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tv   Bloomberg Surveillance  Bloomberg  October 23, 2017 4:00am-7:00am EDT

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♪ francine: the lead of the rising stocks. the nikkei hits a record 16 day of growth for another term of outing onyx. the spanish prime minister announced his plans to strip power from the n government. catalog government -- cap salon -- catalan government. good morning, everyone. this is bloomberg surveillance. we have a really packed show for you.
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in the meantime, this is what i'm looking at. the euro having a little bit lower. spain continuing to be on edge after it's prime minister moved of thethe authority region. the nikkei up 1.11%. sent thee's election region to elect -- to a record. that's your market check. let's get to the bloomberg first world news. catalan separatists are meeting today to formulate their response. catalan president is set to be ousted, but he vowed to fight on.
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his allies are signaling he could be declaring independence this week. rex tillerson is calling on european allies to support new sanctions on iran. he is warning that companies doing business with tehran are doing so at their own risk. he was in riyadh for talks trying to bolster a new alliance between saudi arabia and iraq. saudi arabia has rebuffed his requested in the four-month isolation of qatar. may's efforts to get brexit legislation through parliament has hit a low -- new load lock -- new roadblock. political -- political fragility was underlined by the opposition. around brexitity has undermined authority --
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manufacturing. had 6.5%nies investment down from 7.5 persistent best investment. the uk's rice secretary will have dinner with french foreign minister in paris is the evening. scotland's first minister has urged theresa may to strike a deal with the european union. they also want the right to decide their own future was the details are known. a lot of uncertainty around brexit, so we will not consider the timing of that choice until that uncertainty clears and we have an idea of what the outcome of the brexit actually says. as the leader of the scottish national party, i continue to hold the keys for scotland becoming independent country. >> global news 24 hours a day.
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powered by more than 2700 journalists and analysts in over 120 countries. i mayor cain edge. this is bloomberg. hitch -- thische is bloomberg. the landslide abbe when paves the way for more policy. what is abbe likely to do with his next turn? i'm in front of the tokyo station, man station, we had to move from the tokyo stock exchange. we were there all day as we saw that record streak of games -- days. we have not have a street like that.
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>> the big question is about kuroda. he is at that retirement age. it are he will stay on or someone last to stay on. either he or a clone. francine: join us our guests for the hour. thank you both for joining us. this is my chart for the week.
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in may be overbought, but this goes back to policy. >> monetary policy in japan is extremely easy and that makes some of the more hawkish noises we are getting. all year, really, the dollar-yen should be higher. isn't is because you bought the yen. if we look now at the continuation of abenomics and growth in japan and we look at the market assumption that corroded or a like-minded governor would carry on it is likely the union weekend.
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francine: what are you expecting from the next term of shinzo abe? >> if he manages to change the constitution and 2020, it's one thing. for the markets, we will have more fiscal spending. he will try to put women in the workforce. this is japan trying to deal with the shrinking population. they need more people in that workforce. change, abeutional has been a big supporter. japan still has a pacifist constitution. they have been interpreting that. but i think japan now potentially wants to change that because of the missiles that fly across japan from north korea. francine: what about abenomics? what's the step forward for japan?
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the consumption tax, as long as it is a transfer and not an effort to reduce the deficit, i doubt there will be much impact on demand. but what we have seen with abenomics is the growth potential increase. that's all we see markets growing so much. the rate at which japan can supply goods and services has improved. that means increased profit. he goes japan is a large open economy, it is in a very sweet spot in terms of what he can benefit from. i think that can continue. is aarket going on today reflection of no change in the status quo. when you look at japan, it's unlikely they will get inflation at the target. what will it take? misnomer i often see in markets is attaching the demographic problem to deflation. that's just demand side.
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it doesn't have supply-side implications. i don't think it's clear. , rising profits, modest increases in productivity and wages, should add to demand. as long as they can raise expectations, that's a critical point. i don't think you will see things rise to the dangerous levels of the japanese economy overheating. is there anything else that the next governor or governor kuroda can do? with kuroda, he's one of the most forward thinking. he talked about if you don't believe, you won't be able to fly. problems the bank of japan has had is trying to
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companies to part with their cash and give it to the workers for wage inflation. that is the real problem. the lack of wage inflation. despite the fact that the labor market is so tight. we have 1.52 jobs for every seeker. yet there is no wage inflation for every seeker. that aside, things are going pretty well for japan right now. the big risk is china. that could come back as negative headwind for japan. francine: we will talk about china deleveraging coming up. both of our guests stay with us. stay with "surveillance" as the spanish prime minister announces an unprecedented barrage of measures to assert authority over catalonia.
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noble sold most of its oil business. we'll give you the details of that transaction. this is bloomberg. ♪
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>> expects reported loss. have demanded double the pay. is since the budget airline was forced to cancel more than a routingghts due to mishap that left it with enough current without enough group -- left it without enough group. jpmorgan is using artificial intelligence to give traders a picture of the whole market. the machine learning program is being deployed in the sales to look at data from all that's in
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orders to give traders a clear picture and help anticipate market moves. that's the new bash is the bloomberg business flash. cap ine: separatists are considering their response -- cap catalan separatists are considering the response. maria taddeo joins us. nothing concrete has happened yet. when we have a showdown? we will have clarity on the dates now. the senate will reconvene in madrid on friday. they have a majority so if they want to, they can get it done. they can get sweeping control over catalonia.
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what we know is that the regional president will be asked step down. a new regional election will be held within six months. say he wanted to the rule of law to prevail. madrid will get veto rights over the catalog regional parliament. in order to stop secession from continuing. francine: how is the n administration going to react? -- how is the catalan administration going to react? he said this is an attack on catalonian self-government. this matters because in order to
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create a republic, they have to have a vote. they are not happy and are still very defiant. thanks so much. our spanner economy reporter in madrid. -- spain economy reporter in madrid. the ecb is expected to stretch the qe program and wait for inflation to pick up. --'s bring it back j foley jane foley. how do you look at the catalonian independence bid? 's ecb may be the bigger event this week. in terms of catalonia, it's confusing.
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however, it doesn't appear that is contained. change, thatto clears the changes the picture. but for now that's not the case i think will be the ecb meeting that is a bigger factor this week. i have the spread here between spanish and german bonds. does it play in the bond market? jane: i think the euro has been particularly interesting because you look at the dollar for the last month, there's a lot of signals. shows that the dollar is waiting in the wings. this can be linked to tax on the u.s.. is the dollar positive? reluctant tos been
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sell the euro despite all the speculation that the dollar could be turning. one of the reasons is the speculation that we could see quite a lot taking from ecb. if it turns out that meeting is more dovish then we could see more capitulation. we have a nice chart -- francine: we have a nice chart that looks at the weighted average versus the remaining. here you have germany. the euro zone economy has an us to obtain momentum that it doesn't matter how fast or how slow the qe is now. it will have very little effect on gdp. i think mario draghi will be pretty happy with the way his policies going. you have the eurozone economy growing above its potential rate
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without creating much inflation. the eurozone is probably two or three years below -- behind the u.s. and u.k. in terms of recovery i think markets -- recovery. i think markets may be surprised. we will go to maybe into six months into 2018 before designed to cut it. the ecb is absolutely wedded to its inflation target. when it looks around the world, there are structural factors on inflation down. it will run qe as long as it can to make sure a full recovery takes place in the eurozone. francine: thank you both so much. they both stay with us. up next, we check in on the markets as the nikkei sets a record winning streak. this is bloomberg.
