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tv   Bloomberg Surveillance  Bloomberg  November 22, 2016 4:00am-7:01am EST

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francine: trade-off. don't plans to shred the transpacific partnership deal his first day in office. will china fill the void? things markets know with certainty about the trump presidency. all four major benchmarks making records. in a world of disrupted trade couldents, theresa may negotiate a better deal for britain. this is "bloomberg surveillance." i am francine lacqua in london. go morning. we have a great show set up. it is said to be the greatest
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trade deal in regional history. donald trump says the united states will withdraw from the transpacific partnership on his first day in office. the statement was included in a video outlining executive actions his administration "can take" on day one. meanwhile, all four major u.s. equity benchmarks climbed to record highs for the first time in 1999 as the market looked at odds of a december rate hike and it hit 100%. we focus on what the new white house will mean for investors in the tech space. as you get from minister reaches out to business leaders, we will bring you the latest on the brexit debate. first, let's great -- let's get to the first word news. here is no stretch a hitch -- here is nejra cehic. on the whiteate house and policy changes. trump says he will withdraw from the transpacific partnership,
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cancel restrictions on american energy, and get rid of old regulations. will formulate a rule that says that for everyone new regulation, two old regulations must be eliminated. so important. u.k. new labour party leader jeremy corbyn says business leaders and trade unions have expressed concern that britain is heading for a "hard brexit." corbyn warned over the impact of such a move. the idea of what i suppose would be called hard brexit, where you end up with a terrorist war between britain and europe, when much more than half of our trade is with europe, it would be very damaging indeed. nejra: european central bank president mario draghi said more urgent action from governments is needed to address the structural weaknesses of the euro area. also pledged to maintain the ecb monetary stimulus. he spoke to the european parliament in strasbourg. japan has lifted all tsunami magnitude 7.4
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earthquake off the coast of fukushima. warnings were issued widely, urging residents to flee for higher ground. five people have been reported injured and some bullet train services were suspended, but otherwise the region was operating as normal. go for news powered by more than 2600 journalists and analysts in more than 120 countries. thank you. this is your data check. this is what we are seeing. i want to show you gold and some of the equity indexes. we did not see a record hyper indexes in the u.s. zero point00 gaining 5%. i also want to show you this is a picture for crude oil. 48.50. the video message, president-elect donald trump has spelled out six areas he intends to act on his first day in office. he started with trade and his intention to withdraw from the
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transpacific partnership. trump: entree, i am going to issue our notification of intent to withdraw from the transpacific partnership, a potential disaster for our country. instead, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto american shores. the u.s. as president-elect signaled his intention to walk away from the biggest regional trade agreement in history, what will it mean for the rest of the world? if get a global perspective with bloomberg's asia economics correspondent and according. we also with our guests in a second. is the breakdown of tpp mean for the region's economies? is a negative.t it was already struggling to get across the line. now, we have president-elect trump's comments, somewhat a nail in the coffin. some governments in this region put a lot of political capital into tpp when it was not especially popular at home.
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you only have to look at japan's shinzo abe. he flew to new york last week to meet with the president-elect. i'm sure tpp was part of their conversations, not just japan, but countries like vietnam as well were hoping for this, because it would have brought down terrorists, barriers to internal markets -- it would have brought down tariffs. is a sweeping tide against globalization. it is a real setback for trade in asia, and certainly for u.s. interest in this part of the world. francine: if the u.s. is retrenching from the influence it has had in the past, what does that mean for china? can they really stepped it up? enda: there is an opportunity. -- itis never as simple is not a simple case of china walking up and filling the gap. there is an opportunity. there has been a parallel trade conversation going on around that isg called or step
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led by the saudi and arabian nations plus china, india, and others. that does not include the u.s. the focus is naturally on the shift in negotiations, which is .ind of a silver medal tpp it does not offer the same reduction in tariffs or breakdown of barriers to internal markets, but it is a massive regional trade deal, probably as good as these asian governments can hope for on a multilateral basis. the focus shifts to china, and china's role in these talks around the process, and what can be delivered on the table. if those get across the line, it will be a master trade deal that does not include america, and that is certainly a negative. francine: thank you so much. enda curran, our chief asia correspondent. our guest is a global strategist. the other is chief international economist at ing bank. thank you for joining us. tpp, i know we have had record
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highs on some of the u.s. indexes. market is sothe focused on the fact that it is going to reflate the economy. are they discounting any damage from trade? >> i think the immediate action from the election was to look at the positives, to assume some of the things on trade which are negative for growth as well as positive for inflation, in the sense of pushing it higher, would be downplayed. have heardt words we do not really support that very much. i still do not think that is going to outweigh the sense in markets that the trump program is a boost for growth, with a stronger dollar. i do not think it will derail the equity market. but it is a warning to us that there are two sides to this new administration, and its attempts to get jobs back home -- either he will be doing a variety of things. people are looking at how much stronger the dollar is than when he first said. that is not going to help them either. francine: the yields will not
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help with the funding either. you get how this trump trade could possibly turn out. can it turn out ugly very quickly? can. let's turn straight back to the tpp. remember that hillary cap -- hillary clinton also opposed this during the campaign. she said, i will oppose it after the presidency. the fact he has come out and said, we going to pull out of this -- he is not in place. nothing has really changed on trade. or have's the best market interpretation of this is something that might have happened may not happen, and we are back to where we were. can it turn ugly? absolutely, it can. francine: the problem, which some commentators are worried about, is that trump has made threats, saying he will punish china for alleges unfair trade practices, right? the chinese have so far ignored these. the rhetoric we have heard
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on the campaign trail, and what we are struggling to grasp right now is, what is he actually going to do? all of the candidates said a lot of things in the run-up to this. what is he going to do? so far, we do not know. who is going to be treasury secretary, who is going to be commerce secretary. until we get some inkling of that, it is hard to know whether this really is the soft trump, the warm trump google talk a big game on trade but not deliver a lot, or whether he is going to go hard on this. francine: has he been cut the lisa far in terms of his appointments? think., i the first thing you get is a heard reaction by markets. -- a herd reaction by markets. you need to see something that makes that narrative -- if that is the right word nowadays -- change. we will have to see. tpp has not happened yet.
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the bigger story for global trade -- we're past the peak in global trade. we are moving to regional trade blocks. there will be an asian trade block, and the u.s. is not going to be part of it. but the u.s. will still be the world's biggest importer. francine: i want to show you a chart in just a second. it shows some of the trade relationships. if i clicked on china, between the u.s. and china, the relationship in terms of trade is probably second-best after canada and mexico. juckes and rob carnell stay "surveillance." two weeks from france presidential election day. u.s. equity benchmarks are at record highs. reaction to donald trump. plus, trade, trump, and brexit. quitdministration plans to the tpp trade deal. could open the way for peace -- for post do you trade deals with the u.k.? and immigration and world trade.
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what the new presidency will mean for investors in the technology sector. ♪
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francine: this is "bloomberg surveillance." equities in europe higher as the rally from the u.s. ripples through the global markets. let's get to mark barton. mark: let's look at the big chart of the day, the chart showing the four major indexes hitting record highs yesterday for the first time since 1999. the s&p 500, the white line. the dow, the blue line. the russell 2000, the red line.
