Skip to main content

tv   Bloomberg Daybreak Americas  Bloomberg  November 18, 2016 7:00am-10:01am EST

7:00 am
warm welcome to "bloomberg daybreak." alix steel is on assignment. i'm jonathan ferro alongside david weston. futures are little bit softer ahead of the open. the bond market earlier on, we did print a year today high on treasury yields. king dollar back in the driving seat, david. david: ok, we are going to start with the king dollar. the dollar rising against the euro. the greenback is getting a further boost after fed chair janet yellen's comments that a december rate hike is likely. coming up, an exclusive interview with st. louis fed president james bullard. bonds are poised for the biggest two-week loss in a quarter-century. president-elect trump continues
7:01 am
his marathon of meetings after speaking with japanese prime minister shinzo abe. he is expected to meet with mitt romney tomorrow. since the two egg stories are the rise of the dollar and the fall of the bond, is that the rise -- upcoming trump fed -- or the the fed? such an increase could well become appropriate relatively soon if incoming data provides some further evidence of continued progress toward the committee's objectives. >> the sustained adjustment still relies on the continuation of the current unprecedented financing conditions. it is for this reason that we will preserve the very
7:02 am
substantial degree of monetary accommodation. david: with us is josh feynman, deutsche chief economist. dollar?driving the does it stop at some point? josh: i think it is a couple things. the perspective divergence. it is likely the fed will raise rates in december. people are anticipating further hass ahead, while the ecb their foot firmly on the accelerator, not likely to take it off. then we have the election in the u.s. and markets are focused on the prospect of some substantial fiscal stimulus coming in the u.s.. you couple those things and they imply higher rates in the u.s., better economic outlook, stronger dollar. david: how much of this is
7:03 am
atmospheric as opposed to changes in the underlying economies? josh: i think some of it is atmospheric's or perspective. people are anticipating where the economies are going and they are thinking that the outlook for the u.s. looks brighter and the policy path looks higher than it does in europe. jonathan: why is it different this time around? i'm looking at the dollar index. we have gone through 100 and we have stayed. why is this time different versus early 2015, versus late 2015, early 2016? josh: i think people are anticipating that this is a break. particularly the election result is going to result in a sea change in policy perspective. we are going to get this thrust on the fiscal side. things that are growth friendly will allow for more growth, inflation to pick up, and interest rates to move higher.
7:04 am
it seems to me that the markets are really downplaying some of the risks associated with the new administration, the possibility of immigration restrictions, geopolitical risks rising to read we don't know that those things are going to happen, but they cut and those things would cut the other way. it seems the markets are not focusing on that stuff at all. jonathan: has the narrative got away with itself? josh: it may have. there is a lot of uncertainty associated with the new administration. this is a very different administration. we just know what they are going to prioritize, who they are going to come -- a point to key economic positions. we don't even know what the fiscal package is going to be. people are anticipating this really bold package. until we see details, we are not going to know. what would the next
7:05 am
treasury secretary tell you about where they are likely to head? still leave a lot of questions unanswered. we don't know how well the new administration is going to work with congress. aboutou are talking fiscal and regulatory reforms, spending initiatives, the president has influence, but congress has a very important say. we going to have to wait. david: there is a report that has just crossed that jeff sessions, the first -- the senator who first supported donald trump will be named secretary of state. if you are deutsche bank and you think about what the fine is you may be facing, the attorney general has a lot to say about that.
7:06 am
do you know what he might be doing, mr. sessions? the thought is that this administration will take a lighter touch when it comes to financials. we have seen some other sectors rally. thinking that the regulatory burden will be somewhat lighter. jonathan: the other question is whether these people are being appointed because they are the right person for the job or because they have stayed close to the person over the last year or so. david: jeff sessions was the first senator to endorse donald trump. very willingseems to reward loyalty. josh: i think sessions will be able to get through. but there is this issue with loyalty, for sure. at the same time, he is talking
7:07 am
to mitt romney tomorrow. there is no loyalty there. it is the opposite. they were at loggerheads to say the least during the campaign. the fact that he is willing to consider him for secretary of state means maybe loyalty is not the only thing that is important. jonathan: on the table is this big fiscal stimulus package. the narrative seems to be that it will go through. as you sit here at deutsche asset management, isn't that simple? josh: it is not that simple. republicans in the congress may have a somewhat different agenda. people are worried about the budgetary implications. you are talking about infrastructure spending, tax cuts, even if they do boost towth, absent in a reformed long-term entitlements, they are likely to worsen the debt trajectory. that may upset some of the people in congress.
7:08 am
how that plays out is a big unknown. david: as you sit there at deutsche asset management, you have to make decisions day today. how do you play the dollar? so you take advantage of the strong dollar and prepare for the fact that it may turn again? josh: the market moves we have seen have been very powerful. we have seen treasury yields rise, risk asset yields rally. we understand that, but we are cautioning people that there may be a little bit of an under appreciation of some of these unknowns and risks and markets may be ahead of themselves. jonathan: great to have you with us. that wraps up some of the market action. let's get to the headlines. >> president-elect donald trump is trying to delay a trial over his trump university until he is president. his lawyers say he is too busy as he prepares for his inauguration. they are heading to court today to continue to put the matter on
7:09 am
hold. the judge is the same one who trump attacked during the campaign for being biased against him because of his mexican-american heritage. he has urged both parties to settle. making sure heis is a force to be wrecking -- reckoned with for the next president. his approval rating is more than 80% and one survey says nearly two thirds of russians want to see him continue after 2018. in france, former president nicolas sarkozy is heading into . presidential primary if he wins the primary, he could face marine le pen in the presidential runoff next may. he is attempting an unprecedented comeback after
7:10 am
being defeated by françois lond in 2012 -- hollande in 2012. this is bloomberg. let's get over to abigail doolittle. >> the big deal is official. i'm talking about tesla and solar city. 85% did approve the merger. this does combine green cars with green rooftop panels. the question could be going forward, could it help the stock? trading lower on the session in the u.k., we are looking at some of the miners. we had some weakness here. we are seeing a slide in metals including copper, iron, and gold. iron was down four days in a row. some of this could have to do
7:11 am
with strength in the dollar. the dollar index is on pace for its best quarterly performance since march 2015. are tradingres lower after the company actually met estimates on the top and bottom line for the third quarter. what investors don't like is the fact that the company has been promising revenue growth. revenue declined in the current quarter, so the stock is getting somewhat hammered. david: coming up, alabama senator jeff sessions is reported to be the pick for attorney general. we will have more on the process for picking the next cabinet. rout pace, the bond continues. ther on the program, it is euro. we will hear from the st. louis fed president james bullard. this is bloomberg. ♪
7:12 am
7:13 am
7:14 am
david: this is bloomberg. i'm david weston. 10 days in the transition and all eyes remain on trump tower in midtown manhattan. a parade of advisors and cabinet officials have been meeting with president-elect trump. president-elect trump is said to have picked alabama senator jeff sessions for attorney general. is the senior executive editor for government. bring us up to speed on senator sessions. marty: our crack reporter jen thats broke the news according to two people with knowledge of the proceedings, donald trump has, in fact, decided to name senator sessions
7:15 am
to the post of attorney general. it is not clear whether he has formally told him that that is the case. we are pretty confident that is what it is going to be. david: take us into senator sessions. he was the first sender to endorse donald trump, which is probably not a coincidence. marty: it is definitely not a coincidence. it is true he was the first and he has been at his side through the campaign, an adviser and immigration and trade policies. he is well trusted by donald trump and that is probably the main reason he's got the job. there were others who are rumored to be in line for that like rudy giuliani and they are obviously out of the picture now. david: this was not a total surprise. senator sessions had been mentioned for department of defense or attorney general, but one of the things that strikes me that it may not be a coincidence that the announcements have been of people that don't need senate
7:16 am
confirmation. senator sessions is part of the senate, does that mean it will be easier to get him confirmed? marty: in 1986, he was nominated and he did justice not get confirmed in a republican senate. there were issues about purported racial comments that he made that he denied. ultimately, he withdrew his nomination. it is not a slamdunk. ride forot be an easy either him or any of the candidates. david: there were comments that can be taken as racially charged that he made about an african-american prosecutor. that was a long time ago now. marty: yes, and it does conjure up images to me of donald onmp's famous comments heard tape that he dismissed as locker
7:17 am
room talk. this was 30 years ago and he has been a three term senator. it will be interesting to see if they conjure up those comments, those purported comments, that are three decades old to use against him in the confirmation process. david: finally, for our bloomberg office, treasury secretary is particularly important. a lot of names have been kicked around. one of the names is jamie dimon. what kind of confirmation problems would he have? marty: well, given the anti-wall street fervor in congress and in the country, you would think that he would have a tough time, but i do think jamie dimon is so well-regarded and so well spoken that he would actually probably get confirmed in the senate, is my view. david: thanks a much for being with us, marty. it does not make it any more easier for jamie dimon
7:18 am
when lloyd blankfein comes out and says he is great. [laughter] jonathan: frank discussions in a warm atmosphere. shinzo abe meets donald trump and says he is a man he can trust. an important conversation coming up with st. louis fed president james bullard. the markets potentially poised for a second straight week of gains. futures a little bit softer ahead of the open. a single-digit on the s&p 500. on the bond market, a year to date high a little bit earlier. we are down by a basis point. king dollar and dollar strength was this same -- the theme earlier in the session, but not anymore. just marginally. will we close out the longest losing streak in the history of the single currency in the history of the u.s. dollar? this is bloomberg. ♪
7:19 am
7:20 am
7:21 am
jonathan: what does a trump presidency mean for the federal reserve? in the background, a dollar index approaching highs we have not seen since 2003. right now, an important conversation over in frankfurt. matt miller is with the st. louis fed president james bullard. matt? jon, thanks very much. jim bullard with us. we just finished a very interesting panel. one of the questions you were discussing was how trump's policies would affect u.s. growth. will fiscal expansion be re-inflationary or inflationary? >> well, i think the program does seem to -- of course, we don't know is probably the best answer. the things people are talking about have some potential to
7:22 am
affect u.s. productivity and i think it should be focused on u.s. productivity. some of the regulation might be overdone. the republicans are betting they can roll that back and increase you dust -- u.s. productivity. the infrastructure program done properly could provide some public infrastructure, which could improve u.s. productivity and drive medium-term growth. some kind of tax reform -- that would repatriate growth back from overseas that could increase u.s. investment and u.s. growth. there is some potential here. we have a long way to go to see if that is implemented. then come on these issues that may be more concerning, which are immigration and trade, as a macro economist, these are longer run issues.
