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tv   Bloomberg Markets Americas  Bloomberg  July 14, 2017 10:00am-11:00am EDT

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vonnie: u.s. inflation data came out a little disappointing earlier today with retail sales and we have more economic data. julie: we have university of michigan's consumer confidence for july, the pulmonary number came in at 93.1 which is lower than the prior month's reading 9595.1 and lower than the even that economists were estimating. it looks like current conditions in the index ticked up of the expectations index went down, going to 80.2. that is potentially what's responsible for the shortfall in consumer confidence. we earlier got the consumer price index coming in unchanged. even if you back out food and energy, only rising 1/10 of 1% and retail sales dropped for a
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second month in june , falling by0.2%. even ifl get a decline you leave out car dealers. the date is not strong but stocks are holding up relatively well in the face of that. all three major at bridges are higher on the nasdaq continues its winning streak. i think it's 8/6 straight session of gains that index -- i think it's a sixth straight session of gains for that index. one group is in the red and decidedly so which is financials. after wedown 1% even see gains in the interest rate with sensitive groups like real estate and utilities and consumer staples are seeing a change. tech is also participating in the increases. when you look at the financials, it's not only the data but the earnings. we got earnings from some of the big financial companies,
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jpmorgan was down 1.5%. the earnings-per-share beat estimates. the bond trading revenue pistol faltering. addition, the net interest income for the year, the company cutting is forecast for that measure. wells fargo came out and beat estimates. however, new car loans dropped by a most half in the second quarter so they are in danger of losing his title as biggest carload originator. citigroup is the best of the three. it beat estimates. the company has renewed its focus on investment banking. that helped revenue in that particular unit. those shares are flagging along with the last -- along with the rest. market, we are seeing a five basis point drop in yields this morning as a result of economic data. that means that yields this week have fallen by around eight or
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nine basis points. that something else putting pressure on the financials and helping some of the other groups like real estate. of this minutes left last trading day of the week. stocks are up marginally in europe, the best run since april 26. this is the best weekly gain since may. the euro is up slightly. currencies have alternated between weekly gains and losses. that's 11 weeks of alternating gains and losses. it reached its highest level since may of last year. the implied probability of euro-dollar is seeking a fresh high.
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one analyst says the son that dollar negativities firmly priced in. the dovish stance did nothing but match market expectations. price action revealed it may take a catalyst from the eu side of the equation for the euro-dollar to take on $1.15. the german 10-year is little changed. draghi will attend the fed symposium in jackson hole at the end of next month. it opens the possibility he could send a message on the ecb program. it was just three years ago or so that he last went to jackson hole. he said inflation expectations have fallen. that was before they started their bond buying program six months later.
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this index shows the euro zone on the white line is the u.k. -31.3 meaning data is off-balance, missing expectations. it's near the lowest level since june of last year. the data this week was unemployment falling to eight 42 year low but real wages fell the most since august, 2014. next week we've got cpi and retail sales. the blue line is the surprise index, recently rebounding from the eight-month low on june 23. vonnie: thank you for all of that. getting back to the big corporate news of the day, in the u.s., the big three banks are kicking off earnings season for u.s. banks. investors are getting a sense of how wall street has fared in the marketsamid sluggish
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and weak loan growth. joining us is the senior bank analyst for.bloomberg intelligence each bank is better in some units. the big thing people focus on his trading. that tends to be where we get the biggest surprises. the bank had significantly lower expectations a month or so ago. jpmorgan came in just about in line with the lowered expectations. there are equities trading is worse but fixed income is more important. vonnie: so they really gained ground. does it mean for the rest of the year? >> for the banks coming in next week, things are in line so far. the tends to be seasonally weaker. expectations -- my guess is that trend will continue.
