Going on. Afteran stocks slipping we had a mixed session over in asia. Government bonds followed treasuries higher. Investors trying to figure out what the reduced odds of another Interest Rate hike mean for them. Euro drifting lower before the ecb releases minutes of its latest policy meeting. Zinc trading near a 10year high. That is a very quick snapshot of the markets. Now lets get to the bloomberg first word news. Sebastian south koreas president says donald trump has agreed to ask for consent before taking any military action against north korea. Gameirst News Conference and he said only his country could greenlight a strike. He warned that kim jonguns regime is approaching a red line. White house chief strategist steve bannon has gone public with his long simmering feud with some of trumps top economic advisers. Prospecthe american that he often battles with Steven Mnuchin and gary cohn. Benin did not immediately respond to request for comment on the interview. Minutes from the fomcs july meetings shall policymakers scratching their heads about why inflation remains low. Officials still see a gradually rising to their 2 target, but many saw some likelihood that inflation might remain lower for longer than expected. Britain is considering allowing European Union citizens to travel freely to the country after brexit. E. U. Nationals would be free to visit, but working, studying, or settling their would require permission. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Ceocine americas first president is being abandoned by big business. Two of Donald TrumpsAdvisory Councils have been scrapped after chief executives left. Blackrock Ceo Larry Fink said events in charlottesville were nothing short of domestic terrorism which needed to be condemned unequivocally. Jpmorgan boss jamie dimon said it was a leaders role to bring people together, not tear them apart. It marks a stunning rebuke for the man who pitched himself as a savvy business leader. The former treasury secretary Larry Summers also says those plans are probably out of the window. Taxaybe there will be some cutting, but i think the reform,s for structural which was the aspiration the president laid out, are minimal at this stage. Francine lets get more with our Global Business correspondent, stephanie baker. We are also joined for the hour by bob janjuah and Ralf Preusser. Thank you both for joining us. Stephanie, what happens today . Yesterday we had the councils being dissolved, a lot of ceos saying, we dont agree with the response of President Trump. Does he regroup and refocus . Stephanie we started off with a trickle of ceos leaving, then it turned into a torrent. He tried to get out ahead of it by disbanding the council. We are seeing an unprecedented rift between Corporate America and the u. S. President. Obama of course was not perceived as a probusiness president , but this is a president who pitched himself as the ceo in the white house, isolated from the top titans of Corporate America. I dont know how he moves on from here in terms of trying to get his agenda through. I think i agree with Larry Summers that many of them probably decided to jump ship because they realized the councils werent getting much done anyway. It looked like it was going to be hard to get tax reform or infrastructure through. So why continue . Francine what i cant get my head around is, in times of controversy, he could focus on tax reform. He could focus on infrastructure. Trouble get him out of a little bit. Why not focus on that . Stephanie i think that is what his advisers are telling him to do, stay on message. As weve seen time and time again, he cannot stay on message. Adingnnot help himself w into these other controversies. Tax reform is the kind of thing you have to stay on message constantly. Put pressure on members of congress. Without, it is unlikely to get through. Francine how are the republicans dealing with this . Stephanie youve seen the republicans come out, not naming him in many cases, but come out with very strong statements about what happened in charlottesville as a contrast to what he said on tuesday. He does look isolated from republicans on the hill, which will make it harder to get his agenda through. They havent come out on tv, criticizing him by name, so they havent gone that one last step. Francine bob, we will talk about the fed and fomc, but does this impact fed policy or dollar and treasuries . Bob i think it does. In the context of fed policy, the fed would have to allow for some kind of fiscal policy taking effect. The more likely that is, probably the more likely the fed is to hike. The less likely that is, the fan can sit back and look at the data. I also think it affects this kind of on shoring thing. Investment into the u. S. I think all of this stuff really arms that. Francine do you agree . It is difficult to see the real impact. You have an america divided in turmoil. For investors, what does it mean when councils dismantle . Ralf to stephanies point, given those councils havent done very much, i dont think it is that big a deal. Where tax reform is concerned, to me, it is down to congress more than the white house. I guess the risk we face is at some point the Republican Party will have to decide whether they want to go into the midterm elections with the white house or against the white house, and that is going to determine the success and likelihood of tax reform this year. Carefulso far been very to emphasize that their forecasts are independent of any hypothetical fiscal push, possibly taking a more realistic view of the chances. At this point, it is not like the rates market is pricing in anything. Francine what is priced in . Let me bring you