tv Bloomberg Daybreak Americas Bloomberg November 23, 2016 7:00am-10:01am EST
daybreak. i am jonathan ferro in new york alongside guy johnson in london. david westin and alix steel away. equities in the united states, all-time highs. benchmarks pretty stable as we count down to the opening in new york. a very witty session for the british government bonds. thiswhat we need to know hour, let's talk about trump in transition. he is said to be looking at reshaping the fed fast. who is in line to fill the vacant seats on the fomc? crude trading their $40 a barrel as opec fails to agree on iran and iraq hospira tip-in takes -- precipitation.
statements autumn fall short of estimates? why should u.k. chancellor philip hammond deliver more stimulus? about 30ement in minutes from about 30 minutes from now. jonathan: we get to anna edwards in london outside of parliament as philip hammond gets ready to deliver his autumn statement. good to see you. economy has been more resilient perhaps in the wake of the brexit vote at least than some economists expected but we see no brexit yet, just the vote. expect brexit to feature very highly. overlouds above it gather these autumn statements as the economist wants to make the economy match fit for the time
ahead. with this certain -- with the future uncertainty around brexit , he will work around the forecast and the chancellor will announce those as part of his autumn statement today. that will tell him how much room of maneuver he has. he has described the u.k. debt as i watering late large. some emphasis on infrastructure spending. jonathan: let's talk about the giveaways, who is the audience for chancellor hammond? anna: certainly are going to be some giveaways. the news phrase that has entered the lexicon is jam. people who are just about managing. theresa may seems to be very much about spreading the benefits of globalization to those people who may have felt benefitsfrom those
previously and hence, resulting in the brexit vote. there will be some pressure perhaps being applied by theresa may to the treasury to find a few more gifts to give even if the debt level at 89% of gdp is ateringly high. a few taxation changes as well, changes around the rules when renting property in the u.k. to allow those renting to keep a little bit more of their money. there will be some more giveaways but perhaps no fireworks. jonathan: great to have you with us. we will be breaking down the outcome of the autumn statement in the next few minutes. you are looking at live pictures of the houses of parliament where the questioning has started. we talked about a fiscal reset in the united kingdom several months ago. that is certainly not we are -- what we are going to get from this budget and at the same time
we are talking about a fiscal reset in the united states, and that maybe is not what we will get in this country as well. the parallels are quite distinct. guy: the president-elect was trying to draw those before he was elected, what the thing about the data is it has held up. why should you add stimulus to a story that is looking fairly good? takennk of england has out an insurance policy with the rate cuts we have seen and some of the policy. we have already seen the insurance taken out to the chancellor needs to be adding to that. it might be a volatile trading day when it comes to the pound as we work our way through the .ext hour to hour and a half the chancellor speaks at 12:30 to give us the fiscal statement. then we have the kobe are coming out in terms of what the objection -- rejections -- the coming out inr
will it have a meaningful impact on the pound? >> we do not think so. we think it is turning a little more boring if i could put it this way. the attention has shifted to the dollar as you said this pivot to focus on u.s. fiscal policy and what it does for the dollar i think has been driving the foreign exchange market, so the pound has been on the sidelines. given the short market positioning i would say if you wanted to be long dull, it is probably not the best place to do that. jonathan: one of the most curious things for me is what has been happening with the pound throughout the president fallout in the fx market. you will see the outperformance over the last month in the g 10 space against the dollar, has come from sterling. me. explain that for
that is every g 10 currency against the dollar over the last month and the outperformance is coming from sterling. do you call it outperformance or less bad performance? i think it is the case of the latter. momentum tradeg in the foreign exchange market and everything else was a range bond jade -- trade. i think the markets were not sufficiently long dull against the yen and some of those commodity currencies, where we are seeing the interest in the pound staying on the sidelines. guy: somebody once told me many years ago that if you want to have a great year you a terrible year before that. we got too far, didn't way? vassili: that is our opinion. a lot of the negatives related to hard brexit are in the price. we did have a significant declineda second stage
based on fears of hard brexit but we think valuations are relatively cheap. the long-term value for the pound is closer to 1.50. forink with less room monetary policy stimulus as we have talked about recently, we do think the pound is bottoming out. jonathan: the other aspect to all of this, there was an obsession with u.k. politics over the last several months and you get the feeling we have a , the focusir of it more about the risk events on the horizon and across the eurozone. guy: brexit was conceived as a singular event. it was a surprise, the market was shocked, but it started to draw the lines. once we got the u.s. election in place you can start to draw that line from brexit to donald trump, to maybe what huddle -- happens in italy and france.
case, is thehe focus shifting away? vassili: i think we are seeing the interest fade in euro sterling and people have refocused on the european market. even with brexit and adding the european political risks and the presidential elections in france next year, i think people are starting to say maybe there is too much in the price of the sterling and not enough in the price of the euro. guy: stay with us, around 24 -- beforefore they philip home and -- philip hammond against to speak. let's catch up with what is happening outside the business world. here is emma chandra. emma: president-elect donald trump is planning to name south carolina governor nikki haley to
be the u.s. ambassador to the united nations. the announcement will probably be made today. she is one of the republican party's rising stars. opec has differed the issue of whether iraq and iran will make oil cuts. that will leave the crucial measure to ministers who will meet next week. they are trying to agree to a cutback in order to stabilize prices. has focusedtates its attention on another set of trade negotiations. next week talks are planned in indonesia for a regional trade agreement that includes china but excludes the u.s.. it would further boost china's role as a geopolitical leader if it goes through. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. jonathan: captain you down to the market open, future stable in the united states, equities at an all-time high.
abigail: in the premarket we have the shares of eli lilly absolutely plunging, which are trading lower and this is not the correct chart. here we go, down more than 14% after the company said its alzheimer drug failed to make the primary end point. they say they do not know what the next steps are but they will taking a nine cent per-share charge. it is worth noting these shares are plunging, on pace for the worst drop since 2000 when they lost their prozac patent protection. a serious issue for eli lilly that we will be covering throughout the day. some car stocks on the move, volkswagen trading nicely higher , upgraded by goldman sachs from by -- from neutral to buy. daimler chairs are lower on a downgrade to neutral, goldman
sachs saying the earnings growth picture is not clear and they see headwinds overall for the car sector. john deere shares are nicely higher and the earnings winning streak continues. they made $.90 per share in which was 130%gs better than what they were looking for. they took their fiscal year 2017 that profit view up to 1.4 billion. the stock is already up more than 20% of the year and it looks like this run could continue. jonathan: coming up, why it might be now or never for parity with donald trump rejuvenating the so-called rejuvenated trade. head of commodities research had more's -- ed morse joins us. from new york, a transatlantic
jonathan: this is bloomberg daybreak, from london and new york with guy johnson and jonathan ferro. equities, all-time highs in the united states, futures go nowhere. outperform ours up one quarter went percent on the ftse 100 driven by the miners. guy: we saw the same thing yesterday, a big gap higher. we have seen positive views from the mining sector out from asia. let's talk about what we are watching on the cross asset board. 1.262.le rate, we have been talking about what
is happening with the cable rate. we are about to hear from the chancellor of the exchequer. moves on the front end of the german curve over the last hour or so. that is where the u.s. 10 year is, 2.32. oil, will they or won't they? down by 3/10 of 1%. wimpyan: i thought it was for crude and it is wimpy for the bond market. never,might be now or with the victory of the ,resident elect donald trump the dollar-euro has been swelling. here is one of the most powerful charts in the fx market. kit juckes says it is the bond dog wagging the fx tale. the two year spread, germany
versus the u.s. that is what is driving it at the moment. dust isit is a much there much oxygen left in that move? vassili: there is a little bit left that i'm not sure it is enough to get us to parity. hikes andced in two maybe three. i think again there is going to be a point where we will start hitting the limits of this policy divergence, because a strong u.s. dollar is ultimately not supportive for the economy. guy: i want to bring up my chart which is the move we saw at the front end, negative rates coming through. the ecbare seeing is effectively having to say it is going to change some of the criteria involving repo operations and lending of german bunds in order to make sure the
market does not freeze up. are we reaching the limit of what the ecb is having to do? the ecb is going to have to step up and make some big changes. would that be enough to project forward into that parity? vassili: i think you are right. yieldeepening in the u.s. curve is happening elsewhere as well. yield curve has been steepening for different reasons. a be ecb is running out of room in terms of qe. we think they, in december and extended qe and that is not going to be easy. we will get to the point where the ecb will have to start tapering and that will be a big turnout moment for the euro. i think a lot of the parity calls are with european politics as well so we have to see how that plays out.
the second half of next year i think is going to be pretty good. jonathan: you are looking for 1.15 year end and that is certainly not consensus. , youli: on the u.s. side have the inauguration on january 20. 100 days, optimism about stimulus as a lot of people have said the current plans are likely to be significantly restrained by congress. as we move further down the path in 2017 we will realize maybe we do not get as much fiscal stimulus in the u.s. and not as much growth pickup, and the ecb will start tapering. the combination of tapering and a trade surplus is a powerful one. jonathan: breaking headlines from an ecb spokesman, they are set to look at securities lending under review on an ongoing basis. they were said to be looking at bond letting amid a repo market
tension. how much is fundamental, the divergent story, and how much is technical? markets have been -- starving for shorter dated bunds. guy: germany owns the bond market. i watched what surrounds, the whole thing and i was thinking, that is a very big move relative to what looks like a benign headline that then you think about the tension in the market because of concerns about shortages of bonds. they will have them on the books for regulatory purposes and if they cannot do that, there will be a problem. it is playing out in a big and surprising way in terms of the move. jonathan: the question i would be asking at this point, looking ahead, i have an ecb where the data is holding up.
