tv Bloomberg Surveillance Bloomberg November 22, 2017 4:00am-7:00am EST
francine: u.k. budget day. the chancellor walks a minefield. uber hacked. ride-hailing service concealed a breach of nearly 57 million people. the outgoing fed chair says rai sing rates too quickly risks inflation below the central bank 's target. this is "bloomberg surveillance" and i'm francine lacqua in london. we have a really packed show. a lot of movement on the market.
the rally created a little bit of a left in european stocks. the dollar falling, weakening after janet yellen warned of rate increases. of course, i am looking at the pound on the back of the budget and oil heading for its highest close in two years on extending output puts. we hvave a great show for you today on budget day. that conversation at 10:30 a. m. london time with normon l amot. of a: dodging the risk snap election. while merkel has publicly stated she is open to another vote, the president is to renew the
partnership. zimbabwe is waking up to the post mugabe era. there were to be let -- there scenes lastnt night. what will take over as the leader. a u.s. navy aircraft carrying 11 crew and passengers has crashed into the sea. the seventh fleet was on route to the uss ronald reagan. they are conducting search and rescue operations. because of the crash is currently not known. the outgoing chair of the federal reserve has cautioned that raising interest rates too quickly with inflation below the 2% target. janet yellen said there were some hints that expectations of
future price increases might be moving lower. >> it is dangerous because inflation expectations are also down. i don't really think they have drifted down really very much, but there are some hints that after many years now, they could be drifting down. that would be a very undesirable state of affairs. nejra: the mexican peso weakened against the dollar after the u.s. trade representative said there is no evidence canada and mexico will seriously engage on renegotiating nafta. that came after the fifth round of talks, which was read to have failed to make any progress. a heavy workload is ahead in talks scheduled through march. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. am nejra cehic. this is bloomberg. francine: it could be make or
break for the british chancellor as he prepares to deliver his budget later today. philip hammond will be under pressure to strike a balance between meeting his fiscal targets and to appease voters. he also has to factor in the enormous uncertainty around brexit. westminster is at ahead of the announcement. aboutof all, how balancing the budget? it will be difficult for him to please everybody today. expectationsuced because they have been overly optimistic in the path about low productivity. low user productivity will be a theme hanging over this budget. brexit will be another theme, as well as the weakness of the government itself. theresa may will not want to lose another.
the chancellor has been a little -prone as of late. she will be trying to avoid anything that could risk destabilizing the shift. there could be some news around when a tax decision will be made by the government. could we see big pledges around housing? how much of that will be followed up on? oil and gas could see a change in tax treatment to encourage a little more m&a. national investment will also be a theme, the kind of funding will be replacing the european investment funding? look for this to be something with a slightly more positive tone. the opponents of philip hammond have suggested he has not been positive enough around what the u.k. can do within the brexit context.
they are playing budget bingo. you might want to look at any tweaks he makes to diesel, and even plastic bags could get a mention. francine: thank you, anna edwards. we will check with her throughout the day. she has fantastic interviews coming throughout the day from westminster. now, let's get to ap is called --, now let's get to a piece called, may's budget war with hammond. can the chancellor deliver? and what's the outlook for the u.k.? let's get to the head of macro rate strategy. thank you both for joining us today. what are the stress levels like today at number 11? >> they will be high, as they always are in the run up to the statements. the stress will be regarding how
the tone is perceived. this is an overtly political budget for the chancellor. rumor that hepen was going to be fired if theresa may increased her majority. she lost her majority, but that has resulted in an uneasy relationship. the mood in how it is perceived will determined hammond's short-term future. francine: what are the pitfalls he needs to avoid? this will be a balancing act, it seems. the economy is not as bad as expected. >> to a degree, he has to reflect the forecasts provided to him by the rbr. it is not to him to forecast strong growth. it's presented to him. also, it will be partly because of his own strength through the fiscal mandate and the rules he has put in place.