7:23 am
they do affect the macroeconomy, but it takes a long time to unfold. if you were going to redo trade arrangements, you have to negotiate over a long period of time. i see that as a 5-10 year horizon, which is outside the box for day-to-day monitoring. immigration, as well. , could havereform an impact on the macroeconomy, but i see that as something that would be slow-moving because it would change who is coming into the country and that would affect the workforce over a long period of time. as a macro economist, i see those. term, a tax near cut or tax reform, infrastructure, you think that would add to the inflation? does this constitute a regime
7:24 am
change? can we go back to the reagan years? >> i think it is way too early to say that. it has a little bit of potential to go in that direction. we will keep an eye on that. growth has been very slow. premium onigh government debt. investors love government debt all around the world and are willing to hold government paper and negative real returns. that has been declining for decades. as far as monetary policy is concerned, what we are saying is you should accept the fact that we are in this low interest rate right now and make monetary policy for that regime. that is why we have called for
7:25 am
not too many rate increases. it is possible that you switch to a real interest rate regime later and we would have to watch if that happens. then we would have to change monetary policy at that point. matt: if this fiscal expansion comes to fruition and boosts production and if selling more government debt brings up the returns, you were talking earlier about the negative real return on one-year government paper at 100 -- -135 basis points. >> it is really, really low compared to what it was historically. what exactly is driving that is the subject. for the purposes of thinking about the next two years or 2.5 years, we think that will probably continue going forward. we will continue to see slow productivity growth. some of these programs, some of these fiscal initiatives might help productivity go higher. but we will see as this
7:26 am
develops. there are lot of ifs. at this point, we are very early on. matt: but do you see the risks to the upside or are there risks to the downside looking at 2017? >> i know markets are talking about maybe the fed won't raise rates as soon as previously expected. suppose we did that, that would be a reaction to fast growth, faster inflation. be appropriate monetary policy given those developments. i think i would like to make a distinction between an appropriate monetary policy responding to things that are .oing on in the economy if we get a faster rate rise environment, it would be for good reasons. matt: let me ask you about some things we have seen in the markets. dollar strength has been incredible lately.
7:27 am
euro weakness, the longest streak of data drops against the dollar in the history of the single currency. does that concern you, the speed at which we are seeing assets fluctuate? >> there has been some volatility postelection. but if you look at a bigger picture over the last year, since the fed first made a move on the policy rate, really, we are coming back to levels that are consistent with december 2015. thatgives you some comfort these kinds of prices are probably not out of line. 2015, therates from dollar for 2016 actually fell, the yields fell by almost 75 basis points. matt: contrary to what the fed was trying to do. opposite of what you
7:28 am
would have thought, but now we are coming up to those previous levels and a lot of that is expected inflation, which has been too low. has been closer to the target, that is encouraging from a central banker's point of view. as of today, looking at the data, these moves are not shocking. matt: on the one hand, you oh donald trump a thank you note for helping you to achieve your goals. >> that is not what he had in mind. [laughter] matt: i wonder if you are concerned about the independence of the fed. there has been a lot of talk about janet yellen and her -- trumps view of her role. are you concerned about this new administration leaving the fed's sovereignty intact? >> signals from the transition team have been that they will respect the independence of the fed. we have a big committee, a lot of institutional memory, a lot of analysis, i think we will keep a lot of continuity in
7:29 am
monetary policy and we will keep us from arm's-length at the political process. the new administration will have a chance to name new members to the board, there are two openings. the chair's term does come up and they will make a decision at that point. they will have a chance through normal channels to have their influence on the fed. matt: the fed will be able to continue following on the policy that it feels best suited for the u.s. that seems really divergent from what we see happening in europe. there is of the divergence besides monetary policy divergence. we have fiscal expansion looming in the u.s. what i hear in this conference and in berlin is a clinging to austerity. in every sense of the word. does that concern you? there has certainly been a lot of talk about policy divergence over the last several years and that it would lead to
7:30 am
major dollar strength in particular. you have already priced in european monetary policy. it is only when there are surprises, that there are major changes in the currency. terms, the u.s. fed policy will not be too different from what we were seeing before and obviously, the europeans, the ecb is continuing to provide stimulus for the european economy which is consistent with what markets have expected. so far, i think that this divergence issue has not changed much. we will see how it develops over the next six months. matt: jim, thank you so much for your time. jim bullard, president of the
7:31 am
st. louis fed. back to you in new york. david: good to hear from mr. bullard. the thing i took away is that the fed is being very cautious in the reaction to donald trump. you heard from janet yellen, we will see. jonathan: you heard it from the minneapolis fed president. they have no idea what is coming down the pike. what can they do with their forecast? nothing. david: the smart thing is to not do too much. jonathan: not making predictions is the prudent call, i guess. jim, great to have you with us on the program. let's get to the st. louis fed dot plot. dots at the bottom is the st. louis dot plot. jim bullard said the rates would
7:32 am
stay. are you with jim bullard? jim: i think jim bullard will be right only if the reflation and growth trade of the new administration is not tried. i think what we are seeing is a clear desire and the market seems to be believing them that the new administration will oversee tax reductions, infrastructure spent, and some deregulation. if that is the extent of the policy changes, you do get an acceleration of growth and flat forever does not work. david: recession. if you look at historically what happens, if you look at all the presidents, eight of 12 had a recession in the first year. we are overdue historically for a recession. what about that possibility? jim: that is a possibility,
7:33 am
david. we are looking at a classic teams in stimulus in there sian stimuluskeye in there described policy. the advocacy from the administration spokespeople is, sure the unemployment rate is 4.9%, but it is really 11% and there are a lot of people who really want jobs who have not got them. i'm a little bit on the skeptical side about that and i suspect we are not that far from getting an economy running at capacity. jonathan: before the fiscal stimulus comes down the pike, the market just adjusts. out withachs is coming their estimates for 2017. 2016 was a rough year. 2017, the bigger call is the dollar.
7:34 am
the dollar is the winner from developed market populism. the rising likelihood of fiscal stimulus, more protectionism, immigration controls. then you get tighter monetary policy offsets. on the flip side, you have the politics in europe with the euro . you have the politics of the u.k., the weaker pound, all of this is bumping up against the dollar and the dollar becomes the shock absorber for global politics. how much longer can that go on for? jim: it depends on what is going on in the world, but probably not that long. i would certainly call the dollar to be strong next year and i think some of that will be the safe harbor against slowing growth in europe, i don't patten is not great. as a result, that could be one of the slowing points. the other thing that could cause a recession is if the promised tariffs arrive.
7:35 am
,hat could cause a recession that could cause a reduction in world trade. all of the strong dollar protectionism may be bad news for american protectionism -- manufacturing, which contrary to popular belief is doing well at the moment. there are some straws in the wind that make you worry about an extra session. the explosion in dollar-denominated debt. this is a global economy that has been levered to dollar-denominated debt. has to bite into the risk rally. when does it happen? jim: that is a hard question. the real growth driver above all, the u.s. economy. i do think the outlook for growth could be hurt by the stronger dollar. the other geopolitical risks,
7:36 am
when you look through that, if the administration gets lucky, you could see growth accelerate for a couple of years, but more likely, they will find it difficult to plot their way through the capacity constraints of the economy. that will be the challenge for them. the infrastructure spend in itself will be difficult. david: one thing that perplexes me is that i've always been told that markets hate uncertainty and donald trump is the uncertain choice. equity markets have skyrocketed. why are we not seeing an uncertainty discount. take equities, for example. shouldn't the price-earnings rate be going down because of the uncertainty? jim: maybe not yet. i think a lot of what has happened is that the stress has been felt in the bond market, clearly, and rates have gone up in expectation of faster growth.