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donald trump's election fueling optimist him that he will cut taxes, boost infrastructure spending. oil jumping on optimism opec will cut output. let's get to the fed. the meeting is only a matter of minutes away. there is a 100% probability now the fed will hike rates in december, according to fed funds futures. that is a fascinating chart. we had a two-year option yesterday during the highest beforeince 2009, five-year debt today. that is the two-year yield versus expectations for a rate hike in december. talking about oil, searching for a third day today. opec members have made progress toward finalizing a deal to cut output, says the opec governor of libya. this is the price of oil, the white line. the blue channel is the level where opec wants to cut 32.5-33.n to,
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opec production is the blue line. you have to cut it by at least a million barrels a day. is that achievable? resuming,llar rally moving toward an almost six months high on fading demand for safe assets, which boosted the yen after the earthquake struck japan. francine: mark barton with the what they don't trump presidency mainly in for the future. trump is fueling market optimism. over at societe generale, analysts have revised up gdp growth and inflation. we bring in kit juckes and rob carnell. let's get back to the changing forecast in a second. kit, it is all to do with equities. playing outt, it is in equities. you play the donald trump presidency through equities. as beings perceived good for some sectors -- for finance, the drug companies, for example. good overall -- more growth area
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, a little inflation. what is to worry about? francine: and this is something that you agree with? yet changedave not your forecast. we are going through that process now. but the direction is a bit more growth, a bit more inflation, but not yet. we will have to wait for it. there is quite a cumbersome process putting together a budget in the u.s. it takes time. the market may run ahead of itself a little bit. we may have a slightly testy period through the summer where we wait for this to come out and it starts to impact activity. francine: is there a feeling that in certain aspects, the markets have just run too fast with this? you need to fund this. you need backing. but houses are republicans, you still have fiscal hawks such as paul ryan, and those yields changing tact is not helping with funding. kit: if he gets everything that he wants to get done, frankly, we will have significantly higher bond yields, significantly more inflation,
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and we will be on a bad path. you cannot overheat and economy. you would not want to overheat and economy with 5% unemployment. i think we are all right on treasury yields if they move up more slowly from here, toward 3% . a 3% 10 year note yield -- 1999, they were a lot higher than that. they were i think at 10% briefly, in memory. francine: good memory. [laughter] so, 3% would not be the end of the world. it is the speed of adjustment. but yes, there will be a move in that direction. francine: this is the spread between the german 10 year and the u.s. treasury 10 year. you can see the spread the widest since 1989. is this just going to get wider? i am not going to turn around and say we are at 2.06, that is the high. but to jump into another market,
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that is what has driven euro-dollar. i think as far as the interest rate move, there is a lot priced into that, relatively, in rates already, relative growth, and what that means for the country. that is the currency move. come here on, euro-dollar i think is all about politics and not about relative risk. francine: do you agree? rob: the politics in europe does remain a bit of a break for quite some time. you were talking about this earlier in the program. there is a lot going on. you mentioned the french election is the real story. what is the two-way race between pen going to look like? is the gap big enough when we bear in mind how unhelpful polls have been? got to take into account voter turnout and differential likely voter turnout in that election. francine: when you go back to equities, our equities really supported by strong earnings? if you look at some of the tpp or trade extra tariffs, it will
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hurt the supply chain of american companies. how faris a question of forward market can look. at the moment -- remember, we are coming into this with earnings picking up again after a period when they were falling. we have got a tailwind, and we are going to get a growth tailwind. we have a confidence tailwind. you have these sector stories. you have got a lot of things helping right now. the further you look forward into the future, the less that gets. i think we are going to have most of our jam today and less in six months. enjoy it until christmas. francine: there you go, more marmalade. kit juckes and rob carnell both stay with us. up next, trump bow's to scrap the tpp trade deal. is this an opportunity for risk for post-brexit britain? ♪
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francine: this is "bloomberg surveillance." let's talk about global trade, the incoming u.s. president-elect, and the desire to focus on bilateral agreements instead of the tpp. could this paved the way for a post-brexit deal? we get more from kit juckes and rob carnell. we are try to figure out whether a trump presidency means theresa may has more bargaining power, either because of security -- either the e.u. needs her more -- or because you need a trading
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partner and that you could step in at any moment. is there any trace of that? --: i suspect theresa may there is always a chance this side of the atlantic that the special relationship is a really important thing we can leverage. in the states, they go, what are you talking about? they do not take it that seriously. there is a hope, but i would not want to push this too far. we do not know how long this bet-brexit world -- it could 10 years after her speech. francine: what are you expecting from the statement tomorrow? kit: from yesterday, not a great deal. theresa may does not want to upset the cbi members any more than she is perceived to have done. she has softened her tone. that is just moved, i am sure. it would be odd for a prime minister to really be in opposition to cbi. she wants to make friends, if you like. oftever the hardest version brexit is, we are trying to lean away from that, for a bunch of
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reasons now. we will get the numbers on the public-sector in a few minutes here in the u k they are not going well. overeficit is, on a year year basis, falling to slowly. there is very little largess to give away. all the noises you are hearing are the token moves to try to make some political capital, that there is very little power behind it. rob: we actually do not need a great deal. just know the data is ok. then might save up some spending, the little they will have for next year, the actual budget. it could be looking a lot worse. trump lastonald week, late last night -- many people would like to see nigel farage represent great britain as their ambassador to the united states. he would do a great job. what do you do with this? you are theresa may. she is probably on twitter, or one of her aides. do you just ignore that? this is the president of the free world. we: she came out and said,
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have a public ambassador already in the united states, which indeed we have. francine: no vacancies. kit: no vacancy right now. she will take it on board. there is a willingness for moore, that not much substance behind it, if you like. francine: it is very unusual to see a president-elect weigh in on who should be ambassador to wear. not a usualtrump is president. i cannot think we should expect usual from him. francine: thank you so much. very diplomatically put. kit juckes and rob carnell. both stay with us. up next, with a new policy agenda on immigration and world trade, what a trump white house will mean for investors in the technology sector. ♪
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good for a door. and a network. comcast business. built for security. built for business. francine: this is bloomberg surveillance in london. donald trump has released a video to date the people.
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trump says he will withdraw from the transpacific partnership and cancel restrictions on american energy. corbyn says business leaders and trade unions have expressed concern that britain is heading for a hard bridget. he had some harsh words for donald trump. the eye deal of a hard brexit between britain and europe when half of our trade with europe would be very damaging. clear that it very absolutely and totally deplore the comments he made during his presidential campaign. mario draghi said more urgent action from government is structuralddress the weaknesses of the euro area. he spoke to the european
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parliament in strasbourg. japan has listed all to nominee alerts after of magnitude 7.4 earthquake. warnings were issued widely telling people to leave for higher ground. five people were injured and some train services were suspended. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. francine: thank you so much. european equities are trading higher. mark: the talk of canceling tpp, it's worth noting the u.s. balance of trade worsened. imposed unilaterally unitive tariffs on chinese and mexican imports. its trades scrapping obligations creating disruption. and other interesting thing of
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looking at according to pi is the failure may increase china's influence over u.s. allies. china is proactively attempting to grow its influence through its one road initiative. tried to passve tpp and they may turn to china. as you can see, it's clearly falling. steel manufacturers are among the companies that have drawn support from donald's infrastructure spending plans. he has called on penalizing china for steel imports. the united steelworkers union says imports have contribution to factory job losses. this is the steel and dekes. this tracks the value of north
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and south american iron ore and steer producers. -- steel producers. tougher enforcement of trade policy and an infrastructure plan are improving the outlook were steelmakers. this and exits up my 19%. some of the companies to watch, we are talking about steel and donald trump rolling back on energy restrictions. yes, coalmpioned oil, interests over renewable power. it's unclear how much he is going to make good on his promise to bring back coal mining jobs, which have dwindled. regulationsback and/government jobs, he can pull out of global treaties and strip tax benefits, can he make coal
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great again? probably not say industry leaders. this is peabody energy. on december 9, the day after the victory. the coals for industry. in the wake of the u.s. election, tech stocks took a dive on worries about the new white house. immigration, the u.s. tech sector will fall apart. thank you so much for joining us. give us a sense, are you still worried about the texas her and give us the reasoning. will it be harder to get immigration visas? i think the number one issue right now for the tech sector there is the uncertainty we have
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across the entire political spectrum. there are three big issues. and there neutrality is only one comment from mr. trump about potentially repealing that. privacy and surveillance, to the extent that the tech industry relies on the internet being seen as a safe space where people can transact and share ideas certainly the notion that there would be increased government surveillance are limited privacy would be a big issue. the third one for the tech sector is offshore cash and tax policy. now $450 billion sitting in the hands of five companies offshore and $700 billion overall sitting in the hands of them broadly. if that money were to be repatriated, that would be a huge impact on the u.s. economy. we don't know how things will lean. francine: if we go back to
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privacy, with this hurt share prices? that he wantsr full power to deal with terrorism. that could lead towards less privacy. would it hurt companies? >> there is no doubt that silicon valley would united in resisting as apple was in the case of the iphone in the san bernardino shooter, resisting backdoors or licensed government -- aboutnce that surveillance. the notion that people can rely on the internet to have some level of privacy, to see whatever content they want to see or transact business, that is critical to all of the companies. repatriation is not necessarily bad.
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>> it's a separate set of questions, but it has an impact on the tech industry because you have companies like microsoft that has $100 billion offshore. google has $50 billion on shore. if that money were brought back, it could be reinvested in the economy. i think one other issue mr. trump is raised and it's wildly unrealistic is the notion you can move all tech manufacturing to the united states. of the supply chain sits in asia. you can't simply in the space of a couple of years shift that back to the united states. you can expect they won't relocate their facilities and find the talent to drive that industry. francine: you can if you put up tariffs. i know that would disrupt the supply pain -- chain. that would force companies to come back to america. >> that is wildly unrealistic.