he does not have a lot of room to maneuver. that's why i think simon is right. an overtly political budget. he does not have a lot of room to economically maneuver and within that political constraint, he is under a lot of pressure to make plans that come across well. francine: how important is it that he does not same weak? things he needs to watch out for this time? >> i think he needs to position himself very carefully regarding brexit. there's been a lot of challenges from his backbench to provide the money to prepare the u.k. for a fallback scenario if a comprehensive free trade deal is not forthcoming, if in december the european union determines that sufficient progress has not been made, he will be under pressure to release the funds to government department. his spending envelopes are still
on 2015 terms. if he's going to provide that money, that will appease his backbench, making the political landing much easier for him. >> clearly, they have to look at the overall fiscal stance, and any changes with regard to the economic outlook. they have been trying to walk a tightrope themselves in the context of their own economic expectations i think slightly they forced to come up with expectations compared to the consensus anyway. but at the same time, acknowledging brexit could cause serious damage to the u.k.'s economy. they will have to gauge whether this makes any difference to obviously, the fiscal stance, but also the potential progress around brexit. by december, b but through the course of next year as well. francine: simon french and john wraith stay with us.
francine: good morning, everyone. this is "bloomberg surveillance" and i'm francine lacqua in london. it's budget day in the u.k., but what does scotland want from the speech, especially when they voted to remain within the european union? we just saw an open letter, and jeremy corbyn called it, why are they supporting the terms on brexit? anna: let's beat to the mp for the international party. it is very good to have you on the program. we referenced just there the letter on brexit. just a quick word on the budget, austerity and the background on austerity, you think that must get more of an airing. >> it must. living standards are falling. wages are under pressure. we have had the worst decade for
wage growth in 210 years. this is the opportunity for the chancellor to change course. it is not working. there has to be more to the balance between monetary and fiscal policy. the chancellor has got to take his responsibility to deliver economic growth. we have got to give hope to people, particularly amongst brexit. francine: there is uncertainty for brexit and uncertainty for the economy heading forward. but on the brexit subject, ian, you talked about how you don't see much difference between the labour party policy -- you think the labour party is supporting the tories, as my colleague was just referencing. the labour party tells a different story. they say there is a different than it has to do with the softness of the brexit. ian: i am not quite sure what labour's position is because it seems to change on a daily basis. labour wanteds,
to do it slightly later with the transition. i think it has to be clear that coming out of the single market will cost jobs, cost jobs in the city, cost jobes elsewhere. it will cost 70,000 jobs in scotland. we can't take that risk. i suspect we will be coming out of the eu in march of 2019, but the transition deal will present an opportunity. i think what we need to see, and the likelihood we are not going to get a deal that's going to keep us in the customs union an market -- wele cannot run the risk of coming away from that. we have the opportunity to remain connected to europe, and that is what we should do. politicalyou see a situation where we have a
transition deal that lives on and becomes the future? ian: absolutely. they are talking about two years at the moment and that is not enough time to negotiate. if there is an opportunity where we can remain within the single market and the customs union, i will be very happy and it will protect our economic interests. enough tod that be satisfy those people in your constituency and elsewhere who voted for brexit? ian: well, 52% of the people in scotland voted to remain in. we have to have that debate, that dialogue about the economic impact of brexit. enormousoing to be an economic impact. we can see that already with the job losses that have been announced in london this weekend of course, through the banking authority as well. that is before the brexit process starts. so, there are real dangers for
the economy. there are real dangers for living wages. anna: independence for scotland is something -- it is very topical. sturgeon,rom nicola and she said she wanted to see what the brexit deal looks like before your party put timing around that. ian: our first priority is brexit. let's make sure we can protect the people of scotland, and then we can have that conversation about independence. it could be before, but it could be after the 2021 election. we need to have a mandate for the people of scotland. inthere's a change circumstances, we reserve the right to go back to the people of scotland. the first priority is to make sure we can protect that interest are the brexit vote. anna: your former colleague led es, aarty for two decad