7:37 am
in the equity market, a lot of the reaction after the market was because people are conditioned to make money buying on setbacks. that is the consensus right now. i happen to believe it is right for a while. scenario, the u.s. will be the best growth driver in the world. i would buy united states equities on setbacks. i would be much more wary of the international equity markets and they have not done so well since the election. david: thanks so much. the principal global investors ceo. it was a big weekend monetary -- sales.contemporary art has the president-elect boosted sales in art? then we navigate the global bond selloff. this is bloomberg. ♪
7:38 am
7:39 am
7:40 am
emma: this is "bloomberg daybreak." coming up in the next half hour -- from new york, this is bloomberg. i'm jonathan ferro. the markets are shaking up in the early session. potentially the second straight week of gains for the s&p 500 as we sit near a two-month high on a benchmark in the united states. a couple points away from an all-time high on that index. switch up the board quickly. i will whip through the other asset classes.
7:41 am
we printed a year to date high on the 10-year and bit earlier. dollar strength was the theme, it continues. euro-dollar down for the 10th straight day. you've got to go all the way back to the late 1990's. ok, this week was a remarkable week in new york and not just for president-elect trump putting together his administration headquarters on fifth avenue. it was also the location for a series of art auctions that brought in more than $1 billion, far more than anticipated. .eading the list was a monet over $66 million. this is the painting. the pace gallery has been at the center of the art world for years. we are joined by the president of the pace gallery to take us through the sales we saw this week and what we saw. welcome to the program. >> thanks very much. david: what do these tell us
7:42 am
about the art world and the economy generally? >> a tells us about the art world's resilience. it is a market made up of thousands of tiny markets. these balance each other. growth seen incredible over the last 10 or 15 years and it is continuing. was whataw this week we considered a very rational, calm kind of market. with a really great work went for spectacular prices and the collectors were very discerning. david: rational, but some of these were well over what was estimated. is it too much to anticipate that some of this is because of president-elect donald trump and
7:43 am
in anticipation of good times yet to come? marc: i would not quite say that. i would say that there is a sense of uncertainty, but in the sense of uncertainty, the art market sometimes flourishes. the value of art is based on inspiration. inspiration is something in demand in great times and troubled times. auctionsaw this week's starting off with some jitters, but it builds its own confidence and that is something that happened right into that monet and so forth. david: we should put up a picture of the decode an egg -- eunig, as well. it went for $66 million. are these domestic u.s. buyers? are they overseas buyers? it changes and it is in
7:44 am
the midst of changing right now. chinese collectors move from just collecting chinese contemporary art to collecting western art, as well and moving to the top of the market. was a long time when eastern european and russian collectors sort of dominated that kind of area. as they moved out of the market, the chinese moved in. , in the states, we are beginning to see another shift, as we saw in the 1980's, where the market was really made up by the real estate development community and it moved into wall street. now, we see the tech community starting to come in. david: you have opened a gallery in silicon valley? marc: we did. we opened a gallery in palo alto . about two years ago.
7:45 am
it is incredibly successful. david: one last question. one of the things donald trump said, he wanted to do away with the inheritance tax, he called it the death tax. if that happens, what effect does that have on the art market? does that have any effect on the market? marc: it has an effect on the auctions. as a lot of the auction business is based on the fact that at the end of somebody's life, there is a necessity to move that, half of that material over to the government. the art inan't cut half, it heads to the auction house. if that goes away, we will see of moving from one generation to another much more quickly. david: thank you so much. time for other stories making headlines. emma is here with the bloomberg
7:46 am
business flash. emma: volkswagen has reached a landmark agreement to cut as many as 30,000 jobs globally. the automaker is planning for $3.9 billion in expenses as it tries to crawl back from the emissions scandal and develop electric vehicles. layoffsd to know forced until 2025. britain's moste prominent brexit supporters is concerned about the hardline direction the process has taken. in an exclusive interview, he urged a more measured approach. >> we are going to have to be a little bit patient. the government is going to need to think things through kumal workout what is achievable and what is not achievable. wolfson says it would be
7:47 am
an enormous mistake to cut ourselves off from the best and on principle. tesla is now a clean energy company after shareholders overwhelmingly approved the acquisition of solar city. the deal, valued at $2 billion, would integrate the maker of electric cars and batteries with the installer of rooftop solar panels. more than 85% of shareholders voted in terms -- in favor of the merger. jonathan: thank you very much. coming up on this program, will opec reach a deal? for an head to doha update on the latest. that is coming up next with crude up by five percentage points over the last week. in the broader market, we are one hour and 43 minutes away. futures positive, up on the dow. a single point on the s&p 500. the 10 year yields touch a high.
7:48 am
dollar is the highest since 2003 earlier in the session. the euro very close to closing out the day with a 10th day of declines. finding a little bit of marginal strength in the last couple minutes. it is all about crude next. this is bloomberg. ♪
7:49 am
7:50 am
jonathan: from new york city, this is bloomberg. i'm jonathan ferro. potentially the first week of gains since october 21. .et's head over to doha opec and non-opec members have been continuing to cement a deal. the energy minister echoed comments from the opec secretary-general, saying he
7:51 am
remains optimistic over the agreement reached. for more, we are joined by manus delhi -- doha. how close are we to a deal? manus: the saudis, the russians have been here. they had short, brief meetings. why do i focus on the number of barrels? it is the lower number agreed with. minister waserian focused on iraq when i caught up with him. problem today is that every country has the right to forecast extra capacity. it is the right of every country
7:52 am
. we have an agreement and every member country of this organization understands to respect this agreement. , every country. 14 countries signed an agreement in algeria. it is 14 countries. each of these countries reaffirms its commitment to maintain the agreement on which that will not go back. they are using the same rhetoric in terms of optimistic -- i think the essence is that a millionuld cut barrels a day, will that be enough to get the russians on board to cut as well? what will that do to crude? will it get to $55? look at the dollar.
7:53 am
that is the other side of the trade. jonathan: the stronger dollar story has been fueling the decline in the commodity market. can they get a deal done and leave at others from the plan? i said it last night. exemption, exemption, exemption. iraq is the most pressing issue in terms of will the freezer will they join? we have a six-month deal on the table. the print team, the online team, we are all here watching this. the consensus is that there is a six-month deal on the table, would that be enough to take board rightn on the
7:54 am
now? do six months of a deal clear the inventory off the table? madewas the point that he to me as he left this delegation. the saudis are gone. been awesome.has manus always gets the good gigs. manus cranny in doha, thank you very much. david: it is time for bloomberg trends. we take a look at the top stories terminal users are reading. actually chinese piling into u.k. real estate. jonathan: there we go. david: they decided to invest in the big new financial center. this is interesting given brexit. area.in the east end dock
7:55 am
it will be a hike. making a hugele investment in london, as well. goldman sachs, the top trade for 2017, we talked about one of them, the u.s. dollar. stellar for the year ahead trades. david: maybe there is reverse psychology going on here. maybe you take the goldman trades under the other side. jonathan: perhaps. , theg up in the next hour outlook for energy and investment ideas under the president-elect donald trump. from new york city, a quick look at the markets. futures, positive, up nine
7:56 am
points on the dow. positive to points on the s&p 500. key levels we have hit. the dollar index did hit a 2003 height a little earlier. then it retraced some of the moves. we county down to the cash open in new york city. that is an hour and 32 minutes away. futures are creeping a little bit higher. a lot to digest. the fed chair and the ecb president speaking in the last 24 hours. this is bloomberg. ♪
7:57 am
7:58 am
7:59 am
jonathan: from new york, a very
8:00 am
warm welcome to "bloomberg daybreak." i'm jonathan ferro alongside david weston. alix steel is on assignment today. we are poised for a second straight week of gains. futures are positive markedly. on the dell.oints we get to the bond market very quickly. dollar strength, the highest since 2003, david. david: here is what you need to know. it starts with the dollar. the dollar is rising for the 10th day against the euro, the largest winning streak since the euro was created 17 years ago. the greenback is getting a further boost. the looming interest rate hike is pushing treasuries lower.
8:01 am
trumpesident-elect continues his marathon set of meetings to after meeting with shinzo abe, he is expected to meet with former presidential candidate mitt romney tomorrow and that is what you need to know. abigail, how about some movers? abigail: lots of movers this morning. marbella technology, shares are surging. on, it wille holds be estimates for earnings. marvell has some tremendous strength going on. another tech winner today, salesforce.com. bloomberg intelligence claimed that this has to do with better expectations and a key step, deferred revenue groups, suggesting that sales momentum .ill continue
8:02 am
downs of the chipmaker are , it fell on a quarter over quarter basis at applied materials. the fact that they raise the guidance for the current quarter. this is the premarket ahead of the open. let's get you up to speed on the big stories this morning. the rise of the dollar and the fall of the bond market. the question is whether it is anticipation of a trump presidency or is the prospect of fed policy.n the we heard from janet yellen and mario draghi on the different takes of where their economies are headed. the -- ifen: such of data provides evidence to the committee's objectives. mr. draghi: it still relies on
8:03 am
the continuation of the current unprecedented financing conditions. it is for this reason that we preservingitted to the very substantial degree of monetary accommodation. capturing this divergent story, it is not just the fx market, it is also the bond market. i can show you this on the bloomberg right now. it is the spread between treasuries in bonds. this spread is the widest it has been in decades. will yields continue to stretch out and will spreads continue to blowout? does the dollar strength stop that from happening? david: all of that money is
8:04 am
going to be sucked out of europe jonathan:. it is a big issue for policymakers over at the federal reserve. the bond market is moving on potential prospects for fiscal stimulus. if you are a policy maker, can you make it forecast on where it should be? apparently we do not have that sound, but we do have a guest. rates and that of affect strategy who joins us now from london. we are just talking about the bond market and the big spreads. the widest in several decades. wider. think it can go the treasury said office pulling yields up everywhere. i think i see some room for the .preads to widen
8:05 am
if you want to buy treasuries as a european investor, you can take the fx risk. a lot of the guys are going to hedge fx. when you take the costs of the cost isto account that the highest it has been in 10 years. the spread treasury boom is not that large. it is quite timeless. -- tiny. looking at the spread on a gross .asis might be a little bit david: how much of this is inflation expectation on the two sides of the atlantic? vincent: we have seen in the u.s. quite a sharp surge in inflation. definitely, there is that you in the market that if mr. trump fiscal in twovide
8:06 am
capacities that are already quite tight, that might generate more inflation. that is where the big difference has come from. i also see room for real rates in the u.s. to pick up. if you look at five-year real rates in the u.s., they are quite low on a historical basis. fore there is more room treasury yields. given the experience of the last couple years, we have seen the limitations of monetary policy. why is it different this time around? wasent: for a long time, it tough for the fed to tighten because all of the other central banks around the world, the boj, the bank of england, they were all easing and it was tighter for the fed to tighten.
