Because we are making the right decisions. Francine we will have plenty more from our exclusive interview with the economic minister of france, le maire. This is bloomberg surveillance and im Francine Lacqua in london. There is quite a lot going on and quite a lot of things we need to keep an eye on. European stocks are edging higher, bolstered by Resource Companies after iron ore surged. Fridays data seem to lead to gains. Amongst the biggest gainers, i andooking at bhp billiton anglo america. Oil, 39. 43. Lets get straight to the bloomberg first word news with taylor riggs. Reporter north korea is threatening to take action of justice in response to u. N. Sanctions imposed over Intercontinental Ballistic Missile tests. That is according to the korean central news agency. South koreas foreign minister briefly spoke with his northern counterpart yesterday, urging him to respond to the offer to resume talks. group of mercenaries attacked during the early hours of yesterday morning. Speaking on television, maduras said this was an assault on a ford in valenc venezuela. I have asked for the maxim sentence for those involved. There will be lonely and see under the circumstances. There will be of no leniency they will be no leniency under the circumstances. Reporter market share in europe will be grabbed at the expense of the continents phone companies. The french finance minister said his country will propose simpler rules for taxation at the meeting of eu officials next month. The first step will be a tax normalization between france and germany. Im quite convinced that after 2018 we should have a common Corporate Tax, which should be for auto parts taxes of the 19 Member States of the eurozone. Reporter u. K. Consumers cut back on spending for a third month in july, putting them i nthe worst slump in four years. Of 1 wasays 8 10 broad ranging with clothing, has a good, food, and transport among the worst hits. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs and this is bloomberg. Francine thank you, taylor riggs. Payrolls report was not Strong Enough to rattle the bonds, but this weeks inflation data could do the trick. The jobless rate matched the 16 year low. The dollar rallied from its lowest point before paring some of the gains. We have two titans of the bond market, clinging to the idea that it will make a comeback. The senior manager at vanguard says the underlying trends in core inflation will be higher. Allen andg in david Athanasios Vamvakidis. Both of you, thank you for coming in. David, do you believe inflation does drop . The job market is so tight that at some point it will feed through which growth and therefore, inflation. It will feed through, but we dont know the timing of that. The u. K. Inflation reports were published last week. At some point, wages will accelerate. We are not really there yet. Francine do you think it is three months, six months, or longer . We really dont know. The fed will carry on tightening with this focus on shrinking the Balance Sheet. Core inflation in the u. S. , actually, inflation is below that of the eurozone in the u. S. Francine are you more optimistic that inflation will start to take hold . If you look at the position of the u. S. Economy on the business side, yes, indeed. Inflation should be higher. However, inflation has been very low, not only recently but in the last couple of years. The phillips curve is flat throughout the world. This is not the justification for the Central Banks to follow loose policies. Financial conditions are very loose. So, the answer to what the fed is going to do is not so much on inflation, but on overall asset prices and to what extent the fed is concerned about them. Francine is the phillips curve completely broken . Do any to stop looking at it . Lets bring you over to the thanos charley made. Thanos chart we made. The phillips curve is flatter than it used to be. This is not sustainable, but nobody knows when it will go back. Before the global crisis, monetary conditions were very loose, but we did not have inflation. We had asset price bubbles. From this point of view, the Central Banks are focusing on the broader picture of inflation. This is what the market might be getting wrong, because focusing only on inflation you can justify the eurodollar move we have seen. Francine what makes sense to you right now . Do you look at the phillips curve anymore . Yes, we do. We dont quite know when inflation will break out. Inflation keeps picking up. The growth we see in some of these countries world trade seems to be synchronizing. That continues. We can see intereurozne trade flows kicking into the game. I can see reasons why Central Banks are thinking about either starting to taper in the case of ecb, or in the process of exiting their unusual policies. Buckets, something unusual has been happening. Theres little in the inflation bundles. Its true in europe and in japan. Francine we are calling this chart the unqualified america and on the back of the jobs report, it means when you look at the Small Business hiring plans, so they continue to climb. Can you point to actually the labor market and say the structural beeper issue . Possibly so. We have a structural change occurring. Inve got ongoing growing use central economies. Central banks are underestimating how strong economies are. But that brings with them low inflation price discovery is now much easier. Price seeing more discovery areas, such as services, which we never saw b efore. These things all changed. Francine we will be back with david allen and Athanasios Vamvakidis. Alex get straight to the Bloomberg Business flash. Reporter volkswagens saudi unit has been made party to the munich prosecutors. The country made profits from selling engines. An administrative probe is the tool prosecutors can use. Spentutheast asian bank 3. 