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you can change tariffs and it takes years to build a semiconductor manufacturing facility. it takes years to bring in the talent and train them to work in the leading technology companies. google, at facebook and they are increasing their hiring. these decisions are not taken with the eye you that something will change tomorrow. it's the need to train people so that in five years they are highly productive for those companies. francine: we were talking about theresa may at her speech yesterday. to we expecting donald trump -- if you look at his to do list , he is focusing on manufacturing and infrastructure and asia and ripping up of trade deals, technology is at the bottom. in thes focusing on jobs
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heartland, manufacturing jobs. we are all going to look at him and his 4.9 unemployment rate and say you want to have a apart standard of living, from how long it takes to build a semiconductor factory, putting people in it is going to stress growth. jams in the valley, in san francisco would be even worse. we look at voter base of donald trump and the kind of america he wants to build, people have felt displaced high-technology. far he is focusing on is away from silicon valley. >> the blame has largely been put on those pesky foreigners or immigration. the reality is one of the
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biggest causes of manufacturing job decline in the developed world has been technology. i don't know if he sees it like that. he's trying to get back to those jobs that would help people build the american dream. there have been a lot of jobs lost in the sector. we talk about the post reality in,ost truth world we live that appeals to the voter. whether or not it's true is not here or there. is there anyone in the transition team or anyone close to him that can help the tech sector? think the one prominent supporter from the tech industry has been peter thiel. areink some of his views rather extreme.
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i think the issues that you are raising is a very basic one, it's very similar to what we see in the u.k. with theresa may talking about the nhs. it would be wonderful to have 100% british nhs. it takes a generation to train those doctors. it would be great to take the rust belt and turn those people into software engineers. it takes years and years of investment and effort. the question is if this administration will have the will to take long-term decisions to make that effort to produce the employees they are desperate to hire. francine: he is also probably the biggest twitter user. does that count for anything? >> unfortunately not. it hasn't affected twitter stock, which we have talked about on this program. we were the only analyst to have
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a sell rating on the stock. the company is actually no longer growing. the fact that mr. trump is on twitter all the time may bring it people to it. , the abusiveontent content you see on twitter means it's not a brand safe platform for advertisers. youtube is another story altogether. it is a tremendous growth asset. it is very carefully curated. you don't see hate speech on youtube that you see on twitter. it's just a very different asset altogether. francine: richard, thank you so much. and we have first new world disorder. what a trump presidency means for foreign policy. uncertainty,h
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there is one thing the markets are certain about. this is when berg. -- bloomberg area ♪
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francine: this is bloomberg surveillance right here in london. we will look at how president in foreign function policy. but it didn't has said he and donald trump want to normalize relations. there have been questions raised about nato. what role will donald trump's america play in the world.
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mark, it's great to have you on the program. >> i think the first thing we still need to do is a big caveat to say we know what he said the campaign. we don't know what he is going to do in foreign policy. this is a president with no record. the unique situation. we're going to have to wait and see. we have started to see some of his team together. he has a national security advisor and a former general. he is looking at a number of other spots. we still need to see who is there. we can see a lot of generals there. from what we can look at with my clinic, he is assessed with going after islamic state. we know that. francine: will russia and the u.s. come together? >> i think that is a very high possibility. it's something he talked a lot
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about her in the campaign. it was the only thing he did something concrete about in terms of taking language about ukraine out of the republican party convention. we are going to see him do something with russia. the question is exactly what. that fitsk at syria, with a narrative where donald is going to focus very heavily on islamic state terrorism. mike flynn it would fit in with that. he will try to do something in syria, he will need to work with lighter put in. francine: the problem is if you are the fed you don't care about vladimir putin. until it starts affecting you. inare expecting a fat hike december. understands the overarching theme? >> these are quite slow burners.
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foreign policy is something that will develop over time. the domestic economy right now, i don't take it's going to be first and foremost on her mind. what they do know is the u.s. economy is in pretty good shape right now. bedoesn't require rates to as low as they are right now. they can squeeze a few more out next year. that's all she has to do. francine: what happens after a year? is she out? inher term comes to an end february 2018. i cannot see donald trump asking her to stay on. i'm not sure she would want to. i think that's the most likely turn of events. when the fed talks about international events and uncertainty, i think it correlates with the s&p. when u.s. equities are on a high, the world is fine and you
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can hike rates safely. i think that's where we are right now. she might have been more nervous if market pricing was 50%. 10% lower.&p were the fed just carries on as they were because it all seems fine. at some point, financial conditions are getting. francine: if you look at dollar dynamics, the important relationship is the u.s. and china. the one for the world economy that is most important is the u.s. and china. >> the interesting thing there that you look at countries have regimes that have defined themselves against the u.s., that includes russia with vladimir putin's regime now and the hard-liners in iran, they
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could only see an upside to donald trump selection. allary was going to be reversal for them, something worse than obama. donald trump can only be better for them. china has a very complex relation with the u.s. it is both and security terms arrival and in economic terms a trade partner extraordinarily integrated and dependent. they have a much more complex relationship. what the chinese have been saying since the election is very consistent. they have said this relationship is far too important to you and us to screw around with. in essence what they are saying is you can do what you need to do with the russians or china, youbut with
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have to stop and think. francine: thank you so much for all of your insight. we will talk more about interest rates from the emerging markets. we will look at where the markets might be headed next. this is bloomberg.
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francine: let's get some final thoughts with our guests. if you look at the risks, we talked about china and president trump and russia, the biggest risk is what? there is going to be more populism and you're worried about europe? >> there is a lot of politics on the calendar coming up in the next 12 months. i think the lessons we've learned over the last six months is you really can't take anything for granted. i still get the sense that there
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is an enormous amount of complacency. said brexitople who wouldn't happen and company would never be elected. in europe's case, there is more at stake. francine: what is at stake? scenarios.d create it's a very different place from what it is today. a europe to have a vote of confidence after the referendum would be a challenging environment. another existential threat to the european project. sleep easy at night. markets can sleep easy at night until after the second round of the french election at this point. i'm not sure the euro can start
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going up again. francine: we have to leave it there. come back soon. thank you so much. bloomberg surveillance continues in the next hour. tom keene joins me in new york. we will talk about the referendum. he would vote no to the referendum on december 4. we will be looking at yields. the fat hike is now a certainty to bond traders. what if they are wrong? what if something happens? this is bloomberg. ♪
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francine: trump vows to shred the transpacific partnership.
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will china moved to fill the void it? all street hits high with major benchmark. a call for brexit. can theresa may negotiate a better deal for england? this is bloomberg surveillance in london. tom keene is in new york. it was an interesting day because we have a couple of tweets and a video from donald trump. we see record highs. theme of surveillance, 100% certitude that we have the memo on blue today. francine: we even match in terms of clothing. let's get straight to the first word news. has set upald trump his policy priorities. he will take aim at controversial trade agreement. >> i am going to issue a
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notification of intent to withdraw from the transpacific partnership. a potential disaster for our country. we will negotiate fair bilateral trade deals a bring jobs and industry back to american shores. taylor: he wants to limit regulation. for every new regulation, two more must be scrapped. china is calling on donald trump to improve relations between the two countries. the relationship is too big to fail and the president-elect shares an obligation to make sure ties between the two improve. japan has stood a potential deadly earthquake with relatively little impact. it was 7.4 and struck off the shore. this latest quake knocked off-line a cooling system. it also caused a small
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three-foot tsunami. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. francine? tom? up up.rkets are up we had martin phelps on yesterday and he referred to an asset bubble. the yield is 2.29%. the euro, it doesn't really do much. there is a nice advance on oil. let's go on to the next screen. the fix is 12.31. dow futures closing 956. the two year yield is higher. that's all you need to know. yields are up. equities are up. francine: stocks are rising around the world as crude and metals are advancing.
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that is optimism in the market, the opec will agree to cut output. the australian dollar is also rallying. that is what the markets are betting on. tom: let's go to the bloomberg right now. this is new home sales in white. these are existing sales and yellow. down they go for the beginning of the crisis. there we go. i've got to get my little nfl like thing. it's normalized at the beginning of the crisis and then goes down and comes back, except new home sales have not come back like existing home sales. that is that wealth divide it, where it's very difficult in america to build affordable and inexpensive housing.