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♪ francine: this is "bloomberg surveillance." bige waiting for the next development in spain. obvious victory since the nikkei to its record end. we will come back and talk brexit. this is bloomberg. ♪
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monetary policy that has boosted stocks to its highest level in two decades. it also raises abe schatz's winning another term next year as head of his liberal democratic party, which could make in japan's longest-serving leader. cap separatists are meeting today -- catalonian separatists are meeting today to determine their response to run on a -- to .ejoin -- to rajoy they are saying they could declare independence as soon as this week. calling onon is european allies to support u.s. sanctions on iran. he is saying that companies doing business in tehran are
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doing so at their own risk. is trying to connect saudi arabia and iraq to counter iran's influence. saudi arabia leaders rebuffed his request to end the quarantine of qatar. the caveat aligns gain ground in midterm elections. argentina's win five largest districts. that includes windows areas province that we knows i'll race aries province. has urged leader theresa may to strike a deal with the european union. >> there is a lot of uncertainty now with the brexit so i position is we will not consider the timing of our choice until that uncertainty clears and we have a better idea of what the
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outcome of the brexit actually is. as the leader of the scottish national party, i continue to meet the keys for scotland to become an any country. nejra: global news 24 hours a day. powered by more than 2700 journalists and analysts in over 120 countries. i'm nejra cehic. this is bloomberg. let's check in on your markets. the third dayfor and for after falling for the first week in six months to digest the election in japan, the catalonia crisis, the potential unveiling of the next fed chair by trump, u.s. growth data, and trump's efforts to overhaul america's tax code. lots to focus on. euro-dollar down for the separate -- second day. rajoy announced an unprecedented amount of measures to step down the rebels. probably half purchases to 13
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billion euros, stretching out the programs remaining capacity as it awaits for inflation to pick up. that's according to our bluebay survey of economists. the euro has fallen 1.3% since that september meeting. that is against the dollar. this is showing you how the ibex has spared going back to the middle of may. since the referendum, it's down by 2%. stocks underperforming there. down 8%. and we have 1.5%. post referendum, that was 4%. that was the wednesday after the referendum. two of the worst-performing stocks. today, the ibex is outperforming the stoxx 600. stoxx 600 is up less.
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this is the nikkei. the best run of gains since 1988. higher since 1966. --ays coalition -- on a shinzo abe's coalition remaining in power. that the yen a filing to its weakest level against the dollar. francine: thank you so much. let's get back to brexit after a small victory in europe last week. the prime minister's battle to get her legislation through parliament has hit a new roadblock. the labor parties plan to unite with tory rebels will veto any deal theresa may strikes are the eu. to convince her cabinet to approve a bigger divorce bill payment. and you look at the u.k.
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the questions over brexit, do you focus on boe and whether or not they were be a hike before the end of the year or do you just focus on what the deal will look like? that's a good question. i think the bank of england will hike next month. inagain and 2018 and one 2019. the market tends to focus on demand. if that balance between demand and supply that they are focusing on. when it comes to brexit, the best case is that the u.k. and eu will strike a deal. back at lower u.k. potential growth. but the interesting thing when it comes to uncertainty is, we have to explain the way people are behaving instead of make assumptions. businesses are investing in hiring. demand is expanding. businesses are worried about brexit but not so much that they
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are risking losing market share. when you bring this together, that is what the bank of england is focusing on. the glue thatis binds the government together. they would prefer a soft brexit to the labor government and the moderate conservatives would provide -- prefer a hard brexit to the opposite. francine: what does that mean to the pound? with the customers i speak tend to be not so confident about investing. that goes with the assurances about farmer subsidies not extending beyond 2022. that point of view, it's not good enough to see investment. there is a lot of concern. at 18 or 17 months until brexit, it means it's not a very
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long time friend. some firms are going to have to make decisions soon. that's moving jobs or investment out of the u.k.. even if there is a trade deal, it might come too late. they have to make those decisions before hand. francine: what impact the boe? jane: i think it does. that's why i think my views are a little different. we think they will hike in november. but we don't think that they will hike for a long time we think -- time. we think it's one and done. done, if that is what the market will think, can that sustain sterling? from my point, that is one of the biggest reasons to become stop awkish in order to
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negative spiral from emerging. thinks it's one and done, sterling could be vulnerable to the political necessity regarding brexit. francine: this is a hawkish boe or a reversal? thanm: it reverses no more a third of the emergency stimulus if you have one hike. we think about uncertainty in how it is impacting the u.k., sure, if the u.k. had it voted to leave the eu instead of growing at 1.6% it would have done 2.5%. but this is playing out on the supply side more than the demand side. the more uncertainty affects business hiring an investment behavior, the more you have inflationary pressure. this ford use inflationary targeting. even if the bank were hundred basis points higher, it would
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still be a hundred -- negative in real terms. is far't monetary policy too easy. marcus lee into relax. the restaurant inflation and inflation rate hikes are hugely exaggerated. francine: something you don't really agree with but jane, if you look at euro pounds, does it have some kind of support at some level? i think we can have a far greater impact than some of the put the levels we see at the moment. is other side of the coin what we've seeing during the course of this year. a massive rotation back into the euro more generally. if we did see political uncertainty not unwinding, if we still see a lack of detail about
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what the transition. might be, he could sew a huge amount of division of the tory party. that would clear that creep higher. francine: thank you much. they will mostly with us. wake of calls to further for dues financial risks it seems the country is making some measures. we will discuss the latest. this is bloomberg.
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♪ francine: china's deleveraging campaign is it to satisfy the central banks targets.
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for more on all this, bloomberg's chief asia economics expert joins us from hong kong. , great to see you. edna: this is one of the key themes under china's economy. the amount of debt and leverage in the system. they have made plenty of us official statements. we are seeing some kinds of buyings when it comes to risky high-yielding assets. we are seeing declining gains from shadow banking. a pullback in the ending lending -- lending. they are raining in risk. raining men off-balance-sheet risk. the regulars were especially on
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top in recent years. he gives us optimism to say that they deleveraging campaign is starting to gain some traction. the bank how much is actually worried about this? we heard it's a matter of urgency. the governor has been especially vocal on the risk in recent weeks. speech in washington and more recently last week he gave some comments to the congress that tackling debt in the system is a matter of urgency and policy. other officials have made the same warning area it's been the biggest consistent warning for the past two or three years now. there is a feeling that once a gets through to party congress, this will remain a focus. they will continue to rein in credit and risks. that means destabilization of
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china's economy, that's important for the global economy to an that is why this matters. francine: thank you for the update. our chief asian correspondent talking of those from hong kong. the amount of treasuries held in china and belgium, is there to much focus on the lot of the deleveraging? if you look at a drop in the , there is a syndicate slowdown. things have been done but i, like a lot of investors, and quite confused about this issue with respect to china. actually deleveraging isn't deleveraging is just a slowdown of leveraging. there's a huge amount of confusion out there. what everyone agrees on is the amount of credit in the system is a problem.
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it has to be addressed. it's possibly a big issue. growth,had pretty good better than many anticipated, it was kicking the can down the road because you have a party congress. however, the amount of credit will be an issue. china, a problem for it's a problem for global growth. allum?ne: k kallum: this process has a huge head of steam. if you think china is running a policy of borrowing to invest, those real returns will exceed the cost of credit, and it will continue. you will not change until the government runs a small deficit which will reduce the rate of growth in china.
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it is in contrast to the policy of the government. we will see them slow their moves and kick the can down the road. francine: is that enough? kallum: no. china has an unusual, nation of problems. debt problems. demographic problems. these are the problems of a developed country, not a developing one. high central bank rate. those are apple policy tools to kick the can down the road. given that the chinese economy is wedded to its growth objectives, they will offer the former. they are minimizing the amount of credit. shadow banking. they know how to do it. should we assume that as long as they know how to do it is under control? it might be optimistic. they might know how to do it in some areas but we have these
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local governments usually leveraged. the investment they are doing is in nonproductive assets. roads are going anywhere and buildings are being used. those investments are quite dangerous. they know they have to do it, but there are a lot of warning signs. we come back to the kicking the can down the road. unless we know that they are wedded to their plan, the reason for that, china is a communist country essentially, and they fear civil unrest. this is perhaps why they are wedded to their growth target. why they have this massive incentive to kick the can down the road. francine: thank you both for joining us. up next, the embattled commodity trader noble agrees to sell off some of its oil business. we will give you the details. this is bloomberg. ♪
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♪ bloombergthis is surveillance.