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people will be watching next week his goldman sachs. it underperformed last quarter and there were some reasons behind that. if we look at this quarter, investors will be looking to see if they can at least perform in line. what's interesting is their net issue inmargin was an the ceo said that was due to the investment banking unit. that's an area or banks like jpmorgan tended to make more money where his jpmorgan -- goldman sachs does not have that running through their lives so that might bode well in terms of relative performance next week. that's something we're focused on. is the rebound and bond that it'sidence stalling or do we put it down to seasonal factors? >> what's important about fixed is perhapsing
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putting a bottom on the secular. there will still be cyclical factors and seasonal factors. the first quarter is generally a stronger rest and it gets weaker -- is generally the strongest and he gets weaker as the year continues. volatility is the key to trading revenue. we have seen weaker volatility. we get more questions around the fed, will we see some of that volatility picking up with more trading opportunities? maybe not in the seasonally weaker 3q but maybe into september going into october. jamie dimon has come back from a busy trip overseas. he has unloaded on absolutely everything. it's an embarrassment being an american traveling around the world.
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he's got some things on his mind, doesn't he? >> he is consistent and calling for tax reform and how he thinks that can benefit the economy. bank investors are watching this for all of the bank stocks. it really is the indirect impact and that's what jamie dimon is alluding to. we expected to hear this from him on the call. we have been hearing this consistently from him but perhaps he is exceeding expectations with his enthusiasm on the subject. he wants action. this is something that's important to the bank. he is talking about the amount of lending that could have been done if they could lend out there excess capital. they got good news in terms of the stress test with banks freeing up some of the excess capital for buybacks. preferably, they would want to do organic growth. what has been missing is the demand side of things.
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some stimulation on that side, that would be positive for banks. jpmorgan loand growth this quarter, wells fargo went down and jpmorgan was short . that could be affected by cash changes. vonnie: thank you so much. france,t's get to president donald trump shared a lengthy handshake with french president emanuel macron. he attended the annual bastille day parade which included u.s. units to celebrate the 100th anniversary of the nations entry into world war i. we go live to paris. would you say the relationship has recovered from the initial
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handshake which has been much talked about a month or two ago. are the two nations closer now? >> we will have to wait and see how this relationship develops after this meeting. there were signs of positive movement toward being more in line with one another. we saw president trump and president macron say positive things about each other during a press conference yesterday. we even saw president trump contradicts some of the negative things he said about france previously. he said he believes now that president macri was leading the country that all of the negative things he said about paris no longer being paris and terrorist a guerrilla country, those things are no longer in play. strongeves macron is a leader. we saw the handshake a couple of months ago. it's a softer tone now with both leaders having dinner at the eiffel tower and spending a lot of time together. they said a bunch of positive words about each other. the relationship is
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getting closer but we will see of its followed up by actions. vonnie: after the news conference, president trump focused on the cease-fire in syria. did the two leaders come to any more conclusions about what should be done with foreign policy regarding russia or syria or even north korea? topics were all being discussed yesterday. we have not gotten a full readout of the meeting that basin the press conference, it asidethey want to put their differences and focus on areas specifically on foreign policy where they could agree. syria's one of those areas. we heard president macron thing he does not necessarily believe that the president of syria has to go in order for any progress to be made toward a political solution. we heard president trump say they are working on a second cease-fire and they would join together on any potential military actions if there were
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further uses of chemical weapons by the syrian government. there is a partnership going forward between the u.s. and france. president macron a president trump's partnerships would continue to grow based on the meeting that happened yesterday. of the the president u.s. seemed to suggest that he might be swayed down the line on something like climate change. he said he might be open to rethinking not being part of the paris climate accord. was that just for the benefit of president macron? he was very noncommittal. he said maybe the u.s. would consider rejoining and maybe there would be a renegotiation or maybe not. does not seem like he was committed to renegotiating. that was an area where the two leaders new there was going to be contention so they did not spend a lot of time on that. fate tried to focus on common ground.