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it just doesn't happen. there is a big gap in home sales today. francine: i did a more vanilla chart. it's the spread between the treasury 10 year and german. this is at the highest since 1989. we charted it. you see a lot of the indices in the states gaining the most. you can see the spread. it has become to divergence is that we need to talk about. we are joined by alberto gallo. thank you both. when you look at the indices and the u.s., i want to talk about tpp. we will get to it in terms of trade. i don't understand how earnings can go up and she used share prices when you don't understand the supply chain or a lot of companies will be affected by extra tariffs.
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>> we are seeing animal spirits. people were concerned about the election. they did not buy stocks and closed their shorts. a lot of these companies in the s&p have 50% international revenues. theou start going through road of the globalization, of cutting trade agreements. that is bad for large companies. it should be bad for global growth. you have two angles to what donald trump is trying to do. a lot of that we need. then you have the protectionism, the populism. these things are eventually bad for the rest of the world as well as the u.s. francine: spending was claimed for. how much do we know about what president trump when he gets inaugurated will be able to spend? how does he fund it?
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it's going to make this go up. central ideas behind his infrastructure's plan was the u.s. was able to borrow at negative interest rates. the more interest rates go up, the less attractive it is going to become. point, support alberto's the dissonance between what was expected of an uncertain president trump who nobody out there apart from maybe russia wanted election and the market response, the dissonance is beyond shocking. it oils down to the percentage of people who wanted it. it's much smaller. only part of that can be self-directione
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that people had been sitting on the sidelines. the only thing that has gotten better in economic terms is we no longer have a divided government. barack obama was not really able to effectively an act policies for much of his term. now you have a united republican government and president. that can actually move things. whether or not they are moving in the right direction, it's definitely bad for global growth and bad for the united states and immigration and protectionism. in the short term, there could be a spike in profitability for american centric revenues. tom: help me out here with what we are seeing with mr. trump and the idea of one-off moves. see auggest we will higher rate in that will dampen back to where we were lower for longer. i love doing this with alberto. going to dampen back to
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lower for longer? can we say that mr. trump in his enthusiasm moves inflation and currencies? those rates and duration over the last few months and the low for longer mantra, everyone was on the same side. now you have someone who wants to inflate an economy and wants to do spending in the u.s.. japan is doing the same. you've got the u.k. trying to do the same with an undecided brexit plan and bond yields have to go up. we have almost reached our targets on treasuries and german bonds. we still have a way to go on it u.k. yields. we have been talking about on yields rising for many months. we're close to our targets. what i am worried about now is
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these policies may not be sufficient to solve the inequality problem which is created the global populist wave we see. in italy or france, we have votes coming up. you may see a flight from the bond market not because there is inflation but because there is political uncertainty. tom: we are going to come back with this. let's bring the bond market analysis in here in -- in. is this a regime change when we ?ee mr. trump is this a one-off move where we returned to a more traditional system? >> i think in terms of the thisl trade regime, probably does look like at least a sharp discontinuity. in terms of the interest rate moves in the bond yields, i
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think that's too soon to tell. my instinct says some of the big changes are going to reverse. it depends on when policy unfolds. the problem is with the trump presidency, it may not be delivered. if you look at all the promises that have been made, they are undeliverable. there is a conflict with congressional republicans in terms of his stance on fiscal policy. they are much more hawkish. effectively is looser than bernie sanders would have been. tom: i want to keep a check on the markets. you see the s&p futures. that's very insignificant. we will do an extra data check. stay with us. in the next hour, we will speak
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with the former prime minister of italy. we will talk about the referendum. he is one of the most famous politicians asking for a no vote. as bloomberg. ♪
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francine: it was a most interesting day. we heard from donald trump from youtube. update from get an the bloomberg business flash. taylor: that's according to people familiar with the matter. planted -- pled guilty to helping americans
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cheat on their taxes. now investigators want to know why credit suisse didn't show 200 million in assets. volkswagen will start making electric cars in north america. production will start in 2021. they are trying to told it's tarnished image. the automaker reached a landmark agreement with workers to cut as save $430,000 jobs and billion. that's your bloomberg is this flash. francine: thank you so much. president-elect trump released a video on youtube. on traded, i'm going to issue notification of intent to withdraw from the transpacific partnership. a potential disaster for our country. we will the go she ate trade deals that bring jobs and industry back to american shores.
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that was donald trump. 11 tpp is a deal with countries. if the u.s. abandons tpp, could china step in? let's kick it off. thank you for joining us. is this a concern for a lot of asian economies that would benefit? do you assume that global growth will take a step back if this is removed? state -- stepe back. you'll have to look at the list of losers. carmakers, australian iron ore producers. is one of the biggest
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losers out of all of this. the potential death is a step back for trade and integration in the world. trenches, is. the this a gift to china? can they step in and fulfill that vacuum in asia? >> i think it's an opportunity for china. the trade deals are not simple as we have seen. there is something in the background. it's being run by the southeast asian nations. china has a big say in that. the asian governments here in despair of what's happened will swing back to china to look for leadership in getting a multilateral trade deal done. that's why it's very much a gift to china. quickly, i want to go beijing aea, is
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zero-sum philosophy? are the leaders in beijing doing a neo-mercantilism? do they believe in a more modern theory of an expansive tray world? >> i think they are somewhere in between. in transition between these two worldviews, having realized the virtues of having fair global system from which they have benefited in norma slate, one only has to look at the bizarre financial times headlines where china actually was chiding the united states to continue to fulfill its obligations in the paris climate change agreement. who would've expected that? it's a much more traditional trade agreement. potentialuch bigger positive impact for growth and collapses provides a
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stronger incentive to go ahead sooner, this may be that positive for growth in asia. tom: what do you see in beijing? he spoke of the need for global coordination in terms of boosting trade around the world. they promise to bring down their own barriers to let foreign investors in china. whether or not they deliver on their word, we will have to wait and see. we have had a big year of political change in china. francine: thank you so much. over to the problem, china has a lord the threat to punish them for this unfair trade practice. when will that get heated? >> we need to be very careful
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about this. so far, china has tried to depreciate its currency slowly. when we saw depreciation's, this created a shockwave across emerging markets. it hasn't happened so far. it could happen in the future. if the trump administration imposes tariffs on imported goods, which is part of their plan. imagine what happens if they do that and on the other hand china depreciation in the yuan. other -- this can create a big tantrum across markets. tom: let's come back to this. noter next hour, we should the two year yield is 1.10%.
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without fail choose are right up near 19,000 this morning. -- doubt futures are up near 19,000 this morning. this is bloomberg. ♪
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>> we intend to make sure there is market access for british companies to have trade with europe. what has been gained through european membership will be defended and continued. we will work with europe in the future. hard brexit may bring a tear for.
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half of our trade is with europe and that would be very damaging indeed. francine: jeremy corbyn saying a hard brexit would be damaging. we are back. with jeremy corbyn yesterday on the back of that theresa may speech. residencyald trump give her more bargaining power? she could help with some trade deals. i think. all the uk's obligation in terms of security are under nato. is somebody ready to bargain. extractsmembership leverage. security is irrelevant to the discussion. in terms of what donald trump's presidency means, there was a liberal case for brexit, one that did not add up. it said that the u.k. would be
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freer to trade. done, thed trump has world has become less friendly to open trading. are no longeres taken for granted. the u.k. has a stronger economic eu thatbe closer to the go out into the increasingly uncertain world itself. francine: talk about new rules. lastd clumps -- trumps tweet was about nigel farage. i've never seen a tweet like that before. does it go to the special relationship? is this just completely different? >> it's a good idea. good at probably be that job and do less damage there than here. the problem is we don't have an economic plan for the u.k. under brexit. there is no plan.
