up in each other. That would be one very specific that could go a long way toward appeasing what loeb wants. Nestle is a pretty well run company for a company that size. Tom i find this extraordinary. Basically a en 30year workout, like unilever, being ng down companies, less euro in that. Mr. Loeb even gives their management credit for being euro, being less swiss, etc. Where does he want to be in six if the ith this stock charts Straight Line up as years . N for 10 eric i think theres probably n element of opportunism here, too. Hes looking at whats happened nestles big rival, and look, they fended ff kraft hines there, but then they took some measures to booth returns. They put the slowgrowing up for sale. Ss maybe theres an opportunity for something similar with nestle. Eric, not Everyone Wants to buy kale juice. Sure you, tom and i are more for the chocolate bar instead of the kale juice and health stuff. Rupert, what do you make of his . Does it mean were going to have more activist investors in europe . Harder make your life or easier . Rupert i think its a positive gn for some of these companies to improve margins and returns. I should share some of the skepticism that i thought was out of toms question over how much of a big deal this is. Ese are quite familiar issues, the loreal issue, the margin issue. Its a positive sign of the margin for this kind of continues ory, which to run. Francine are we going to have more activist investors in it depend what does it actually depend on, valuations, or is it mpossible to tell . Rupert i think it depends on specific opportunities, where people see opportunity. Gradually see more of this, and thats a good thing. Francine thank you so much, eric and rupert. Rupert stays with us. This is a picture for tv. A bloomberg user, and we hope you are, you can sign and ask rupert a question by clicking on here, ask the guest a question. U can also steal some of toms cool charts. This is my nestle premium chart. This is bloomberg. Te note emma this is surveillance. Deutsche bank excluded u. B. S. Underwrirlte of its recent 9 billion rights issue. E reason, according to the financial times, Deutsche Bank says that u. B. S. Is trying issues to inancial hire away senior bankers. Theres no comment from either f the banks. Rio tinto is banking australias improved offer for its coal assets. Raised its bid to almost 2. 7 billion in an attempt to by ff the challenge yancoal. Rio tinto says theres greater certainty the deal will be approved. Tom, francine . Tom fran cry, i guess youve got some headlines, right . Yeah, we do have headlines on nestle. This is according to a pokesman, saying the company is having open dialogue with all shareholders, so theyre ot talking about dan loeb in specific. They say nestle remains committed to a strategy and to the longterm shareholder value. Thats all i have for the moment, but certainly the first time we heard nestle actually fact that dan he loeb is in the company now. Updated if we have anything else. Tom i thought he was really good on that moments ago, talking about the great total revenue ven though growth has been subpar compared have group other of the food competitors. Rupert harrison with us. Hes from blackrock. Bring up the transatlantic divide chart. Its a real simple chart. The five year out, fiveyear view of their inflation. And s. Has it going down rolling over. Grand granted, its rolling over in the United Kingdom, but gap here in inflation outcomes. Wheres the opportunity in this . I think the opportunity is staring you in the face, which is to kind of those two are going to come together some point. I think the u. S. Has been the really interesting thing. In arket now is pricing some big deflationary signals, downside s now, surprises. Youve got oil, which i think is now testing the bottom of his new range. My incollision asian is if you believe in economic momentum, a ight labor market is eventually going to lead to pressure, you want to fade those moves. So there is opportunity on the break evens. S. Also, the market is pretty long u. S. Treasuries now. A change from a few months go, so potentially scope for a reversal. Tom where do you fit in on friday that he really cares p. M. I. s and the efo institute is, frankly, the pmis . Of all do you care about behavior or litmus tests of manufacturing nthusiasm . Rupert absolutely. That stuff has been very the that drove cators markets on the way up. I think the fading of the some of the to deflation, kind of reflation theme now. I think the important thing is any sign of things really rolling over. Your central case has got to be now. The european, japanese, u. S. Economies look like theyve got decent momentum. Of ssue, the change pricing recently has all been about inflation. Goldilocks is at going to continue . Do you think the inflation is going to come back . R do you actually want to look through this and play for the renewal of inflation . I think thats probably where most of the opportunities are. Do you expect inflation to go . This is a chart which basically the fed chair and what theyve done with inflation, again, for our radio listeners, e will push it out on social media . Just very clear, this feels different. This is kind of a medium time. E each this is janet yellen. Rupert thats what the you year inflation is, and see right the end of that chart, this collapse in the u. S. Because inflation has always presented the year number, thats going to be march ll february or next year. So were going to have very low prints. Youre going to have headline continuing to