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said they know that's an area of disagreement. we will wait and see a president trump decides to make a move on that. based on his words, he does not seem committed to moving forward or rejoining the climate change program. vonnie: thank you from paris. we will be back in the united states in a few hours. up, the u.s. production outlook shifts and futures in focus is next. this is bloomberg. ♪
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mark: live from london, i am mark barton. vonnie: this is bloomberg
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markets. it's time for futures in focus. we have been talking big moves and agricultural commodities like wheat and corn. joining us is the chief market cme.egist from the let's begin with oil. we are sticking in the 46th dollar range. we are a little bit higher today. what will keep oil at these levels in terms of opec? think maybe he is not saying us. we will talk about the movement in oil. wheat and soy are having a moves, racing their gains for the year in the last couple of sessions alone. iak: especially with the
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report that said the market would take a little bit longer to balance. they seem to be stepping back from the timing. let's try again. vonnie: why not? let's get back to ted. can you hear me this time? talk about oil and how there might be asked her countries coming into the opec production agreement potentially? yes, that and declining inventories and a cap at 1.8 million. imports are up so there is good news. there is a reason we bounced off the lows but $47 in crude is a tough nut to crack. if we get over that, we have a clear shot at $49.50. if it falls, we could get all the way down to $38. still a lot of
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variables so this could be the area to fail. if we get over it, we will see. traders haveulture had a trust day after the department of agriculture report shows plentiful supplies. is this a reverse are are we finding a new range for wheat and soy? >> we have had massive reversals this week. two days ago, corn was making highs for the year. yesterday at the close, we were just pennies off of the lows for the year. it has been massive ranges. we sought more supply for corn and wheat than what we were expecting. about 20 minutes later, we saw the u.s. forecast get cooler and wetter. there had been hot and dry that got us worried about our crop conditions. forecastthe weather did not bear that out. we have crop conditions 11% worse than last year in corn and we are further along in the
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growing season. with the better weather forecast, i'm not sure that will turn this crop around. the recent breaks we have seen in corn and wheat is an interesting buying opportunity. i wonder if we will make new highs sometime in the next weeks and months. thank you so much. always good to warm up before you go on air. julie mark: yes, we got there in the end. has become the second biggest oilfield services company. will join us.lli this is bloomberg. ♪
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mark: this is bloomberg markets. vonnie: and i am vonnie quinn. it's time for etf friday. julie: well the etf business was
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built around the index business, it looks like we might see some of these etf brands superseding the indices they were based on. ericaltunas is here to talk about this. you have written analysis about this? what is the competition if that's the right word and why is it a problem? >> you would think the growth would be best for index makers and it has been. the stocks are double the s&p 500. black rock and vanguard have been taking it on the chin for having to lower fees. while passive is good for the in next maker, what is coming could be a big challenge. when money goes too passive, it's not just going to passive, it's going to be ultra dirt cheap absolute nearest to zero passive. there is a chart showing flows of all funds over the last year. if i did that for three years, you would see the same trend. basis pointss 0-10
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in a goes down. managers are only going to incur these costs for so long. they will do all they can to passive downstream and i think that will present a challenge for index makers who make their money from the latency fees. in 5-10 years, if everything is 1-2 basis points, does not much money for anyone and the asset manager will not make nothing. this is a dire situation. julie: in other words the etf issuers will put pressure on the index makers to reduce their fees? because they are under pressure. >> totally, and they may dump them. most of them are vulnerable. julie: what about branding? youess you can do that if have the brand power on the etf side but if you are linked to the index brand power come you don't have as much flexibility.