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i am francine lacqua. let's get to the bloomberg business flash. cisco systems is going to acquire broadsoft as soon as today. broadsoft of a market value of about $1.7 billion and has been working with jefferies group to seek suitors. in early attracted interest from buyout firms. both companies declined to comment. inorgan is bringing artificial intelligence to give traders a picture of the trading floor and predict where markets are going. the program is being deployed in the fixed income sales and trading income -- trading operations. it will give salespeople and traders a clear picture in real time and help them it's a market moves. an ad hoc pilots group at --nair have them banded the demanded double the pain. the dustup has simmered since the budget airline was forced to cancel more than 20,000 flights, affecting about 7000 customers
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due to a messed up that left it lacking in approval to retain its schedule. on blues group has announced they want to sell in moscow and london at $14 to $17 each. they seek to be valued at much as a $.5 billion on a pre-ipo basis. as the bloomberg business flash. this is what we should be watching this week. this afternoon, theresa may makes a statement to cut -- to parliament on brexit. thursday,em to watch, we get policy decision and a news conference from the european central bank. noble is selling its u.s. oil .iquidating -- oil business noble needs cash urgently with debt repayments due this week. it will report a loss of more
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than one billion u.s. dollars in the quarter. it has lost more than three quarters of its value this year. stewart joins us now. what is going on right now? >> it can get very ugly. i would say it has allayed some of the fears. we didn't hear anything concerning, we went to the weekend, and finally before the market opened in singapore they came out with this. one, a confirmed that they did manage to get this done. probably at a lower price than it wanted. there are multiple escrow accounts and multiple if this happens then that happens. a extension did get on their debt cover waiver. there's a lovely piece out this morning that delves into all of that and goes into the various scenarios about what could happen.
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worse case an oreo another three or four months. best case scenario, they go forever. francine: worst-case mario, they can survive after that?'s the debts.-- if you're selling assets to cut valued at a negative the price you ask for, you can pay it down. francine: it's noble. it doesn't branch out to the industry or have any impact beyond noble. impact on thee people lending it money. the bondholders are currently trading at $.39 on the dollar. the equity is not quite wipe out that almost there. in terms of the account deposits, says this has been going on for the better part of three years, they have enough time to change the way they operate. a lot of this is secured trading.
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it would not have been as bad as it would be three years ago if that will happen. francine: thank you for the update. bloomberg surveillance continues in a sour. we will tom out of your. newly looking again. -- we will be looking at again. he will also look at euro and catalonia. shock and all over the weekend. bonds gaining. spain remains on edge. oil. this is bloomberg.
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land of the rising stocks.
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japan votes for another term of abenomics. who will head the fed? president trump promises a decision very soon. madrid's gamble. the spanish prime minister announces plans to strip power from the catalan government. good morning, everyone. happy monday. this is bloomberg tv and "bloomberg surveillance." i'm francine lacqua. tom keene is in new york. we have a busy week. tom: we have a great guest in the next hour on the ecb. what a joy, francine. yes, we have plenty from tokyo. let's get straight to the bloomberg first word news. taylor: we are starting with how investors in japan are responding to the big election when by prime minister shinzo abe.
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stocks gained for the 15th day in a row in japan. in the u.k., from minister theresa may faces a new challenge to her brexit bill. the opposition labor party may join with rebels and her own conservative party. acceptis demanding she six changes to the repeal bill. republicans have not given up the idea of keeping the tax-cut plan from increasing the budget deficit. he --mcconnell said wouldd to say if the plan change the tax treatment of 401(k) plans. in argentina, it was a victory for the president and his reform agenda in congressional elections.
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it would make it easier for him to overhaul tax and labor laws that he says are blocking economic growth. inbal news 24 hours per day more than 120 countries, i'm taylor riggs. tom: thanks so much. how about a monday morning data check? let's get right to it. s&p 500, unchanged. the dow is up 13 points. a little bit of curve flattening. next screen, if you would. there is that record close on the dow on friday. 24,000 not insight -- in sight. dollar showing renewed strength. we will do the dollar throughout "surveillance." francine: the euro weakening a second day. investigators watching and waiting for what happens in spain next.
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catalan separatists are planning their response. abe'soking at shinzo victory. to its strongest opening ever. tom: here is the yen. let's do a massive shout out to jill o'neill at goldman sachs. i sat in the meeting room, the basement room, in london with jim o'neill right here and he was adamant about weaker yen. he nailed abenomics. right here is bank of japan and they want to get here. they didn't. yen was stronger. now we have a little bit of re -affirmation. the hope is to get a weaker yen again. we will see. francine: this is what i'm looking at. .his is nikkei this is looking at some of the technical levels we have seen on
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the nikkei. it is a simple story that japanese shares are hitting a record streak because they are looking at monetary policy under another term of shinzo abe. if you look at this technical 85 couldything under imply that it has been over-bought. it is a crucial week for the ecb. a bloomberg survey suggests the central bank is set to half monthly bond purchases next year. stanford university economist john taylor is a current front runner. kit, great to have you on the program. will get tothink the markets overall? is it just who is in charge of the fed next? >> i think it is probably tax policy and the fed governor is the big mover rather than
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anything else. francine: it is impossible to guess who comes next, but how whetherwe know about the fed governor will be picked on monetary policy or regulation? kit: donald trump does not only have one appointee to make at the fed. someone for monetary policy and then put other people in terms of regulation and freeing up on the banking system, but those in there. that is double guessing president trump's decision-making. tom: i want to go back to francine's chart. it is gorgeous. absolutely gorgeous. this is the relative strength index. was up 14 days in a row going back to 1961. are we seeing this around the world.
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are we seeing one way that established?- bets it is not the only one where we have seen rfi's get very high, but you've got them in a bunch of equity markets. we don't have very many in foreign exchange or bond markets, which are terrifyingly shopping around sideways. i think that has been the challenge. a lot of investors have struggled with the challenge of embracing an ever-rising equity market globally, when they can see that it has gone a long way in one direction. you don't necessarily want to fight it, but i guess that is what a lot of people have been doing the last 3-4 months. i guess that is why a lot of trading performance has not been as good as buying the equity market on every dip and ignoring francine's chart.
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francine: is this a good technical way of looking at it? is there anything else you would be looking at? kit: i would overlay things like dollar-yen over the top of that. rfi's are a good speed indicator. go sideways, shop around, and take the froth out of it. i think euro-dollar, we were going way too fast. we are now curing that one way traffic, not with a big direction, but just by staying in a tight range. francine: i don't want to spend too much time on yen, but i'm looking at bond buying for the ecb. this is my other chart. this is the total bond buying and what they are buying in germany. you can see that level. tothe ecb in a hurry or not actually start normalizing a touch, qe? kit: i think the ecb probably
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has two broadcasts, probably one that does not want to strengthen the euro and the other that says, we need to be done but i the end of 2018 -- by the end of 2018 on qe. i think there are those two pressures. i think this thursday is about getting both sides, finding out the position everyone is comfortable with. i would say's lower for longer seems more likely than anything rule --route all. longeruld say slower for seems more likely than anything brutal. tom: i want to bring up this chart, kit. we have really never seen this widening of spread really getting us back 21-22 years.
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what does that limit for mr. draghi? how does that limit his degrees of freedom? sense, it is all helping him, that he is getting some of these to move this way and helping him out. be thatest fear would you would get a more rapid rise in u.s. yields, faster fed tightening, and the euro-dollar going up very fast. his biggest fear has to be what happens if the fed is even on -- and they just keep i get a stronger euro, if things happen to slowly. at the moment, i think the pace the fed is moving at is about as generous to the ecb as you could wanted to be. tom: what is your call on pound
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sterling right now on cable? kit: i think cable is a function of what happens to euro. the pound is incredibly cheap in trade weighted terms for incredibly good reasons. we reacts more to good news then too bad news and we get as much bad news as good news and i think we will cable of. tom: that is what we love. kit juckes will continue with us across all assets. coming up from tokyo, robert feldman of morgan stanley. his decades of wisdom on economics and the politics of truly is japan. we will do that next. from london, from new york, this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. cisco is close to sealing the deal to buy broad stock. a deal could be announced today. ofadsoft has a market value $1.7 billion. they commodity trader says it is that to post a lost of more than $3 billion in the third quarter.