decline. And then youre going to have this big jump up, and if youre reserve, the federal youre looking through that and thinking, ok, if we step orward a year to the middle of next year, were going to have c. P. I. Well above two. P. C. Creeping back up. Whats given them the confidence to carry around tightening, and i think for you t participants, again, probably to want look through the recent weakness. Francine whats your top buy right now . Rupert i think u. S. Break even, i think the one flashing is the oil price, which is testing in the short term, the bomb only of this range. If we get stability there, i think the u. S. Is the wrong price. Go within all this, let me back to politics and your wisdom on the conservative party. May s Prime Minister going to be seven days from now . Rupert actually where she is now. She is hostage now to a conservative party that sees kind of the dam holding back chaos. They do not want another election, because youve got corbins ratings in the short term very high. Lose an rvatives could election. Youve also got a party that cant really agree on who it leader. Be the next tom exactly. Rupert the plurality who dont majority want Boris Johnson or david frontrunners. I think its in everyones interest to allow more time, maybe someone else to emerge. Feeling that a brexit has turned into this political kind of kills maybe it touches, and just let them do brecksity and get a fresh face the next had a. After tom may i suggest harrison on the shortlist . Rupert well, there are a procedural issues, because im want a member of parliament. Other than that, im very flattered. Tom very good. Thank you so much for being with us today. Harrison holds a shingle out of blackrock on their multiasset strategy. E really enjoy rupert. He has a lot of value on this link annal of politics into what we do every day. Were going to drive that conversation forward. Us, william lee, you group. From citi bill lee on the international u. S. Economy. He im going to show g. D. P. Chart g. D. P. Rolling over for the second quarter. Its going to be a good hour. At italian ooking banking as well. He yankees, they need some pitching. This is bloomberg. Tom this morning, any talks of european Banking Union, they are over. Its good bank, bad bank, and e ultimate political crossexaminedown, as italian taxpayers will write a check euros. Lions of in the United States, the senate may vote on mcconnell sometime this week. Moderate and conservative republicans, they are in ntensive care. The state of the american economy, in this hour, william lee of the Milken Institute. Everyone. G, this is bloomberg surveillance, live from our World Headquarters in new york. Im tom keene. In a most busy london, Francine Lacqua. Saw the doorstop with the Prime Minister of the United Kingdom and somebody from Northern Ireland. E they going to come to an agreement . Francine we think they will probably come to an agreement. At was the leader of the d. U. P. We are expecting some kind of agreement on this conference. To still find ed out what exactly the d. U. P. Want in return, if its anything more than hard cash their region. Tom most interesting. Italian banking, well do in a moment. Now, with news, heres emma chandra. Emma thank you, tom. Ty lee has carried out its biggest ever bank rescue. The government will spend as up as 19 billion to keen two failed banks. Plan calls for so paw low tailed face sets. British Prime Minister theresa may outlines her plan to e. U. Rding the right to citizens living in the u. K. Later. Last week, e. U. Leaders say did he feel didnt go far enough and risks costing people rights. Meanwhile, david davis says the government will fight any demand that e. U. Court should have power in the u. K. Once brexit is final. In the u. S. , Senate Majority mark connell faces defeat over the mcconnell bill. Opposition from at least five republican senators, who are demanding big changes to the legislation. To lose more than two republican votes for the bill to pass. Global news 24 hours a day, by more than 2700 journalists and analysts in more than 120 countries. Emma chandra, this is bloomberg. Day here. To the on italy and the collapse of the two banks there, i looked west texas with a little bit of a bid on west texas, with advancing within, what is it, 8, 9, 10year bull market. Next screen, quickly. You the good market, 10. 11, extraordinary quiet within the market. Peso with llar mexican peso strength this morning. Im ine tom, this is what looking at, european stocks starting the week on the front foot. Rebound in equities thanks to nestle. Getting some 3. 9 . The pound also erasing a gain seems to be first of all, finding an agreement with the d. U. P. , but also know she will spell out how citizens living in the u. K. Brexit. Protected in tom thank you so much. Let me do a morning must read weekend expert on italian banking. Juliano let the zeitgeist this weekend on the collapse of these two banks. E eye tail jan scheme is radically different from the one foot in place, only two weeks ago. Slap in the face of italian taxpayers. Cherry picking the assets it sandpts leaving the bill to the government. Its hard to see how this aid, involve state which the e. U. Forebids. Thank you and congratulations on your work over the weekend and scale. Pe i did a populationadjusted calm out with 103 billion equivalent if this was the United States of america. We heard earlier this is not a big deal for the italian axpayer. Do you agree . Ferdinando in terms of size, i clear that uld be the immediate payment by the 5 