i can see clear shortages in the bond market and i have a series of risk events on the horizon. can i step back from qe in a material way? vassili: i do not think you should be stepping back from qe and inflation is the main concern. now, the think for issue is let's keep going. the problem is they cannot be doing more, and fx markets react to the marginal change, so they can be doing more -- cannot be doing more and desperately trying to make the kind of program work. i think in the third quarter where the this is improvement in the economy will start moving the ecb the other way. jonathan: great to see you this morning. -- vassili serebriakov.
jonathan: in the commodity market, both brent and wti softer today. wti..87 is the trade on a conversation around opec did not resolve whether iraq and iran will participate in production cuts. , today's oilg market caught between a conclave -- and a president elect with an itchy twitter finger. if you thought federal bankers
speak was hard to get through, opec talk even harder. guy: now beginning to question it. let's get to will kennedy. it was always going to be difficult and they had to wait until the big boys came in and decided, but nevertheless it is looking very hard to see a deal on iraq and iran working. right, soink that is the real question is how much heavy lifting the saudi is willing to do because it looks like they are the only people who will materially cut production. the equation for saudi arabia is how far are they willing to go because if they take too much of the burden themselves other people will move into that space , and shale producers may come back into the market. they will have given up market share.
at modest reward. jonathan: we had the embarrassment of doha then saving face and out years and what is going to come out of vienna, what is the downside if you do not get a deal at all? what do market parts of britain's -- participants think? gotteneople have optimistic so if it collapses i think you could see a lot of downside. we have seen a lot of action in the options market this morning are busy -- people positioning themselves. like and feels like a week deal and the market will see straight through this. will: yes, i think that is probably right but as liam points out, if they get a deal what will that do? show producers will come in hedge and that guarantees more
barrels in the market for the next year so that could be a poor outcome for saudi arabia as they see a temporary up swing and prices and a hedging. jonathan: bloomberg news managing editor will kennedy. look at the situation as it evolves. if you see saudi arabia stuck between a hard -- a rock and a hard place, they want to do something but they are supporting the other side of the ocean, aren't they? that is going to make life harder and harder for opec. the u.k. chancellor of exchequer is about to get on its feet in parliament. ♪
the autumn statement, the post brexit vote update out of the u.k. this is how the trade -- the cable rate trades. say not justas you any old budget statement, this is the brexit budget statement and that is quite significant. these things are usually reasonably interesting and this one more because of what happened earlier this year. anna edwards is live outside of parliament. the brexit twist makes it fascinating. anna: absolutely. certainly there is going to be brexit hanging all over this. in the background there is some 40testers, maybe 30 or gathered outside the houses of parliament demanding brexit. we want it now, they say.
some fearing perhaps momentum is being lost and things are going to slowly. philip hammond will be speaking shortly in the house of parliament behind me. he gives his first update on the state of the economy. the office ofd budget responsibility forecasting since march and a lot has changed, but we do not have a lot of facts. do their forecast for the economy goes and that is what hammond it works off of when he does his tax and spending plan. a have to do a lot of guesswork in terms of migration levels in the future and trade numbers, but they will have to come up with numbers on the strength of the u.k. economy. we are expecting a downgrade to the gdp numbers and upgrades to inflation because of that fall in the pound well increasingly have a significant impact on consumers. the u.k. economy has held up
pretty well in the wake of the brexit vote but philip hammond has said he wants to make the economy fit for the challenges that lie ahead. guy: what will the market be listening for? you talked about some of the borrowing requirements. if i am sitting in the gilt irket and watching, what will be paying attention to in terms of what the chancellor will actually say? anna: there could be this big number of 100 billion pounds, could that be the size of the shortfall that philip hammond has to make up because of that brexit vote and because of the effect that has on the forecast? enough,ion pounds is something has been put out as the median forecast. 100 billion pounds over the next five years, we will have to add up if things are as bad as that. some of the october borrowing
numbers came in better than had expected but we see a government working within what philip hammond has called himself, eringly high debt levels. on the gilt markets and the u.k., global yields have been rising and it is not as if there is a hammond premium. suggestw on research to that maybe 15 to 25 billion pounds of extra gilt it issue with is something the market could deal with quite happily but that depends on its structure. is something the market could deal with quite happily but that depends on its structure. could we see infrastructure bonds, and innovative way of handling this level of debt if it will be needed to fund infrastructure? anybody following the
intricacies outside of london and the united kingdom, there is always something that moves stocks and for most people it is more property in the capital. foxton is down by nine full percentage points in the united kingdom. give me the why. heads-uphad some early from the government about some of the policy announcement. around one .4 billion pounds spent on new homes but the thing that is affecting some of those real estate brokers in the london market's limitations on their ability to charge rental customers specifically some of the charges that started off pretty small and were growing. the government is going to clamp down on those. i talked to the royal institute of chancellor surveyors. they were praising hammond for the amount he is listening to
the real estate sector in his plans to build homes, and cautious on this particular policy that has been hurting the real estate companies this morning, but broadly they were welcoming. guy: what you were watching right now in the building behind anna is the prime minister's questions, which is kind of a knockabout session where the prime minister takes to the dispatch box shortly. it will roll straight forward into the budget statement. you can see the chancellor of exchequer to the right-hand side of your screen. very shortly to read out the numbers and statements and details. in some ways is is about people that feel left behind. the statement is going to be about people that voted for brexit and in some ways, voted for donald trump as well, who left phil -- who felt left behind by globalization.
what will be in the statement this is aanna: government that has a big majority in the poll so why do anything to give away money? , we certainly know she wants to spread the benefits of globalization more broadly and she wants business to help her try to sell globalization to the british people. we have been talking about this new phrase over the last week or so, jammed, those who are just about managing. changes to tax credits that might work in their favor and an increase to the minimum wage, and another theme around infrastructure and productivity. ron bands, money for science will all be a future. it is about those who feel left behind and putting in place .easures to boost the economy
the confederation of british industry has been calling on the government to put 3% of gdp into infrastructure spending. the sense of progression all cap this is -- the u.k. lags behind germany. infrastructure, like that is a big theme in the united states, a big theme here but not on such a grand scale. this is not a chancellor who likes fireworks and he is mindful of the debt limitations he is operating under. the parallel is so clear, the united states versus the united kingdom. we were told we might get an emergency budget from the u.k. vet -- u.k. government off the vote of the brexit and did not get one. now we are talking about a fiscal reset and i wonder how things are looking on the side of the atlantic. ultimately we will not get a
lift budget update today. guy: it will be interesting to see how that works its way through. in the i were on set york listening to when donald trump announced his win, and came through and made that statement. he talked straight away about building roads and bridges. let's take a listen. chancellor hammond: it is my privilege to report on an economy that the imf predicts will be the fastest-growing ager advanced economy in the world this year. unemployment at an 11 year low, and economy which through the hard work of the british people has bounced back from the debts and anr's recession, economy which has confounded commentators at home and abroad with its strength and resilience since the british people decided exactly five months ago today to leave the european union, and
chart a new future for our country. , that decision will change the course of britain's history. it is thrown into sharp relief the fundamental strength of the british economy that will ensure our future success. the global reach of our services industries, the strength of our high tech manufacturing base and thatutting edge business are leading the world in disruptive technologies. it is a decision that also makes more urgent than ever the need to tackle our economy's long-term weaknesses like the productivity gap, housing challenge, and imbalance in economic growth and prosperity across our country. mr. speaker, we resolved today to confront those challenges head on, to prepare our country to seize the opportunities ahead . and in doing so, to build an economy that works for everyone.
an economy where every corner of this united kingdom is part of our national success. mr. speaker, i want to pay tribute to my predecessor and right honorable friend. my style will of course be different from his. i suspect that i will prove no more adept at pulling rabbits successor has my been at retrieving balls from scrums. of [laughter] chancellor hammond: my focus on building britain's long-term future will be the same. he took over an economy on the brink of collapse, with the in our budget deficit postwar history and brought it down by two thirds. that is a record of which he can be proud. our taske moved on and
now is to prepare our economy to be resilient as we exit the e.u. , a match fit for the transition that will follow. we will maintain our commitment to fiscal discipline while recognizing the need -- while recognizing the need for investment to drive productivity , and fiscal head room to support the economy throughout the transition. let me turn to the forecast. forecast. since 2010, the office for budget responsibility has provided an independent economic and fiscal forecast to which the government must respond. gone are the days when the chancellor could mark his own homework and i think the team for their hard work. today's forecast is for growth to be 2.1% in 2016, higher than forecast in march. in 2017 the forecast growth will slow to 1.4% which they
attribute to lower investments and weaker consumer demand, riven respectively by greater uncertainty and higher inflation resulting from sterling depreciation. that is slower, of course, then we would wish that still equivalent to the imf forecast for germany, and higher than the forecast for growth in many of our european neighbors including france and italy. a fact that will no doubt the a source of very considerable irritation to some. of the uncertainty diminishes the growth forecast recovers to 1.7% in 2018, 2.1% 202119 and 2020, and 2% in . while they are clear they cannot predict the deal the u.k. will strike with the e.u., their current view is that the referendum decision means potential growth over the
forecast period will be likely to .4 percentage points lower than would otherwise have been the case. acknowledges there is a higher degree of uncertainty around these figures than usual. growth thew lobar u.k. market is expected to remain robust. shows the number jobsng every year, 500,000 created providing security for working people across the length and breadth of britain. mr. speaker, for those who claim that recovery is a southeast phenomenon i have some news. over the past year employment grew fastest in the northeast. pay grew most strongly in the west midlands. every u.k. nation and region saw
a record number of people in work. speaker, is a labor market recovery that is working for everyone. monetary policy has played an important role in supporting growth since the referendum decision, but a credible fiscal policy remains essential for maintaining market confidence and restoring the economy to long-term health. in view of the uncertainty facing the economy and in the face of slower growth forecast we no longer seek to deliver a surplus in 2019 and 2020, but the prime minister and i remain firmly committed to seeing the public finance this return to balance as soon as practical while leaving enough flexibility -- while leaving enough flexibility to support the
economy in the near term. today i am publishing a new draft for the budget responsibility with three fiscal rules. public finances should be returned to balance as early as possible in the next parliament. , estherhe interim cyclically adjusted borrowing should be below 2% by the end of this parliament. second, the public sector net debt as a share of gdp sb falling by the end of this parliament and third, welfare spending must be within a cap set by the government and monitored by the obr. the welfare bill spiraled out of control with spending on working termsnefits in real between 1980 and 2010 as a result of the action we have taken since 2010.