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it is looking to reduce its debt. asia'sroup used to be largest commodity trader. shares are down about 90% since 2015. royal phillips posted third-quarter profits that rose 12%. phillips got a boost from sales in china. the company has made a series of medical technology acquisitions in recent months. it has moved away from its historic roots. that is your bloomberg business flash. francine: thank you so much, taylor. theresa may's battle to get her brexit legislation through parliament hit a new roadblock as the labour party threatens to unite with tory rebels. she is expected to update parliament on the outcomes of thisalks with the eu afternoon. let's get back to kit juckes. we underestimate the fact
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that jeremy corbyn has more power than we think? kit: he is front runner to win the next election at this point in time and that gives them power in these negotiations because if you look at them from the european perspective, the rest of europe wants to know how things would look like if we did have an election in the middle of the process. this is not a government with an outright majority. so, passing laws with a divided conservative party that is a minority government is not that easy. francine: what does that mean for europe? or sterling? kit: i think it just means that we go on with every single piece of legislation, we just go on wondering. meanslife, it sort of that there is this 10%, 20% chance that the whole attempt at getting out of the eu falls apart at some point just because of the politics. so, you have a range of
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, 15%mes, from the unlikely currency moving option that it does not happen, to the likely, which is shambles with an eventual messy exit. everything in between as possible. tom: what does prime minister may need from the economy? a look at the articles and i'm a foreigner on this, but to me, it is everybody walking around in a circle, it is almost like musical chairs, except the tune is not nice. what is the ramification of this politics for the economy? kit: well, it is uncertainty and decision-making that is changing. i read my sunday paper yesterday that told me the weakest housing market in the u.k. is in london, which has slowed significantly as people worry about jobs leaving. i don't think that is a coincidence. if we get decision-making negative for the economy, they will be focused on london,
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geographically. we've got some gdp numbers coming up for the third quarter. we don't need the economy to slow any faster than it are ready is. -- already is. that makes it harder in terms of the fiscal math and in terms of the implications of leaving the eu generally. theresa may needs the economy to hold up, as well as it is possible for an economy close to full employment with weak wage growth to do. tom: will we see any new wants here in the current account flows, rather than the dynamics of interest rates and foreign-exchange? the actual flows of money. that was a panic the first week of july a year ago. it does not seem to be the panic it was then. kit: i think it is more likely to be a grind. evenroblem in the u.k. --
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if we get a one-off rate hike in november, we are likely to have rates that are then on hold for a very long time because the economy is slowing. if the european central bank is gradually raising interest rates , if the direction of travel is further fed tightening and then ecb tightening and eventually even bank of japan tightening, while in the u.k. all we are trying to do was contain the pace of slowdown of the economy, that u.k. bonds and u.k. acids are gradually going to get less attractive to everybody else -- assets are gradually going to get less attractive to everybody else. that is just going to hurt the currency on an ongoing basis. francine: they do so much for now. kit juckes stays with us. stay with bloomberg this week for live coverage of the future investment initiative in saudi arabia. we start with top-notch guests from the calm -- conference.
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look for that at 8:30 a.m. in london, 3:30 a.m. in new york. we will talk about valuations in the european banking industry. this is bloomberg. ♪
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it is a fog of washington. president trump's washington in a fog over a set of issues. those issues no doubt will change this morning as the
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president tweets. good morning, everyone. francine lacqua and tom keene in new york. knowng us now for the fog as washington and the fog known as the new york football giants. >> i'm not responsible for the giants. [laughter] tom: the yankees went down and tears were had at the keene home. we are focused on december 8, which he would predict where the conservatives take their stand for fiscal responsibility. is that their last stand? >> it could very well be. we have written about the prospect of shutdown of the government if they don't reach budget deal by then. they can always extend it through christmas. paul ryan has suggested they may keep them there to keep the deal done. the fiscal conservatives have thus far been accommodating, but that is the deadline. tom: the chat this weekend, the
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democrats against the republicans, the politics of all of this. is it a rockefeller republican presidency up against a modern conservative congress? marty: we actually don't know. donald trump has not signaled his position on a health care repeal and replace fix. and mitch mcconnell is moving to put a bill before congress, but he needs to hear from donald trump what he will accept. so far, he has kept everybody guessing. francine: marty, what about nafta? it seems that he is threatening to tear up the north american free trade agreement, but we don't know exactly to what extent. marty: that's right. there are another set of talks in a few weeks. there was strong rhetoric from the white house on nafta and stronger push back from mexico and canada. the markets have not yet reacted in a way that would suggest they think that the deal is going to
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fall apart, but that could still happen. said herump has always does not play his hand in advance, so he is keeping everybody guessing. and that is true on a range of issues. tom: where does mnuchin fit into all of this? where does he fit into this mix? marty: he is one of donald trump's advisers, but donald trump does not signal who he is really listening to. that is true with the fed decision. we and others have reported various names being front runners, but until donald trump makes a decision, no one really knows. francine: marty, very quickly, what do we know about the fed chief? a talkas a little bit of about he could appoint two people. any thought process we are looking toward? marty: then he threw in janet yellen's name again, he has refused to take her out of the mix, though i personally think
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that is an extraordinary long shot, that he would reappoint janet yellen to one of his signature picks, akin to a supreme court pick, whether you would take a democrat to run the fed is hard for me to conceive of, but taking powell and figuring out where the others fit in is a real possibility. again, we just don't know. francine: all right. marty, thank you so much. we will be back with kit juckes to talk about the fed and the treasuries health and the belgian holdings that china has. stay tuned for bloomberg coverage of the future investment initiative in saudi arabia. this is bloomberg. ♪
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tom: your monday briefing, fran seen lacqua in london. an amazing weekend driving to the important e.c.b. meeting. is it thursday, fran seen? francine: it is, and we're
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looking for a news conference, and anything to do with unwinding, even gradual. tom: i like the comment, more important than normal is how i would put e.c.b. also, always more important than normal is our first word news. here's taylor. taylor: tom, francine, russ tillerson rex calls the relationship between the saudis and iraq vital to bolstering security and posterity. tillerson was in saudi arabia to seek more money for reconstruction in iraq. it's a sign of the c.i.a.'s increased role in president trump's counterterrorism policy. according to the "new york times," the c.i.a. has expanded secret operations in afghanistan. the paper says c.i.a. officers and contractors are joining with afghan forces to hunt and kill the taliban. and in italy, leaders of two regions in the northern part of the country claim victory to demand more autonomy from the state. the vote could strengthen the
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anti-immigrant northern league party going into next year's national elections. global news 24 hours a day, powered by more than 2700 journalists and an liz in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: taylor, thanks so much. an historic moment for japan. you can do no better than to speak to robert feldman of morgan stanley. his decades of experience out of m.i.t. in japan, he is not a japan watcher. he is absolutely part of the fabric of commentary and analysis across all of political and economic japan. he joins us from our studios in tokyo. wonderful to have you with us. tell me, who is mr. abe? what kind of politician is he? is he someone we can compare to an american politician? robert: i think mr. abe is a politician who makes a habit of getting along with people, working out compromises,
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getting people in a room together, something the way, ideal american politicians worked 20 or 30 years ago. he's been extremely effective in getting along with the u.s. he was good friends with president obama. he's good friends with trump. this is an asset to japan since the u.s.-japan relationship is so important. i think the prime minister deserves a great deal of credit for that. tom: i believe i give you credit for giving me the classic book coming out of world war ii. that's when they last addressed the constitution. do you look for profound constitutional changes now that ill move japan away from a passivist structure? robert: i think the answer is probably yes. the results of the election over the weekend have increased the number of members who are in favor of some kind of change in the constitution. the downside of that, of course, is that's going to be a difficult negotiation to take place among a number of parties and with the population,
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because there has to be a referendum before any changes of the constitution can take place. the worry is that might divert some attention from economic policy to the detriment of the growth strategy. francine: all right, but dr. feldman, if you look at abe's priorities, will they change and shift as the market underprices this? robert: i think that the market understands what's going on pretty well. i think it's gotten -- might have gotten a little bit ahead of itself. it sort of bought on the rumor, bought on the news as well in this particular case. but the key thing now is where does economic policy go under the next abe government. we do know that he is trying to come up with some new economic measures, probably more in growth strategy than anything else. there's not much more they can do on fiscal and monetary policy. we think he's going to be focusing on that. but i think the market isn't paying as much attention to the growth strategy as it is to little rumors about who the next b.o.j. governor would be.