rnment would be around billion. Thats the subsidy for making acquisition of these two more traveled lenders impact its capital russia scombrow doesnt impact on cost, because obviously theres going to be a restructuring. There are 12 more billion of guarantees which the government because, in place, as we said, as you rightly said, its taking all the bad out of these banks. That makes it 17 billion in total. Is stressing its 5 billion we should concentrate on, but its a hell price for a solution which should have been different. Remember, there is something berlin, which had been in place in the eurozone for years, which the Italian Government was determined to avoid. E result of that decision to avoid the berlin of holdings. Tom your work is a very paneuropean work. The germans, the people of the netherlands, how should the United Kingdom react to this cramdown . Period in ordero the question asked in berlin and amsterdam is, are these european rules, which are meant to protect taxpayers from bailing out still valid . Is there a Banking Union which are sure that the rules there for everyone to apply . And this matters, because as we needs e eurozone greater integration in order to survive in the long term. At means more resharing, i. E. , german taxpayers possibly you know, italian, the Italian Government, or the other way around. Now, if there is no trust in rules, can these steps go with sharing and be taken . Thats the really important i think which everyone should focus on today. Ferdinando, what are the chances of a Banking Union actually being revived . In order ferdinando smaller today. There are some that say once we problems, e legacy the problems there before the new rules were introduced, lets just make sure that all out of the ms are way. Remember, italy, after all, really the countries spain. Many or even once these are out of the way, we can concentrate on getting the future. Why would we want to take this step . Glance, these rules are circumvented, and now its taxpayers money. Countries e, other money, will they be so keen to open the purse . Om very good. Thank you so much, ferdinando view columnist, and, of course, his worked this rate. Was first firstrate work is always the province of william lee. Group, now at ti the Milken Institute. Are you enjoying the west coast snths a whole different world. William i actually got a tan out there. Without sun. Doing . At are the what is the overarching challenge youre trying to do . This is an example of how important it is to get it correct. At were doing is saying the world is better off if we get capital at the right time. Were having a round neighborly to talk to morrow regulators, practitioners, and academics about how best to perimeter gulatory for the United States. Its really in bad shape. Tom were coming up on a anniversary of the crisis, third week of augustish of 2007. Now, or is afer this italian bank idea just 2006 to he same from 2008 . How am great example of regulators can screw things up. They want to get the Banking System stronger, but they havent raised capital levels. In the United States, weve raised capital levels, but now were saying the United States is different because market. The capital lets extend all the things we did to Asset Management and everybody else, and thats the orst thing you can do, because Asset Managers are not banks, and the way you define systemic problems in the Capital Markets same way you define it in banks. Banks is a payment system. Them what makes systemic. You lose money, you make money, markets way capital are supposed to work. Trying to get re the conversation going in, and try to straighten out where the egulators are going. Francine bill, just on the talian banks, tchublity slee safer today or not . William i think theres a lot more moral has ard going on, everyone is thinking the government is going to bail things out. What we should have done is allow what the Banking System which is to to do, bail in the bond holders and other stakeholders to say, is to get ncentive your management to do safe banking. Safe banking means you dont loans. Bad youve got a history of bad loans, and thats and to deal the taxpayer. Ve tom bill lee on too many of, including an update on american were 20 what half of year is it, 2017 . Were in the first half of 2017 go . Find out from bill lee as well. Well also find out about the american Banking System. Gerard cassidy of portland, aine, and r. B. C. Capital markets, an update on the state f regional and Smaller Banks in america. That will be good. This is bloomberg. Emma lets get to the Bloomberg Business flash. Ctivist investor dan loeb is making his biggest ever befment his Third Point Hedge Fund has billion stake in nestle and is demanding a note. According to he urged to increase leverage for share buybacks. Year nestle sales growth fell to the slowest pace in at least a decade. Nt commenting on loebs stake. Its the biggest corporate ilure in postwar japanese manufacturing. Air bag maker tack at ahas filed for bankruptcy protection tokyo. U. S. And the company has million of recalled air bags that have more than a dozen deaths. He filing clears the way for 1. 6 billion takeover of takatas assets. Billionaire Mikhail Friedman has agreed to buy one of the Largest Health food retail chains in europe. Friedmans retail will pay about 2. 3 billion for holland and barrett. Chain is owned by the private equity firm carlyle group. And thats the bloomberg usiness flash. Tom, francine . Francine thank you so much, emma. The u. K. Prime minister is with the iscussions Democratic Unionists, this as she aims to nail down an greement with the Northern Irish party to ensure her conservative keep, her conservatives keep a grip on power. Today, shes also due to give details of her strategy to 3. 