very prominent figure in the scottish independence movement and now hosting a tv program. it is being criticized. have you seen it? ian: i have not seen it. inspirational brya leader for the scottish movement. personally, i would not have made that choice, but i wish them the best for his career. anna: ian blackford, thank you for joining us. francine: thank you. i really enjoyed that. anna edwards joined by ian blackford. we will be back with anna later in the program. publicly saidhas she is open to fresh elections, but does she really prefer a grand coalition? we discuss that next. this is bloomberg. ♪
francine: this is "bloomberg surveillance" and i'm francine lacqua in london. here is nejra cehic. jra: hacker stole the data of 57 million users and drivers. this week the ride hailing firm ousted the chief security officer and a deputy for their roles in keeping the hack under aaps, which includeed
$100,000 payment to the hackers. hewlett-packard enterprise slumped after hours. meg whitman says she is leaving the role, and will step down on february 1 and be replaced by president antonio neri. tesla has been burning money at a rate of about $8,000 per minute. if the trend continues, the committee will exhaust the current cash pile on august 6 next year. the carmaker blamed hitches and ramping up the model 3. investors do not seem too concerned and shares rose 3% in new york, taking the market cap to $53 billion. francine: let's talk germany now and chancellor angela merkel's
party is betting on a revised alliance with the social democrats. that is according to people familiar with the discussions in berlin. merkel has publicly stated she is open to another vote, but her preference is to renew the partnership that underpinned two of her three terms. simon french and john wraith are still with us. ,imon, are the concerns founded things that will help economic growth? inon: they are founded certain instances. economic growth -- actually, it did not just remain constant. empirically it has improved. i would not overplay what they will do in terms of the real economy benefiting from a weak euro, albeit it is taken back some of that weakness in recent
times and it continues to benefit from a pickup in global trade, which is the real tailwind that germany enjoys. francine: do you believe that, john? at the same time, you don't have a government and we are talking with the u.k. about brexit. john: there are certainly implications beyond the wider economics. we don't know where it is necessarily heading, but we are pretty sanguine for the outlook for germany and the eurozone. but yes, in terms of things like brexit negotiation, it means the ability of the u.k. to negotiate is somewhat compromised, and that has been the case since the beginning of the process -- attention is often elsewhere. it is not always about brexit on the eu side of the table anyway, and that is one of the reasons why it has been so slow. they need to accelerate soon and this will not help. francine: we also had a story
saying the ecb will take some steps in the qe reduction next year. does that comfort you? >> draghi's recent statements have not suggested that he has any confidence that we are heading sustainably back towards 2% without the fiscal reforms he is looking for. back to germany for a second, ma cron is paris really going to be looking at this in terms of his monetary union? that kind of social reform that draghi is talking about will not happen if merkel is weakened at home. francine: up next we talk yellen and inflation. this is bloomberg. ♪
democrats to dodge the risk of a snap election. has say that while merkel publicly stated she's open to another vote, her preference is to renew the partnership. zimbabwe is waking up to the new post-mugabe era. there were jubilant scenes overnight after it was announced that the president was resigning. the 93-year-old had been under increasing pressure to stand down after the military took control of the country last week. emerson, who moved on a dismissed, will take over as interim leader. carrying 11aircraft crew and passengers has crashed into the sea southeast of okinawa. the seventh fleet said it was en route to the uss ronald reagan. the vessel was conducting search and rescue operations while the cause of the crash is currently not known.
donald has effectively backed alabama republican senate candidate roy moore, who has been accused of improper sexual conduct with teenagers. trump told reporters, we don't need a liberal person, a democrat. asked if he believed moore's accusers, the president said the alabama republican denies it. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much. it could be make or break for the british chancellor as he prepares to deliver his budget. what does business want from the budget? to answer that question, anna edwards is joined by someone from the british chambers of commerce. anna: thanks very much. let's get straight to conversation. giving us an economist's perspective. what is it you are looking for?