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but the key is whether prime minister abe takes his own party, which is moving toward big government, takes them and pulls them back and says no, we have to have a market-oriented, policy, arket-oriented structure for industry. francine: i like the way you talk about a little rumor on who the next govern another could be, but actually, this has the potential to swing one way or the other. first of all, what are you expecting on taxes, and therefore, who are you expecting to be governor of b.o.j. in a couple of months? will it be governor kuroda? robert: most of the thinking is governor kuroda could very well be reappointed. he has done a good job, certainly in the eyes of the administration. there's no particular reason to change horses in the middle of this stream. we're not quite out of deflation yet, and there's no reason to upset markets by appointing someone who might
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suggest a change that won't occur. that said, the most important thing for monetary policy is what happens with prices, not who particularly is in the seat. that period is over, because the b.o.j. has pretty much done what it needs to do. in fact, now that we've seen the trim here, accelerate over the last year from about zero up to .6, probably going a little bit higher now, what we'll see is the bank of japan having to deal with the fact that it's beginning to be successful in its policies, and that has nothing to do with the governor. it has to do with what the policy is. i expect there to be continuity in that. tom: interesting. that follows on to a better nominal g.d.p. let me show a chart to get ready to you, we brought up yen earlier. here's bank of japan. here's where abe wanted the yen to go. here's where we are now with the election. weaker yen today. i guess here's where abe wants to go. what is mr. abe's optimal yen level? is it 120, where i have it on
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the chart, or does he need an ever weaker yen? robert: my sense is he does not want an ever weaker yen. it's probably not good for the country, because, of course, the weaker the yen goes, the higher we see imported prices going in yen terms. it might raise the c.p.i. a little bit, but that just means that japanese money flows abroad. that's not good for our own economy past a certain point. my sense is that the government here is quite comfortable with the yen between 110, 120, maybe a little bit on each side. but somewhere near where we are right now seems to be quite comfortable. we also have to think about the u.s.-japan connection there, because the last thing in the world the government here would want would be yen-dollar that might disturb the u.s.-japan relationship. so i think they're comfortable near where we are right now. tom: who elected mr. abe in this true landslide? was it rural japan? was it tokyo? was it a generational shift in election? who made the marginal
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difference in this election? robert: well, this election gave a share of votes to the only people that was very similar to the previous one, but i think some of the momentum in this one actually came from the young, because the they pushed through earlier, a few months ago, a lowering of the voting age down to 18. it had been 20. they lowered it to 18. and the data from exit polls showed that the younger voters supported the l.d.p. in much larger shares than older voters. so i think the young actually got a little bit more voice in this election. and i welcome that very much, because i think that's key for us re-establishing some kind of fiscal sustainability in the country. francine: when you look at japan, i know we touched on it a little bit at the beginning of the show, but actually what can they really do to work on inflation? robert: well, i think the things to get inflation back into the system are much more
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structural growth reforms. i don't think there's a magic bullet with an ever weakening currency that could solve it. monetary policy at this point needs to stay and keep it here. i agree entirely with that conclusion. so it's more structural issues to try to get price expectations back in and going to take a long time. so on the general thrust of policy, keep a steady ship and keep working a bit, kind of the boring stuff behind the scenes. francine: kit, we started the interview with robbie feldman on geo politics and, of course, the balance of power between the u.s. and japan and dealing with north korea. is the yen still a haven if something bad happens with north korea? should it be, will it be? kit: it's still a country with a huge net asset position relative to the rest of the world, so that if japanese investors bring money home when the world is a scary place, it will go to yen. you know, i don't think that's
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changed. equally, dollar-yen, we know in a mundane way, credits terribly closely with u.s. real yields on a day-to-day basis. so if risk-averse events send u.s. bond yields down, they send the yen up. i don't think that relationship has changed. it's not my favorite. it's not my favorite safe haven for missiles flying over japan t. might come behind gold or something even for that, but it is still -- this is what countries with big current and lots of foreign assets are safe haven currencies. tom: thank you so much. robert, greatly appreciate your attendance on a busy and historic day for japan. dr. feldman is with morgan stanley. don't forget, after your television briefing here on a monday, how about in the autumn ? across canada, on our many different platforms, sirius x.m. channel 119, boston bay area, washington, new york, houston, houston, houston, we
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have a problem. houston, we have a problem. houston, we have a problem. ♪
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francine: this is "surveillance" from london and new york. we're talking about technology
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today on "surveillance." selling its u.s. oil business o goodall group. the group expects to report a loss of more than a billion u.s. dollars in the third quarter, while bloomberg's executive editor for energy is with us, still with us, kit. so thank you, kit, for sticking around. stuart, as always, thank you for coming on. how much do they have left? stuart: it depends what scenario you believe in. we looked to an optimistic scenario, pessimistic scenario, somewhere in between, and we i don't understand through anywhere between the next three months and perpetuity. it really comes down to how much cash can we liberate from these assets. are they going to get the headline numbers? it is a complicated deal. there are multiple escrow accounts that are dependent on various scenarios happening. at this stage, it's very, very hard to tell. what i will say is bonds are up slightly. shares are down massively, but
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i wouldn't pay too much attention to the shares right now. because they are small. francine: it's not really supply, but it's a kind of who's impacted by this. stuart: the obvious hit, people that holds bonds, banks lending the money, and i think this has been such a slow crash for lack of a better word that people have had two or three years to get themselves out of positions in terms of trading environment, they're very much going to secure the credit. so it shouldn't be too capital, because if the worst happens, but we're not there yet. francine: i don't know who is to blame around this, but what will happen? stuart: i think in terms of the way the trading environment has evolved since the commoditied crashed, that was already underway. when you have swings in prices like that, people tend to react, taking money off the table, being a lot more cautious in how they're trading. i don't think that's necessarily going to change as a result, and noble is one of many, many stories going on in that particular environment. tom: stuart, i want an update on the stuart wallace
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charlotte. this is a really, really interesting chart. this is good math, folks. this is the bloomberg commodity index with a boom in the last part of the decade here. and then down we go, and we prince william can'tly come up and kiss against this long-term moving average, and we're really right now at an interesting full courtroom point. whether it's noble or any other company, stuart, is there even an understanding about which way this would cut to further bear market or possibly finally breakout to optimism? stuart: we're getting optimism in i know it's difficult to look at $50 to $60 and think that's optimistic, but it is. i think there's a strong argument that maybe it's got ahead in the fundamentals. we're seeing negativity in agriculture because of the harvest. but in terms of the money flows into commodities, it's definitely there. it's coming back. it's not what it was, and i don't think anyone's predicting
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that we're going to return to the super cycle. but certainly a lot more positive influence on that market, and some suggestions this morning might even outperform equities over the next year or so. tom: are commodities dollar-based? when you think of commodities across assets, do you think of them in terms of a dollar foundation? kit: yeah, although within that context, if i'm bearish of the dollar, i'm going think that commodity prices will go up in dollar terms because the two go together. so when i look at that chart, there is part of me that says how commodity prices really get , and if i'm looking at a world where i see that big fall that coincided with the dollar's revival, then i'm looking and thinking, if i think the dollar has seen its best days, i think commodity prices have seen their worst days. so i'm with stuart on we're breaking higher from here. that's kind of how i look at it. francine: but how much is
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sensitivity with china? stuart: china is the cause of the boom that is the cause of the bust, in the sense that it's the big shift in global mand, one off a great jump upwards. that created the fall. so now we're getting back to a more normal relationship between global demand and global supply, and actually, we have to find new sources of quite a lot of raw materials over time, so that helps the price come back up from the bargain basement. francine: do you look at the people's congress in china to try to understand that 6.5% is really true? stuart: yes, absolutely. it's partly about economic growth, but for the commodity markets, far more important, in some respects, the capacity restraint. they have been come back across all sectors, and that's what's driving a lot of the gains in commodity markets. what we should get really excited about is the stuff not included in the index. these are very, very attractive
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commodities right now that are going through the ceiling, and it's linked to the story. francine: interesting. thank you so much, stuart, blorg's executive editor for energy and commodities. i think we should actually be able to get a cobalt graphic with you. we stay with kit, strategist there at societe generale. in the meantime, see us using tv go. log on to tv go, and look back at some of the calls we had on commodities with our guests and ask tom and i to ask more questions on your behalf. you can also pick up an issue of bloomberg business week. this week, soul searching. we focus on the google c.e.o.. this is bloomberg. ♪
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taylor: this is "surveillance" surveillance. let's get to the bloomberg business flash. russia is seeking evaluation as they have billion dollars for its i.p.o. they're controlled by billionaire oleg. the company's main assets are 48 percent percent stake in aluminum producer rusol, and also stations in siberia.