2 ards the rights of million e. U. Nationals living in the u. K. Beyond brexit. Now were with Simon Kennedy, also with us in new york is bill lee of the Milken Institute. Exactly are we going to find snout theyre going to page a 15page we ent saying this is how propose we deal with e. U. Nationals living here. Simon the proposal theresa may it didnt go down particularly well with her in the e. U. They suggested it fell short of what they wanted. Away uggested it stripped rights that the e. U. Living in britain currently enjoy. And over the weekend, it emerged, no surprise, theres going to be a big fight according to david david over, over the role they postbrexit britain. To oversee ed arguments and britain said thats a red line for them. Are ine we also understanding theres pictures showing media theresa may siping a deal with the d. U. P. She met with the leader there. Is it all about money going to ireland . Simon it probably is. Theres a good amount of money to belfast in the next few years, no doubt. Earlier rrison talking about how they delayed the deal ill now, and this is the money, the need for treasury to monitor that. So perhaps something more on the brexit plan, well have to see what that document says. But certainly gives theresa may some breathing room. Shes got votes later in the week on her legislative program. Support of the 10. U. P. s. Tom i believe the republic of of 32 counties on the island of ireland. What do they want out of this agreement . They want the d. U. Pfment to ate with the tories . Simon i think when you look at both islands, the big issue for is in the brexit talks this hard order thats been and so certainly the addition of the d. U. P. To holds ernment vote count theresa mys hand a little on that. Es probably going to have less able to negotiate that, although its both the e. U. And said the absence of hard border is important for both of them. The back story you learned last week, within the ageantry of meeting . Youre pro. Ive seen you work hotels like no one. What did you learn in the halls hotels . Simon i think you can tell went on headlines what last week. Obviously the first round of lks between the e. U. And the u. K. , and they kicked off with the u. K. If its about it, t the nly the u. K. Los first round. They entered the talks with avid davis, the brexit secretary, promising a row of the summer over the schedule of those talks, and immediately now, very for talks much on the schedule, that the e. U. Wanted. So certainly first blood for e. U. Francine were getting u. K. Al news from a official that theresa may has reached a governing deal with he Northern Irish d. U. P. So were just seeing pictures of the Prime Minister with the leader of the d. U. P. , a couple of minutes ago, when they were signing that deal. O well get plenty more on that. We now need to understand by speaking and calling the exactly what rse, was in the deal. I mean, were just wait for the deal right now. Know anymore. Simon absolutely. Ts most likely that the conservative party and the d. U. P. Party have similar views both pro things, brexit. His, to some extent, will be a meeting of minds, and a meeting of money that youll see, as money flows to Northern Ireland d. U. P. F maintain the support, which as we talked about earlier, is fragile. Continue necessarily for a long time. Well have to see the content of that document. Ask the dumb american question. Does this save the Prime Ministers tenure . Simon it certainly helps her out. Shes got this big vote wednesday and thursday that she to win, after the queens speech, the legislative program we spoke of that lier, defeat would be pretty bad for a Prime Minister. D. U. P. , the 10 law makers it brings to the party will guide her through and certainly this rupert report, most likely is that she and through that vote, shes still with us in a week, and she continues to push on or a little while yet. Tom an economic question, we saw a great number today, some good economic cat on out of urope. What have you seen the latest of the United Kingdom Economic Growth . Is it better than the gloom . Not. Perhaps we saw retail number fall the other week. Fouryear high. Certainly theres a case to be is that the euro area solidifying its recovery, just as the u. K. Goes the other direction. Gives some hand to the e. U. Negotiators, lot has been made of the fact that he economy, on the content, is picking hand to the up, that macron brings and that theres signs of inflation picking up. Breaking news, get back to working, head of our brexit coverage. Imon ken demee londonful william lee of the Milken Institute is with us as well. Were going to come back with talk about the american economy, maybe a little bit on england as well. Ireland, shed say. Important discussion on sterling. Stay with us from london. From new york, this is bloomberg. We with Bloomberg News, sources. Ur with us now, Edward Hammond out of the university of sussex, working the m a desk at Bloomberg News in new york. He broke the story here on leer over the sources. With us weekend, which everybody has picked up. This is aing about number, even shares. 3 of heres a hedge fund, worth more than god. I think dan loeb owns everything on long island out past hempstead. Great. Of money for lot dan loeb. He has to raise than god. Money this shot at nestle . Thats right. Its actually the position in terms of the size of the shares, relatively small. 