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there was a bbc article about that. i think that's the key. we are in a much more uncertain environment. thanks to a free hand the inward focus of the trump administration. francine: the spokesperson for theresa may was quick to react saying we don't have vacancies. tom: it is a new era to say the least. thank you so much. up, donald trump's 4% economy. from london, this is bloomberg. ♪
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tom: there is mr. trumps new york. i was down fifth avenue weekly yesterday. there is almost a celebratory feel to it. there are lots of tourists
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gazing on the trump tower. yesterday, media executives and anchors greeting mr. trump as well in what was a sporting meeting. here is taylor riggs. taylor: donald trump will move quickly once he moves into office. his first day, he will start the process to get the u.s. out of the transpacific trade agreement. he will take payment regulation. >> i will formally a rule that says for everyone in regulation, two old regulations must be eliminated. taylor: he says he will cancel job killing restrictions on coal in shale energy. canada's prime minister will speed up a plan to eliminate --l-fired -- powered higher
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power plants. the u.s. president-elect says he wants to back out of climate bills and boost coal production. britain's national health services facing crippling problems because of the biggest deficit ever. to $2.3 billion in the most recent year. the government's spending watchdog warned that money to improve buildings and software will have to be re-allocated. japan withstood a deadly earthquake with little impact. it measured seven point or and struck off the coast. that's the home of the nuclear power plant crippled in 2011. this knocked off-line a cooling system in a separate plant. it caused a small three-foot synonymy. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg.
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i am taylor riggs. tom: thank you so much. we want to dive into the market. let's ring up the chart. this is the chart we should four or five years ago about three times a day. this is the spanish german spread. is heu need to know loaded the boat right there. he did better than good in trying to game how rates would come down for spain, italy, greece, and the rest of them. we are down here now. what does that symbolize for the old and new levels of spain? is it a new regime for spain? is it all clear for spain? >> it's a low and you are supposed to be cautious. stable political situation. what we are going to see is the
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emergence of the same populist wave scene in the u.k. and the u.s. countriesulnerable are italy and france. that's where we are more worried about rising yields. italy goes to vote in december about the constitution and the government. this boat has been painted by the opposition as a way to kick out the current government. then you have in france the risk of le pen riving -- rising. the center-right candidate is very harsh on economic policy. statement, weral were talking about asset doubles. he had real concern about elevated markets. do you agree with that? our markets frothy or is there value in the bond space?
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we have been cautious on bonds. we have been calling for this double to reflate for several months. we are worried about french bonds and u.k. bonds. you are getting 1.4%. there is no value in bonds. you've got to be in a type of investment which is positioned for rising inflationary environments. currently, bond funds are not set for that environment. they were passive strategies. what the ecb has done is give time for physical spending. this has to come back if we are going to keep in check some kind of populist measures which are
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counterproductive. >> buying bonds is not really a risk. francine: certainly not at the moment. >> if you think growth is world -- low, you buy bonds. if you think there is growth, you buy high-yield wants or stocks. you buy all of those things that people were not looking at because they were linked to growth. in equities, people were dying utilities. that was a dividend trade. we see a huge rotation out. whenine: there was a point there was no growth, but the real opposition was political. it was the bond market that can map. -- kick them out. >> we don't have that. in januaryeaving 2019. if we have a no vote in italy,
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it's not going to work as well. we could still see italy spread. we could see france spread around 100 if there is a no vote in italy. that is possible. this is the relation. inequality leading to populism. tom: this is critical. this is nominal gdp. it's not a pretty story. this is the four-year. do you see any indication of economic growth? havemr. trump and others to work in a no growth analysis? >> i think it's different.
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the u.s. will see stronger growth. some will have an impact. if you spend a dollar increase gdp. 1%, youut taxes to the don't have that same effect. infrastructure spending is good. in the u.k., you will see the same. the pound is weak. finance minister said they are going to double it. to make it 10 times bigger. let's finally look at the euro. just -- through parity? we made it to parity. is a weaker euro the solution for all of these different issues? >> i think it helps.
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it's not the solution. it helps and we're going to see another move to parity. i think the weak euro helps germany and some countries. you really need inclusive growth policies. you need some spending and infrastructure. the 33 countries in the done austerity, the dividing growth between germany which benefits the most versus the other countries is too large. if the other countries all vote for populist governments, there is no more euro. see an the cards if you no vote at the italian referendum. all of these trends are going to weaken the euro and increase spreads. francine: there you go. in the cardssible
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depending on the referendum in december. coming up, we speak with the former prime minister of italy. that is it 6:00 a.m. in new york. we will go through the referendum. we will also talk about brexit. this is bloomberg ♪\
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tom: good morning, everyone. it is a really nuanced day today. we are going to haul in right now. about going to speak caution on gdp. right now, we've got to do a 100% certitudea
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that they are going to do something in december. it's wonderful to have you here. i thought this was evidence-based. changes were you had the unexpected election of donald trump. very dovishu had a planet. it's important to notice one of the fed governors was a contributor to the hillary clinton campaign. you have all of these issues. he has already said he will not renominate janet yellen to the chairmanship. you're are likely to have a change in early 2018. bond yields have risen. that would drag the fed with them. the fed cannot resist hiking them. what confounds me is donald trump has been a lack did. we knew that he was going to do spending.
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election,k before the every single market participants said if he gets in, there is no chance of a rate hike in december. what is happened? >> i think the opposite. elected, if he was elected it looked like it was highly likely that the fed would increase interest rates in december. the political reason the fed has had for not hiking is now over. in and conventional expectations are turned on their heads, janet yellen is free to hike in december. i anticipate to more hikes next year. tom: that is a big change for you. i like that as an angle.
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what is so important here is where we are from stanley fischer. we are still ultra accommodative. even with the december hike. what are we waiting for for 2017? why isn't the fed pausing? >> if the question is why doesn't the fed hike by 75 basis points, they could. i don't think they would. i think they prefer increasing it in stages. the answer to your question is 25 is going to do enough damage to the global markets. are rumblings in the malaysian market. the emerging markets have been beat up pretty bad. it's going to get worse if you have a 50 basis point hike. tom: let me bring up this chart. ?ow cool is it
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we can instantly bring up a snapshot of the malaysian ringgit's. 98, we are back there right now. francine: i love that. let me bring you over to my chart. this is like the battle of the charts. we never do this. this is basically how much the u.s. has exported to the other 11 tpp countries. we heard from donald trump yesterday that he would rip this agreement trump. you can see the exports have been solid. the reversal is true. they can't sell to the u.s., what does it mean for a lot of these asian economies which will suffer no doubt about it. asian companies will suffer if it's pulled.
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in addition to that, the u.s. is also going to be a loser because china is ready to step in and to start trading agreements with neighboring countries. in terms of what is likely to happen, you have the asian countries serving in terms of their exposure to the united states. the united states really closes the door on imports. you are going to see a retaliation on the part of some of the asian countries, the one country powerful enough to do that would be china. francine: that's where i wanted to go. donald trump's rhetoric to punish china because of what he calls unfair trade practices have been largely ignored by china. will they continue to ignore it? what kind of retaliation can we see? >> i think they will nor those threats as long as it's nothing
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concrete being done. the first statement that could really upset the apple cart is if as president mr. trump decides to name china as a currency manipulator, even though it has no immediate consequences. chinese imagethe in terms of being able to call them that. if he were to say that the chinese are not appreciating it's currency fast enough, going to weaken even more after being named as a currency manipulator and that creates more problems for the new president. tom: we will come back on u.s. gdp and your view on the economic growth. david wessel will join us from the brookings institution. you know him from the wall street journal. does he and it ben bernanke?
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stay with us. this is bloomberg. ♪
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francine: this is bloomberg
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surveillance. let's get our corporate fix. to buy akr has agreed japanese automaker. the price is $4.5 billion. it's a 28% premium over there last closing price. the sun owns 42% of the company. they want to spin off less important businesses so they can focus on electric vehicles. a change of the top of fidelity investments. takeil johnson will control of the family-run firm next month. she will succeed her father ned johnson. fidelity has been losing market share. that is your bloomberg business flash. i am taylor riggs. tom: congratulations to fidelity. it is privately owned.
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the lead note there is abby johnson earned this. she is a legit analyst. she did it the hard way. she came up and actually did real research and real work. also doing real work is tracy alloway. at e.m. am looking erosion. if i just look at the turkish lira, this is one example. this is really for real. is donald trump permanently moving e.m. currency to new weakness? that's right. the lira is at a record low against the u.s. dollar. that is quite a turnaround. let me see if i can walk you through some of the narratives changing for emerging markets right now. in the aftermath of his surprise when, we saw emerging markets
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start to selloff. the narrative was that his policies, his america first protectionist policies, would be bad for emerging market economies. since then, we have seen a change in some of the stories that analysts are writing. they attribute much of the selloff to bonds rising yields. the higher dollar is leading to a significant tightening of financial conditions which historically are negative for risk assets like emerging markets. tom: this is a chart that tracy knows. they all look the same. what's interesting is the curve up. when does president-elect trump blank? there is going to be a catalyst where he's got to realize he is president for the globe. when does that happen? >> that's a good question.