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j.p. morgan is bringing in artificial intelligence to help fix income traders predict market moves. the world's largest debt ceiling will learn a program developed by a london startup. the program will compile data from all desks and orders to give traders a clear picture in real time. and that's your bloomberg business flash. francine, tom? tom: taylor, thanks so much. without question, the great call of the summer was a weak dollar. very, very few people got this right. they looked for flat or even stronger dollar. we've shown this chart many times. now we talk with kit. this is a beyond elegant, teach it in a technical analysis course, just a gorgeous set of resistances, which keep it weak dollar. we've turned around this catharsis here, and up we go. we're already to almost a breakout. can you call a shift to strong dollar?
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kit: i don't think you can. i think we're seeing a picture of a chart that's gone too far down for the dollar between scommar september. and it's now probably chewing around. when i look at that chart, my best guess where we'll be at christmas is within three inches of now, depressingly. i look at that, and i would like to see more of a dollar bounce that i can sell into. i think the next significant move is going to be lower. but i think we could be chewing around for a hunk of time here. tom: the money question is always -- and i know, kit, you've written about this -- is an interest rate analysis versus a flow analysis of billions and trillions of dollars. which is determine aren't right now for the future of the dollar? kit: right now, the dollar is supposed to be getting a lift from relative interest rates. as the fed hikes, as treasury elds rise relative to buneds in europe, the dollar is
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getting less of a lift than it should have done, and so i would like to sell it at a higher level that's not coming. in the long run, the flows, you know, the u.s. has a big account deficit, financed in part by countries like japan, which has an undervalued exchange rate, despite big surpluses, europe, the same story, those flows, as policy normalizes, ought to give us in the next five years significantly stronger euro, somewhat stronger yen. we're at that transition right now where the interest rates dominate, but they're not dominating as much as you think they should be. francine: let me bring you to my chart, which is simple, but looking at the holdings of treasuries by china and also through some of their holdings in belgium. given what we're seeing in the people's congress, are you surprised that this went up by quite a bit? kit: that's a reminder that this year, despite the u.n.
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having done well against the u.s. dollar, it's weakened overall on trade-weighted terms, and the chinese are getting their way. and in fact, i guess what you see is that with the currency that they're holding successfully at competitive levels and they don't want it to get stronger and they're managing to succeed to do that, that's slowly accumulating foreign assets again through time. if the dollar were to start weakening, i think the problem with this would pick up. but the chinese have had a very good year of not having a weaker currency against the dollar, so they don't get any political flak. at the same time, we're not seeing the currency reserves fall and not having any kind of stress. for policy make there's like to be in control, they have managed to be very quietly in complete control. francine: and will this continue? kit: i wouldn't bet against it continuing for a while at this point in time. they look to me like they've got -- you know, they've got
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the tools. certainly everything has fallen in place for them. tom: this has been great. kit, i've got eight more questions. we'll do it another time. he's getting us briefed all morning. a lot of interesting nuances in the market. the research piece of the week ast week was by deutsche bank. the author has a fabulous view on the balance of central bank purchases of stuff versus the issuance of said stuff, and europe is the decided outliar. that's in our next hour, torsten slok. it's joe girardi's new york. ♪ who knew that phones would start doing everything?
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no one else lets you do that. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to ♪ tom: the dow begins to weaken at record high. .he dow advances yet again
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prime minister abe has giving a landslide victory. in fray reaffirmation constitutional change. the president of the united states prepares for a trip to reform, front and center. kevin cirilli in moments. i am delicate on difficult decisions for mr. draghi. torsten slok and ecb calculus. good morning. this is uncertain. go -- this is "bloomberg surveillance." francine, give us an update. give me a spain update. where are we on the independence of catalonia? exactly know what will happen next with catalonia. what we know is madrid is
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putting powers in place to proceed. you have to think about it philosophically. you don't know what this means for the separatists as madrid takes their powers away. this could be resolved fairly soon and fairly well or it could get ugly. tom: it says remote from venice thursday and friday, you and me. right now, with "bloomberg first word news here is taylor riggs. areor: investors in japan responding to the win by shinzo abe. he retained two thirds majority in the lower harvests -- lower house. that is the longest run on record. the victory means he is likely to continue policy of monetary easing and fiscal spending. theresa may a new challenge to the brexit bill.
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the labour party may join with rebels in may's own conservative party. that could force may to give a photo on final deal to leave the european union. the u.s. republicans have not given up on the idea of keeping the tax cut plan from increasing the budget deficit. senate majority leader mitch mcconnell is not going into detail. he refused to say whether he would force and additional tax bracket for the richest americans. he also says he would not say if treatmenthange tax for 401(k) plans. in argentina, with a victory for the president with the reform. the alliance is said to up seats in both houses of congress. that would make it easier for him to overhaul tax and labor laws that he says are blocking economic growth. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg.
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tom: let's get to this quickly. too many people to talk to any six clock hour. that -- at the 6:00 hour. a vix 9.98 showing better than good markets. doubt record high. weaker. i know, francine coming of the japanese stock market. francine: i want to show you a drop in euro. investors watching and waiting for the next big deval met from spain. shinzo abe's election victory is the longest winning streak on record. i am looking at west texas oil gaining. tom: over to bloomberg. we have shown this chart twice in the last hour. yen weaker, and the basic idea is bank of japan action on this
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abe win. morgan stanley saying this is not the goal for a weaker yen and what mr. abe wants is yen stability while he addresses historic constitutional change. francine? i amine: this is what doing and what i have for the moment. to nine.anged i will push it out. it is the lowest in more than three months after the coalition gets a election victory yesterday. what that means is it composed of monetary easing. it could suggest that this has been overbought. while the yankees were going down in flames, lawrence summers, former secretary-treasurer, was writing up a storm.
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he were once on his blog. then he wrote for the washington post. on sunday.te again here is summers fired up here he goes after kevin hasson. burling sterling, who devoted their lives to honest, rigorous, evaluation of tax measures, no one has defended the $4000 claim as very conservatively estimated let alone indoors the plausibility of kevin hasson's $9,000 claim, the highest quality assessment and corporate tax issues has been provided by thegreville for congressional research service. joining us in washington are our chief washington correspondent kevin cirilli. larry summers is it really taking issue with the trump administration on tax reform. does he have a lot of support?
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kevin: republicans on capitol hill feel the need to get this done by the end of the year. that's why the vote by the senate was interesting. it keeps them on pace for the end of the year. president trump spoke and he said the number of brackets could be tweaked from the number of 723. he singled he may be open to doing it -- seven to three. about thelk more specifics. tom: has there been a scoring of hopes and dreams? kevin: no scoring at because we don't have a bill yet. about next week, i would anticipate when the tax committees in the senate and house will begin hearings and try to move legislation. they are meeting. gary cohn will be meeting with the members of the republican study committee, a broad
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coalition group of republicans. francine: why is it so hard? kevin: i have asked that a lot over the last couple of months. what they are trying to do is the correct course on strategic failure of health care with regards to tax reform. , butlicans want tax reform they are divided on how to pay for it. that is why you are starting to hear more about the reduction in taxes. tom: thank you so much. joining us from deutsche bank is torsten slok. information on the european bank. congratulations. everyone is talking about your work over the weekend. i want to go to u.s. tax reform.
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bring up the chart for dr. slop. --slok. world war ii, the great paying through 1945 and immense stability. here is a surplus, down we go and up we go. are we paying too much in taxes? torsten: the revenue side is important. it is striking how stable it has been. just many -- one it is not moving that much. tom: the great reach of deutsche , is it imaginable that you could have tax reform about texas coming in if you do not have spending reform as well? torsten: it has been talked about from different angles. it is what is needed to get something done. tom: you don't hear that in the conversation right now?