you don't want to hear the chancellor mention changes to thresholds. that has been talked about a little bit. give us your thoughts. >> as with any fiscal statement, the chancellor has many choices and conflicting objectives. from our perspective, it really is a game changer. the economy is slowing. growth has been sluggish. dot the government needs to is make sure the u.k. economy is ready for the post-brexit world. anna: would you say that expectation is high for a game changer budget? there's been a lot of talk about housing policy, but also about how his hands are going to be tied by productivity, but forecasts for the economy, by his own fiscal rules, and by the brexit process. suren: certainly a lot at stake for the chancellor. key concern for
businesses across the u.k. is how to make the economy ready for the challenges ahead when we leave the european union and couple years. if you don't start the work now, there are concerns further down the line. our own forecast is quite sluggish the next couple years. -- [indiscernible] under the current measure, business rates are set to go up next year. .t is going to take money out anna: we have some construction going on. the noise is just around the corner. apologies to viewers for that. in terms of productivity, that is a focus. what is your thinking, what is
the cause of low productivity? i've heard so many theories around infrastructure, overreliance on financial theorys -- what is your on productivity? suren: it is a symptom of the long-term issues. the structural issues. economy,cross the manufacturing, construction, all these are facing skills shortages. that is impacting businesses' ability to grow. infrastructure, broadband, mobile coverage, all these are key nuts and bolts of the economy. anna: thank you. i'm afraid the noise -- [indiscernible] suren thiru, thank you very much for spending time with us. francine: thank you so much. we were joking during the break
that parliament was being refurbished around 5:00 to 6:00. they started without us. that is the breaking news on this budget day. and edwards joined by the bcc's head of economics. now, fed chair janet yellen has warned that raising interest rates to quickly risks stranding inflation below the 2% target. her comments come as she prepares to step down in february. >> one reason it is dangerous is because inflation expectations are likely to drift down. , i don'tsome evidence think they have really drifted down very much, but there's some hint that after many years of low inflation, they may be drifting down. that would be a very undesirable state of affairs. francine: for more on the u.s. and inflation, simon french and john wraith are still with us.
inflation in the u.s. is tricky. you either believe the fed and say it is just lagging, or you are saying, the bond market and the flattening of yield curves means there's something more disturbing. >> last year they were saying a stronger dollar, lower oil price, labor market, was the justification. they can't say those things anymore. they still say wage inflation is going to come through. i suppose the jury is out. there's been quite immaterial rise in front end yields over recent days and weeks, which tells you the market perhaps is becoming more convinced that inflation is going to become higher in due course. nobody can be certain about that, which is why i think they are right to tread carefully. francine: simon? simon: i slightly differ with
john on the yield curve. it is not that the bond market has become convinced inflation is returning, but more that the fed will be inflation agnostic. i put my cap on the table and say, i expected the fed to move once this year. i got the inflation call right, but the fed have moved beyond sole data dependency and started to worry about broader factors. if that prevails into 2018, there's a lot of uncertainty, so it is a difficult environment to call, but i don't buy the fact that inflation is going to return sustainably at 2%. francine: what does it mean for the curves? this is an interesting chart. the 2-10 guilt with the 2-10 treasuries. simon: you could put a third one on there, the balloons, as well
bunds, asas well -- well. i think what is interesting around the back and of the u.s. yield curve is, there is still a ready number of buyers for yields of 2.3%, 2.4%, 2.5% outside the u.s. there's no sign of a buyers strike. no concern of a right down in the values of those bonds. difficult to see it steepening. francine: how many rate hikes are you expecting next year? simon: next year we expect two, but if it was purely targeting central bankers, there should be one, maybe zero. francine: john, do you worry about communication? you have a new fed chair. bill dudley is leaving. there are a lot of heavyweights