has stabilized and the cap i am announcing today takes into account the policy changes made since the last budget, sitting a reasonable baseline. i confirm again the government has no plans to introduce further welfare savings measures in this parliament beyond those already announced. r fiscalrn to the ob forecast but i will set out the key charges -- key drivers of charred -- change. expected classification changes provided 12 billion pounds since budget. tax receipts have been lower than expected this year, causing the obr to revise down projected revenues in future.
rapidly rising corporation and self-employment further erodes revenues. with the impact of forecast believesowth, the obr spending is said to be 68 .2 billion pounds next year, and then 21.9-- -- and finallyin 1222 billion pounds in 20 -- in 2022. they will continue to fall over the parliament. this will be the lowest deficit as the share of gdp in two decades o. thebr expects cisco --
--lically adjusted growth comfortably meeting our target reducing it to less than 2% and importantly leaving significant flexibility to respond to any headwinds the economy may encounter. forecast of higher buying and lower assets sales along with the temporary actions of the bank of england translates into an increased forecast for debt in the near term. the debt will rise from 84.2% of gdp last year to 87.3% this 2017 peaking at 90.2% in and 2018 as the bank of england's monetary policy interventions approach their full effect. in 2018 and 2019 the debt is fallted to fall, the first
since 2000 -- guy: you are listening to the u.k. chancellor of exchequer philip hammond delivering a prebudget report. the significance of this one coming after brexit, some big changes particularly in the 2017 forecast. a big growth downgrade for next year. the comparisons between brexit and the recent u.s. election be made -- being made fast. donald trump it seems has a few thoughts when it comes to the federal reserve and those two empty seats. that is the discussion we will have next. ♪
the focus on london as the chancellor delivers the budget update. if you want to follow them action you can follow it on the bloomberg. the headline so far, and upgrade to the growth forecast to 2016 but an aggressive downgrade for 2017 to 1.4%, and an upgrade in the amount of debt that will need to be borrowed over the next five years. guy: you can also watch it on live go on your bloomberg. let's talk about the comparison between brexit and what is happening in the united states, the relationship between the federal reserve and the incoming president elect. donald trump looking interesting, potentially putting some new faces to the fed. he will move to phil two vacant seats on the fed board of governors in his first 100 days in office. with us as tom porcelli.
worked on the open market desk of the federal reserve bank of new york. how significant is it that the new incoming team is looking to fill the seats and fill them quickly? tom: they should. they have been vacant for some time so we need to fill the seats. what is more compelling is when you consider he might have the ability to fill five seats. 2018,yellen will leave in that is the third seat. it is conceivable they will wind fisher and there are some rumblings that tarullo might want to step down as well. literally five seats is what donald trump can fill, which is rather significant. jonathan: what kind of people does he put in those seats? hawks? does? -- delves?
-- doves? tom: kevin marsh strikes me as a bit hawkish for what donald trump is trying to do. he was talking about the potential for selling assets. i cannot imagine that donald trump would want that. nevertheless that is a name being talked about. it seems that you will get more of a hawkish lean. guy: what sort of the skills that will be people made? it looks like we are going to see demand for inflation. it will be interesting to see how that works through the labor market. what kind of skill set will we need? tom: the skill set is always going to be the same, people attuned with what is happening in the marketplace and with a good sense for how the economy is evolving. i think at the end of the day, whoever the president is, they
are going to try to chew someone who is in line with their general thinking but in terms of the skill set, it will be the same. jonathan: at about 2:00 p.m. eastern there will be people waiting to get away for thanksgiving and the federal minutes -- fed minutes come out. are these the most dated? tom: i could not agree. i will be out of here at 2:05. i think these are stale minutes are the most part. we heard from janet yellen saying we need to be forward-looking, adding credence to the idea that we are going to get a hike in december. i do not think you will be able to glean much in the way of new information from these minutes, and i would tell people trying to get out the door early, do not let the minutes stop you. jonathan: tom porcelli with us. it feels like the most dated set the federal reserve minutes we have seen for a long time.
given the amount of change we have seen over the last few weeks and i am not sure the fed expected this political outcome either. guy: the market certainly did not, and you will go through a similar scenario i suspect as the one in the u.k. and you is historical can argue that everyone will be operating off incorrect information in the united states. jonathan: we take you to the commodity market with ed morse joining us to reveal his outlook for opec and crude, and we will discuss the big move and base metals. from new york city, this is bloomberg. ♪
john at the bank good morning. good morning. i am jonathan ferro along with guy johnson. markets,rkets, equity all four benchmarks high. only marginally down. futures down. as and p going to know what -- s&p going to nowhere. plenty in the eurozone. , a look atbonds treasury, switch of the board at the moment. yields, where are we? going higher by a basis point. the capital rate up. thiswhat we need to know hour. fred hammond said the u.k. economy will grow more slowly as he makes his first major interventions since britain voted to leave the european union. trump in transition. tempered some of his more
extreme views but he is said to be looking at reshaping the fed and fats. who is in line> -- the fed and fast. -- who is in line? that is what you need to know. that is what you need to know. jonathan: let's start. the news from opec and the talks in vienna or their lack of. agreement andhe then the meeting before. i am confused. try to make a really, really simple, what is going on with opec and what will happen at the end of the month? two roadblocks. iraq and iran said it we what a deal, too, but we do know what to be a part of this. that's the problem with saudi arabia. why should we have to do all of
the work. the committee yesterday would decide how the burden would be shared and they cannot resolve the iraq and iran situations. in the full ministerial meeting takes place next week. >> was the most likely meeting? will: the consensus is that there will be some kind of deal. it would mean that oil plummeted were not getting it back. the question is how strong a deal and whether the market buys it? you will get a deal and saudi arabia will do most of the work but the quest is how many barrels for jonathan: and whether they need to do even more given the moves we have a mean and the strength. what do they agree in algiers is somewhat outdated? will: that exactly right, jonathan. one of the biggest surges has been liberia.
they have been exempted from the deal and we have seen hundreds of thousands of extra barrels and we will look at the indicators of the fiscal market in place like the north's the, the mediterranean, a lot of oil. north sea oil heading toward asia, not a trade you normally see. so much oil around it makes sense. jonathan: will kennedy. want to bring breaking news on the latest out of the trump administration. ben carson for the department of housing and urban development. ben carson getting that pic from president-elect donald trump. back to the markets. joins us to continue the conversation. opec and an agreement, are we going to get one? ed morse: the odds are we going to get one. it does not really matter what iraq and iran will do so. fori arabia is in a bind
being so aggressively in favor of a cut. i think they should of then plaintiff more ploy. when the heart of opec wants to do something, they need to get behind them. a little bit of bad diplomacy failed to get them there. will bend, the iraqis peeled away from the alliance with iran. very unlikely to want to stick with that alone. i think there will be a deal. guy: you are trying to figure out what your hedging strategy will be, what would you advise? ed morse: the hedging strategy is to wait for different prices for 2017 and 2018 to pop up above $50 and lock in more hedges. veryermian companies are well hatched at high levels, high 50's and low 60's and this the low cost place. the permian is going to grow and the prices more or less and $50 a barrel.