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we were having a similar debate when it came to the federal reserve. that debate is still going on. will get a rate rise, that potentially be painful for e.m.. i was just looking at ubs 2017 outlook. they point out that even though ofrging markets are the star 2016, we had lower interest rates around the world. even if we don't get a big spike in developed market interest 2017, even ifto we get stability, that's not good for e.m.. e.m. will be left without a positive catalyst for reevaluation. it's quite a gloomy picture coming out of emerging markets right now. francine: thank you so much.
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global strategies. he is in new york. the problem when you look at the emerging market selloff and we go back to what tracy was saying, how much does this have to do with fundamentals? how much does it have to do with donald trump and trade? >> the two major influences a tracking the selloff, they had been worried about the fed rate hike in december. we remember what happened last december. there was a massive outflow of capital from china and the second half of december last year. global equity market correction. that was a worry in itself. chinese have been weakening. it is now weaker than it was during the financial crisis of 2008.
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tracy spoke about the turkish leader and the mexican peso has been very weak. we knew theat, donald trump election would have a double whammy in terms of what it is. it's not going to go away quickly. with rate hikes, if they continue into 2017, it will be a correction, but a good time to get in in terms of what's happening in the market. francine: thank you so much. hour, we in the next speak with the former prime minister of italy. we will talk about the referendum and growth. this is bloomberg. ♪
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then why settle for slow internet? comcast business. built for speed. built for business. i've spent my life planting a size-six, non-slip shoe into that door. on this side, i want my customers to relax and enjoy themselves. but these days it's phones before forks. they want wifi out here. but behind that door, i need a private connection for my business. wifi pro from comcast business. public wifi for your customers. private wifi for your business. strong and secure. good for a door. and a network. comcast business. built for security. built for business. tom: it is 100% certain that in december. rise of course, it was 100% certain
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that donald trump would lose. david wessel of the brookings institution. dell futures touch 19,000 and the go-to-cash crowd get crushed. it is 100% certainly rules in the debate will never end. ofthis hour, kim schoenholtz nyu. this is "bloomberg surveillance ," live from our world headquarters in new york. i am tom keene. francine lacqua is in london. i miss the shortbread cookies from london. francine: we will send them in the post. we need to look at currencies and the latest tweets, and the video for donald trump, and what it means for foreign relationships and for global trade and growth. tom: it is 100% certain. it was a most bizarre political day. here is taylor riggs. president-elect donald
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trump says no more business as usual in washington. in a video outlining his agenda, he announced new roles involving lobbyists. ethics reform, as part of our plan to drain the swamp, we will impose a five-year ban on the executive officials becoming lobbyists after they leave the administration, and a lifetime ban on executive officials lobbying on behalf of a foreign government. is also taking aim at the trans-pacific partnership. he says on his first day in office he will start the process to take the u.s. out of the trade deal. in san antonio, a suspect has been arrested in the killing of a police officer. the officer was shot while sitting in his car in front of police headquarters. he is the 20th to die in a targeted killing this year, the most since 1995. it intentionally deadly earthquake with relatively little impact. it measured 7.4 and struck off the coast of fukushima.
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the latest quake briefly knocked af-line the cooling system at second fukushima plant. it caused a small tsunami. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: we want to get to marty schencker in washington. 50ures up 5, dow futures up to the 19,000 futures that an hour and a half ago. you can see oil elevated as well. yields advancing. now, 12.41.ed right the dollar index takes a day off, a churn in the markets. francine: it is really american shares. extending their five quarter profit slumps third it is fueling speculation that there
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will be more manufacturing and infrastructure spending. world.rising around the the biggest three-they rally in commodities. this is why we updated there -- opec is meeting next week, and it is very likely that they will cut output. there is in politics, the manufacture, distribution, the consumption in the political message. there's no question the distribution of a president-elect's message is original. marty schencker has decades of experience working at "the wall street journal," and runs all of our economics and government coverage worldwide. komal sri-kumar is with us from sri-kumar strategies as well. marty, i thought of you sitting in the room, if you had been in that room of media types. i say this with great respect for your decades of work. should the media have lectured back to mr. trump?
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marty: it depends on what he told them. i think that there is some kind of disconnect between what the role of media is and what donald trump thinks the role of media he is a master at using the media for his own advantage. so i would be respectful, but i think i would be firm and what our job is. tom: i see charlie rose there. onck todd, who appears sunday on "meet the press," and others. where is this relationship going as we stagger to january 20? --l it be business as mutual will it be business as usual, or absolutely original? marty: it is absolutely original. donald trump's youtube video is a great example. he bypassed the media completely and went directly to social media to deliver a message, albeit a message he had delivered in his campaign.
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there was really nothing new, but he went directly to the people as president-elect. francine: what do you make of the policies we heard yesterday? it was very interesting and telling that china is telling trump that the ties with the u.s. are too big to fail. does the president-elect realize this? marty: i think he does. it is very interesting that we have china lecturing the u.s. on free trade issues, but donald trump has said he is not going to participate in tpp, and hillary clinton and bernie sanders also said tpp was dead. so there is no real surprise there. what is going to be interesting is this bilateral approach to trade, which will be extensive throughout the world. not just asia. francine: and the last tweet from donald trump, his twitter handle, he has more followers -- he said many people would like
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assee nigel farage represent their abbasid or to the united states. he has done a great job. ambassador to the united states. marty: it is sort of really bizarre. his whole relationship with nigel is quite strange. as you know, he showed up during the campaign on behalf of donald think donald trump just likes to stir the pot. there you go. tom: marty schencker, thank you so much, from washington. with us now, komal sri-kumar. i want to go back to his important call on weaker gdp. my chart of the year, the presidential four-year moving average of economic growth. mr. trump and secretary clinton making clear that we migrated from 4% gdp 20 years ago to the
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circle on the right, 2%, subpar gdp. is there any hope that mr. trump can do sleep and level of gdp to 3% or even to his rhetoric of 4%? sri-kumar: it is eventually going to be possible to put to 3% plus in terms of growth rate. it has been my contention you cannot do it by monetary easing alone. to the extent that we have fiscal reform and structural changes in taxes such as lower taxes to bring the money back to corporations, it is going to work. tom: this really works with your west coast experience. do we need tax changes along with a policies prescription, investment or job credits, to create jobs? do we not only need the money to change but the policy to change, to incentivize job creation? sri-kumar: absolutely. , otherneed the changes
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policies that go hand-in-hand with reduction to tax rate. fiscal stimulus would be a positive, but it is an important point -- you are not going to reach three putting growth immediately, not even in 2017 or the first part of 2018. it might take a while to get there, and the question is, does the new president and his team have the patience to do it, and the people who elected him, in terms of those suffering from a low income and not getting wage increases -- are they prepared to wait for it? and creating restrictions -- structural reform, in fact it is a structural setback. that will set back growth expectations. there are a lot of different positives and negatives in the mix as we look at the new administration. francine: going back to the trade deal -- let's say that donald trump will impose some kind of tariff on china.
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retaliate on doing something with the currencies or they could say they want to block foreign direct investment. that must hurt directly u.s. growth. sri-kumar: absolutely. i think they can impose tariffs on u.s. goods going into china, and the u.s. is a big foreign direct investor in terms of multinationals in the u.s. investing in china. and they in turn can be restrictive in terms of what markets they are going to have, what they will be allowed to access -- what they will be allowed to sell or expand. finally, on the political side it is power as well, never to forget the issue of the south china sea and the chinese domination. those issues have been dormant and they can always restart those issues if they have problems on the economic or tariff side with president trump. so china is a very powerful
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operation to take on for the president. francine: thank you, komal sri-kumar. coming up, we speak with the of minister he believes the italians should vote no. what comes next -- that is what we will be asking. this is bloomberg. ♪
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francine: a most interesting day when you look at the rotation of bonds and also equities. they are parting like it was 1999. i am francine, with tom, in new york and london. here is taylor riggs. taylor: credit suisse is facing a u.s. tax investigation over
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undeclared accounts, according to people familiar with the matter. in 2014, credit suisse pleaded guilty to helping americans cheat on their taxes. help closeomised to suspicious accounts. is not commenting. -- aashington, and anti-- government lawyer argued against the $40 billion merger of anthem and cigna. for anthem responded saying the combined company will be able to lower rates to providers and pass on savings. that is your "bloomberg business flash." tom: let's have some fun with plug and chug. it is a plug and chuck moment kim schoenholtz of nyu.