8:07 am
keen tonks now are less cut rates. they are less keen on expanding qe or enlarging qe. that might make it a bit easier for the fed to tighten. in the process, the u.s. dollar is still strengthening sharply. i don't think that will stop the fed for now. the risk is that this dollar rally becomes uncontrolled. and then it becomes disruptive. that would make it different. stronguities have been and it is good enough for the fed to raise in december. david: take us beyond the day to day of this. we had ray dalia calling for an end to a 30-year bull market in bonds. trends thatlarger
8:08 am
are structural that would indicate that this is a longer-term trend that will continue for several years to come or is this just markets go up, markets go down? i think the turn happened before the u.s. election. you had a slightly stronger growth outlook. that the, i would note gdp in the u.s. is trending around 3.6% and this is stronger. inflationo seeing turning a bit. it is not positive. there is inflation which is diminishing. wage growth in the u.s., headline inflation picking up. . think this is a turn the u.s. election and the trump victory only magnified the policy rotation that is at play.
8:09 am
less monetary policy easing -- policy easing, more fiscal policy easing. in the meantime -- david: in the meantime, we want to get an update on headlines in the outside world. emma: president-elect donald trump has centered on alabama senator jeff sessions as attorney general. it was not immediately clear whether he had formally offered the job to sessions, an early and ardent backer. he called texas senator ted cruz last night, who was under serious consideration for the role to tell him the job was going to sessions. trump has offered the position of national security advisor to retired general michael flynn. the 57-year-old is the former head of the defense intelligence agency and a key military surrogate throughout trump's
8:10 am
campaign. he has been a vocal critic of president barack obama's strategy to combat islamic state. directly troops advanced cautiously into the eastern district of most so -- mosul today? civilians could be seen fleeing the violence. dayal news 24 hours a powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. david. david: coming up, the massive rotations out of bonds. the heaviest outflow in bonds in three years. later, japanese prime minister shinzo abe calls donald trump a trustworthy leader. gifts at trump tower. this is bloomberg. ♪
8:11 am
8:12 am
8:13 am
jonathan: let's get a check of the markets for you very quickly. one hour 17 minutes away from the cash open. unchanged on the s&p 500. still poised for a second straight week of gains. switch of the board quickly. treasury yields, a 2016 high. the dollar strength over the last 24 hours, renewed dollar strength. at one point, the dollar index, the highest since 2003. david: dollar strength compared with bond weakness, actually. president-elect donald trump has sparked a selloff in the bond market, now on pace for its biggest two-week loss and 26
8:14 am
years as investors rotate into riskier assets. still with us is society general's global head of rates. take us through the bond selloff. what is causing it? vincent: well, it is both a withing economic outlook growth a bit stronger than it was a few moments ago. expectations that inflation will continue to pick up. there is an economic story. a policy story. policy rotation out of monetary policy easing. rotation really has been magnified by the u.s. election. i am concerned that we have
8:15 am
implied a sharp increase of duration in the portfolios. is causingand yields quite some losses on those portfolios and you have concerns that you would see outflows. you are starting to see that already and that is causing more pain. it is the duration built up that we had over the years that is making the correction now quite large. jonathan: i want to get to a quote from the deutsche bank ceo speaking on a panel in frankfurt. the quote -- of course, he is talking about the ecb's corporate debt buying program. it is the italian 10 year yields over germany. we are at 181 basis points. we have blown that over the last couple of months. how do you priced sovereigns?
8:16 am
appropriate price, what is the appropriate yield? vincent: admittedly, the central bank actions, qe in particular, had damaged the recovery. ins is may be true or corporate bonds right now. in sovereigns, it is true that the global qe had distorted bond yields to the downside. it needed a couple of triggers for that to be corrected. it is happening now. we do have a few models. depending on whether or not you , you havee global qe different levels. -- unadjusted values, maybe we are in a
8:17 am
transition period as the market prices the policy rotation from one value to the other. it is quite dangerous to try to fade the setup we have right now. jonathan: let's look at eurozone debt specifically. you see it in italy, you started to see it in france. do we see a continuation of that story as far as you are concerned? vincent: it is true that you have many risks down the road, especially in europe. the electoral agenda is very busy over the coming year. we do here investors asking about the french election. we have the primary election on the right side this weekend and next weekend in france. i think the outcome of that will be quite important. i think the market could be quite pleased and potentially --ssured if somebody like
8:18 am
they would be in a good position for the presidential race next year. with mr. sarkozy, the market could be a bit more worried because you will get a more dilution of the vote in that case because you have a new candidate stepping in. near-termrisk factor that might keep some spreads under pressure. we don't think it is going to stop bond yields from going higher. david: one last question, vincent. talk about u.s. bonds, basically , we are blessed in that we are coming off a very low base. if we were adding 50 basis points, we would be very concerned in another world. does it get so high that it may interfere with the growth that the bonds shift their basis on? if bond yields continue
8:19 am
to rise very fast, that is going to feed into global risk markets and in particular into equities. u.s. equities have performed very well on the basis that the fiscal stimulus and, potentially, the lighter regulation will be good for corporate america. if you have a continued surgeon bond yields, that might in fact the broader risk markets and eventually stop that bond sale. now, we are not seeing that. for now, i'm worried that there is a not a lot of fed hikes preston for next year. for next year, there is a bit more than one hike christ in on the markets. i'm appraised -- convinced that is not enough. the market will reap price the fed to the upside. david: thank you so much. society generale's global head of rates. alabama senator jeff sessions is
8:20 am
donald trump's choice for attorney general. later, russia's oil minister me .pec heads in delhomme -- doha this is bloomberg. ♪
8:21 am
8:22 am
david: breaking news coming out all morning long. the latest appointment on the cia from donald trump. be the ciag to director according to reports? >> according to reports, mike pompeo, a congressman from california and a tea party guy, has been selected for cia director. david: and at west point grad, i understand it, as well as harvard law. harvard law, has been a strict anti-obama guy voting against obamacare in congress. he is generally well-liked
8:23 am
there. i don't know whether his policy views really jive with cia director, but there you go. he does have a military background, so that is probably why he is being tapped. david: breaking news from last hour was jeff sessions reportedly being the picked for attorney general. what do we know about that appointment? >> well, he was the first senator to endorse donald trump very early. he has been a key advisor, part of the inner circle. it is clear that those kinds of people are getting the top jobs. he was rumored to be in line for andrney general or defense apparently, donald trump has decided on him for attorney general. that moves rudy giuliani out of that potential spot and we will see whether he gets anything at all. david: we have also had news with respect to foreign affairs.