we are likely to see 300,000 barrels a day next year. -- and been to get exited out of the basin because of the pipeline capacity. if it keeps growing, there may be pipeline constraint. jonathan: i want to bring it up for the viewers. the bottom line is the curve right here, right now. were atop line, where we month ago. as a whole has shifted down since the agreement. i asked will this question, is it pushing them to do even more then they get a couple of months ago, do they need to be more aggressive? chance ofthere is a the bazooka agreement the saudi's have talked about cuts with a cut for you that would require more than one million barrels a day in cuts. together alliances
that could easily get you to the 800,000 barrels a day number. we do not know what they want to do in that regard. sea,verhang in the north you look at really temporary phenomenon. a surge in nigerian production. time to get absorbed. high north sea production out of maintenance. to asia, we will clean up the atlantic basin pretty quickly. we are looking at kind of a little bit lower and potentially a lot higher if there is pretty $45 binary situation. president elected donald trump, has he had any meaningful impact in how people are thinking about the u.s. reserves and where they go from here with pipelines being built and access and how capital is going to work? has anything changed meaningfully since november? ed morse: there are signs that
are meaningful changes. huge natural gas resources in the state of pennsylvania. the state of pennsylvania would be the third-largest data producer in the world, larger than the u.k., i've times larger than china. we have pipeline constraint coming out of the northeast to the southwest to mexico. and i think a lighter touch environmental assessments is certainly in the cards and -- and celebrate -- should accelerate in gas coming out of the northeast. on infrastructure side and openness of the trump administration to make more acreage available to companies for exploitation is very favorable. jonathan: end of the month, big event, the opec meeting. the chief guy used to be ulysses and that was it. nothing else for it has the power going toward iran, iraq, a
lot more time listening to at the end of the month? not think so. if you look at iran, a big surge of 800,000 barrels a day and it does not like there is much more. maybe a couple of hundred thousand barrels left and that's largely going to be compensated. oiloes not affect the black market. iraq is in the same position. 2015 and a surge in telling off in 2016. the iraqis are kind of in a bind. they could be threatened by low prices. if their low price, they cannot ante up to new developments. if they do not get the ioc, they will not ante up. they really need the higher price and that will get them to pull away from this bilateral arrangement with iran. jonathan: ed morse, great have you with us. we will talk about base metals.
an update on what is making headlines, we need to get to emma chandra. emma bank president-elect donald trump has offered then carson the job -- ben carson the position of secretary and urban development. he is a retired neurosurgeon who ran for the presidential nomination. in london, a jury has the bed a man accused of killing a labor candidate labor party . the jury found thomas guilty. witnesses said he yelled "britain first," before shooting and killing cox. a federal judge in texas has blocked an obama administration policy that whatever made about 4 million more white-collar workers eligible for overtime pay. that decision is a victory for the 21 states and dozens of groups who sued the labor
department. they said it will cost the state's more to enforce for global news -- enforce. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am emma chandra. this is bloomberg. jonathan: equities at an all-time high. futures are pretty stable. over to abigail doolittle. abigail: the big mover is eli lilly, plunging after the company said the alzheimer's point ined to meet the the study. third time is not a here. stock is plunging. the worst decline a since 2000. a huge move for this form of company. fair and better in premarket is john deere. shares higher on another earnings beat. 130%ng estimates of by three it looks like cost-cutting
and managing is behind the big gains at this point. on thec is outperforming year, and investors like the cost-cutting strategy, up more than 20% ahead of the gains. loser, urban outfitters, shares are plunging on a disappointing third quarters. they missed estimates by 9% and missedon these sales -- mi on sales. some say they like the company but wunderlich downgraded urban outfitters saying the quarter is the reason for a whole going to the sidelines. guy: thank you. industrial metals trading near their highest level in more than a year. sincest monthly gain 2011. will trump's promise for infrastructure keep it alive? this is bloomberg.
jonathan: this is "bloomberg daybreak." i am jonathan ferro alongside guy johnson. a check of the markets. futures are positive on the dow. .othing on the s&p all four benchmarks. guy johnson, you can walk us through. guy: to you wish, jonathan ferro. what else is happening. parity. talking about that in the french election. that is the cable rates. not a big move about what is happening currently in houses of
parliament and westminster. fred hammond on his feet delivering the statement. 232 is where we are trading on the market. a little out of date, folks. down by 0.3%. speculators are piling in. speculators are palling in around anything that can get their hands on in the metals market pushing copper short of an all-time high reached in 1995. we should inflation-adjusted. infrastructure plan could affected that, ed morse is still with us. i got the charge that was kindly donated to me. it is copper futures. they are searching and searching high. interest pretty high. if you were looking at this market, would you say we are getting overextended at this time? almoste: we are getting
a little overextended. really the market is going to be tightened next year and what is driving a lot of them momentum. not pure speculation. a look of what is happening in the copper market. we started with a consensus, a consists of we do not share that copper would be oversupplied with a new mind from peru -- mines from peru and mediocre from china would keep a lid on. china has increased imports and limited inventories and differential between raw and processed copper has widened significantly. a market that is moving toward a breakout and deleting the metals complex would -- which should follow it through today team in 1920. 2018 and 2019. jonathan: how much is china and how much of is a president-elect donald trump with a signal of
what will happen with infrastructure spending? ed morse: with the degree of donald trump, it is peers speculation. it would behappen, 2018. we have to get through reform of the tax season, we have to have fiscal measures of spending that is required. i think the only thing we can see from all like to regulatory touch is on the pipeline side and copper will have to wait. it is mostly a phenomenon, china is having a housing boom again. read doing infrastructure in terms of transmissions this them. on the centralized grid and these are very copper intensive moments for china. guy: let's talk about i and or -- iron ore. sparking withn don't -- spiking with donald trump. the lads result. dipped a little bit and
postelection, spiking again. is what goals with copper goals to lead and zinc, what is the story? ore is clear, donald trump has less to do with it. where is the increased dependency on iron ore, absolutely in china. if you look at iron ore and coal, bulking commodities, it should be traded in the lower price range for fundamental reasons bring they have skyrocketed. tremendous, 300% increases in iron ore prices. if you look at the lull, want to percent in thermal co -- 30% in thermal coal. china was an impact on the rest of the world. reasons having to do with internal affairs in china rather than the real-world.
in all three cases, a drop with iron ore going down with 10%-20% and thermal coal going down by 30% and other coal by 50%. these are bubbles there are not likely to last given the fundamentals. jonathan: talking about some of the levels in the markets come the dollar index, you look at the capitulation. super dollar strength and the commodity markets rally, how much longer, can that continue? ed morse: we are in a new world. the older normal will become the new normal. in a very short-term time when there may be a trade, but that negative correlation is dissipating. the return to normalcy with tighter rates and the dollar higher, i think it will lead to a separation of that trade.
guy: one final, quick question. earlier it was still them and now -- steel and now thermal coal, the fast money on the speculative changes in china. is it any way possible to predict which one will be next? ed morse: no, it is working against a government that is trying to put a lid on prices. what to do they do? they take action and the reverses the case. to china government decided limit the amount of coal production and they put a lid on it. what happened? a surge in imports, a tight market at home and a lot of speculation on the shanghai exchange is. now, they are trying to find a new mechanism of all longer, nonvolatile set price. how does it work when there are fluctuations between demand and supply? regulation makes for
superabundance a it is a government that is trying to keep a lid on prices and try to get rid of excess capacity and in doing so is growing up a smoother adjustment. guy: great to see you. thank you for your time. ed morse as citi's global head. continues toet take shape. the president-elect is said to be offering former republican rival ben carson the job of secretary of housing and urban development. hammond.k. chancellor is finishing his statement on the budget. hammond is finishing his statement on the budget. does he deliver the goods? we have your recap a market reaction. all of that is ahead -- this is bloomberg. ♪
offered former republican rival ben carson the job of secretary of housing and urban development according to people familiar with the matter. marty joins us. great to have you with us. another name, maybe not the most significant position for our audience but another name and a day you stay loyal and you get a position and my administration. is there something to that? marty: there is something to that. the speculation over mitt romney as secretary of state and he is not a loyal proponent of donald nor is chris christie who was being considered for a post. is really expecting the unexpected. ben carson as a neurosurgeon at hud is fascinated -- is fascinated. the bank john alice is said to be considered -- jonathan: john
alice is said to be considered for role. it is fascinating. how do you keep up? what is the approaching? is talkingld trump to a whole range of people and will make up his mind. our sources tell us that steve nugent is at the top of the list for treasury secretary he is listening to other voices. i think you have to expect the unexpected print jonathan: for you and i know david has spoken to you a million times, are there issues about the venting? is that why is taking so long? go back to the other administrations, didn't take this long to get these positions field? -- filled? marty: you have to do your venting and make sure that your sure that and make your nomination can get the nomination. you do not want a big fight in congress in your first 100 days. i think it is not that unusual.
the process, the visual process of donald trump putting these people up front is very unusual. it is a reality show, really. jonathan: it really is. always appreciate your time, a privilege for it coming up -- breaking u.k. economic data. we will reveal the numbers. the u.k. chancellor philip hammond is finishing up his statement. the post-brexit update. we will head back to westminster as he cuts the forecast a big time for the growth in the united kingdom. this is bloomberg. ♪
futures, positive, up eight point. sitting at an all-time high yesterday. same thing for the s&p. other asset classes. the cable rate, attorney lower. the government cuts and the outlook for growth. turne cable rates, a lower. here in the united states, data drops. jobless claims at 251k. for initial jobs claim. we were looking for 250k, that was the estimate. revised lower to 233k. durable goods, transportation at one full percentage point. in up parties. that's an up price for the month of october. have been looking at 1.7% in the median estimate of a bloomberg survey.