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torsten: know, that is why it is not about reform. it is just discretionary spending. francine: with a finance agreement? torsten: we are hopeful something will go down. we also listent to bloomberg radio and bloomberg tv and watch the news coming out from d.c. it is somewhat worrying overall. there is a timeline. as you discuss come of the senate vote was an important step last week. now they have to get the house in senate -- a bill in the house and senate. there is a delay and it may be a signal there are challenges getting the votes. francine: what does that mean? if there are challenges getting the vote, does the market selloff because of the correction of duty can give the trump administration more time?
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torsten: it is hard to interpret what is priced in. i can tell you with my conversations with clients, a are somewhators confused about accepting what will come out of this tax reform. is it just tax cuts? is there really reform russian mark to a degree will this be helpful for different industries and consumers question -- reform? this be helpful for different industries and consumers? forward witho move your work that everyone talked about this weekend. bank researchhe on ecb dynamics. how important is this thursday ecb meeting? torsten: it is very important. we had basically negative interest rates for so long and the market is only pricing. the ecb will raise in 2020. if the ecb pushes that earlier
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to 2019, it could have invocations for the whole european union. francine: tom has been talking about nothing else. we are looking forward to having a conversation with you shortly. torsten slok. stay with us for live coverage of the investment future. will talk about u.k. brexit. that is tomorrow. this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." fiscal is close to a deal to buy broadsoft according to people familiar. a deal could be announced today. broadsoft has a market value of about 1.7 billion dollars. commodity trader noble group warns that it is says -- set to post a loss in the third quarter. at the same time, it has agreed to sell most of its business to reduce its debt. noble group used to be asia's largest commodities trader. now it is having trouble gaining access to financing. shares are down about 90% since 2015. health equipment while philip posted raises. there are medical technology acquisitions company. they moved away from historic roots. that is your "bloomberg business flash."
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tom: this is the research pizza friday.ece of it is the ecb meeting on thursday. torsten slok is with deutsche bank. everyone knows this is the actual sausage that you get from an investment house with fancy charts like this. all you need to know is this chart is different. the blue line is draghi's purchases of bonds. the red line is the issuance, and this gap is historically unprecedented going back to the west failing agreement of the 17th century. i am making a joke here. alone in this dysfunction of a bring in bonds and. torsten: the issue is that government issues bonds and the question is, how much does the thanal bank by more issuance? let's say the fed issues $100 in
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bonds, they but less than that. where it is in the ecb case, the issued 100 years of hans and was seven times that. the ecb bought a lot more than issuance and that brought fire marker -- firepower to markets. is: the money question quantitative tightening. you cannot tell me we will have stability when the ecb unravels that seven times factor. it is illogical. torsten: the total outstanding amount of bonds that are trading in negative interest rate is $8 trillion out of a total noble market of $50 trillion. if the stocks turn around and become positive, the ecb would potentially on thursday and later on down the road when a tighten this very significant.
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francine: let me bring you to my chart. this is an ecb debt duration chart. you can see the difference. this is a waiting average of maturity. germany is around 6.8. the lack of german bonds impacting ecb thinking? issuen: the significant is what has been the conversation of the purchases. there has been a lot of discussion of will we do this? how long can this continue? . is ame sense, there question of how long they can continue with this. comes tohy once this an end, the big question is will markets shrugged their shoulders and say what ever, this will end
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and we will slowly pushed rates higher, or is there risk where interest rates have been negative in the u.s. and in your area. what they wake up and find not negative. that becomes a very significant issue for investors, including on thursday. francine: which way do think it will go? torsten: we are going into thursday with the expert tatian that something will be signaled expectationb -- that something will be signaled about the ecb and that their buying has to be lowered. the amount they will go down to is less important as if there will be an end date. will they just keep it open so we don't have an end date? that is critical. investors will no longer be
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and then thebonds fear is that you will see the spread from the periphery start to come out. tom: torsten slok with us from deutsche bank. you will be, briefed on tv on bloomberg surveillance. over to radio, bloomberg daybreak coast-to-coast. us. with from london and from new york, this is "bloomberg surveillance ." this is bloomberg. ♪
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♪ is dead -- is that -- ime and bowl -- will into next year's national election. torsten slok is with us. we can talk catalonia and we can talk about a number of european countries. do you worry that separatist movement have to have an impact on ecb policy? the ecb policy is complicated by the fact that there are so many different countries and different things going on. i think they honestly look at this and ask if this is a risk
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to financial markets. so far, markets have been relatively on impacted by the events in catalonia and the vote that is going on. there must be some sigh of relief in the ecb is my guess. modelskets and building and predicting what the outcome will be an models where there will be political outcomes is quite a challenge. i think that is also the case for the ecb. francine: how should we look at political risk? put in thests have back of their minds and could it come back with a vengeance? is, here is issue what we know and here is macro data for your area and for the u.s.. there are risks in directions of north korea here there is political risk in the u.s. and also in europe. it often becomes a function of
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what do you think the macro picture looks like. is sos why macro important. tom: is this a reaffirmation of the northern league? when i look back at venice, it is it -- is it a reaffirmation of the north-south access? francine: the northern has changed quite a bit over the last six or seven months. become and modeled themselves with france. one of the crucial errors was when they looked to reintroduce the italian lira. economy of it is still something that we need to figure out exactly what it means. it has evolved. we'll get back to a lot of these
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separation movements. of deutsche bank stays with us. you can pick up the latest issue a bloomberg businessweek paid ceo week, we featured the of google or we talk about artificial intelligence and a little bit about what we have seen in terms of some of the big scandals at google. for example, feminist movements. you can get the latest insight after theabe coalition secured a victory. this is bloomberg. ♪ is this a phone?
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or a little internet machine? it makes you wonder: shouldn't we get our phones and internet from the same company? that's why xfinity mobile comes with your internet. you get up to 5 lines of talk and text at no extra cost. so all you pay for is data. see how much you can save. choose by the gig or unlimited. xfinity mobile.
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a new kind of network designed to save you money. call, visit, or go to tom: good morning. "bloomberg surveillance." now, to our first word news. taylor: in saudi arabia, rex
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tillerson oversaw the first meeting of the new alliance aimed at countering iran. he called the relationship between the saudis and iraq vital to bolstering security and prosperity. seeks in saudi arabia to more money for the reconstruction in iraq. is the sign of the cia's increased role of trumps -- the paper says cia officers and contractors are joining with afghan forces to hunt and kill development. leaders of two regions in italy claimed a victory in the north in a referendum to demand more autonomy from the state. the vote could strengthen the anti-immigration party going into next year's national election. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much.
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the japanese prime minister shinzo abe's gamble on a new election has paid off. the landslide when paved the way monetary policy that has boosted japanese stocks to the highest level in two decades. what was this election about? was it about foreign policy or the economy or both? kind of about both, but also about the status quo, because the biggest surprise here was the fact that i can stand outside with clear skies above me after we had a super typhoon hit this morning. the election results were pretty much a foregone conclusion. he saw the opposition in disarray in the weeks leading up -- you saw the opposition in disarray and weeks leading up to the election.