8:24 am
last night, the japanese prime minister met with president-elect trump, the first world leader to meet with him face-to-face. what can out of that meeting? >> well, we did not get a clear readout on the substance of those conversations. although, we did hear security issues were brought up and trade. they exchanged golf paraphernalia. of theire came out saying that he feels that he is a leader that can be trusted, which is an important thing for him to say. david: we have a quote we will put up from the prime minister about him being trustworthy and that they will be able to do business together. the president-elect as an important meeting with a possible candidate for secretary of state. >> that is mitt romney. it is really extraordinary, given what mitt romney said during the campaign, that donald trump is a fraud and no one should vote for him, very publicly and through the campaign. that he is meeting with him is
8:25 am
really interesting and if he were to get a cabinet job, it would say a lot about how donald trump plans to govern. david: it might also say something about russia. mitt romney is the former .overnor of massachusetts the presidential election, he took a strong view on russia that president obama made fun of. >> yes, i know. romney's credentials and foreign affairs are quite strong. i think he would be welcomed by the senate and would be a clear sign that donald trump plans to have a government, a no grudges government. he is about as strongly anti-trump is any of the republican establishment. david: there is a theme going through all of these which is confirmation. we have a congressman who is popular, the senate would be confirming one of their own, we have mitt romney, who could be confirmed. is that the common theme we are seeing? >> it is a tribute to the transition team that they are picking people who will probably
8:26 am
get confirmed. although, senator sessions did have a problem getting confirmed 30 years ago when he was nominated for a u.s. attorney's job. that said, i think sessions would fly through. what is interesting is who replaces sessions. the governor of alabama is a republican turned democrat. that could turn the balance in the senate a little bit. david: that is an interesting turn. well done, marty. bloomberg's senior executive editor for global economics and government. coming up, donald trump won't be there, but his trade threats will be discussed in peru. we will be right here next. this is bloomberg. ♪
8:27 am
8:28 am
8:29 am
emma: it is 8:30 a.m. on wall street and 1:30 p.m. in london. the dollar is rising for the
8:30 am
10th day against the euro, the longest winning streaks and the euro was created 17 years ago. the greenback is getting a further boost after janet yellen's comments yesterday. the december rate hike is likely. that looming interest rate hike is pushing treasuries lower. bonds with their biggest two-week loss in a quarter-century. donald trump speaking with japanese by minister shinzo abe last night -- he will meet with mitt romney tomorrow. let's get a check of the markets and see how it's capturing those stories. ofuities poised for a week gains. a single point on the dow. a quarter of a point on the s&p 500. swing on 10oint after weurope --
8:31 am
printed a 2016 high on 10 year treasury of's. -- treasury yields. euro-dollar up on the session by .1%. let's get today's morning meeting. is jurrien timmer. great to have you with us. let's talk about energy investment, shall we? opec at the end of the month. a lot of people think maybe it won't happen. at the same time, a stronger dollar influencing the oil market. oil went to $52 and it's been stuck between $42 and $52 ever since. big moves. the way i look at it, oil eventually will go higher because of supply and demand catching up to each other. we have to get past the opec situation because they need to
8:32 am
get some kind of conclusion and until we get there, we are stuck in this range here. it's one of the few commodities that has not broken out. copper, the commodity complex in general has moved higher on this whole notion of ore growth in the u.s. strange bedfellows to see the dollar spike higher and a lot of other commodities go up at the same time and emerging markets go down at the same time. question have the opec -- whether they have a deal at all. you have donald trump being elected president -- on the one hand come he says let's pump a lot more and on the other hand, ive tovery accommodate the fossil fuels business. you still need higher oil prices to induce companies to pump more. whether or not there are more fields available to actually do that.
8:33 am
it still remains a supply and demand issue. generally north of $50 for companies to get interested in increasing supply. jon: about a month ago, we had this breakdown in this comeionship that they have together marginally. what does that mean to you? jurrien: a lot of relationships have been standing upside down. the dollar has broken out of its range. the 10 year treasury is north of 2.3% today. historically, over the last year and a half to make that work to happen, we would have a giant taper tantrum on our hands. the dollar is going up along with the stock market, along with bond yields. the market is pricing in more growth. as long as we get that, we are ok. we can live with higher rates and live with a fed that will raise rates in december and or three more times
8:34 am
next year as long as we have that growth multiplier in place. if not, the markets are overshooting here. inid: is the market right pricing this amount of growth in or not? the treasury never belonged at 1.3 or 1.5 or even 1.7. 2.1, we value is around are now at 2.3. the market is pricing in more growth. if we get that, we can go higher. we will all survive, like the last couple of years. know what the plan is come up we don't know how the cbo would score it in terms of the actual growth multiplier. at this point, we have to make sure the markets don't overshoot because then we could get a taper tantrum. a stronger dollar does have its impact on emerging markets.
8:35 am
the russell 2000 is that a new all-time high today. the global stock market is still down from its highs. there's a large disconnect between the u.s. and non-us here. there is an argument that we are going to taper tantrum that emerging-market currencies getting back, peripheral yields all over the place. year yieldsrman 10 go from negative to positive 30 basis points. in percentage terms come in price terms, a massive move. the only thing that is holding up as the mill the -- developed market equities. jurrien: not the kind of route that that would be overly concerned about. the s&p would go down and that would force the fed to hold off. with the s&p testing all-time highs and the dow at all-time highs, the fed is very happy to go.
8:36 am
if we get rising rates and more growth, that could be a good thing because that would give the fed and exit when that -- give the fed an exit plan. jon: jurrien timmer, great to have you with us. next up, the asia-pacific leaders summit to discuss the trade and economic conditions and the relationships between them. mike mckee is joined by alan bollard. great to have you with us, michael. mike: thank you very much. those statistics tell you why this meeting is so important. a peck formed discuss ways to promote free trade.
8:37 am
you have the elephant in the room, the election of donald trump. the host says this is something the leaders have to address head-on here. alan: either we haven't been doing our job properly -- we have to pay more attention to the picture of globalization. two decades of opening of trade and investment has helped half-a-billionaire people get out of poverty into the middle class. mike: that is a great statistic and something you can focus on. how does that help the unemployed steelworker in pennsylvania and the united states. how does that translate what you do that --
8:38 am
alan: we have communicate the advantages and beneficiaries. that is clearly not what the mission out there is. we are looking at what we call soft globalization. trade agreements running into big problems. we are pushing ahead with voluntary stuff so economies who want to go ahead on these things well. it is contingency driven. we are paying much more attention to what it does in terms of the effects on the ground. come a lote debate of the manufacturing stuff is old globalization. rely on services. mike: you mentioned trade deals that are not happening. to be become a president obama has to come here and tell everybody it is probably dead. for president obama has
8:39 am
to come here and tell everybody it is probably dead. are the countries here going to move forward? alan: peru is part of the pacific alliance. outward looking, learning quite a bit from them. we have the east asia plus arrangement going through slow negotiation. tpp is on the shelf. bet we are trying to do is atthcoming -- it was working how you build on those -- this might be a plan b. states is theed biggest economy in the world and was the driver for free trade, was the leader of apec. where does it leave the united states that it will have a leader that is anti-trade?
8:40 am
we have the current administration here. president obama, john kerry have given us a good message about moving forward. change in policies, we will have to accommodate that. jon: that was michael mckee with alan bollard. we have lost that line. interesting that he's having a conversation with the current u.s. administration -- which is borderline useless. he has to talk to the new administration. how can you come to agreement and say things are moving forward fine when it quite clearly is going to be real trouble ahead? incoming and mistaken has made it clear that they don't agree with anything secretary kerry has been doing when it comes to trade and
8:41 am
climate. jon: mike mckee will be speaking to christine lagarde. that interview, coming up later. the potential for an opec deal. energy minister says production cuts could be reached. this is bloomberg. ♪
8:42 am
8:43 am
emma: coming up in the next
8:44 am
hour, black rock's rick rieder joins us to navigate the global bond selloff. david: this is bloomberg. non-opec members alike are continuing efforts to cement a deal to rein in oversaw i and lift rises. that's oversupply and lift prices. he remains optimistic over the agreement reached in algiers. -- more, we are joined by you been there 24 hours now. what is the mood? we have shifted gears a little bit. the word i'm hearing is preparation. that is the rhetoric we heard from the algerians. the algerian minister is one of the great protagonists -- there's a line that comes to
8:45 am
mind from the best. step in so far as can't turn back. preparedness for november the 30th. an airing from saudi arabia and the algerians refocusing back on 32.5 million barrels. is a little bit better even though the dollar has had a great run. 32.5 million barrels would be at the lower end of what was potentially on the table. the algerians also indicated to us that there could be a new six-month timeframe on the table. that is playing and slightly into the markets today. david: i will know of her dust never take issue with someone from great britain who quotes shakespeare to me. even better, irish. it was in accord to have an accord. i want to know what the agreement is.
8:46 am
they going to get down to who produces how many? isn't that where the rubber meets the road? which i don't think shakespeare ever said. every opec deal of substance that ever seen in the past 30 years has been one where there is a very clear measure. there will be a committee set up to look over the iranian and libyan production. one of the great harpoons that everybody puts at opec is you create these feelings but don't monitor. have a little bit of substance in terms of control and monitoring the levels the iranians produce -- the iranians want to get back to 4 million barrels a day. what are the russians going to do? we chatted briefly off-camera.
8:47 am
the rhetoric used was rather optimistic. monitoring, you bang on the money there, monitor what the deal is. that would be at the good end of this overall contention that i have never heard so much talk to get a deal done. the consensus is there are 24 hours on the ground, they smiled a little bit more -- they're hesitant about putting anything on camera. the saudi's came, they nodded and left. david: how much does it matter? we just had a report from the e aea -- >> bear this in mind, there is a phrase "swing producer." for me, it's not so much about the nuances of 32.5 million barrels or 32.7 million barrels. it's about the direction of
8:48 am
travel and the -- what is trump going to do for big oil? the cartel is still relevant. the cartel has the ability to shift the market in conjunction with a material agreement of the russians and other non-opec producers. this is about messaging. well, you cange shift the minds, hearts and barrels of oil. time, i want to hear yates. never heard mcbeth quoted in a conversation about opec. we thought opec would try to put
8:49 am
a floor under the crude price after the meeting in algiers. since then, crude has rolled over. wonder how much pressure -- the saudi's turned up, nodded and left. i wonder if they are thinking about doing even more than what they agreed to. david: they did this once, had the effect of bringing the price up, it has drifted back down again. emma: business executives in the u.k. earning the highest salaries o facing a fresh crackdown that theresa may's government will demand more transparency for bonus pay -- may responding to a populist backlash to narrow the gap
8:50 am
between wages and the pay of those at the top. big of aive asked how bribe it would take to be doubt a competitor for our nor oresits in guinea -- iron thesits in guinea -- company declined to comment but the accused executive is denying the allegation. volkswagen has reached a landmark agreement with workers to cut as many as 30,000 jobs oblique. the auto maker's plan to save $3.9 billion in expenses as it tries to crawl back from the mission's cheating scandal. the reduced headcount represents nearly 5% of its workforce. forceded to no layoffs until 2025. david: coming up, stocks may be
8:51 am
near record highs, but other asset classes are sounding the alarm. this is bloomberg. ♪
8:52 am
8:53 am
jon: this is bloomberg. in the bond market globally, global bonds was for the biggest two-week loss in a quarter century. the data going all the way back to the mid-1990's. month since 2013, yields up 46 basis points on 10 year treasuries. the conversation in the next hour of the program with rick rieder -- a conversation i'm excited about. david: time for battle of the charts. abigail doolittle and alix steel? you are back? alix: my plan got in really late
8:54 am
last night. that's my playing that's my plane got in really late last night. 2014 when you have that huge spike in the dollar index, you also had a near record high long positions as well. that is not the case this time. you have the huge run-up in the dollar index. the reason why that is significant is if you round up seeing that's how much more can the dollar extends to the upside? one of the few reasons why many analysts are bullish on the dollar going forward. abigail: that is very good. we have a terrific chart here made by the great hillary clark.