being replaced. we don't know how the new guys will talk. john: when rates are so low, fragile,ything is so any change is potentially problematic. people have to get used to listening to new people. certainly a perilous path they are walking. we also think they hike twice next year. then get back to the neutral level of rates. francine: simon, what do the dots tell us? 2018, moreeast in fomc members -- sorry, and equal below of fomc members see three hikes and more than three hikes. so much will be determined by the package of tax reform, the midterm global end of cycle behavior. you focus on next year and try to work out from the communications forthcoming, starting with the fed minutes
tonight, whether they are going to move back towards being data dependent or go on more of a credibility journey. francine: and this depends on jay powell and how he wants to play it, or is it consensus? simon: i don't think it is determined hugely by jay powell. he is one member on the fomc. the chair sets the tone, but there's more interest around the forthcoming appointments and the new governors that are going to be appointed, whether they will take a jay powell outlook or whether names like kevin walsh come back into the discussions. francine: we are still talking about tax reform, possibly, maybe. does it help with inflation? john: there's still so much uncertainty. going to form any conviction view on the back of that. we don't think it is going to be a mix of measures that
materially boost growth and that feeds into our view on the fed and inflation. francine: is there something, a pinpoint that you are waiting for? i don't know if it is construction or house prices. it doesn't have to be inflation. it can be inflation expectations. john: the big determiner is wage inflation. in the u.s., it did seem that wage inflation was accelerating more meaningfully. it has slowed down again. it is hard to see how inflation expectations can become materially more entrenched. you have to have wage inflation. leaves what tends to inflation expectations more generally. francine: john wright, head of u.k. rates strategy at ubs, and simon french, stays with us. the uber cover-up.
just getting some headlines out of lebanon. last wednesday or last thursday we were speaking to the central bank governor of lebanon in the midst of the crisis. waslebanese prime minister still in saudi arabia. we now understand he had just 24 hours before, last week, he had decided to resign. this was not accepted by the president. the latest is that the prime minister said he will cooperate with the president to try and protect lebanon. hisaid he has delayed resignation at the request of the president. he was absent for about three weeks, and the crisis engulfed lebanon. we will have plenty more on lebanon. in the meantime, let's get to the markets. mark barton has been watching. mark: a nice piece today by mark
cudmore. he talks about the inverse u.s. yield curve. we know it could be a precursor to a recession, as this chart shows. the yellow dotted line is the yield curve when it inverts. mark says during the last 30 years, it has taken at least a year and an average of 18 months after the initial inversion before the recession sets in. the economy kept growing as the curve narrowed. the u.s. yield curve still has a bit to go. during the last 30 years, the recession has only come after the curve starts steepening again. cudmore'sar mark view. janet yellen yesterday cautioning that raising rates too quickly risks stranding inflation below the 2% target. she said there had been some hint that expectations for
future price increases may be drifting down. the rest of the fomc attempting to guide rates back to a more neutral level after keeping them near zero to combat the effects of the financial crisis. median forecast pegged neutral. it has come closer to market expectations, the white line. wonderful chart. this is also a great chart. a handful of europe's biggest equities are dragging the euro stoxx 50 index toward its worst november since 2010 thanks to their heavy waiting on the gauge. a basket of stocks free of capitalization biases is holding up better, now on track to beat the conventional benchmark by the widest margin in more than three years. s&p equal weighted versus market cap weighted is showing outperformance too. what iseeping an eye on
happening with regards to the formation of a new government. still hovering near its highest valuation since april, 2015 versus the stoxx 600. the gase rallying twice as much, sending its valuation to 13.8 times estimated earnings notwithstanding political wrangling. the dax rebounding from back-to-back weekly kleins as a lower euro boosts exporters. francine: thank you so much. ride hailing company uber paid hackers $100,000 to delete stolen data and keep quiet about the security breach. personal information of 57 million customers and drivers was compromised last year. the company says emails, addresses, and phone numbers were stolen. for more, made lance and joins us -- nate langston joins us. simon french is still with us.