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this, folks.lly do this is a lot of noise, but i want to tell you that on the bloomberg you can bring up rules and discretion. what i want you to focus on is this mess down here. kim schoenholtz is one of the experts in the world on all these plug-ins of the taylor rule. here we are with the taylor rule. let's get rid of that and come on over here to what we are going to talk about with kim schoenholtz this morning. rules and discretion -- it is really fun and center with a new fed chairman, isn't it? kim: i think the fed actually is very rule-like with its behavior . it thinks about rules all the time but they are not slavish. they realize there are factors other than a simple rule that should govern monetary policy. tom: i am going to pick on two
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ofnomists, john b. taylor stanford university. one from michigan and columbia university. taylor and michigan work with the markets and what the markets do. bring up the 10-year yield. this goes back to eisenhower and the idea of making a rule, given the great moderation in the changes we see. can a rule work? kim: the rule has been very helpful. the fact that the fed has been more rule-like for the past 30 years has helped lower inflation expectations and brought bond yields down, as you see. that has been a huge plus for the u.s. economy, giving them more flexibility to respond to the kinds of shocks we have seen over the last decade. francine: we are talking about disease and theses and ideas, and that is great. but first of all we need to address whether donald will
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replace chair yellen or not. kim: i cannot say with any certainty, but he has criticized the chair. he has argued that the fed has been a political agency. i think that is overstating it. i think the fed always has to make decisions that have political implications. but they have been very technocratic in their approach, and that has been a benefit to the united states. the fed has been largely independent to political control for the past 30 years, partly because esidents have shown great restraint in criticizing them, both republican and democratic presidents. francine: you can criticize, but if you replace, do you go a step too far? it has theit authority and the people who run the federal reserve -- the president has the authority and the privilege of a beating people who run the federal reserve. we have seen the president rip in previous chair, but that is
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not always the case. the question is, once you up to people running the fed, do you let them make the decisions? thatthat is the discretion chairman greenspan speaks about. if we look at the roles, the new zealand model, most critical of -- come on, new zealand is not the complex, massive global economy like the united states. is that a valid criticism of rules? kim: the better way to put it is, the fed currently operates under a mandate, and congress examines whether it is successful in meeting its mandate, of keeping inflation low and stable and keeping out close to some normal level, or keeping unemployment close to a sustainable low level. we can measure that and criticize them when they feel to do that, but trying to change that to monitoring their operational decisions puts congress much closer to being
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the monetary policy maker. i do not think that is a good outcome. tom: it may not be a good outcome, but mr. hence hurling i rling i- but mr. hensa think has a different view. coming up, david wessel of the bookings institution. what an advantage he has working with ben bernanke at brookings on some of these questions on how our monetary institutions fold into the new presidential administration. this is bloomberg. ♪
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tom: and here it is, a new tweet from the president. i do not believe we have ever done this, waking up to a president-elect out tweeting. here is donald trump. going to not editorialize, other than to say that this is an original way to communicate. we are seeing that a lot over the last couple of days. kim schoenholtz is with us from new york university. to bring youed david wessel in washington with the brookings institution. relativelyl comes up --ginal -- two to prices,
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two prizes, one with "the washington globe -- one with -- one of the summaries is, chair yellen should speak more, and the position would speak less. discuss that. that is an important distinction. david: i think that the markets, the public, and the congress are a little confused about what the fed is doing. i agree that kim. most of -- i agree with kim. most of what they have done has been received well by the american economy, but people are not quite sure what they are doing. we have observed about 50 fed watchers. only about a third of them understood the fed reaction fun, how they would respond. iat they are hoping for, if could interpret their findings in looking at the comments, is to have more clarity if they had a more consistent message from the chair and less noise from the regional fed bank president.
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mostdavid, we have a unique moment on the bloomberg. we see a 100% certitude of the december rate hike, and i believe evidence is the word du jour. 100% certitude of the fed's rating -- if the fed is waiting for evidence like a december jobs report. david: i do not think they are waiting for the december jobs report. because the fed does not really want to surprise the market at this early stage of liftoff, they have sent a pretty unambiguous message. the december job number's would have to be really out of consensus or there would have to be some disruption to the world markets for them to hold off on this rate increase. what people are going to want to know in december is, what is the the to rate increases that fed anticipates given their current reading of the economy, and up only, what they assume president trump and congress will do on fiscal policies since the world has clearly changed
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there? aancine: are you expecting 25-basis point hike, or is it a 50-basis point hike? i am expecting a 25-basis point move because that is what the markets anticipate, and i think that chair yellen at this point would have said something to make them change their minds. 25 basissure that points tells us much about the future. people will be looking at the words they use, and they will be looking at those darned dots, where members of the federal market and 80 -- of the federal market committee voters and nonvoters do their jobs. se dot is to know who whose. tom: within all your work and
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your wonderful book on the central banks, we have the asset buildup. over to bloomberg, and here is the asset buildup, of the fed, of the bank of japan. and europe as well. do you look at that asset buildup in perpetuity? is it ever going to come down? david: i think it will come down only very slowly. the fed may not actually outright sell securities. it may let them run off. tom: david wessel, congratulations on your work with former chairman ben bernanke as well. we will come back with a discussion on economics, and what we see from mr. trump, mr. trump tweeting out. mario monti on italy, next. ♪
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" on "bloomberg surveillance economics, finance, and investment. mr. trump tweeting out moments ago to "the new york times." with first word news, taylor
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riggs. taylor: donald trump has spelled out his policy priorities in a new video. on his first day in office, he will take aim at a controversial trade agreement. entree, i will issue a notification of intent to withdraw -- on trade, i will issue a notification of intent to withdraw from the transpacific pressure. instead, we will negotiate fair, bilateral trade deals that bring jobs back to on to american shores. taylor: he says that for every new regulation, two old ones must be stopped. in chattanooga, tennessee, police have arrested the driver school bus that crashed, killing two people. the driver is charged with vehicle or homicide. -- with vehicle or homicide. thearthquake struck off coast of fukushima, japan. that is the home of a nuclear
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power plant crippled by a tsunami in 2011. the latest quake knocked off a cooling system in a separate fukushima plant and also caused a small tsunami. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom? francine? francine: the italian referendum is less than two weeks away, and just like brexit, it could have ramifications on the e.u. if the referendum is struck matteo renzi has said he would resign. he backed off that. joining us is mario monti. , thank you so much. you aren't one of the most prominent figures who said we
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should that you are one of the most prominent figures to sit we should vote no on the referendum november -- you are one of the most prominent figures who said we should vote no on the referendum december 4. mario: i think it was a mistake to dome minister renzi nature so much the referendum on the constitution because this is a referendum on a partial unification on the constitution. he has decided to overcharge with so much of a dramatization. that is, i think something that he himself believes was wrong. now, i, for example, i vote no because i believe that the new constitution might make the process more cumbersome, complicated, and uncertain, not
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less, and also because i do not like the new senate, which will aing to national prominence political personnel which has been highly corrupted on average. but i, for one, say the prime minister should continue. francine: but do you think he will? there was a realization that a vote against what has been proposed by the government makes it very unlikely that the government will stay. do you assume that matteo renzi will have to step down? this is his own choice. i do not believe at all that he will have to step down. if he does, and if he gives today the impression that he might, in that event, step down, and if there are uncertainties, that is his responsibility. francine: what comes after a
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matteo renzi government? the referendum is linked to his political future. what comes after him? is a technical government, snap elections, a lot more turmoil for italy? mario: no. i would expect mr. renzi to stay on after all. secondly, if he wanted to leave, i would expect the president of the republic to form a new government with a new prime minister, but very much from the same center-left political spectrum, which is now the renzi majority. there will be, in my view, no early elections. they will stay where they are supposed to stay in 2018, and there will be a continuation of current policies. and, i should say -- and i have
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consistent the most supporters of prime minister renzi, especially initially -- that the policies of mr. renzi in the past two years have been quite different from the initial ones that the initial ones included a labor market reform that has not given results so far. years, i willo say that the base of economic reforms has slowed down a lot. and also that the space of fiscal consolidation has slowed down a lot. so the outcome of these two years is not really brilliant considering that there was a mostly favorable situation on certain qe, the exchange rate, etc. -- thereeve that he will be another similar
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government, not a technocratic government at all. but i do hope that the policies become more vigorous. francine: you are a liberal reformist. are you not afraid of the base and the power that some of the movements that are more extreme, either to the right or the left, of the advancement that they are having, and the fact that any political turmoil or any chance of snap elections, they will get in power? mario: no. to get in power, they need to have actual elections, and they need italian electors that are good at government that that are good at governing. -- that are good at governing. the message i am trying to convey is that there should be no turbulence in the financial market, and that renzi or not renzi -- italy cannot go on like this.