8:55 am
measures of volatility going back to august them in white, we have a merrill lynch bond volatility index. in purple, a deutsche bank currency volatility index and in blue, we have the vix, the so-called fear index, fear gauge on u.s. stocks. after the election, we have heightened volatility in bonds and fx and in currencies and stocks come it has gone quite down. bonds arecies and more of the foundational asset classes. suggesting there is perhaps more volatility ahead for stocks. david: this is a great chart i will go with alix. she knows this one of our two big stories and she just got off a plane -- alix: and you missed me. coming up in the next hour,
8:56 am
we will discuss how to navigate a global bond rout with rick rieder. in the equity markets, futures a little bit negative. poised for a week of gains on the dow and s&p 500. we hover near a two month high. high oned a 2016 year 10 year treasuries. now down by two basis points. dollar strength the story the last two hours. counting you down to the cash open in 34 minutes. from new york, this is bloomberg. ♪
8:57 am
8:58 am
8:59 am
jon: good morning and welcome.
9:00 am
this is "bloomberg daybreak." alix steel will be on television a little bit later today. we are counting you down to the cash open. poised for another week of gains in europe and united states. , what a weekarket it has been. they 2016 high on treasury yields and then we are down two basis points, but the dollar in the driver seat. dollar rising for the 10th day against the euro, the longest winning streak since the euro was created 17 years ago. greenback is getting in for the bruised after janet yellen's comments yesterday that a december rate hike is likely. that looming interest rate hike is pushing treasuries lower. bonds are poised for their biggest two-week loss in at least a quarter of a century. president-elect donald trump is
9:01 am
said to affect jeff sessions for attorney general. -- said to have picked jeff sessions for attorney general. we are told that trump wants the alabama senator for the role. emma: an unchanged open for stocks ever so slightly higher. are still investors pretty tired after last week's big rally in stocks. the s&pis the fact that 500 yesterday closed within three points of its record high. indexes, the dow come s&p 500 and nasdaq all on pace for a weekly gain. carnage in retail. gap shares plunging after the company put up and in light quarter but what investors don't like is the fact that gap has been promising revenue growth. the sales did meet
9:02 am
estimates in the third quarter, they declined 1.5% on a quarter over quarter basis. shares are lower. also lower, foot locker. this after their earnings beat. inventories rose by 1.9%. foot locker close more stories than they opened. abercrombie & fitch plunging after they put up a big significant same-store sales comp miss for the third quarter. there. negative stuff this stock is down 35% year-to-date, suggesting a turnaround for abercrombie & fitch is pretty far out of sight . jon: the month of december, the potential for a rate hike, probability and 96%. fiscal 2017, stimulus set to come down the pipe. what will be the monetary policy
9:03 am
offset? >> the markets are hopeful there will be a lot of fiscal stimulus. i have no idea what the new president and what the new congress are ultimately going to pass and what the fiscal stimulus will look like. it there will be stimulus. guess,ow, if i were to until we know more, assume the status quo. fiscal policies will affect short run and long-run economic behavior that we have to take into account. >> a more expansionary fiscal environment facilitates higher policy rates. for me, it seems it's what the markets are expecting, it's likely to mean more rapid rate increases. jon: joining us now is rick rieder. the theory is pretty simple. physical does that do work and
9:04 am
monetary policy has to deliver an offset. they don't have their fiscal stimulus yet. they have not got it. how did they forecast for it? mike: i don't think you can. -- rick: i don't think you can. we have hit all their metrics thus far. we hit the targets, the fed would have gone in november. the 90% odds the fed is going to in a number of metrics through the 2% target. it's 25 basis points on the front end of the yield curve. they should have gone a while ago. we are ready to go. they will be going in december. then, the trajectory, if you follow the dots, it's those go moves in 2017. they will watch the data and watch the physical transmission for sure.
9:05 am
david: the fomc has a lot of uncertainty. you do as well. people investing in bonds have a lot of uncertainty. how do you position yourself? you don't know what will go through congress and get done by the government. how do you position yourself that you will not take about the bath ifbonds -- take a you own bonds? september, when the bank of japan talked about letting the economy run hot, the fed later that they talked about letting the economy run hotter, the paradigm has shifted in terms of inflation. let inflation accelerate and then you push it into a new gear. long and interest rates are dangerous. you see what's happened since the beginning of september. the long end of the curve come almost 15 points -- this is aaa
9:06 am
securities that are -- that have had this sort of dissent. you own a lot of cash flow on the front end of the ocher. that will be deliberate in terms of how they move given all the uncertainty. think about high cash flowing assets and hold them, that's the way to insulate yourself. make sure you are being really careful about long and exposure. you can still generate positive return in fixed income. -- it's whereit do you own it that will be greatly important. there are assets overseas that still make some sense that will outperform u.s. interest rates. that dynamic is really important in terms of how your managing -- buying investment-grade credit that has a lot of interest-rate exposure. you can use tools to manage the interest rate component of it and it's being really thoughtful
9:07 am
about long and interest rate -- it will be incredibly volatile. jon: let's talk about this from a global bond market perspective. spread, thehe widest since the late 1980's. 20 to look at this chart and say 22 -- how do it think about this at the moment? rick: this is an unbelievably powerful chart. so many crosscurrents. the international demand will still be there. there is an interplay today between the international demand which will continue to be , that bit and the
9:08 am
fact that inflation is accelerating and u.s. investors are reducing their exposure. what wins? the dispersion. u.s. long and interest rates don't make a lot of sense. until you widen that even more significantly. german rates are also too high. they will continue to move higher. how much of this is nominal and how much of this is real? both and perfectly .ymmetric take what's happened the last couple of years and go all the way to the last data point, what's happened is real rates have compressed and inflation
9:09 am
break evens have come down. now, you are starting to see both. at the end, you see both starting to move higher. that is the right dynamic. inflation is moving up and real rates are moving up. it's literally both that are taking place. that is the right dynamic going forward. david: rick rieder will be staying with us. emma with first word news. president-elect trump has chosen jeff sessions as attorney lawyer who was an early and ardent trump backer. president-elect donald trump is trying to delay a trial
9:10 am
over trump university until he is president -- they're heading to court today to try to convince the judge to put the matter on hold until next year. former french president sarkozy is heading into a weekend presidential primary as the front runner. -- he will likely he's attempting an unprecedented comeback after being defeated by francois hollande in 2012. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i'm emma chandra. this is bloomberg. coming up, trumps economic agenda and what it could cost taxpayers. rick rieder says there is a way
9:11 am
spendingr trump's without it showing up on the government's balance sheet. they'll join energy minister says a deal could be reached on production cuts when opec meets at the end of this month. details ahead. this is bloomberg. ♪
9:12 am
9:13 am
david: this is bloomberg. as part of trump's infrastructure plan, the president-elect has encouraged private investors to help act public projects. rick rieder has talked about ways of moving trump's agenda forward without putting the burden on the u.s. taxpayer loan. he says the time for these so-called private partnerships that public private partnerships is right now.
9:14 am
explain what the deal is here. rick: there is the knee-jerk reaction, if we are going to spend, more debt goes on -- that is not necessarily the case. you have seen it in many parts of the world today that we are at a historically perfect time --create public-part of it public-private partnerships. you've brought real rates down to a level that you can now fund fiscal policy. it doesn't have to be all on the federal government balance sheet. you talk about, you have to spend more to borrow that you can create a partnership with the private sector and the private sector s are dying for assets that have real income attached to them. flowey are secured by cash coming in from infrastructure, it is a win-win for everybody.