to the outlook. You can see that economists are not quite as optimistic about growth in the u. S. As the president is. You can see that yellow line taking off. You have the median forecast. Does this go back to divisions in the country or reality that is not quite taking fruit, or do you just ignore this as noise . I guess my answer would be the same as about the feds dots. You ignore the forecast and look at what the market is pricing in , and structure your views around the risks relative to those forecasts. Despite all the negative news out of the u. S. Over recent days and weeks, i would argue that the rates market is poised to go higher rather than lower, because we can only really go lower if we start pricing in cuts. That would take a massive change in outlook. Francine do the markets look at what is priced in in terms of this division that stephanie was talking about, also in congress, and the dot plots . Bob i think markets are one thing and i think markets are functioning off a whole bunch of different metrics. Primarily the fed. The point i was trying to make is about the real economy. That actually matters in the context of what is going on. I think that is where the longerterm damage is. The longer we have this uncertainty in the white house, this almost bipolar kind of behavior, the longer that persists, the bigger the problem will be. For markets in the near term, it is all about the ecb, the fed, those kind of things. They are slightly different things. Francine wonderful. Thank you so much. We will get back to the fed. Thank you to our Global Business correspondent. Stay with surveillance. Plenty coming up, including data versus theory. You fed officials need to rip up the script . The latest fomc minutes next. Plus, the British Government considering visa free travel for e. U. Nationals. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Sebastian companies behind the most popular u. S. Credit cards say they are severing ties with extremist organizations that incite violence. Discover is ending agreements with hate groups. These and mastercard said they are coming off a number of sites. The moves come after they saw pressure in the wake of the violent protests in charlottesville. Tencent shares have risen after it posted record profits. The chinese internet giant is billion,ord 2. 7 topping analyst estimates. The companies benefiting from its smartphone game. Shares in Cisco Systems have fallen after it predicted another revenue decline as the business tries to remake itself. The Company Whose machines form the backbone of the internet said revenue in the current period may decline as much as 3 from a year earlier. Ceo Chuck Robbins joins us at 2 30 p. M. U. K. Time. That is your Bloomberg Business flash. Francine now lets talk about the fed. The battle between data and theory. That is how one analyst described the situation. Minutes from the fomc july meeting showed officials scratching their heads about why their models arent working. Us, bob janjuah, client advisor at nomura international, and Ralf Preusser, global head of rate strategy at merrill lynch. Range weves the seen. What will happen to them from now on . Ralf we think theyre going to go higher. It is a question about whether or not the market is willing to go the extra step and price in the end of the hiking cycle for the u. S. It is a question of what impact you believe the fed Balance Sheet will have. I dont believe transferring 685 billion worth of treasuries into the private sector by 2020 isnt going to have an impact on prices. I think rates will move higher. Last night didnt really tell me anything new. We all know the phillips curve models are challenged in the current environment. At the end of the day, the noise the fed is making about financial conditions can only be squared if they believe the Balance Sheet will actually impact 10year rates. If it wont, they will hike more, not less. Bob rates do need to head higher. I think the fed is going to be i think oneive and thing we dont talk about today, but we were talking about a few weeks ago, this issue of financial conditions. We have this inflation gig. Becomes astability bigger and bigger theme in public, certainly behind the scenes, so im with ralf. I think were going to see higher rates. I think terminal 10year yields are probably three and something. We are definitely heading that way. Francine talking about the Balance Sheet, we have a nice little breakdown between securities, treasury bills, notes, how messy is it going to be for the market . Ralf it cant not have an impact. What we also have to take into account is what is going on at the ecb, the other big liquidity providers globally. I think if were going to get some kind of coordinated maybe japan is to one side, but coordinated tightening, either rates or scaling back on qe, it must have an effect. Francine but we keep on being told not. Let me bring you over to the financial conditions easing despite rate hikes. We brought it back to 2015. Is this something the fed will start looking at more . Ralf i think they already are. This isnt the first time the fed brought up financial conditions. Dudley did his postmortem on what went wrong in the 20042006 cycle based on the fact that the fed was ignoring conditions and helped create the subprime bubble. That is why the Balance Sheet discussion came back onto the agenda sooner than originally benchmarked, because they are looking for tools to tighten financial conditions. If the market is right, and the Balance Sheet unwind will leave treasuries unaffected, that will force the fed to do more elsewhere. Ism both sides, the argument for steeper curves and higher 10year rates. Francine thank you so much, Ralf Preusser and bob janjuah. The fed isnt the only central bank with an inflation situation. We will talk about ecb. We also have some minutes being unveiled later on. This is bloomberg. Francine this is bloomberg surveillance. The euro area economy is in focus with julys inflation data out in just over half an hour. It is expected to come in at 1. 