nate, this is quite shocking. has uber apologized? they tried to conceal a hack that exposed 57 million people's data. nate: at the time this took place under travis kalanick, dara khosrowshahi is the new ceo and has said this should have , obviously in his tenure this has been revealed, the company needs to improve public standing. we've got scrutiny in london about the license being revoked for uber. the company was told it isn't proper to operate here. i don't think having a giant data breach helps. francine: what is the culture like in a company that does this kind of thing? how did they think they would get away with it? how does the new ceo change the culture? nate: we don't know.
the $100,000 paid to hackers was paid within understanding this would be deleted. there isn't a belief that it has been used at the moment. essentially, they can only move forward. mick got to the open, honest, and transparent about it. francine: what is the next step? do we even know the identity of the hackers? nate: no. two people approached uber asking for money for this. at the time, it was being separately investigated in the u.s. for other privacy issues. it may have felt that covering this up or hiding it may have been the lesser of two evils at the time because they were already under intense scrutiny. the fact that it has come out now is probably inevitable. francine: does it impact the license that uber is still trying to negotiate in the u.k.? nate: indirectly it might.
i don't think it directly impacts it. you're looking at a regulator asking questions about, should we have this company operating here? covering up a data breach like this does not suggest they are doing the best for their customers. i don't think it will help. francine: simon, does this cross over to your world? simon: i think it does. i'm not going to comment on the specifics, but in the eyes of the public, the mayor took a very strong view that uber were not operating on a level playing field. in the eyes of the public, not only has he won that battle, now the perception is challenged by this. there will be more positive -- public support if politicians take a challenging approach to the technology disruptors who seem to be playing by a
different rule book. you look at not just uber, but a number of platform companies. there's a big takeaway. francine: we keep on going back to productivity. when you talk about productivity, how much is uber the cause of this? simon: such a good question. i was desperate to answer earlier about productivity. i think the technology platforms are a challenge to the incentives on more traditional firms to invest. if the half-life on that investment is challenged by the disruptors, who are in some unlevellaying on an playing field, you've got to be that much more cautious. the lack of confidence is a significant part of the productivity story. we need to get through the growing problems before we get out the other end. francine: this also goes back to wage growth and inflation.
are they treating drivers better? i feel like i'm breaking a story on some court or another with hubert. nate: uber is part of a wide number of companies under the so-called gig economy. there's been a recent tribunal hearing about whether uber should be classifying staff has workers. technically they are self-employed. uber says it is because they want the flexibility to drive when they want. others are saying, what about holiday, that kind of stuff? so far, the needle hasn't moved. it is something that all these companies have to address. onecine: i was speaking to of the big investors in spotify and he's looking at health care. this is one of the industries that can be disrupted the most. does it mean uber will always remain and it will just permeate so you other industries,
are going to have a harder job to look at the data? simon: i think that is absolutely right. the phrase i use is contestable markets. what the platform companies are able to do is make markets that used to be able to operate behind vague barriers. those barriers are coming down. that is keeping pricing power under control. it comes back to yellen's comments. it comes back to whether areas of core inflation can prevail going forward. , theset set of headwinds are temporary, but if we look through them, the structural trends are the prevalent theme keeping inflation low. francine: who is the right person to measure it right? simon: we have to have faith in our statistical agencies. , but they dod rep
a good job in a rapidly changing economy. francine: tom keene. simon: absolutely. the current generation is always the hardest to measure. they do quite a good job of using the new possibilities of data analysis. we must rely on them. francine: simon, thank you so much. nate as well. nat lanxon and simon french joining us. "bloomberg surveillance" continues in the next hour. tom keene joins me. we will be speaking to the former chancellor of the exchequer. it is budget day in the u.k. u.k. viewers can watch chancellor hammond's statement from 12:30 london time. dollar weakening a touch against major currencies after we heard from janet yellen, warning about rapid rate rises. let's bring that up for you. looking at what europe is doing,