265 billion company, nd hes got a 3. 5 billion position. Hes done gone and done some of this with his own capital. Sort of raised the special Purpose Vehicle just to do this particular thing. Is this private equity . I think of the others, and this is a new internal rate of give money to ou an alternative investment guy like mr. Loeb . See more of will these situations, but particularly with a company this big, you need to go in eally high dollar amount to have any leverage at all. So hes done that, and i guess hes er thing here is taking advice from some of the people. Of sara ice chairman lee is involved in this, right . Right. Has a guy who knows his Coffee Business very well in europe. Third is advising point, loebs fund, and also heavily coinvested. How angry of an activist is he . He lked about amazon, and was you know, im positive on this, i want to be nevolent s. Dan loeb benevolent on nestle . U. S. A. Hes striking that taupe at the moment. Estle has a new c. E. O. Loebs tone right now is we think its incredible, work with him to engender some of these changes. We want to get the ratio up. We want them divest some stuff. In ally their stake loreal about, a 23 stake, worth somewhere around 23 billion. Hes saying you should bring that cash back in, return it to m a, grow s, or do the business in a sort of nonincremental way, which eyve been critical to doing in the past. Francine did you get a sense hell go into other food europe . S in or is it just nestle . Nestle is not only the iggest food company in europe, the biggest in the world. I think this is a pretty strong place for him to start in terms of trying to move into that into the kind of packaged goods space. A ton of stuff that nestle can do. I think hes going to push for the to do moves around world in terms of getting out noncall. s perhaps whether he uses this more, it will be interesting to see. Thus far, the guy whos done kind of Food Beverages has been nelson. So tell be interesting to see if loeb starts to see some of sort of spotlight from him. Francine ed, thank you so much. Hammond broke the story on nestle and dan loeb. Bill lee stays with us, coming daybreak america, a nversation with alex gorsky, j j chairman and c. E. O. Theyll talk about inflation, some of the pricing they need to do into the emerging markets. Thats coming up. 7 30 a. M. In new york. 12 30 p. M. In london. Him the things ill ask is also about divesting, but also m a. Maybe a component going something be theyll shy away from, because of where the dollar is. This is bloomberg. Francine this is francine and tom from london and new york. First to get to the word. Heres emma chandra. Emma in london today, Prime Minister theresa may has governing deal with Northern Irelands dim i can unionists. Support the partys after her conservatives last the majority in parliament. Negotiations centered on extra Northern Ireland and plans. In pakistan, the death toll has risen to 157 in a fuel truck fire. Scores of villages have rushed o the scene when the truck crashed. They were collecting the spilled fuel plans. In when the wreck exploded, engulfing people in lames. U. S. Secretary of state Rex Tillerson is criticizing some demands saudi arabia and its allies are making of qatar. Tillerson says they would be ry difficult to meet and urged the country to start negotiating. The saudiled bloc has told to shut down Aljazeera Tv Network and contact with islamic groups, such appears brotherhood, and remove turkish troops from the country. Policymaker ve John Williams is making the case to further gradual sydney, ate hikes n. The San Francisco fed president said he expects inflation to target next year, and he said the feds intention to start reducing its holdings. The goal here is really just gradually ease off the kind of stimulus to the growing a p it little bit above trend, but dont let it go too far and try normalization of Interest Rates help, keep that from going too fast into the ock. Emma some fed officials have argued for a pause in the rate Hike Campaign to see if heading is actually any higher. Global news 24 hours a day, owered by more than 2700 journalists and an liz in more than 120 countries. Im emma chandra. Bloomberg. Francine, tom . Tom thanks so much. I put this out on twitter on sunday. This was the clearest short article on the healthcare in washington. Steven pearlstein at george mason writing in the ashington post, as he often does, you cant lower healthcare costs or extend some people without raising the taxes or premiums of everyone else. Game. Zero sum what we get is a financial shell game. He goes on to say president pedal that o soft redistributive reality in trying to pass obamacare, just g. O. P. Are now desperate to cover up that they are doing the same, only in reverse. Its a great article. Ill resend it out on twitter today. Our chief is washington correspondent. Kevin, the senator from kentucky, does he have the votes . Kevin the Senate Majority ader, Mitch Mcconnell, doesnt have the votes right now, tom, balls the junior enator from kentucky, rand paul, as well as people like senator ted cruz, mike johnson im sorry, senator johnson, senator lee, are also opposing this as a result of saying that the bill isnt conserve testify nough. , en you talk to moderates including senator kevin heller, 2018, who flexion feel this bill is too far to the right. Watch all of this go on as, of were awaiting the nonpartisan congressional but office score. We could get that today or tomorrow. Thats