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>> the only index that is above all of this is the s&p 500. those etf's are on fire. i'm a big anybody will mess with that. then again -- vanguard dumped i but 12 funds that have dump them have taken in 12 billion dollars. some advisers insisted percent of them said the index was less important or doesn't matter compared to the etf brand. the etf brand will get bigger and bigger and it will have more pressure. this week, to etf's self indexed so this is the first time black is tracingack rock their own index and they're looking at anyway possible to cut fees. julie: smart beta, how does it fit into this question mark do they use indices or create their
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own question mark >> but now youse msci see big shops, because -- smart betas just repackaging. to re-packagerng self and create your own fidelity index and have it track the brand-namece makers. is not a severally good for the brand makers because a lot of becausel not be used they want to use their own secret sauce. julie: thank you so much. vonnie: thank you. there is a new ticker for baker hughes. this is bloomberg. ♪
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mark: live from bloomberg world headquarters in london and new york, i am mark barton vonnie:. this is bloomberg markets. powering consolidation in the energy industry, ge oil and gas
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is celebrity a merger this morning. the he began trading last week. the deal makes ge the largest shareholder in the new company. the ticker is bhge and alix steel has more from the exchange. mark: alix: i am here with lorenzo simonelli. great to see you. >> it's great to be here. alix: this week, we had a lot of big people talking about where oil was going. they say it could take until the end of the decade until there are better times in the industry. >> i wish i had a crystal ball. seeing is what the pundits call lower for longer. we look at the macro trend and there is the demand for electricity and a demand for oil and gas. we see positive macro trends. is drivingus
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productivity. we brought together the two countries to enable us to go full strength and help our customers in the productivity side. irrespective of what happens with cost, they are able to go forward with their projects. alix: how do you model a profit outlook in the short-term? >> if you look at the demand side, you are seeing positive demand. if you go forward, you should start seeing more activity pickup and it's a question of driving that productivity in services and the equipment we provide to them so they can be efficient at any price per barrel. alix: the real story for oil is the down term, down as much as 50%. do you expect to recoup that once the market stabilizes? >> i think you have to look at a new way of doing things. wasation came down and that just going out there and giving price cuts. we got to change the way in which we work and the way in which we collaborate and new
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ways of doing things. we are focused on designing the space differently. instead of going for deflation which we cannot do, it's not sustainable when you look at run materials, we got to look at data analytics. how do you marry the data analytics and start to drive production rates. that's what we are focused on. you can already start to see it. only 1% of the data available within the oil world is used today. if you look at nonproductive times, you got over 50% nonproductive times. how do we connect the value change to increase the nonproductive time? alix: the majority of activity will be u.s. onshore shale. competitionense because you smaller companies so it's hard to see a world where you will have any kind of pricing power in a short-term. will beay in which we able to differentiate ourselves is by providing them increased
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production for the same cost. if you look at the standpoint of at geology information and you can see below the market ,ine and marry that information you also think about electrification. we have the capability to provide this. we are able to grow our space with our customers by giving them more value. alix: when you look at contracts, you want to enter into longer-term contracts with shale players at a lower price to get that business? >> where open to commercial ways of looking at things. it becomes more outcome based. how do we drive an improvement in production by 2%? how do we take down the inefficiencies buy one for sent -- by 1%? that way they have certainty in
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the outcome and we can provide that because we can marry these things together. alix: what other manufacturing sectors what you have to buy two marry that package? >> we are in a unique situation, bringing together baker hughes and ge, we have the upstream, the midstream and the downstream covered. the portfolio is very couple mentor a. it andem and enhancing the industrial operating system, you think about 3-d printing and some of the equipment from the power business to go gas to bridgewe've got a good portfolio where we can work with their customers. we will see there's anything else we need but at this moment, the focus is on inspiration. we are looking at the technology different tatian -- differentiation of how we can
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look our customers reduce the amount of our used in an operation or change the way in which it's used. oilfield services are uncertain for next year. you see in that environment? to bes still very early able to say what is happening. there is clearly downward pressure. people are calling for a longer cycle to depress prices and we got to stay relevant by focusing on what we can do. the cost perve barrel for a customers and drive that productivity? we got to be able to be relevant. but he putting together these companies, we have now created that relevance and differentiation in the industry and have been support of our customers. alix: is it fair to categorize
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in a short-term? could you see the industry turning at some point? >> we will build as we go forward. if you think about the macro g,, thend you look at l& growth is expected at 3-4%. maybe 1% of the long-term. what we are doing is focusing on the integration. we've got great opportunities and creating that die on capability for our customers and being able to go through the full stream capability. alix: in terms of that, what is your projection for r&d spending for the new company? will it be more or less question mark >> as we come together, we see ourselves being technology focused. we will be in line with the rest of the industry.