9:15 am
there's a number of elegant ways ,ou can structure deals structure dynamic around bridges, tunnels, rose where the actual private sector owns the and match the liability streamer the government can own a piece of what is functionally the equity. realar to how a estate deal is done. andn where rates are today given the need, because of the aging population and pensions insurance, there is a need for those assets. it is the best time in history to create these. you are seeing and in other parts of the world. in europe, you are in an incredibly powerful time to do it. this has been talked about a lot more in europe and here. as i understand the deal, the government owns the bridge and i will loan money to the
9:16 am
government to build the bridge and then i had my repayment secured out of the cash flow from the bridge from the tariffs? claimyou would be first on those flows that come off, whether it is a toll or bridge or what have you. you can create a structure that makes a tremendous amount of sense. you can cut the amount the federal government has on the hook. functionally, the government benefits because you create a multiplier effect in terms of what happens, you are putting people to work in creating tax receipts on the other side of it. it is a win-win if structured right. private investor, one thing i'm skeptical of is big government projects. there are cost overruns, delays -- where does the private
9:17 am
discipline of the marketplace working to these private public partnerships? part of having the government involved in being a partner with you is they are the risks on what is the equity in similar to aon -- real estate transaction if you are a developer. being at the top, being a debt by theand being secured taxi sheets, toll receipts come etc., you can create something really you feel pretty good as i get older that you are getting paid out. david: what about this infrastructure bank? good something similar be done with the overall bank? rick: 100%. something that is really important going forward and that'shave prayed tha painted the president-elect as you are going to spend and borrow -- we have a congress that is disciplined and has talked vocally about keeping the debt down.
9:18 am
you can create an infrastructure bank and have participants in .hat jon: fascinating stuff. rick rieder sticking with us. still ahead, bank stocks rallied since the election that we will discuss the future of financials with rick rieder. a quick look at futures markets for you. largely stable, positive six points on the dow, going nowhere on the s&p 500. from new york city, this is bloomberg. ♪
9:19 am
9:20 am
jon: this is bloomberg. a strong week for financials as they rallied after trumps when last week. the ceo of deutsche bank spoke earlier about the need for less
9:21 am
bank regulation. banks in europe need to be there is ensure that growth in a sustainable way with creditors expanding. forces a set of operating against the banking system at the moment which undermine its ability to foster economic growth. jon: that was the deutsche bank ceo speaking in frankfurt. joining us now with what's next for the banking sector is yalman onaran and rick rieder. that thely a surprise banks want something done on the regulatory side of things. the rally we've seen over the last week has been an aggressive repricing and the prospect of soccer regulation being part of that story. -- softer regulation being part of that story. n: it's hard to decipher
9:22 am
how much of that values because of regulation and how much is more infrastructure spending, all those things. there is definitely hope that will happen. about lifting the shackles off the banks, etc. there will be some changes. it will be hard to do big major , even because dodd-frank when the democrats had so much stronger control of the congress , it took them a long time to pass. to change laws, it is still not easy. things thatrtain can be done on the sidelines such as capital regulations which are not done by congress, they came from international negotiations. in europe, the winds have been
9:23 am
blowing against more harsh regulation. is that pressure coming from europe for several years now. if the u.s. joins that side of the equation and says maybe we should hold back a little regulatorsdifferent that trump a points to key positions in the u.s., things might get easy for banks. david: what could president trump do on day one? is at the treasury secretary or the fed? yalman: the fed. david: he cannot change that. yalman: janet yellen usually designates that -- the one who has been doing this effectively playing the role of vice-chairman was never appointed as such. he has an unofficial title.
9:24 am
the position of vice-chairman is still open. he could appoint -- there could be confirmation issues. david: the senate's republican. yalman: there could be a new vice-chairman. all this is in place, things could look a little different and the u.s. could start playing a different role. weedse are in the d.c. here. i love the steeper yield curve. the bank stocks -- if i listen to mario draghi, the same constants, he was not talking about a softer touch on bank regulation. are we really going to get that kind of thing? so much of what's happened in the markets the last couple of weeks is the potential for something to happen when the reality can be much more difficult to implement. rick: markets tend to overreact. there is something real.
9:25 am
if you take what mario draghi said, there is some regulation and has gone a bit far. something's can be paired back a bit. pared backngs can be a bit. rates have moved up nicely. they can start to lend, leads to inflation, greater velocity in the system. on september 21. now, we are kicking fiscal into --h gear in anticipation of if you drop the corporate tax rate from what it does to their cash flow means you can borrow more. there's a lot of things that play their part -- at play there . jon: rick rieder and yalman
9:26 am
onaran. the opening bell up next on "bloomberg daybreak." dow futures up 14, s&p 500 futures up two points. the record high in the premarket. -- equity market. yields at 19 basis points -- treasury did print a year-to-date high on the 10 year . -- euro-dollar the declines. -- euro-dollar declines. ♪ seeing is believing, and that's why
9:27 am
9:28 am
we're opening more xfinity stores closer to you. visit us today and learn how to get the most out of all your services, like xfinity x1. we'll put the power in your hands, so you can see how x1 is changing the way you experience tv with features like voice remote, making it easier and more fun than ever.
9:29 am
there's more in store than you imagine. visit an xfinity store today and see for yourself. xfinity, the future of awesome. speed always wins. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. jonathan: from new york, bloomberg, i am jonathan ferro and we are moments a lipid and the opening bell. futures positive, up 13 points
9:30 am
on the dow. points away from an all-time high. wicked session in the bond market. yields on a 10 year difference. a 2016 high. we rolled over, two-year yield or 10 year yield rather down two basis points. you're a with a losing streak, 10 straight days and dollar strengthens -- euro with a losing streak for 10 straight days and dollar strengthens. $45 and 40 stable at -- $45.43. . >> we are looking at basically an unchanged open. we have the dow, s&p 500 and nasdaq ever so slightly higher. the big deal is the s&p 500 within about two points of its record closing high. it will be interesting to see if they could happen on the day and break the last record high put
9:31 am
back in on august. all three indexes are also on pace for weekly gains. the second in a row, so strength for u.s. stocks. stocks trading higher are the airlines, lots of green. kevin christie at citigroup initiated on the sector with mainly new buys. new buys on delta, american and southwest, and united and continental at the new neutral but the new buys and topic is american. he likes that revenue growth is picking up. fact thate likes the capacity growth seems to be declining and that should help. it is worth noting the sector has been on a tear recently. a bid andfets through did this closed it to compositions and several of the airlines. the index is up more than 4% on the close yesterday. strength care for stocks and airlines. david: thanks. i love the alliteration.
9:32 am
we will talk energy. energy stocks rebounded from a .eak start of the year continental research ceo told us how the president-elect can boost the industry even more. have annk we opportunity here. i think the energy world today is in good shape with the selection. let me tell you the difference. the difference was we were facing extinction. they wanted to put us out of business and hillary was going carry on with the same thing obama has been doing. that did not happen. we will be around an awfully long time. and is the difference, everybody feels david: the change. joining us with his outlook's
9:33 am
david lebovitz, j.p. morgan asset manager global market strategist. welcome back, david. you heard harold pam, saying -- harold hamm. is this real? that l: there are rebounds we have seen since february this year, but i have trouble seeing how oil could push above $50 a barrel about supply and demand balances which drove the initial selloff being corrected. we saw energy stocks, the price of oil, make a slump earlier this year. there has been speculation opec might do something. this comes back to the issue of there being too much supply, and what we see is the times are oil rose over $50 a barrel, although shale producers start pumping over again. k there was a stick -- jonathan: there was a story about germany and the competitive industry and there was an argument that it helps. i wondered about the competitiveness of u.s. shale,
9:34 am
given there are two years of to $50.ound $40 how competitive is u.s. shale now and the efficiencies over the last couple of beers and how significant are they? david l.: it is significant. company's left are pretty solid. we sought the shakeout in the energy industry. i think key players left could be profitable forward. it is the companies at this point better profitable at these levels. if you gotten to the shale business expecting oil to be $100 a barrel evermore, the founders of with an empty bag, but those hospital at lower prices will be a viable source of growth for the economy over the next years. david: it is not just energy stocks that have been out favorite but a number of other, for example, financials. they have surged. how much of this is purely the anticipation of what donald trump might do in the administration?
9:35 am
: anticipation is the keyword word. there is uncertainty and we don't know what the policy prescriptions, which will take cold, or look like the for the majority of the year, i have been pounding the table for cyclicals over defensive, thinking of financials and energy, and they have moved past over the days. i would not be surprised to see stocks and yields take upon is, digest some of the information we have gotten and figure out what a trump presidency will entail. any policy he puts into place, even on day one, probably will not take hold into the middle of next year, so there is a lot in the market to me to see fax before we see another late higher. jonathan: if you had to drop a -- if you had to wrap up the last few days with the word, would it be capitulation? l.: that-- in my david is a fair word to use. you want to be low volatility,
9:36 am
high dividend yield, not enough information, rates are lower, and it yields moved 30 basis points over days. we sought a strong snapback. fax the side, is this what investors have been looking for? --ebody to say, yes, use looser fiscal agenda is a reality going forward and they become aggressive buyers of risk assets on the back of that. david: the election has changed the world. we have seen it already but did not change the law of physics. let's talk about price-to-earnings ratios. it is a richly priced market right now. 19 times earnings. introducing more uncertainty into the world's, typically, that would put downward pressure, so how far can this go? i think about the two main drivers of stock returns, earnings and multiples, i think of progrowth agenda out
9:37 am
of washington is good for earnings. icy earnings doing ok next year, -- i see i means doing ok next 3% to 7% if we see earnings growth, the question is the icing on the cake is multiples. they will be constrained to the up and down side. you have uncertainty about what policies will actually look like, which probably can bring multiples to the upside, but it is like a new version of the central bank. you have this rhetoric focusing on a progrowth agenda which casts multiples to the downside, so it is about earnings. jonathan: ball physics, fine, but-- lot of physics, fine, i keep going back to this quote this morning from frankfurt, there is absolutely no price discovery and corporate bonds, so we don't know the price of credit. he called it a dangerous situation. you could apply that to other asset classes.