strong numbers here for durable goods. capital goods also comic in a little firmer than expected for the month of -- coming to a little firmer than expected for the month of a cobra. -- for the month of october. guy: it the teams to be strong whether or not we will see u.s. companies investing and the kind of stuff in the u.s. economy needs and that will be one of the key numbers. let's get some analysis on what we learned of what is happening in the u.s. economy. a chief economist for north america. he formerly worked in the markets down the road at the bank of england. good morning to you, paul. where are we with the u.s. economy with the data and what it is telling that? is it a high-frequency numbers we should pay attention to? some of the data will be a lot of out of date. and what wasection
the and the market has overtaken that. durable goods going forward and a male -- will may be some holdback before the election. into the we go forward end of this year year, these numbers will probably pick up quite a bit because there seems to be a mission of animal spirit and the u.s.. some of the uncertainty and a regulatory is unmoved and maybe investments will do better. jonathan: two data points close out -- come out an upside a price at the front end of the treasury curve and three basis points on this session. andronger dollar story another pop higher of 0.4% on the session so that dollar strengthen story continues. gold rolls over, drop below $1200 an ounce for the first time in may.
i want to pick up something you said is animal spirit. have we start of animal spirit and the ballroom of companies and houses across the united states? let's think about main street. are we going to see people changing their behavior? paul: a decent chance of that happening in terms of corporate paris yeah, it should be good for corporate, especially domestic oriented. the dollar's popping doubt and we have not seen the end of it. a little bit of bad news with the good news because the dollar will be more expensive. if you are domestically oriented, the consumer will have more cash and maybe the government will invest more. it looks pretty healthy. paul, going back to what you said, how much pick -- pick up aggression within the u.s. economy? cfo'se been seeing ceo's,
say it were not going to spend money out of the middle of the pel. how good are those companies? how good are those companies to see that really feed through the bottom line? think we should get carried away. it will take some time. we do not know exactly what will be legislated. let's seeeople think, what gets through congress. generally with the u.s. promise, awhat gets lot less of this delivered and that may be the case. a more favorable environment and i do not think people will start rushing out and investing tomorrow. the impetus probably will not hit until the back half of next year. i would not get too carried away in the short run. there are still challenges. q4 data will be a little weaker
, risingtion is going up faster than wages are accelerating. that will moderate consumers. 2017 -- i think we will see pick up because they have been held back. i do not think people will russia and go mad. they want to see what exactly will happen. -- i do not think people will rush out and go mad. jonathan: the deserve -- a federal reserve meeting in december. the bloomberg terminal, we can bring it up. dots a quick look. each and every dot is the fomc and where they anticipate rates will be pretty red is where marketing was at the last time. the last time this was of data was september. the blue line is where the market is now. traditionally, we were talking about a blue line shifting much,
much slower and the green line which is the median shifting towards the market for now the market to worthy said. will the offset of the on hold in december because they do not know -- will be fed be on hold in december because they do not know? paul: what we see in december, the fed of the dots, will not know what the fiscal position is and they will maintain the dots where they are. they know there's upside risk to growth and upside risks to inflation and maybe upside to their own forecast. they will anticipate the market will the team to move toward them. the area where the fed moves toward the market, the election and the impetus is the front end of that. guy: tall, when we look at what is going to happen with the said when wealked -- paul,
look at what is going to happen possibly threed or five people that president-elect trump could make, what difference will that make? what difference will their shift to be in terms of how we seahawks versus does -- see hawks versus doug and janet yellen potentially be replaced? paul: the cousins in the market is the people come on will be less likely to be more dovish. the market is thinking we get a bit more regressive said fedtion -- said bam -- reaction. what matters is the forecast in change once wel get fiscal stimulus legislated. that means a more regressive fed said we have seen. more certainty that the demand will be there in 2018.
even if the people do not change, the fed's action will change in a look different. the kind of days of dithering of the fed is in the bank. jonathan: paul mortimer-lee, great have you with us for talking about strong data. and/or bowl good orders strong across of the board. -- in durable good orders strong across the board. the front end sales are up and that drives the dollar stronger. , collingwooddex ever you want, strong, strong. the strongest since march. guy, you know what it will be, maybe now oil and base metals but certainly for gold, the dollar stronger. 1.34% and over abide
economic adviser. -- coming up -- pimco's global economic adviser. jonathan: from new york with the transatlantic "bloomberg daybreak," from london to new and with the jonathan ferro die just bring some private economic u.s. data shifting things around. two-year yields up by 2 basis points. we talked about how this influences the dollar. the yield advantage and the dollar strength story in the drivers seat. more specifically, trading at its highest level since march 2002. their early 2000 yard to go back over a decade does see the dollar this strong. byd rolls over, although 1.45% on the session so far. march 2003 those wrong this of the last timewas
the dollar strength was this strong. poundt seems the british given the surprise of the data we saw out of the united states. the uk's story is issuance rising affecting the guild market. what is happening with sterling. philip hammond, the chancellor, has been on his feet. a short statement, responses coming through. this is what you get afterwards the opposition gets to ask questions. the big headline number after this is they have downgraded expectations for growth in the year and that is one of the takeaway stories from this. and probably the big stories particularly if your anna edwards outside of the cold, no longer going to have an awesome statement, a spring statement. the autumn statement is getting upgraded.
yes, absolutely. the autumn statement but because of the auto budget and now we have -- october budget and now 12 a spring statement, updating autumn budget- and now a spring statement, updating the markets. a big event every year and the autumn statement going back to the early to mid-1990's, pre-budgeting is what it's called. we go back to a simpler situation and welcomed by many members out of the house. , theighlights you spoke of economy matched it for brexit. he established cuts to gdp forecast for next year down from 2.2% to 1.4%. hammock today sometime and that was still a little bit stronger than some parts of the eurozone and he is no longer talked about
the surplus and that is something we had expected. wanting to get the budget in balance as soon as possible. there were a few laughs about the detail and conviction it would he vote. we talked earlier about the figure, wonder billion pounds next borrowing over the next five years -- 100 billion pounds a borrowing over the next five years. he said the government decided to prioritize productivity and it is 122 billion pounds as a result before yields going higher on a guilt, the government -- guild, the government debt. welcoming is that a bull wants to know how much is new. a lot for the markets to digest. linked to the construction
sector. guy: absolutely. the housing sector and construction sector in focus today. if you were to take a step back and look at this from 30,000 feet, this denver not feel like a bit kind of big stimulus that many predicted they britain would need post-brexit. anna: absolutely. the number of 4%, the growth estimate he is working towards next year, that is still higher than certain parts of the eurozone. we are not talking about an economy in recession. the since it is much better than many economists predicted after the break the vote. of course, that was the brexit vote and not the brexit. tore still looking ahead march of next year which is when we are expecting to see acid that is certainly the plan of the government subject to any
delays that may not arise because the challenges and the supreme court. that is the plan. that could be a two-year period. and a higher level of uncertainty around these figures there previously but not an emergency budget as george osborne has been suggesting might have been needed, those were his words before the brexit vote for guy: great stuff. anna edwards joining us from outside of the palace of westminster as we watching this unfold between the conservative party in opposition labor party. a quick look of what is happening in the stock everybody loves in london. a little bit of pressure as you can see. jon, i'm sure people are going to be upset. the downside. we will see the rental fees, the scenes that get taxed on under a lot of pressure. foxton's.
jonathan: for our viewers, that is a huge dose of sarcasm. anybody was had to deal with moving from the united states in new york to the city of london has dealt with foxtons. the other market impact, sterling. looking fore were volatility today and you have a little bit. session lows after philip hammond autumn statement. joining us now for frankford is david kohl, currency reserves head and chief economist, top fx according to bloomberg rankings and he upgraded sterling outlook following that the u.s. election results. great to have you with us. the story for me is bloomberg and i will bring up on my bloomberg. the story has been sterling resilience in the g 10 space. absolutely remarkable. every gt currency -- g concurrency against the dollar.
it has come from sterling, why? because sterling has already corrected and when you look really at the exchange rate, we have a. why is it undervalued? a lot of speculation for the , nott and speculation fiscal policy is helping the u.k. economy going for but monetary policy. maybe that something bad for currency. the fiscal policy, it is currency a little bit pretty active in the end, the big venture is we are staying in this area where it is are really cheap and discounted lots of bad news inward -- in regards to break that. it is easy to surprise of the positive side. little effected by the u.s. dollar and strength which you and alsopanese yen
nothing european currencies including the euro. if you are really money accounts a you were thinking about how you will deal with years earlier exposure, -- dealing with exposure, how would you be dealing with it? would you wait for a better opportunity? how much volatility will i see? undervaluation, the sterling offers us right now is too small given the volatility and every political event in the u.k. is increasing the volatility. do not forget to the big picture. for sterling, if it does not matter what fiscal policy does that the outlook is the big picture that matters for sterling as how well foreign investors. we have a lot of speculation it will dry up.
becausehing the figures as are reported quite late. this is the may figure we focus. it might surprise participants and then we see renewed weakness of the pound. i would use in historic of pound right now to install as a real investor pretty jonathan: very thekly, if you can, political story has shifted from .he u.k. to the eurozone capturing the story is the break -- big spread and i can bring it up on my bloomberg. 180 basis points and that significant for euro/dollar as far parity talk spring where do stand on the parity debate at julie's bear -- and julia's bar? we see lots of things which could support the euro away from parity that would be the talk about tapering in the eurozone. ands out of the headlines
will come back as soon as the meeting in december and going for parity is a bit too aggressive. we see other crosses which might " moore under pressure from dollar strength -- which might come more under pressure from dollar strength. which of the bank david kohl in frankfurt data jonathan: -- jonathan: david kohl in frankfurt. to the cash down open from new york city. 38 minutes away. ♪
sometimes simplicity is a beautiful thing. it is a one-year chart of the s&p 500 in white and the vix and orange. tend to dreadp higher. that's happened earlier in 2016 on macro market fears and a little bit of diverges over the spring and they come together over brexit and then diverges. candidate before the election per is fast, the huge divergence at high levels that there can be some sort of a selloff. guy: interesting stuff. oliver? oliver: a lovefest. a chart showing the same thing but a little differently. look at the stock market in below. and then the credit squeeze barometer -- credit suisse barometer on the as and p 500.