infighting continues. to the ballot box. angela merkel's party is betting on a revived alliance with the social democrats. and uber hacked, the ride hailing service admits to concealing a breach of personal data for more than 57 million people. good morning. this is "bloomberg surveillance" and i'm francine lacqua in london. tom keene is in new york. this is one of the most political budgets in the last, i would say, one or two decades. tom: francine, i'm not concentrating. in "thells nails it new york times." thanksgiving plans, let's eat out. thank you to pete wells. francine: tom is making it sound like he is cooking
otherwise. let's get the bloomberg first word news. taylor: in germany chancellor angela merkel's supporters are betting a new grand alliance can break the impasse over creating a government. merkel's backers expect increasing pressure will force the social democrats to drop their opposition to another alliance with merkel's christian democrats-led block the alternative would be another election, which could be risky. in lebanon, the prime minister has put his resignation on hold. he is back in lebanon due to an independence day celebration. more than two weeks ago he resigned well visiting saudi arabia. saudi arabia accused the lebanese of color thing him and detaining him. the lebanese of-- coercing him to resign and detaining him. the uss ronald reagan is
operating within the philippine sea. eight people have been found, but there is no word on their condition. it's the first full day in 37 years that zimbabwe is not being led by robert mugabe. there were celebrations overnight after he resigned under pressure. they man he dismissed as vice ,resident, emerson mnangagwa will become the ruling party's candidate in the next election. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i am taylor riggs. this is bloomberg. tom: thanks, taylor. it is a quiet day,, like a half-day in new york. futures are up fractionally. a little bit of curve steepening. is linked ining with the foreign exchange
market. gets my a barrel, that attention. francine: the dollar is weakening against major currencies. also looking at stocks in euro pe. quiteere up significantly, but now seem to be struggling to follow this global rally bedroom benchmark indexes in the u.s. also looking at oil -- i thought that was significant, tom. oil is heading for its highest close in more than two years as u.s. stockpiles declined the decision.ore tom: it is a big day. but, here's trade weighted sterling. this is a remarkable chart, francine. i just can't get over it, back to 1992 and really, to a wealth
destruction since the financial crisis lehman low. it is just extorted area for the trade weighted pound-sterling. i just get get over this chart. francine: i actually love my chart today -- thank you to hillary clark. actually, look at this. the u.s. yield curve flattening fever has also reached the shores of the u.k., tom. tom: interesting. francine: look at the spread on the gilt curve. tom: very cool. francine: that is a different way to look at gilts on the back of the budget. it is budget day. chancellor of the exchequer, philip hammond, has a lot on his plate. also, factor in the government's lack of parliamentary majority and the enormous uncertainty on brexit. for more, anna edwards is at
westminster. the stress levels for the chancellor must be pretty high right now. anna: he is constrained on a number of fronts. he is constrained by the political fragility of the government he represents -- they lost two ministers in the last week with the combination of freelance foreign policy activity and the sexual-harassment scandal. also, the chancellor is under a constraint because of the obr, the opposite budget responsibility. they will bring down assumptions around productivity, which means he will not necessarily have as much money to spend as he previously thought he would. remember, the result of the june elections did not go the way the conservative party wanted. they want to address these concerns. tom: anna, is the word austerity mentioned? what level do we have in november of 2017? anna: yeah, certainly it is
mentioned by those who want the chancellor to do something about that. many commentators suggested, austerity fatigue, that played into the weak performance of the conservative party in the june elections. the labor to party and the national party, both are asking the chancellor to ditch any austerity-like policies he might have in mind. of course, he is constrained by the fiscal realities and the fiscal rules, which he is expected to stick to. he wants to have the 2% gdp by 2022. but of course, brexit is a big uknown. -- a big uknown. -- a big unknown. francine: thank you, anna, there at westminster. joining us for the hour, hans riddick. the concern, i imagine for the