right where he wanted to do. To me, dean hell certificate ost interesting senator from nevada. Heller is the most interesting senator from nevada. What does senator heller, desperate to get reelected, what does he need from the Congressional Budget Office . Kevin you cant be kicking people off healthcare. That number, coming from the like we saw in the house, its like political deja vu all over again, look for watch for ler to that. But also, i can tell you that i spoke with a source over the weekend, a political source who talking to the white house, who told me essentially that for senator heller, its either white board with the house or just move over. Because, of course, they feel an lot of ould political threer to say the least in terms of where this debate is headed. Leader is majority not going to bring a vote to this unless he feels he has the votes by the end of the week. Doesnt, then youre going to have to see what we did in the house, which is back o the drawing board, so to speak, to recraft this piece of legislation. Ancine kevin, what is the president s Political Capital like . If he calls one of these switch sides . Ey kevin i dont think its a matter of the president having litical capital on healthcare, as a matter of the Republican Party desperately pass some type of healthcare reform, because they promised it for eight years. Er since obamacare was passed, theyve been saying they were going to repeal it, fix it, do something to it, and it, hey have to do especially if the fate of the majority in the senate in hanging in the balance, quite literally, for the 2018 midterms. Tom kevin, thank you so much, our chief washington correspondent. Nd now joining us with perspective further, we have william lee of the milken jon lieber d also with us to talk about the u. S. Politics. John, let me start with you go to dr. Lee. With the healthcare legislation, theres got to be here in the debate. What did you study over the weekend . What is your Morning Research from your group say about cconnell care . John right now, theyre keep moderates. I think if you look at the content of this bill, this is the most conservative entitle thats ever had a chance of passing into law. Ted cruz knows that. Mike lee knows that. Think those guys ultimately end up being comfort National Voting for this bill. Members like dean heller, lisa some of the moderate members who are at risk because of the medicaid cuts are not that are far more interesting. Tom in the wonderful oped, they talked about the structure needed. Remind us how big healthcare is in the United States. 17 . Up to william exactly. Important component. The c. B. O. Is great at but number evenues, of people covered. They thought four million were going to be recovered by less than half was actually covered. When we talk about economists forecast, the c. B. O. Screws up its forecast. Ot taking into account the people who actually want to would i the insurance that they want rather than pay to avoid buy the government shares that they dont want. I think that line is something we need to understand better, to reform healthcare means you got to give people what they want. You got to give insurance mpanies the opportunity to sell. You cant have them not selling across state lines the way we o now. So Many Insurance Companies are pulling out of states, because they said we cant make it here. Insurance companies are not allowed to come in. Tom over to the d. U. P. Story . Francine were seeing live pictures of Arlene Foster, leader of the d. U. P. , talking 10 downing er street. Is is a socalled confidence and supply and it caps 17 days of discussions after the nserve stives unexpectedly lost their Parliament Majority in this months snap election. Foster saying the deal includes 2 nato commitment for he moment. She hasnt talked about the bothered. Shes saying the deal aims to brecks thought benefits all, and she believes that the deal includes no change to the pension triple oss. It does seem for the moment, is that its focused on domestic issues for Northern Ireland. Go back to washington, as we spin around on a busy monday with our stories. Lieber with us. Jon, within washington, theres sandration to get to tax reform. If senator mcconnell doesnt get his vote, do they just automatically jump to tax eform . Jon no, i dont see how you just abandon this and go on to reform, even if you did to want put this behind you. I think you need to include healthcare s of reform in whatever the tax bill is you eventually do. The next big hurdle for these is going to be passing an fy18 budget, which will set up tax rocess for doing reform. And that budget, if they dont succeed here in healthcare, is ing to have to include elements of healthcare. Recess, when ig this go home on their recess, what are they going to hear . Going to hear from both sides, conservative activists. Hey campaigned for seven years on repealing obamacare, and they failed to do that. And theyre going to hear from lot of liberal and progressive activists who are going to show up at their town halls, mount protests and let support they dont the bill theyre trying to push. Its going to be a really tough environment. Tom thank you so much for in today. Jon lieber, you and i are going to have a beverage of our hotel bar he trump there in washington, so i can get a real taste of washington. Jon lieber, thank you so much. With bill lee. Were spinning around today with the news flow, and yet all dampened. Are is chair yellen orchestrating this news flow . Governor carney orchestrating everything . Puppets . He my