i want to throw in another factor which is the bnp indicator. the purple line has risen quite a bit from the lows have voiced through the year and showing investors are getting more bullish as a brexit back to z row. indeed, things have " pretty far. -- back to zero. -- things out come back pretty far. win.abigail, you withhan: we do not do ties a guy voting. not at all. pimco's advisor joins us from new york and london, this is bloomberg. ♪
jonathan: a very warm welcome to bloomberg "daybreak." i am jonathan ferro alongside guy johnson. we are counting your down to the opening bell. about 30 minutes away and change. equities at all time highs. features treading water. stable on the dow. the other boards and asset classes -- treasury yields up five basis points. 2.36 on the u.s. 10-year. an upside surprise from economic data earlier on -- a stronger dollar story captured by euro-dollar. guy: that brings us into what we need to know the sour. philip hammond says the u.k. will grow slowly -- more slowly than thought. they said we need to borrow
more. trump in transition -- the president-elect tempers some of his more extreme views, but he is looking to be reshaping the fed and fast. who will fill the vacancies? opec obstacles -- crude oil training near $86 an hour. that is what you need to know. abigail. of actionot a lot indicated for stocks. the major averages, futures, basically flat, a modest decline. slightly -- higher. where we have big movements is health care. shares of eli lilly plunging. down nearly 14%. this is a huge move for a large cap pharma stock. investors buy this for defense
to avoid this sort of move. dragging down eli lilly is the news the alzheimer's drug failed to meet the primary entry point in a test. more than 100 compounds have failed to treat this condition, and on this news shares of biogen and mark are lower. both have drugs in studies. biogen will announce the results in december. right now the optimism around the possibility that compound will work is pretty low based on results from eli lilly. jonathan: during the campaign, donald trump was critical of the fed, and he is looking to put his stamp on it, and according to two sources, he wants to do it quickly. he plans to fill the vacant seats in his first three months. for more on how this can affect decisions, joakim files
joins us. i have read some of your work. it is available on the pimco website. what does this mean for shaping the complexion of the federal reserve, and what kind of individual do you think a trump administration would be looking to fill those seats with? mr. joachim fels: there is a question mark for a variety of reasons. during the campaign, donald trump criticized janet yellen for not raising interest rates. one of his advisors, a candidate for a vacant seat, judy sheldon, is an advocate of the gold standard. that is a relatively extreme view, at least nowadays. thirdly, a lot of republicans in congress would like to audit the fed were closely. there is at least a question mark over fed independence. guy: what does that mean for the markets? if we were to look at how the
,ollar has traded post-election it has been strong. is this something that would continue the story, or do you think the insidious nature of a less independent fed works its way through, and the dollar standard starts to fade? mr. fels: well, i think first of all, even two members and hawkish members are appointed to the fed, that does not mean you will see a u-turn in monetary policy. i think what donald trump will learn over time is to understand he needs the fed as an ally rather than an enemy, and when i say he needs the fed as an ally, what i mean is he need someone who helps them keep interest rates relatively low because he has big fiscal plans on the spending side and the tax reform side. people also need the fed as an overshoot ofnt an the dollar. you mentioned dollar straight. there is a risk. we will find out.
despite new appointments, i think the fed will take a relatively dovish stance over the next one or two, as long as janet yellen is at the helm. janet yellen has talked about the need to run a high pressure economy because she thinks this will lead to a supply response. we may see people coming back to the labor market. we may see more cap x. i think donald trump will learn needs the fed as an ally. we do not expect a sea change in fed policy, in the fed approach. we think after the december rate hike, which is pretty much baked in the cake, we might see two rate hikes next week, -- next year, and the market is not priced that in yet. overall, i do not think the fed will turn overly aggressive in the next one or two years. it is a different story what happens later during trump's presidency -- year three or four
of his term, 2019, 2020, by then inflation cut have accelerated, the economy might have run so hot, the fed, maybe under a new chairman, might have to raise funds aggressively. ironically, you might see a recession in 2019 or 2020 when the next election is coming up. guy: you talk about the scale of the plans the president-elect would like to put into the u.s. economy. i read in your notes the comparisons with ike and what aspened in the 1950's period we build a lot of roads in the united states, partly for defense reasons, partly for economic reasons as well. can you make the comparison, and if so, what are the economic consequences? mr. fels: we have to realize trump himself made the comparison. he grew up under president eisenhower, ike, as you say, and
he has stated publicly he admires president eisenhower for a few things like the "structure spending program, like you mentioned, and also for deporting more than one million illegal immigrants back to mexican. i think we have to take him by his words. i think he is serious about the infrastructure part of his program. there are a few aspects of president eisenhower that we may now want to see repeated. for example, eisenhower threatened china to use the nuclear bomb to end the korea war. that gets you into the discussion about how protectionist and how aggressive trump would be on for policy and trade. jonathan: we will likely need a long-term debate. we will need the dust to settle. for the markets, the markets move almost immediately, and a pressure valve for everything in the fx market is a stronger dollar. i want to bring up a chart i have been looking at over the
last few experienced over the last few years, we have gotten used to a dollar index that bounces off the 100 mark, the red line their pit we have gone through that. for you, what stops the freight train? what makes it come back? we had an upside in the data this morning in the united states. who will step in front of the train currently? mr. fels: yeah, so, what does it mean for the dollar? i think the dollar does not have that much room to rally further. this is because while the fed is likely to hike in december, i think their messaging on next year's right path will still be dovish. i think there is also a concern china will retaliate. china is not happy with a strong dollar because it means their own currency appreciates against the rest of the world as well. we have seen them appreciating their currency versus the dollar at an accelerated pace. there is a risk we see a return of what we had in august of last
year and january and february of last year -- accelerated chinese currency depreciation, and the markets by get worried. there is a limit to what extent the dollar can rally. guy: i'm going to shift gears quickly. earlier there was a big move in the front end of the german curve as we saw this story seeping out -- maybe the ecb would be looking to lend into purposes. for repo is there a shortage of collateral? tension,eeling that seeing that tension right now? mr. fels: yes, there is clearly a shortage of collateral in europe, particularly as the current lending programs, programs are complicated. this is something they want to address now. i view this as preparation for the stop in december, extending nine months.ix to
we do not think they will taper. i think you have to see the technical announcement today about lending into the markets, may be trying to ease up some of the shortage there -- you have to see that as a first step toward the extension of qe in december. guy: thank you very much for joining us, joachim fels. this get an update on news outside of the business world. in london, a jury has convicted a man accused of killing a labor party leader. jurors deliberated for less than two hours before finding thomas cox.r guilty of killing jo prosecutors say his home was full of not to literature and memorabilia. president-elect donald trump has offered former republican rival
ben carson the job of secretary of housing and urban development. that is according to people familiar with the matter. he is a retired neurosurgeon who ran for the gop residential nomination. and a presidential perk president obama will be happy to give up. for the final time, mr. obama will issue a presidential pardon to a turkey. the chairman has to theed a turkey or two commander-in-chief. they will go to their new home at virginia tech. global news 24 hours a day, powered by more than 2600 journalists in more than 120 countries. this is bloomberg. jonathan: that is a beautiful thing. thank you. .il hovers around $80 a barrel we will have more on what markets are expecting from the opec formal meeting indiana next week. also, eli lilly dropping after an experimental alzheimer's drug sales in final stage trials.
jonathan: from new york city, this is bloomberg. we are putting oil as our future in focus. they differ crucial matters to the ministers meeting on november 30 according to two delegates. the big story captured by the chart had me -- and run production and direct production has been rising in both of those cut -- iran and iraq production has been rising in both of those
countries. let's turn to the trade. joining us is bobby a chino. great to have you with us on the program. iraq sitting there with the power. do they have production up enough to come into agreement with the rest of their opec partners? >> i do not think you will see a cut from either 1 -- perhaps a cap. they both have compelling arguments if you are opec. iraq, fighting iso, and iran coming off of sanctions. saudi arabia ramped up from quarter four of last year to quarter one of this year. when you look at opec from quarter one of this year till now, up about 1.1 million barrels a day. about 900,000 is iran and iraq. you could argue both sides.