3 , below that target. A few hours later, we will get insight into mario draghi inking. Still with us, bob janjuah, client advisor at numeral international, and Ralf Preusser, global head of rate strategy at merrill lynch. Bob, how much more difficult is it, or how much more likely is it to have a policy mistake from the ecb than it is from fed . Bob entirely possible. The onege here is im focused on, which is probably different from what ralf is focused on, is the risk in the eurozone. We must talk about the italian election. Francine it could be next year. Why worry now . Bob if we start scaling back on the Balance Sheet, and lets say you get a five Star Northern League type of alliance which is pushing for a referendum on italian exit, yields arent going to be where they are now. At the same time the ecb has pulled back its Balance Sheet tool, are they going to go back in three months later . They need to focus on the rate side of things. I think the focus on the Balance Sheet . Rancine ralf ralf i didnt think i would expect to the more bearish than bob. I think the policy mistake is already baked in the cake. Since december of last year, when the ecb reduced qe meaningfully. Weve always seen a massive tapering of the support the ecb expends to the bond market. It has brought with it a very substantial tightening of monetary conditions. If you look at the move in real rates in europe, the entire effect of qe has already been unwound. Monetary conditions today are tighter than they were before qe was launched. Yet we are talking about inflation at 1. 3 and the ecb forecasting exercise where if they apply their own sensitivities mechanically, they might have to revise their 2018 number. Francine where do bunds go from here, and where does eurodollar . We have a chart which shows a spread between treasury and bund between u. S. And euro inverted. This kind of tells us the challenges ahead. Ralf toomey it has been a dollar trade. Weve seen dollar weakness across all majors since the beginning of the year. The euro area is suffering from the unwind of the trump optimism more than any specific expectation of ecb policy. That total correlation between rates and fx, i dont think we will see the correlated anytime soon. Francine Ralf Preusser and bob janjuah stay with us. We will break the latest u. K. Retail sales data. We will have talk on brexit negotiations. This is bloomberg. Francine you are watching bloomberg surveillance. Lets get straight to the bloomberg first word news. Sebastian President Trumps business forums have been disbanded after ceos quit. Former treasury secretary Larry Summers says the administration is unlikely to be able to enact significant tax reform. Maybe there will be some tax cutting, but i think the reform,s for structural which was the aspiration the president laid out, are minimal. Sebastian south koreas president says donald trump has beforeto ask for consent taking any military action against north korea. He said only his country can green light a strike. He warned that kim jonguns regime is approaching a redline as it seeks to weaponize missiles with nuclear warheads. Minutes from the fomcs july meeting show the majority of officials still see it gradually rising to their 2 target, but many saw some likelihood that inflation might remain lower for longer. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. Im Sebastian Salek and this is bloomberg. Francine thank you so much. We are just getting some retail sales out of the u. K. If you leave the fuel from autozone, month on month is 0. 5 . It is for the month of july. It is 1. 5 . Joining us now is shanker singham, director of Economic Policy and prosperity studies. Hes a leading expert on International Trade and has served as trade advisor to the United States government. Still with us, bob janjuah and Ralf Preusser. Thank you so much for coming in. Talk to me about how the brexit negotiations are going. Parts whato grade would you give brexit negotiations . Shanker you certainly need to parties. Weve done a very good job in the u. K. Of negotiating with ourselves, and we need to engage with europe and negotiate the ultimate trade relationship. That is in the interest of u. K. And european companies. Francine do you understand the blueprint the u. K. Government wants to get out of it . What is the u. K. Position . Shanker you need a starting position. It is not always a good idea to telegraph your starting position to the other side at an early stage. The u. K. Government starting position is fairly clear. They want a comprehensive Free Trade Agreement with the European Union. The european position is the same. That should not be so difficult to negotiate given the starting point. We are in the customs union. We are in the euro economic area. All these things should be possible. But we need to start that process. It is very important that we do everything in our power to start the negotiation on the trade relationship. You cant figure out what the interim arrangement is going to be until you know what the ultimate trade agreement in broad terms is going to be. Francine bob, what do you make of the sterling trade has impacts on the boe. Do they stick to the fundamentals . Bob they need to keep it simple, otherwise they risk confusing themselves. This,i do want to make on there is this kind of painting a pic