7 billion u. S. In technology over the last five years. It is now tryin starting to seee investment paint off. Singapores biggest bank sees improvement on the expense side of the business. However, online rivals, such as alibaba, are formidable rivals. I have to say, there are still very formidable competitors. One of the advantages they have the Customer Acquisition cost is very low. They are sitting on a massive full of hundreds of millions of customers that they can sell Financial Products to very quickly. Reporter googles new diversity chief has pushed back that the company has a politically correct model that ignores differences between the sexes. The engineer provided a detailed list of nonbiased causes for the underrepresented women in the industry. He says the companys leftleaning Workplace Culture prevents honest discussion of the issue. Tomorrow on Bloomberg TechnologySheryl Sandberg in an exclusive interview to discuss the social Networks Global impact. That is tomorrow at 10 30 pm. M. U. K. Time. That is your Bloomberg Business flash. Francine frances changing, the message from the economic minister, Bruno Le Maire. He gave us his First InternationalTelevision Interview since the election. She started by asking him about the row with italy. An exception. With the a direct link defense interest. Look at the decisions made by the United States, for instance. They have been exactly the same. When their defense interests are at stake, when your defense interests are at stake. I think this is normal and everybody can understand that we defend economic and strategic interests. Reporter how can you reassure investors that think france is going to block every foreign volveser as soon as it in some strategic interest . Just have a look at our latest decisions with president macron. We have decided to reduce taxes. This is good news for foreign investors. We have decided to simplify the labor markets, and we have taken very deep decisions to simplify the labor market. These are very good decisions for foreign investors. So, just have a look at our decisions and i think that all the decisions that we have taken with president macron send a very clear signal to the in foreign investors. You are welcome in france. No majorfrom hsbc, International Bank has chosen paris to relocate. Why do you think paris is already losing the race to frankfurt . We will win the race. We will win the race of attractiveness because we are making the right decisions and because we are standing firm. That arose questions during the last month is, will we stand firm . We will stand firm. We will make the difficult decisions. We will over the french taxes. We will make our country more attractive. We will take the Structural Reforms and the structural decisions that are needed. For instance, we will simplify the labor market. And i think that many banks, many investors should be aware that france is changing. Somethings ntot fake. This is true. Things are changing deeply in france. That is why we will win the battle of attractiveness. Francine still with us are Athanasios Vamvakidis and david owen. Are you confident that france wants to be reformed . And if yes, what does this mean for European Investment . An economy that has a competitive problem. However, he has to deliver. We have to see actually the reforms. And it is not going to be easy. On the fiscal side, i agree that low taxes will help the economy. But he has to tell us how he will reduce spending. Spending and france is the highest in europe. We are just at the beginning of this process and frances promising, but we have to see results. Francine will we see the results . Well, it will take up to 70 years to see these results on a macro level. Thead reforms in germany in late 1990s that did not show for 10 years. There is a very long lag for the reforms to show through, not just on a macro level, but on a micro level. Structural reforms bring benefit, but you need a strong, growing economy to provide the backdrop to push those reforms through. Growing, butleast it is far from booming. We will see what stronger growth can push those points through. Francine what are you looking for in that of once . Eurozone trade is really important. Trade between france, italy, and germany stopped growing. Now it is going 10 year on year, which gives me encouragement. If world trade carries on growing, that is quite positive, but the strength of the euro could be a problem. We have got elections coming through in italy, as well as germany, of course. Eurozone, at the moment, is on the upside. Francine at what point is the euro a problem . The longterm equilibrium is 5, depending and 1. 2 on the model you are using. Given the eurozone output gap remains a, and inflation is well below the target, the eurodol lar is strong where it is. The projections of the ecb have shown the eurodollar will be at 1. 