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the benefit is that you get benefit from all these investments the general electric has made when you think about digital and 3-d printing. that's an agreement we already have in place. john flannery will take a home in august but has he given you any indication of the role he sees baker hughes playing in the ge portfolio? >> he sees us as being a key component to the if for sector play the general electric has any knows the industry of oil and gas well. he was a system developed leader before so he knows the space. he has been supportive of this transaction and looking forward to us to contribute. alix: he would never spin it off as an independent? >> he has never indicated that. obviously, the halliburton baker hughes merger did not happen. what is the next wave of mergers
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we will see? >> i think you are starting to see some occurring on the drilling side. let's see how the space plays out. some are more crowded than others. people are saying consolidation may happen but it's too early to say. alix: we appreciate your perspective, thank you. ceo of the combined baker hughes/ge business. back to you. vonnie: great stuff, thank you. let's get to first word news. emma: president donald trump says it was a great honor to represent the u.s. at the annual bastille day celebration in paris. he said the military parade was magnificent. he went on to congratulate french president emmanuel macron. the president and first lady are now back to the united states. a federal judge in hawaii as we can president trump's temporary travel ban on people from mostly muslim nations.
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a judge in honolulu ruled the trump administration failed to conform with the supreme court instructions and rolling out the band. he expanded the list of family relationships for qualified applicants for entry into the united states. the supreme court will hear the case in october. health careell's bill is headed to another rewrite. -- he needs a way to keep conservative republicans on his side. needs further republican support if he gets to the 50 votes he needs. in the u.k., the british government has conceded on paper it will have to pay a bill to leave the european union. it was referred to a financial settlement in a statement to -- in parliament. they said is one of the most difficult issues in the negotiation. it could be as high as $114 billion. ma chandler.
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this is bloomberg. up, inflation may take longer to hit its target. the dallas fed president robert kaplan says some of the pressures may not be on and we will hear from him next. this is bloomberg. ♪
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vonnie: live from new york, i am vonnie quinn. mark: this is bloomberg markets. time for the bloomberg business flash. jpmorgan chase chief executive jamie dimon says if tax reform is passed, it could boost economic growth beyond the one point 5% range.
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in a conference call after the earnings report, he also said the media should focus on the major issues instead of the ins and outs of the firm's wall street trading businesses. korr is saidchael to be bidding for michael chu. they are competing with investors from the u.k. and china. lebron james is an investor in blaze pizza. it just sold a significant noncontrolling stake in the private equity firm. the deal is expected to give blaze pizza and enterprise value of more than $100 million.
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that's your bloomberg business flash. vonnie: time for our bloomberg quick take. today, we're looking at the u.s. jobs picture. the u.s. recovery is putting people back to work. its way to is on restoring full employment. economists talk about full employment but they don't mean everybody has a job. full employment means unemployment has fallen below a certain level without invoking inflation. is that level? in the u.s., it has meant the jobless rate of about 5%. the unappointed rate for june remains below that. there is no real sign of inflation picking up. since the u.s. recovery began in 2009, total nonagricultural went to more than 150 million at the end of 2016 and the number of unemployed people had shrunk to fewer than 8 million.
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fed chair janet yellen and the federal reserve are debating the timing for initial rate hikes. they want to reduce their balance sheet holies as well but the problem is, there is more uncertainty than usual over how many people have been discouraged from participating in the labor force and how many people are working several jobs. it makes it hard to pinpoint much unemployment has to be tolerated to fend off inflation. counts theent unemployed as people who don't have a job and of actively looked for some in the past four weeks. i wider measure of people needing work we count other potential jobseekers as well. the bureau of labor statistics reports about 455,000 americans are in the category of discouraged workers, people who stopped looking for jobs because they think there are no openings. about how are divided close the economy is too full employment. something short-term interest
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rates -- something short-term interest rate should ride but others think rates should be held for longer. you can read more about employment on the bloomberg. mark: sticking with the u.s. the consumer price index remains unchanged in june % and roberting .1 kaplan's book to bloomberg in an interview. >> there is two parts of this inflation question. number one, as your viewers know, at 4.4% unemployment, and relatively low amount of labor at6 which islook the unemployed plus discouraged workers plus the board and part-time for economic reasons. that is still not far away from the pre-recession level. at that low level of unemployment, you would