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we called it a gamble for shinzo abe, perhaps we should holiday will take elated risk that paid off in spades -- a well risk that paid off in spades. this is going to be steady as she goes. the political uncertainty is now out of the equation, and shinzo abe and rhoda until april can get on with the business at hand. when you say steady as she goes, does that mean the prime minister's priorities want shift? shift? shift -- will not reporter: we already heard from the secretary saying the priority has to be the economy and has to be to accelerate abenomics. they have another four-year mandate. i can start tackling those more step -- they can start tackling
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those more sensitive issues. also, that consumption tax increase in 2019 still a year and a half away, but if you look in history, i lived here in 1997 when they raised that from 3% to 5% and in 24 -- and in 2014 a raised it again. after each of those, japan fell into a recession. what will be the response of china and korea to constitutional reform in japan? they are not going to like it. they are not going to like it at all. china for a war with japan, and this is the constitution here that has been in place. in constitution has been
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place since the postwar and they do not want to see a rearming of japan. see an not want to increased military partnership with the united states. definitely pyongyang does not want to see that. after this election victory, a strong mandate for shinzo abe, astronomer -- a strong partnership i might add between abe and trump, who will be here soon. has strength as a leader. that is something trump will like about him. they will start to tackle be north korea problem. tom: you have been to tokyo 47 times. what is the mood this time? what does it feel like after the election? thanter: i have been more 47 times. i lived here many years ago as well. the mood on the streets is interesting, because in the lead up to this election, especially after the allegations against the ldp in july when the
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rose toon leader prominence, there was a field that she could be the agent of change in japan. -- there was a field that she could -- there was a feel that she could be the agent of change in japan. that fizzled out. people said, listen, the economy is doing great. why change right now? that seems to be the mood. none of this hope and change stuff. tom: thank you so much. terrific perspective. slok is with us. what is the optimism you have about japan? torsten: japan has been the not -- --
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we were writing books about how to solve depends problem, and here we are discussing essentially the same issues. japan is fortunate enough to ride the global wave of the economy doing well. tom: this is brilliant. you are voicing exactly what i heard, which is japan is taking so long. is this an election -- is this election a catalyst to get to the third era? torsten: now there is a stronger mandate. the second important thing for oruda's termhat k runs out in april. it suggests this will be business as usual, but with more support than it has had for the last two years. francine: we used to talk about whether there was a danger that
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europe was becoming like japan, little inflation, growth was ok, but is that danger gone now? torsten: i think that is gone. look at the fundamentals for the german economy. if you look at gdp growth in spain and italy, it is grinding higher. the most important thing is europe has managed to crawl out of the hole. that is why we are discussing the issue if they should be tapering or exiting. i don't think europe is the new japan. i think europe has done some homework. they have been a lot in the last five years since the euro crisis. we are not there yet, but it is clear things are moving in the right direction. not only for europe, also for japan. underlying that are political winds that are getting more support in japan. we are hopeful it will support further the third era of
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abenomics. francine: if you look at inflation in japan, governor , because he thinks outside the box, is he the one that can move the needle wanted? -- is he the one that can move the needle on it? torsten: the question with inflation becomes, how much of that is cyclical, because the global economy is doing well? is, what is the underlying real trend in inflation in japan? is it starting to move higher? improvement onme the inflation side, but the inflation experience in japan has not been quite yet similar to what we have seen in the euro area. tom: we are going to come back.
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the president's announcement of chairman and possibly vice-chairman. conversationve you on world events. up, david gura. on the.l -- on the philosophy of the new japan. this is bloomberg. ♪ ♪
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this is: --taylor: "bloomberg surveillance." fresh has a new market valuation as it kicks off its ipo this week. was -- will test investor appetites for mail delivery services. -- for meal delivery services. it in a half billion dollars for an ipo. it is controlled by a billionaire. the companies -- hydropower stations in siberia. jp morgan is bringing an artificial intelligence to help fixed income traders predict market moves. dealerds largest debt
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will using analytics and machine learning program to develop -- developed by a london start a. it will compile data to give traders a clear picture in real-time. that is your bloomberg business flash. tom: thank you so much. let's bring up a chart on china. this is a great assumption. it is a chart on china, looks like the chart in the united states. this is chinese inflation, and the basic idea is we are here, loving it, and we are going to stay. we were making a joke last week. there is this and some of them go like this. is anybody clapping for reflation? ? is that the big surprise -- yvette the bigs price? >> beijing has not realized that
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havingernationalist are this consequence of much higher inflation than we have seen. tom: let's go back to the chart. is still -- is it a little bit of lift of inflation? diana: not yet. there has been a large shift towards consumer spending, which -- the foodo prices prices is overstated in the cpi. if we look at inflation measured by the deflator, the official inflation has accelerated significantly to around 4% at the moment. we have seen core inflation uptick as well.
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if we look at the gdp deflator i calculate, actually inflation is much higher. the point is, after the financial crisis, unless china truly reforms, just throwing money at the economy doesn't give a sustainable boost to growth. it produces speculation bubbles in inflation. given that they have tightened against capital controls, it is likely that inflation will start -- that disinflation will start showing up in consumer prices, even though the cpi measure is helping at the moment. as well, notsons showing this underlying inflationary pressure. it is the main thing in flash --it is the main thing investors look at. francine: the other thing investors might know is deleveraging. whetherclear to me deleveraging is taking place.
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you see a current in credit, in shadow banking. credit, ina curb in shadow banking. by deleveraging, what beijing means is actually containing financial risk and directing credit towards the real economy rather than stoking buckets -- stoking bubbles in the interbank markets. they have no desire to move away from the top down directing of credit. they have realized they can't use the bank atm's anymore, so they want to foster direct lending, which is use of capital markets more. perception or idea of deleveraging is not the same as the west. francine: right. very quickly, this is
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complicated, but do the chinese authorities have your support in saying whatever happens they can deal with it because they have the 12, or do you worry that we are too complacent about what happens in china? nejra: i worry, because --diana: i worry, because gdp growth has slowed down. we have this reflationary aggression coming through. the message from the party congress is one that does not bring confidence in terms of the direction of policy. it actually has raised the risk further down the line being worse. tom: you have got to see this chart. this is pork inflation in china. inflation than you think. food inflation is down. you nearly, diana. here is pork inflation in china.
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the higher inflation we get, it is because this trend reverses? diana: it is both. we have this typical chinese excess supply story with food prices, which have diverged , which food prices didn't used to be the case. this is likely to reverse, but that is not the important story. is they important story are cutting capacity and pushing the price of energy and that will filter through as there is no buffer in profits. liquidity bit is fueled inflation. they have injected too much money in the economy for the past nine years, and now they are damning it up again in sight. tom: diana, thank you so much. hartford the announcement.
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we want to tell you about the president's statement later today. maybe something about the fed meeting in there as well. today, joint statement with the prime minister of singapore. look for that anyone :00 hour. stay with us. this is bloomberg. ♪
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♪ francine: "bloomberg surveillance this is -- this is "bloomberg surveillance." coming up shortly, "bloomberg daybreak: europe america's." could you have in the show today --who do you have a measure today? >> there is a lot going on in the united states and around the world. we will have the chief u.s. economy. they have indicators at morgan stanley that are flashing green. we will talk about why, given all that is going on, morgan stanley things it is full steam ahead. really looking forward to the ones that on "daybreak was quote
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this is a great chart. it is moving from the altra accommodative, but we are still at a negative real fed funds target rate. i guess it comes down to the idea of vice-chairman. is john taylor hawk, can he have an effect if he is chosen as vice-chairman? he invented the fed funds rate today. it should be around 3.5%. to hike somebody going rates more? there is almost an implication that the
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vice-chairman would be an activist vice-chairman. i see no history of that, is alan binder or a potential chairman john taylor. it is the chair that runs the joke, but he has to build consensus. having an intellectually powerful vice chair is potentially important. at the end of the day, the chair's try to get the whole committee to come together with the decision and have few dissent as possible. francine: how much do we know about the fed fund regulation from the president? should be look at more clues about what the president wants when it comes to banks? torsten: the first step for , what will been these five candidates do? it is safe to say the market is looking for continuity. the market is not looking for a
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halloween scare. thatarket wants something is a continuation of policies. a lot of policies are already set in stone, so a lot of things are already outlined nicely for the coming years. the question is, who we will be. there is important find tuning that needs to be done. most of it focuses on the monetary policy side. francine: who does the ecb want? steady,just want someone who was as dovish as janet yellen? this is for them, speculation, but my guess would be they are looking for someone who they can talk to, someone they intellectually are at the same level at, who understands what they are doing, who they can call up inside this is what we are planning, what are you planning?
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that conversation is potentially quite important. was do look for someone who continuity of current policies. slok, think is so much and congratulations on your ecb research. we will touch on that many times. let me go to the foreign-exchange report. the yen moves weaker. move.a profound a landslide victory for shinzo abe. we touched 94 on dxy. that is a big deal. strong dollar. stay with us. ♪ retail.
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comcast business outmaneuver.
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jon: a dominant win drives the yen lower. adapt amidpares to political chaos as spain possibly are stands his authority on catalonia. chair yellen is very much in the running. from new york city, good morning. i am alongside david westin. are firm across europe. in the bond market. we are down a third of 1%. have dollar-yen


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