07. We are more than 10 above this level. Francine when do you buy euro again . People are buying the euro against everything right now, yet we see fragility at the corners. That is part of the problem. Investors have become too excited about the euro. It would be better for them to buy the euro at these levels. The eurosterling is very close to an alltime high. I do believe the strong euro and the mixed data will start affecting the eurozone data as well. It might be time to start selling the euro values. Francine will stay with us. Former four star general is already making his mark in the white house. Plus, we talk about President Trumps chief of staff. This is bloomberg. Francine you are watching bloomberg surveillance in london. E lacqua he has only had the job for a few weeks, but john kelly is already kicking back and taking names, sacking two National Security council aides. Then, he gathered 200 white house staff for a meeting, telling them they all act as one team for the president. He has also tried to rein in some of the president s tweets. The president has shown a willingness to consult with kelly before hitting send. Lets get more now with our u. S. Congress reporter, Kathleen Hunter. Still with us, david owen and Athanasios Vamvakidis. Kathleen, welcome to the program. Another day and another piece of information to get our head around. Is john kelly the right man for the job. It seems like he is off to a strong start. He seems to have the confidence of the president. The president talked very glowingly about him in public. That from a president who has been very willing to go out on his own and say his own thing, the fact he is showing public at least difference to kelly, and it looks like that extends behindthescenes, those are all good indications for those republicans that are looking for a more streamlined message from the white house. The real challenge will get underway as time goes by. This week we have the president on vacation. There were already some tweets that emerged on saturday on social media of the president crashing a wedding that happened at his bedminster golf club. That is not necessarily problematic in and of itself, but it just demonstrates the challenges potentially that are ahead for kelly as he tries to keep the white house under wraps. Francine so, he wants to keep the white house under wraps. His priority is what . To stop the president from tweeting, but at the same time also stopping the leaks . That is the thing. It is a game of whackamole, you know when you go to the carnival. He has somebody different problems going on simultaneously. There are the leaks that are happening. There is the president going out and tweeting whatever he thinks at a given moment. Theres a lot of multilevels of problems. He can call the staff together and say, we need to work as one team, but that is only a successful strategy if the president is willing. It seems the president has given some deference to kelly to review some of his controversial tweets. That is a good sign, but time will tell if they are able to keep that up. Tweetse thanas, do impact the dollar levels . Not anymore. We used to read them every single day, but not anymore. Its too much noise. The market is focusing on whether we will see any policies getting done. The strong consensus that this point is nothing will be done. The market was very excited after the elections in the u. S. But now after the failure to reform the health care sector, the market does not expect anything on tax reform. Francine the are getting breaking news out of china. The quarter is ending in july and the reserves are at 3. 08 trillion. That is for the month of july. Do you still worry about a chinau. S. Trade war . Or is that now postponed . We just dont know. It is certainly out there as a risk. Brexit is all part of that story to some degree. We live in a world where we worry about certain things. If we have a strong Global Economy and world trade accelerates, then all these issues disappear. If we have a situation where the rolls over again, these problems will come back to the forefront. Francine thank you very much. Up next, we talk a little bit about china, north korea. An action of justice in response to u. S. Sanctions. We are live in manila, where foreign diplomats try to get the regime to talk. Again, we did have these reserves out of china for the end of july quarter. They are pretty much in line with expectations. The will have more on that, and north korea. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save when you choose by the gig or unlimited. Call or go to xfinitymobile. Com. Xfinity mobile. Its a new kind of network, designed to save you money. Francine you are watching bloomberg surveillance and im Francine Lacqua in london. Reporter venezuelas president said a group of 20 mercenaries attacked a military base in yesterday morning. Two attackers were killed, one injured and seven detained. I have asked for the maximum sentence for those involved in this attack. The maximum penalty and there will be no leniency under the circumstances, civilians and deserters. Reporter france is working with likeny to help companies google, facebook, and amazon to minimize taxes and grab market share in europe. Speaking exclusively to bloomberg, Bruno Le Maire said his country will propose simpler tax rules at a meeting next month of eu officials. There will be a text normalization between france and germany. And i am quite convinced that no later than 2018 we should be able with germany to have a common Corporate Tax. Odde taxes. Onize reporter u. K. Consumers cut back on spending for the third month in july, putting them in the worst slump in four years. Theport from visa said drop in spending was broad ranging, but clothing and transport were among the worst hit. Global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. Im taylor riggs and this is bloomberg. Hascine north korea threatened what it called an action of justice after the u. N. Approves sanctions on pyongyang. Uns regime is violating the sovereignty. We are live from manlia. You a, good morning to good afternoon where you are. How are these developments going down there . Reporter this is the first time that north korea is reacting to the sanctions. What action of justice really means we dont know, but it does sound like retaliation. Noth korea said it will negotiate the nuclear deterrence. Over the weekend, china expressed a lot of optimism that they might be encouraged to talk down those sanctions, the toughest set of s