sister had the puppet with the strings down in the asement. William right now, whats bothering carney the most is the do we do about inflation . Why is it the economy is doing more surprised here in the United States . Where is the inflation . We get John Williams to say inflation is nowhere to be found . The reason why is because the has to n of the markets be taken care of, and we have to normal rates. We have to norm a. M. Rates we got to restore the Financial Markets to their proper functioning. You have the source, which is extorgs of people raiding companies and taking giving it back to shareholders. Tom fran cry . Still getting breaking news from 10 downing reet with the d. U. P. Leader, Arlene Foster, still talking about some of the agreements prop up the d to conservative Government Party of theresa may. O this is why theresa may kept her grip on power, by reaching this deal, in terms behalf we know so far. Arlene foster saying that they will aim to support a brexit that benefits all. We have the deal, and i believe that is the car where driving ter is now off outside downing street. This is bloomberg. Emma lets get to the Bloomberg Business flash. U. B. S. Bank excluded as an underwriter of its recent 9 billion rights issue. To the n, according financial times, Deutsche Bank learned that u. B. S. Was trying to use the german to rs Financial Issues hire away senior bankers. Theres no comment from either f the banks. Rio tint 10 backing yancoal for lias improved offer its assets. They raised the bid to almost 2. 7 billion in an attempt to a challenge by glencore. Rio tinto says it prefers the somecoal offer because a greater certainty the deal will be approved. And thats the bloomberg usiness flash. Tom, francine . Tom emma, thank you so much. One of the th Great American success stories, b. M. W. Of germany thought about building a plant n america. 25 years ago, already. Our Matthew Miller has flown to spartanburg, south carolina, to get a b. M. W. Check on 200some miles from greer to charleston, where they export all this stuff. This is an export in growing juggernaut. Since 1992 or 1994. 2 gets bigger and bigger and igger, doesnt it . Matt absolutely. A lot of people dont know, but hey manufacturer, b. M. W. Manufacturers all of the global x series cars here. X3, rything from an x1, x4, to an x6, even the x7 up, to 450 units a year. They export 10 billion worth out of here, tom, every year, more than any car manufacturer in america. To the cars that go charleston to get shipped on boats, wherever they go in the mr. Trump doesnt support this manufacturing versus socalled American Manufacturing . Matt yeah, thats one of the im going ask the c. E. O. When i talk to him a little bit later this morning. Eyre having the 25year celebration here. Theyre introducing a new model, the x3, the Third Generation of that as well. To he main thing i want know is, how have your discussions gone with President Trump, and have you convinced you have so many jobs down here, 9,000, and create so Economic Growth with this xport miracle, really, since 1992, have you convinced him its not necessarily a bad thing to have b. M. W. Producing in the u. S. . Francine matt, i guess its all about jobs, right . 9,000 e saying, 9,000, jobs they create. Is there any indication that maybe to please President Trump, will create even more jobs . Can you sorry, fran, repeat the question . Francine the question is ether theres a sense that b. M. W. Will create more jobs to lease the president . Matt well, well see what they ome up with today. Theres going to be a few announcements. Senator oing to have Lindsey Graham here, as well as the governor. A lot of state officials, a lot f government representatives down here to talk i guess urther with b. M. W. Executives, and well see what kind of news they come out with. Theres a press conference heduled for a few hours from now. Tom im going guess spartanburg, south carolina, is trump country. They probably voted 140 for the president. There, m. W. Employees do they support the president . B. M. W. L, you know, representatives went with Angela Merkel to the white harald kruger, with whom im going speak later today. They havent come out for or but they are definitely for free trade, and thats one of the contentious between the president of this company and the country, the government of germany as well. Miller, thank you so much. Look for his interview later b. M. W. Th william lee with us from the Milken Institute. This is a whole new thing at citi tten about group, which is its not black and white. The president is doing a black , everybody alysis is melded in. William the president says we jobs in the u. S. This is what b. M. W. Is showing, we have the advantage, if you the right technology and management. B. M. W. Put together that right years tion 20 some odd ago, and thats a Great Success story. It shows you where the future trade policy is going to be. Companybased, centralbased trade policies that incentivize good management, good echnology, and the right combination of American Technology and american labor. Kind of trade policy that we want to see. Lets face it, nowhere in the do you see free trade. We want to change sources in a way to incentivize companies to b. M. W. Did 20 ome odd years ago. Tom the thing about it thats fascinating, i believe this is dream that would they would want. They want mercedes and honda to do this, etc. Exactly. And what has stopped it . The fact there are other ountries that incentivize more companies to go there, whether its china or mexico or canada. To