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it must go down more completely the path of reforms and fiscal consolidation. francine: i understand and respect that point of view, but the markets seem to assume a no vote on the referendum would automatically mean that italy would leave the eurozone. that is completely a distorted imagination. that would take a five-star movement to go into the government, to go for the referendum, and to win that referendum, supposing they called a referendum. see, is far as i can out of reality. at any rate, i know that the financial markets are still impressed by the young, bold mr. , who did exactly the
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policies that the financial markets would have called for. although that fascination goes on, financial markets should also have a look at what the european commission says on the renzi economic policies, and also taking into account that he has become a powerful factor of almost populism from the top, because the way he speaks about the european union is not very dissimilar from the one that the believes,movement except that he has more authority. and more of a megaphone effect. francine: is that not what people want? the people in power now, what can they do to bridge this divide? we saw it with brexit and with donald trump. there needs to be a meeting of the minds or rhetoric which people understand and take on board. mario: then on this account, we legitimize trust, truth, politics.
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we legitimize storytelling overshadowing completely the fact. and i am definitely against that policies.litics and you identified the root of the believe but i do not the firstould take four power of those in the political arena as fully legitimate, even if that brings them to betray their people, essentially. francine: mario monti, thank you so much. we could go on for hours because this is a hugely complex situation, at the forefront of europe with elections. tom: just extraordinary. it really carries forth the divide that we saw when i was in london between david folkerts-landau and homer's
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reading -- the biggest divide i saw in london was on italy, the immediacy of the solution in italy versus the more dramatic like. to do central bankers adapt the political reality of a new western populism? kim: in part it is the leadership, and you will find that new leaders of these countries up leaders of central banks. that will have an impact on the way they behave. but central banks have a very specific mandate at least in the united states, they are instructed to keep prices stable, to keep output close to normal levers -- to keep output close to normal levels. tom: checks and balances are in the air right now. there is a check and balance in england, in frankfurt, in washington. the checks and balances to our monetary policies? there are lots of
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them. it depends on which institutional setup you talk about. if you think about the federal reserve, they communicate rarely what they are doing through statements, press conferences, testimony, and they are called to account by the congress. so i think they are held very much accountable for what they do. tom: are you traveling this holiday? kim: no, thankfully. tom: kim schoenholtz, always sensible. we will come back with kim schoenholtz and talk economics. coming up, brian kelly. buffalo. get to the points guy, next. ♪
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francine: this is "bloomberg surveillance." lacqua in london. tom keene is in new york. let's get straight to the "bloomberg business flash" with taylor riggs. kkr has agreed to buy auto parts maker calsonic. it has been looking to spin off less important businesses. a change at the top of fidelity investments which manages more than $2 trillion. abigail johnson will take full control of the family-run firm early next month. she was seen her father, ned johnson, who will become chairman. that is your "bloomberg business flash. we are honored to have on the set brian kelly.
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he is the points guy, which to how hes justice has single-handedly changed the travel business. before we get to thanksgiving, give me an update. next year do we get 200,000 miles, some stupid charge card? ryan: the battle -- have heard rumblings that american express will come out swinging in 2017. tom: does jamie dimon hate you? brian: no, we text message. we are friends. i am kidding. what is the number one tip you have for the panic? brian: the panic is overblown. we like to hype it up. but i would say go to the airport prepared. get your tsa pre-check. it is a little late now if you do not have it already.
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we know airlines charge fees for everything. so do not go to the airport confused here in it is all about expectation. spirit is a low-cost airline in america. articleur detailed where now they are going to charge me for baggage. where does that trend go? is a veryrit successful airline. thing is happening here. airline passengers do not want all the frills. most people do not know how to use miles, so wipe extra for those miles? that is what united is doing. tom: are we heading to -- i flew british airways -- row was wayir exit
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more comfortable than british airways business. tom: francine, this is not fair. brian kelly is 6'7", i am 6'5". it is an absolute scam or that is why i take the surveillance gulfstream. francine: i am sleep deprived, tom. brian, how much do you -- i travel regularly. i used to live in the united states. i have traveled across many states. but if you look at trump and it automatically affect airports and infrastructure getting to and from these airports? francine: his -- brian: his infrastructure plan has yet to be spelled out, and onrecently did a study airports, and laguardia is the worst in terms of timing and the fact that you cannot get to the city center. i do not think spending on infrastructure will fix laguardia's problems, but
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arguably his infrastructure plan could vastly improve our airports. but the details are yet to be seen. francine: what is the best airport in the world? looking at the holiday season, we have heard that the best carriers are the middle east carriers. tom, maybe you want to jump in. brian: singapore airport is beautiful. it is well thought out, close to the city center. hong kong is great. the middle eastern airports are really nice, but i give the edge to -- tom: let's look at this chart. here is the moonshot, the reality. ais is the last era i picked successful airline. can they sustain cash flows and lose the past bad behavior that has gotten the airlines in trouble before? brian: alaska -- i think the biggest question is what is going on with the merger.
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they have a very dated first class. they're passengers i do not think will go for their product in the future. it is a great run airline. people like it. . would go long on alaska tom tom: i hate you. $186 to the maldives? if you move to london, mauritius is closer. he makes great points. boris johnson speaking, answering questions from the foreign office. we will monitor. if you want to watch that, go on your bloomberg terminal. plenty more on that and look at world trade. this is bloomberg. ♪
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tom: foreign exchange. it is there. equities move. futures higher today. i am going with yen, 110.75, and with the dollar index holding above a hundred -- that is about it. francine: coming up shortly, it is "bloomberg daybreak." david joins us now, and you have a packed show. david: we will start with richard haass, talking with us about what donald trump said about tpp. the first day in office, he is going to get out of tpp. also going to talk about bonds, remaining in the news. we have jeffrey rosenberg with us from blackrock, talking about the short-term, medium-term, what it means for investors. today is a big day for commodities am a with bob michaels of jpmorgan -- for michaelses, with bob of jpmorgan.
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that is part of what we are going to talk about. tom: it is a new world. we just had another trump tweet. this is really cool. great meetings will take place today with trump, concerning the formation of people for the next eight years. for the next eight years. francine: tom, if you are going after that we had one of our guests, which i thought was one of the smartest things. terms, first you focus on growth and you are a little more tame in your thinking because you want to be reelected. you cannot do that much damage even in terms of trade. so maybe this is something -- tom: final thoughts of kim schoenholtz right now, with nyu. 18 things in my head -- productivity and the lack thereof.
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i'm sorry, but that is mr. trump's economic challenge, isn't that? kim: it is going to be a big challenge. some of the things he has proposed are not going to be hopeful. anything that reduces trade abroad will not be helpful. idea of the timeline, the time continuum in economics -- is a tax cut a one-off advantage, or can there be up minutes to tax reduction? kim: it depends on the and the debtx path. if the u.s. debt path is unsustainable, there will not be a permanent tax reduction. francine: what is the one thing that donald trump needs to get right to reflate america? tom: it is important -- kim: it is important to put more of a fiscal emphasis -- more of an emphasis on fiscal policy. there is probably too much reliance on central growth. it is reasonable to expect a bit
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more fiscal stimulus. it is much broader than that. trying to figure out how to get economic policy right is not a simple thing. it will take a lot of experimentation. we should be willing to experiment. tom: kim schoenholtz, thank you so much. he will continue with us on bloomberg radio. lots coming out today, including those trump tweets driving our political, economic conversations forward. look for that on television and radio. tomorrow, rupert harrison of black rock on his brexit. from london, from new york, this is bloomberg. ♪ bbg-110516-0730-sg.
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♪ jonathan: good morning, from new
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york city. it warm welcome to "bloomberg tuesday," on this november 22. in the market, futures a positive 52 points, the dow up six points on the s&p 500. loweracross the periphery in the united states. treasury yields go lower, down by three basis points. the dollar-yen, a marginally weaker story. -- david:t you need here's what you need to know at this hour, party like it's 1999. equities rally to all-time highs for the first time in 17 years as commodities surge. death, taxes, at a rate hike. the market is certain the federal reserve will move next month as the implied probability gets 100%. and donald trump targeting trade.


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