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historically have seen more inflation pressures. we are not. so far. march was week in april and may were stronger but i believe strongly that some of this is transitory meaning there is some one-time factors in the march numbers. i think some of it is not transitory. technology enable disruption. the fact that workers are being replaced by technology and shoppers can use technology and have much more pricing power, i think businesses have far left -- far less pricing power that in my lifetime. because of that phenomenon as , goods andbalization services are being competed for globally, i think we need to some of this muted inflation is the fact we are in a different kind of economy than we were in five or 10 years ago. tom: that's brilliant. the pricing power issue, is this a different pricing power battle
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than the one that made jack welch famous years ago? >> it's dramatically different. is the rateor that of disruption -- let me explain what disruption is -- a new business models being replaced by more efficient models that are technology enabled. you go down the list, the film industry, kodak, polaroid being replaced by the just digital phone. retailers of being displaced by amazon and uber is displacing taxi so it was on and on. because of that, even a businesses have wage pressure which i think there will be more in the months i had, it is much harder for them to pass that on to consumers because consumers have far more choices and traditional business models are being supplanted at a rate i buy not seen in my lifetime new business models that are cheaper and better value for the
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consumer. i think that is having a real effect on inflation. mark: that was the dallas fed president robert kaplan. the u.k. wakes up to the financial reality of brexit. lord chancellor charles falconer talked about this and that's next. this is bloomberg. ♪
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vonnie: there is ownership again. it's a lovely picture of london. mark: like ships passing in the night. this is bloomberg markets. the reality of brexit is hitting close to home. the u.k. is a knology for the first time it will have to pay money to the eu when it leaves.
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i spoke this morning with the u.k. first justice secretary charles falconer. he was one of tony blair's closest allies and served as lord chancellor but last year, was joined.pe i began by asking him how he defends the landmark repeal bill. >> i would reduce the powers the government has to amend acts of parliament whatever they want to. technical -- is in big political and technical trouble but it becomes a power grab by not just a tory government but by the executive to be able to change the law without going through the proper parliamentary procedure. viit's like henry roman
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powers. >> there would be a debate if and a second and third reading of a bill. take it or leave it is all they would have to do. there is much too much power. which isore than that a technical issue which could be dealt with by parliament is the political trouble. is inws the government trouble. contrary to the position of the european union, we don't appear to have a detailed negotiation strategy. we are that is much yesterday. the reason we don't is we have a government who does not have a command over parliament at the moment. the great repeal bill will be the means now by which the commons indicate what is the negotiating strategy that they want the government to do. the: does the end result of process mean a softer form of
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?rexit question ma >> it depends on the opposition. if there is a united opposition in favor of it come -- of a particular former brexit like a brexit that was a transition staying in the single market and after that, a free trade agreement that looks like the single market but and forces the freedom of movement rule, suppose that's what the opposition unified around. the government is so fractured that there is bound to be elements in the government -- it's the say opposition as well as a few tory rebels. there are tory rebels on the back benches but the slightly different. the chancellor of the exchequer -- and the secretary
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home secretary are much -- are for a softer brexit. governmentn in the that's where the commons will end up. we saw an example of this in the comments just at the queens speech. northern irish abortions, in effect the government back down whether the british health service would pay for this. they could not resist a united opposition. faction thes a government that supports what the opposition wants, what we will see, not now but in the autumn when parliament comes back around the great repeal bill, is where did the commons and up on brexit. until that happens, the negotiations will not make progress. mark: former u.k. justice secretary charles falconer speaking to me a little earlier. a fascinating series of interviews.
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he told me he's beginning to think that brexit might not happen. charles falconer said it's typical of the top echelons of government which could lead to another form of brexit. we observed the first year anniversary of theresa may as prime minister. they say the economy is doing a little bit better but economists are not saying that will change things. mark: a quick peek at what's happening in europe today -- londonslowly up, down in . this is bloomberg. ♪
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mark: we have a few minutes left in the trading day in europe. from london the, i am mark barton. vonnie: this is the european close on bloomberg markets.
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hero the top stories we're covering. president trump is in the air right now after a whirlwind bastille day visit to paris. he will find the division among his republican party on repealing and replacing obamacare. confirm more signs of sluggishness in the europe economy is janet yellen adopts a more dovish tone in her remarks. a pair of chief executives are trump.up and talking plus, we look in the future

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