9:38 am
when we talk about prices, we talk about where the prices of something should be. elements,t next to the pricing buyer in the boj and ecb and president-elect donald trump talking about the fiscal stimulus. the market and participants, how to get to an efficient price with that backed up? david l.: the market is full of distortions now, but there is always something distorting the market, always something bothering the market, either in a good or bad way. i think the most prudent thing that investors can do is focus longer-term. valuations are the single biggest driver of forward returns. if we look at valuations in the relativeme market or valuations between stocks and bonds, i think there's clear opportunity in equities over fixed income. we are more optimistic about high-yield credit. we think you can walk away with your coupon at the end of the day, but right now, it is a
9:39 am
distorted market and you let asset valuation work for you and let it be a guide as to what to put money to work. david: the more specific. it is stored in market, uncertainty in the marketplace. this may go better than expected say don't want to be left behind . on the other hand, it make a worse. i do protect yourself and equities against those? david l. : this is relet asset allocation work for you. in 2010, i would say, stocks are cheap, bonds look expensive, he should be over equities. that is no longer the play. we are in a fully valued asset market environment, so you hold some high-quality fixed incomes to give your portfolio that balance and provide the tension. -- provide detection, but maintain exposure to equities, domestic and international, given the prospect of stronger growth going forward. you just try to go down the middle. jonathan: great to have you with this.
9:40 am
david lebovitz, market strategist. cutting globally, an effort to save $4 billion to turn around the company. details,. currently, 10 minutes into the session in the united states. equities trading on the s&p 500 as we sit and a two month high. -- dow rolling by one point .1 of 1%. this is uber. ♪ -- this is bloomberg. ♪
9:41 am
9:42 am
9:43 am
emma: this is "bloomberg daybreak." bloomberg television speaks at ims managing director later today at 3:50 p.m. eastern time. jonathan: i am jonathan ferro. 13 minutes into the session and equities treading water. second week of gains in the united states and across the continents in the eurozone. some of the movers and the united states, good morning, abigail. abigail: before we look at two technology, the nasdaq moments intraday record high and it will have to see if the index and other indices can take on the record highs. sharesp, salesforce.com of the customer relationship management company trading
9:44 am
higher-than-expected third-quarter, putting up $.24 and adjusted earnings, better than what they looked for. and bloomberg intelligence analyst says it reflects better execution, also positive that it grew 20% quarter over quarter, making it some confidence that the current quarter could be made strong while ceo marc benioff has said that he "dreamed of doubling revenue from what they're looking for in 2018." pretty big dreams. as for another winner, we are looking at marvell technology would shares soaring, best day since july 20. earnings estimates for the third quarter by $.67 and raise the fourth quarter and current quarter by $.62. we do have an upgrade at susquehanna to positive. he says he sees this company as his top takeover candidate and they could get taken out the dates week their business by taken outtle bit --
9:45 am
his state week their business by just a little bit. because the bloomberg to look at 41, a longer-term chart of marble technology, lots of uncertainty, but -- marvell technology, lots of uncertainty, but it may still suggest that the upside is hedge on for mrvl technology. jonathan: thank you. the move from frankfurt germany -- by, germany, a company reached a landmark agreement to cut as many as 30,000 jobs globally. looking at equity in frankfurt, the automaker plans to save $3.9 billion in expenses as it tries to call back from the omissions chief of scandal. with this remark bureau, chris, great to have you. 30,000 jobs.
9:46 am
over 600,000 employed, so the contact's cash context perspective. how significant is this forvw? chris: it is -- four vw? chris: it is a big step. they are partly owned by [indiscernible] volkswagen living on to keep people working and employed. the fact that they are ratcheting that back is a big step for them. david: we have a different approach to layoffs in the united states. sos is through attrition, what are the times to get this 5% out of the company? years.quite a few there talking about until 2020, so five years before they get those numbers out. is a huge company, 624,000 removingployed, so
9:47 am
thousands of workers the year is not that much of a stretch. also, they have a relatively older workforce in the manufacturing plants, so they will do early retirement tokages, buyouts, so getting 30,000 sounds a lot of people but for company the size of volkswagen, not that huge. cap operations all around the world. the personnel chief said argentina and brazil will especially be painful there. jonathan: it feels like this is about the deselect emissions scandal. not alle sense it is about that. bachus to their other challenges. chris: 50 so scandal was the catalyst -- the the so's -- diesal scandal was a catalyst. was before the scandal, it just north of 2%, so they have been struggling and they have been too big, not profitable
9:48 am
enough, too slow to adapt to changes,so some of the like underpinnings an undertone behind this is that they made to adjust for the future. that means a lot of jobs are jobs that folks like in -- that volkswagen will not be needed in the future of automotive if you talk about car sharing and self driving bugles. they need to pick it to digital and electronic technology. david: it sounds like there is another pipit. for many years, volkswagen goal was to get market shares and it sounds a a are saying, we don't but to be the biggest o the most profitable. how profound is that? chris: it is a change of tone. it was size matters most. there were clear volume targets
9:49 am
around the strategies, getting the goal of 10 million vehicles annually in sales was the key factor, getting bigger than toyota. the shifting strategy is still volkswagen and a lot about size. they are still run as a job machine and rather than ratcheting back and highly knocking its cap may not be as profitable in the long term, they are expanding, going into mobility services, create mobility service division like an in-house uber that will be there 13th brand. they will announce details in the coming weeks. that would require a lot of investment, so volkswagen is a company very much about size and spending money. david: thank you. 's or art is reported. coming up, bloomberg markets. vonnie quinn, what do we look forward to? vonnie: we will speak about risk assets support and if it
9:50 am
disappears once you get the details about donald trump's stimulus plan and whether it is workable and if it will add to growth or add to the deficit and debt. one of the people speaking to about this, head of global asset asking about inflation expectations because some measures are not as high as others. why is that and which should we trust more? mark,l be speaking with speaking about the pension debt, and that is about $20,000 per household in illinois, one of the ways we are trying to combat this is by ordaining hedge funds in the index and we ask how that is going and what else illinois plans to do. thanks. we will be watching. the trump transition, said to have picked the attorney general and cia director. the president-elect is together
9:51 am
his administration. next, this is bloomberg. ♪
9:52 am
9:53 am
jonathan: key events the rest of the day, a week for feds the, rounded off with more. we will hear from dallas fed president at 1:30 p.m. and then jerome at 9:45 eastern. we will bring in the comments throughout the day. heard several reports about appointments coming out of president-elect's team, including alabama senator jeff sessions, the next attorney general and the next cia chief. a look ahead on what to expect this week, particularly this weekend, we are joined by marty editor, senior executive for global economics and government. thank you for being here. put together what we know so far and what we expect over the next 48 to 72 hours.
9:54 am
marty: the people he considers to be his closest allies are getting the first jobs. senator sessions, as you mentioned, and then the national security advisor. also, and then we had the extraordinary meeting tomorrow in new jersey with mitt romney, and their is serious consideration being given to him for secretary of state. that is one big job standing in the national security apparatus. i would suspect we have a decision on that early next week, if not this weekend. david: retired general flynn, but explain what is going on with the state as far as we know it. at one point, it was a tight cinch for giuliani and now his name has fallen away. is this a vetting issue? marty: it could be. there has been reporting, including are own, about rudy giuliani's financial interests
9:55 am
in venezuela and that could cause some concern over what the here and able to be confirmed by the senate. public,hink that his seemingly to be lobbying for the job, may bring a sour note within the trump apparatus. he may be still the leading candidate but they are thinking about other people. david: on your experience, in the early days, there were reports about dissension within the ranks and confusion, but they keep a pretty good pace, according to the norms? marty: i think they have begun to hit their stride. there was conflict, obviously, at the beginning with power, senators klein for each other for donald's ear, but i think you may see things speed up. also, one big ring is the treasury sector.
9:56 am
-- one big thing goes treasury sector. we had reports of that ina minute now we are not so sure. that is another big one coming next week. david: we started the week whoing like we knew it was. marty: we knew that was the recommendation and we are trying to find out just what that says. david: thank you, rd shanker, bloomberg senior executive editor for politics. jonathan: we wrap up the trade with 25 minutes. this is the shape of the session so far. we tread water on equities in the united states, breaking few levels in the bond market, highest yield on the 10 year and the dollar back on top. from new york, this is bloomberg. ♪
9:57 am
9:58 am
9:59 am
york,: 10:00 a.m. in new 3:00 p.m. in london, 11:00 p.m. in hong kong. i am vonnie quinn in new york. mark: the london, i am mark
10:00 am
barton. welcome to "bloomberg markets." vonnie: we will take you from new york frankfurt, the united kingdom and here's what we watching. president-elect's selects jennifer sessions for attorney general. the odds of when he will get confirmed by the senate. mark: in frankfurt, ecb president mario draghi said the recovery in the area is not yet strong enough to deliver sustained reflation. a keynd what will be ingredient for the economic outlook in coming years. vonnie: st. louis fed president talks to bloomberg about potential u.s. bubble. he is confident it is not the same magnitude like in the

40 Views

info Stream Only

Uploaded by TV Archive on