straighten out the incentives to get more u. S. Production. World of distorted trade, you cannot say that tting on a tariff or trade barrier is bad, because you have to see what the overall picture does, and the overall matters ght now that is american employment. Very good. Bill lee with us this morning as we talk about spartanburg, have e good matt mill her his interview later. Live, get h tv charts. Down here is francine corner. Hate mail, me francine only accepts love letters. You can to this down and here us. To stay with us. Were live in london and new york. Bloomberg. Francine tom, we heard a earlier on from theresa may, but also d. U. P. Deal. Foster he u. K. Prime minister did resume discussions, which ended up in the u. K. Governing party, having a deal with northern airlands d. U. P. Far. Is what we know so so they were talking, of course, about resume discussions, which the n brexit that benefits all. Understand the d. U. P. Said they will work with the did he have lution of corporate tax. Theyre asking for more local at the same time, money to go into their region. We also understand the d. U. P. Downing street to have a direct line for negotiations. But this is significant, 17 days of es cap discussions, and its leading agreement. It was crucial, of course, that theresa may had this before her a vote eech goes to later on this week. Now, coming up shortly, its daybreak americas with david and alix steel. Know you have great interviews coming up today. David we do. Thats pretty big news. Like youre going to have a government in london after all. This is healthcare week. Theyre ublicans say going to get a bill, taken care of before recess comes up. Were joined by the man who a company at the center of it, alex gorsky. Were going to talk about the bill, about tax reform, and also talk about his company, where its going. Biggest completed the transaction of their lives, 30 billion. Om, you know where it was . It was in switzerland. Thank you so tin, much. Our single best chart. I went long on this just to lee awake on early monday morning. Slope matters, bill lee. Migration down to 1. 2 . A new series here. Were not migrating. On bloomberg radio, and ill t this out on twitter, the basic idea that were adjusting down. 3 . We dampening away from william its always the case the initial estimates are based feelings, right . Tom and now hard data. Not matching s it. Thats what weve been saying. Soft data to on drive policy. The fed cannot believe were going to get growth and in the numbers. Of hires ve a chart versus job openings. William the phillips curve has the busted because Unemployment Rate is hitting the slide. I fond a better slide that form of hiring. Everyone says theres a lot of job openings out there. Nonsense. We have a lousy hiring market, because no one wants to hire. Everyone is shopping. Upgrade the labor force, and no one wants to pay it, except in specializing like housing and specialized skills, where there really are microshortages. Exactly what youre seeing, relative wage increases, but not absolute wage increases. Inflation is all about. Francine do you believe the next inflation wont really does it mean the fed estimate in rising rates now is wrong . Right, the fed is because they are having a gradual increase in inflation, up to 2 over the next two years. Thats exactly the kind of pace rise ooking at, gradual in inflation. The fact that Market Expectations are coming down also shows thaw theyve gone overboard in looking at that one lousy number, 4. 3 am hats the wrong number to look at. The number to look at is how much are you hiring people, and wages . Do you pay up youre not hiring. Youre not paying up wages. Tom lets look at the central derby. What kind of chairman should mr. Trump appoint . William one of the great sprobts fed is unanchored. We dont know what principles guided. The principles guiding your assessment of the data . I think we need a more policy. Ed a very good friend of mine, we ed to eat sushi on k street, hes going to be a great addition to the board. I think we need more like him. Om marvin, a guy from richmond, eats sushi . I didnt know he was that sensitive. I learned something today from lee. Marvin, good friend of sushi. William lee of milken, thank you so much. Appreciate it, with terrific news flow. Major shout out to ed hammond the first news, time hes gotten up before 9 00 a. M. In like five years, and ferdinando, who came out of a bank of italy meeting hours ago to speak to us on crisis. An banking let me go Foreign Exchange report right now. Mexican peso stronger, well under 18 as well. Also the yen, 111. Its a great start to the week. Stay with us through the week. This is bloomberg. Alix a big sigh of relief. Ime minister theresa may strikes a deal with Northern Irelands Democratic Union and keeps her grip on power. Bailout, italy bails out two failing banks for 19 the n, as taxpayers foot bill. One big question. Markets wait for the c. B. O. Bill, on the healthcare as republicans defect. David welcome to daybreak on his monday, june 26. Jonathan farrell is off today. Ure getting it started, alix. Alix monday morning feels busy but not a lot of price action. 2 . Utures up by sterling getting a boost after the news that the u. K. Prime keep that minority in government. And the 10year yield, yields one basis point, and crude up. 3 . For your s time morning brief at 8 30 eastern time. Were going to get durable of s orders for the month may. Around 1 00 this afternoon, European Central Bank President federal ghi and former reserve chair ben be