if it iss important is a public agreement in terms of implementing the cap, or whether it is a statement they will implement it, and ignore it altogether. that could be the thing opec members and non-opec members might do as well. jonathan: bob, let's think about what we have had -- we had a meeting ahead of a meeting and an agreement for an agreement, we have not solved anything. i sit here and say november 30, what are we going to get, and is saudi arabia going to have to do that heavy lifting? mr. iaccino: they will. september was brilliant by agreeing to agree, as you mentioned. we have been talking about that as -- a lot. they agreed to agree, the price went up 15%, and they pumped into that higher price. the issue is the curve itself. we are still in can tango. that allows some of the producers to hedge up the curve
glut pricedsupply in. a friend of mine sent me a story from bloomberg best said the imf is estimating a $2.9 billion windfall for mexico on edges of lower prices of crude oil, which they can still do with the curve the way it is. opec and saudi arabia specifically need to get their short-term price of, get the curve into backward nation. i do not know what the duration of the agreement will be -- what the term to a comment, and what the enforcement is going to be -- to plummet, and what the enforcement is going to be. you are seen speculative price increases. jonathan: can you talk about asymmetric risk, the upside for a squeeze, and the downside potentially bigger if we do not get a deal? what is the downside on november 30 if we come out the other side and nothing gets done? mr. iaccino: if we do not get a deal, i could easily see us
grind down. there will be a spike lower. one of the things about crude oil, the volatility you see is speculative. it is a supply-demand market. the downside is easily $40, probably hinging on $38. the upside -- you will see $54,rs when we get up to $55. if it got up to $60, i would sell that hard because the glut is here to stay, and president-elect inflation -- we do not know what he is going to do. 2017, more volatility. jonathan: i think you coined a term -- president-elect inflation. coming up, another step back for drugmakers -- eli lilly's attempt to find a cure for a summer's failed. the stock down in the premarket. biogen falling as well. eli lilly down 15%. bio off by 7.9%, as we cut you down to a cash open in new york.
guy: one big stock on the move -- eli lilly says it's attempt to find a drug to treat alzheimer's has failed in final testing. the company punching in the premarket. on the story,re jewel armstrong, he leads our team reporting on u.s. health care. a huge blow for many of the people waiting to see if we would finally see a therapy that would treat alzheimer's. give assistance of the size and scale of what we are looking at here. drew: this is a massive disappointment for investors and patients here. they were further along than just about any other company out there in a serious trial of
alzheimer's disease therapy that was attempting to actually stop the course of the disease, or slow the course of the disease. they had designed the trial after two large, expensive trials, and failed earlier. they may do this thing so that if there was any signal the drug was going to work, they were going to find it. they announced they had not. they said there was positive news in the data, but not enough to be meaningful. it is a major disappointment for everybody, which i think is reflected in the stock price falling as much as it did this morning before the market opened. guy: shutting down this avenue in terms of the science we are looking at here -- they have been pursuing the line of looking at rain protein, -- brain protein, trying to figure out how sticky the stuff is, where they can stop it. are we not going down that route in terms of the science anymore? drew: no, other people are
continuing to look at this. there is always a question -- is it the drug war the approach, and that has not been necessarily determined, but it is a blow in the approach of going after a plaque in the brain. people are raising questions -- can you wait until patient's disease is show, or will you treat people for decades, which might not be practical. it is a blow to what is referred to as the -- hypothesis, and where biogenic is testing a related drug, shares down there about 10% this morning in sympathy with the failure over at eli lilly. guy: we got a great quote from the cao that in cap -- ceo that encapsulates what people are feeling -- "a blow for investors, and a blow for the militant people looking for potential cure, or something that will slow its onset down." kickis the sixth biggest
-- killer in the united states, a huge market. presently, drug companies will continue to invest into the space. it is an area we have nothing to much progress on. drew: if you look at the top 10 diseases, there is no treatment whatsoever for this one to address the root cause. that is remarkable when you look at medical advancements made around the world. it is a massive disappointment and it has been a huge risk for drugmakers to go after this area. we do not understand how the brain works, how the disease works. we have theories, and they've spent billions of dollars testing those, and this is yet another failure in a long line of failures in the disease. that does not mean drug copies will stop trying this. the efforts and the research will not stop. areainly, the payoffs massive for anyone that can solve the problem -- both for the drugmaker that can develop it, and also for patients. it is a heartbreaking moment for patients to see the
disappointment as well. guy: absolutely. -- and drewng armstrong, thank you. it brings us to the drug pricing story as well. jonathan: it has been a major campaign issue, and after the election it has been a respite for some of these compass. on the wider market, we are building some momentum. five minutes away from the cash open. futures, a little flat. all equity benchmarks at all time highs. i want to bring in oliver renick. we have entered upside surprise to u.s. data, and guess what that means, stronger dollar, treasury yields go higher. the chart we spend a lot of time looking at the last couple of weeks, and i can bring it up on my bloomberg, financial conditions at the goldman sachs index rolling over, and an equity market that spikes higher -- the blue line being financial conditions, and the white line being the s&p 500. that continues. oliver: it is not looking too hot when you bring the chart up.
it does the to something -- when that does rollover -- you can see at been closely correlated to the s&p in the past, but basically, when you look at that, the economic surprise index, some of these things, and measurement fundamentals behind .he move, it is not line up the question is how much of this is speculation on planning around a political centerpiece here who -- whose policies are uncertain. he is kind of gone back-and-forth. there does seem to be speculation and excitement and the financial nubbers another to back it up. jonathan: oliver renick will stick with us as we approach the market open. all four majors at all-time highs. the open up next. from new york, this is blue brick. ♪ wow, x1 has netflix?
♪ the crown, marco polo, lost and found ♪ ♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. ways wins. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. jonathan: from new york city, this is bloomberg daybreak. i am jonathan ferro. moments away from the opening bell, the scene set like this --
futures negative, down 19 on the dow, the s&p 500. the equity markets closing at all 4 -- at all-time highs on all four benchmarks. there is been a big move in the bond market -- an upside surprise for u.s. economic data, meaning treasuries rollover, yields spike higher. the print right there, the high for 2016. the story in treasuries feeling a stronger dollar story. to $47ose over by .9% and $.63. -- $47.63. let's wrap this apart and get to abigail doolittle. abigail: we are looking at mosso clients with for the three major averages -- the dow, s&p, and nasdaq lower. of course, there is typically not a lot of action ahead of the
thanksgiving holiday. although to be more action than last year. we -- it will be just a to see plays out. investors will be watching to see whether or not stocks can close at record highs for the third innovaro. right now, it is not indicated, but the day is young. earnings season ending with a bang. john deere shares are up. they beat consensus for earnings by 130%, 97 -- 90% per share. this is the 16th the in a row, remarkable there is not only in earnings recession, but a farming recession. shares are now up for the 25% on the year. as for other earnings movers -- urban outfitters down on a disappointing third quarter. they missed estimates on earnings and comps. on the year, the stock is up more than 60%. investors are happy.
gamestop trading higher on a beat. they assume they fall-year view. they beat on earnings, the survey demand is weak. it looks like the cloud is hurting hp enterprises. thank you very much. it looks like a softer "but if i said to you earlier this year treasury yields would be trading at 2.38, we had a spike higher, the dollar was the strongest since 2003, would you expect the market to be trading where? has the last few days? guy: no, because -- last few days? because we have this divergence, a new thing the market is having to understand. what is interesting -- we coming to this durable goods number, and you think has been driving the equity markets story -- it has been the industrials. it is a tight story in terms of the sectors.
does that start to spread out? we need wages to rise, all kinds of other things to happen for the merger to keep going. jonathan: before the break, we have been talking about financial conditions -- we have been knocking at around for the last couple of days. the treasury story -- treasury yields spiking higher. you can capture it on the bloomberg chart -- treasuries is the blue line rolling over -- the equity market that keeps on pushing higher. at some point, you would think yields higher, stronger dollar is going to eat into this risk rally in a big way. i guess the question is when? guy: yeah, i think we will wake up one morning and go enough is enough. we're not there yet. that assistance coming through most of the analysts. the other thing to bear in mind -- you have been buying -- this is been so counterintuitive of light -- you bought equities for yields, and that story is changing. that is something the market will have to think about as we
see the return that we buy bonds for yields, not capital gain. that is something the markets will have to get their heads around. guy: how traditional -- jonathan: how traditional of you, guy. we bring in chad morganlander, and still with us, oliver lerach -- oliver renick. we have been talking about the high yields, a resilient equity market. how do you view the opposing forces at the moment? mr. morse: -- mr. morganlander: it is going to return. dollar strength will sap from revenue growth and earnings growth. the expectation is the consensus will have to come down on that. we also believe, oddities -- this huge, oddities rally that you saw because of excitement from -- commodity rally that you
saw because of excitement from this list in will rollover going into q1. investors, how big do you think the picture is? mr. morganlander: the global backdrop is there will be a considerate -- of deceleration that will emulate from china. credit growth that has come from china has been outrageous over the last five years -- two thirds of nonfinancial credit growth really plays into the investment schematic. we think it will be a continuation of that deceleration. probably missy, i phrase the question -- i'm sitting in london, thinking about buying the u.s. equity market. the dollar is a factor in my thinking. how different is the story look when i am looking at the u.s. equity markets from london because i have the currency in the way? mr. morganlander: ok, we think the u.s. dollar will create in 10% inby seven -- 7% to
relation to all the trade partners as a basket. we would be dollar centric at this point in time. we think the federal reserve will continue to raise rates roughly three times over the next 12 months, including the december rate hike. that is where we would position our portfolio at this point. guy: i want to bring --jonathan: i want to bring oliver renick. we spent so much time talking about the yield differential, and the yield advantage is quite clearly in stocks favor earlier this year. that has changed radically. the reward proposition now in treasuries. when does that breakout? oliver: this is really incredible. i have this chart on my terminal where you are looking at a huge divergence, as guy was pointing out, as the reason for why people are buying stocks. what is amazing, it has not gone and pushed the market lower.
there is been a turnover that has been very smooth. i am looking at the earnings yield. it is the same idea. look at the spread diving down -- yields jumping down, earnings yield flat. there is an idea that a lot of people were fearful about how this was going to change the market -- were people going to move out of utility stocks, low volatility funds? there was a lot of money going into that, and they got the switch back to more traditional buying stocks, buying bonds for the yield, would be somewhat disruptive, but it has not been. as long as the tradition happens without tons of money coming out of funds, this could be the sector change that has not disrupted in a negative way -- the change in the leadership happening smoothly is encouraging. jonathan: we start of the segment by talking about tradition. traditional, bond markets underperform, and equity members outperform. something we have been looking at, you can throw tradition out the window over the last six
years given the amount of central bank intervention we have had. can you go back to the old days, so to speak, and get back to business as usual, given that the central bank story is still a much at the forefront of every major market out there? mr. morganlander: yeah, i think you can go back to tradition, and what oliver is saying is 100% correct. if there is the smooth transition based off of the economy moving and hitting escape velocity, which will take earnings up in a free-flowing manner, where you have banks -- banks step away. i have to tell you something, ok anyone that thinks that will happen is getting themselves. bankswith the way the economy l function over the next 18 months will be a step up in economic vitality because of a tax cut. the fiscal stimulus plan is going to be somewhat more accretive, but it is not going to get the overall economy to the inflection point where we
are going to see 4% gdp growth. we have concerns. against valuations here in the united states -- political risk that is starting to elevate itself in italy and france, and as we all well know, there is a -- we have the federal reserve that is now moving off of at least a more conservative mark, and going to start increasing rates. jonathan: great to have you with us -- chad morganlander, and bloomberg's oliver run it. got him a we were talking about , we wereout -- guy talking about the breakup. 182 basis point in the dollars favor, and the euro-dollar rolling over to the lows of 2015. we talk about how much oxygen is locked in some of these trades, and they keep getting fueled higher. the spread is driving the equities market in a big way
today. you see two things happen -- the durable goods out of the united states, the rolling over -- the stories, the data is driving this. the market is just getting on board in some ways. we will carry on the conversation surrounding what is happening with the bond market. we need to focus on deals as well. philip hammond says there is an urgent need to deal with urgent needs in the economy. more on his plan for post-brexit burson. this is bloomberg. ♪
and sky bridge capital finder -- founder joined us later today. jonathan: from new york, this is bloomberg. 12 minutes into the trading session, coming off of all-time highs were we closed yesterday, moving to the downside by not even .10% of the dow, but .75% in the s&p 500. .6 on the nasdaq. let's get to abigail doolittle. abigail: the big mover is morning, shares of eli lilly, after the alzheimer's drug the primaryet endpoint in a third-stage study. 100 compounds have failed to treat the condition. this is weighing on some of the other biotech and pharma companies. all of these companies have alzheimer's compounds in phase
three studies, and investors clearly are not feeling positive about the possibility of success. as for what this is doing for biotech overall, we going to the g #-- erg and look at on today's weakness, we have the biotech index below the 50-day moving average, toward the 200-day moving average. perhaps the health care market will way overall. guy: to work. on my side of the pot, the chance of the exchequer, philip releasing a prebudget report -- not great news to be honest. they give market reacted. we will see borrowing rising. more issues with the guilds. i call them highlights. let's listen to what the chancellor had to say. chancellor hammond: we choose in
this state into prioritized additional high-value investment, specifically in infrastructure and innovation, but will directly contribute to raising britain's' productivity. we will stick to the roadmap we set out in march. corporation tax will fall to 17%, by far the lowest overall rate in the g-20. we will deliver commits we have made to the oil and gas sector. carbon price support will be kept out to 20 20, and we will, the business rate reduction package worth 6.7 billion pounds. we will maintain our commitment to fiscal discipline while recognizing the need -- while recognizing the need for investment to drive productivity. from london,us paul johnson, the director of the institute of fiscal studies. good afternoon. how would you rate the
chancellor in terms of the performance he delivered? is it a surprise we would see the big cut to 2017 growth, and the rise will ultimately see you in foreign borrowing? mr. johnson: no surprise at all, i would say. indeed, i would say the numbers the chancellor was working with from the independent office of budget responsibility were more optimistic than those, for example, the bank of england had been using and independent forecasters. of course there will be expected growth following the brexit vote, and of course there is an inflation increase in the cards given what has happened to the sterling. there will be an increase in borrowing taken it too, on his forecast, borrowing of around 20 bylion a year, or 1% of gdp 2019/2020. i do not think any of that is surprising. i am very surprised to hear you
say that the gilt market has reacted negatively. i did not think there was anything in their -- anything other than as good as we expected. guy: we did see the bond market reacting a little bit to the increased issuance. maybe that should have been projected as well. paul, the fiscal sense of not been great at predicting what would happen to the british economy of late. why should i believe these numbers are any better? mr. johnson: well, there is a huge amount of uncertainty about the next several years. i mean, that is one of the problems the chancellor faces -- the independent office of budget responsibility does, by law, have to provide a single, central forecast from which the chancellor -- on the basis of which the chancellor makes his decisions, and the single central forecast they made is one of growth for the economy being about a couple of percent smaller by 2020 than they previously thought, but there
are big risks in all directions relative to that. as i said, they have probably pitched the forecast somewhere near the optimistic end of the scale relative to others. i think the thing we will see over the next few years is those numbers will jump around. i do not know which direction, and that is why the chancellor did not do very much today. he wants to find out more about the economy before he decides how much room to maneuver he has. guy: cannot compare and contrast with the bank of england has done and what the treasury has done. the bank of england said they would put an insurance policy in place. the treasury has said they would not go down the road. it will wait and see. why do you think the differing policies. the treasury is in a difficult position. first of all, the bank has significantly loosened monetary policy. at the moment, that appears to be enough to keep the economy going in the short run.
secondly, the treasury will wait and see what happens, and thirdly, it is already suffering, what it discussed, -- will that projected be lower, and borrowing will be higher. the post actual brexit, we can expect growth in the economy after that to be rather less. if you borrow more now, that just means more and more austerity and paying in terms of rolling back on that later on. i do not we are out of the woods yet but i do not think we have any final conditions from the treasury. i would see this as a wait n.c. state. guy: absolutely. paul johnson -- weight and see statement. guy: absolutely. jonathan, it is interesting if we compare and contrast what is happening on your side of the atlantic, and here in london -- the upside here was that they would need some type of
emergency measure. it has not materialized. jonathan: i think people focus on the 2017 forecast and the downgrade. 2016 forecast coming in march, they were looking at 2%. now we are looking at 2.1%. in march, we did not have to result in a vote. the forecast goes to show how dead wrong a lot of people in the government got things in the two victory of this economy. coming up, the top of the next hour, bloomberg markets with vonnie quinn and mark barton. what is in focus? vonnie quinn: a conversation about new cabinet up women/their trickling out slowly. some are fascinating both at once, as is typical of the president-elect's strategy these days. we have ben carson for hud, u.n., andy for the another name in the running for treasury, john allison. also, the chancellor of the
exchequer's statements, and we will also have greg clark. we will talk about the markets inflation strategy with michael pond, barclays head of market inflation strategy. jonathan: thank you very much. looking for to the program. 21 minutes into the session, stocks open a little lower in the united states. the dow nearly budging pig s&p 500 down by .7%. dollar straight story can we will break it down for you as we look ahead to the most awaited federal reserve minutes in recent memory. this is bloomberg. ♪
the treasury market continues to selloff. by-year yields spiking off four basis point. we now trade at 1.13%. the timing of managing conditions will be a big conversation in coming weeks, with the move the fx market as .ell, guy off the back of that, two-year yields spike higher. the dollar index up by .5%. to chew overhing if you are heading away to thanksgiving, the big story the markets -- treasury selloff, the dollar stronger, and donald trump may be headed to florida, but he is still far from a vacation. according to sources familiar with the matter, ben carson's expected to be the next head of housing and urban development. are joined. we have one appointment.
the audience wants to know who the treasury secretary is. you'll remember, china hiked interest rates one christmas day because china is not care what anyone is doing christmas day. do you think we might get an announcement tomorrow around lunchtime? >> in this transition, anything is possible. we have a pool of reporters in florida. we have been told to not expect anything until after thanksgiving, but when is after thanksgiving? is it after he wakes up? i think it is quite possible we could get some announcement from sources or from donald trump directly. guy: we have talked about this a lot -- what has been the difference in the trajectory from the election to now versus how it would normally work its way out? i am really fascinated. it has been amazing to watch -- are they going up there to the tower, having a meeting?
-like in termsike of what was happening. how weird is this for you? it is weird. it is more like a reality tv show than a transition into governing presidency, and trump is a master at dominating the media, and he has created a template for how we will conduct business as president, i think, and expect the unusual. jonathan: marty shanker, it has been great to have you. he is off for thanks giving. the bond market and agreement closed tomorrow. the top of the hour, vonnie quinn and mark barton from new york and london. this is ♪ bloomberg. ♪
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♪ vonnie: we will take you from washington to london and stories out of new york and vienna this hour. breaking economic data in the u.s. and julie hyman is with us. -- in new home sales at the month of october, month over month the decline of 1.9%. this on the heels of better than estimated data on existing home sales yesterday as they rose to their highest level in about nine years. and a final rate on the university of michigan consumer above 91.6%.93.8%, a little bit better on estimated. data hast economic ba