chancellor and theresa may -- they can't do a u-turn like they did last time. it's a political budget, so he needs to give something to the youth. but he is also a fiscal austerity kind of guy. where does he take the money from? hans: that's key to this analysis. that is, we have seen productivity growth in this country. the growths potential for the u.k. is falling. that means there is less to be distributed. they need to support the economy, which seems to be losing out. we have seen investment weakness. w have seen the economy move ith a former speed. i believe that all is going to end up in a situation where this
budget is going to be slightly more expansionary. it wanted to persuade the electorate. but i think that is all going to come at an expense, and i think that will be paid by the foreign exchange market. you might have to look for some weaker sterling for longer. tom: ok, weaker sterling. what is your target, hans, and folder that into the emotion of negative wage growth. can you link the world of hans redeker to negative wage growth in the u.k.? hans: that means we have an impact on disposable income. you have to think about what happened to the household sector in the last few quarters. we have seen nonsecure debt accelerating. now, may have the sensitivity of the structure and the amount of debt in various countries in an
environment of higher global funding. you do see that in the case of the u.k., the situation, the impact on household debt is going to be significant. that means the spending of the households today, or nonsecure debt, will end tomorrow's investment. that, i think, will cement the situation where the economy will be underperforming. so, we call this concept the canary in the coal mine concept. we have identified a number of countries which are all in a similar situation. you have wide liability, very weak structure, asset quality being weak. and the u.k. falls into this canary concept and it is a currency that is likely to weaken from here. francine: i wanted to ask you about this global stalemate in germany. the german chancellor angela merkel's party is betting on revival lines with the social
democrats to dodge the risk of the snap election. our morning read comes from "the washington post." her culminating achievement should not be to help pave the way for a new generation of leaders by setting an example herself. groomed at so far successor, but aspirants are waiting in the wings. her choice is not to act or to have the decision taken out of her hands by others. will this be fine in two or three months? hans: i guess now she has to fight for political survival. yesterday we did hear very interesting commentary. for the spd in the parliament. when she was asked about the social democrats tolerating
a government of angela merkel, she said, let's wait and see. we have the big meeting with the president will meet with the representatives of the social democratic party. and the sound bite after that meeting will be very important. will we have angela merkel seading a partiey that i tolerated by the social democrats, but the social democrats will have a price. this government has to implement left-leaning policy. doesuestion then is, where this make germany stand in with respect to european integration? they have an agenda. if we were to get tomorrow a new set line suggesting they are tolerating the new minority government of merkel, we are thinking, what does that actually mean for the currency
and for capital markets? i would say it will be positive for the currency, the euro, and for the capital market. francine: hans redeker stays with us. and of course, our u.k. viewers can watch philip hammond's budget statement. look for that at 7:30 a.m. in n ew york. don't forget, we will be speaking to the former u.k. chancellor of the exchequer, norman lamont, at 5:30 a.m. in new york. this is bloomberg. ♪
taylor: this is "bloomberg surveillance" and i'm taylor riggs. investors are making it clear what they think of meg whitman's decision to step down as the ceo of hewlett-packard enterprise. shares fell in after-hours trading. she took over hewlett-packard six years ago, cutting more than 80,000 jobs. for more than a year uber concealed a hack that leaked the data of more than 57 million
subscribers. hackers $100,000 to delete the information and keep it quiet. that's your bloomberg business flash. tom: taylor, thanks so much. i would note hewlett-packard enterprises had a popping return over its short tenure as well. eric takes over. -- jeremy takes over. ,hat flappebergasts me jeremy, is that they buried this. do we know why? jeremy: no, we know they paid off these hackers to delete the data. they might have thought they could sweep this under the rug. but of course, they will be under big trouble, not just with regulators in the u.s., where
there are investigations underway, but here int he u.k. as well. they will look into this as well. tom: is this going to be the mother of all unicorns? will it go down in flames? are we heading towards what we saw last week, a big valuation, getting pennies on the dollar? jeremy: i don't think we are there yet with uber. they are still a company that is doing innovative things. they have got a new ceo. there is a new leadership team. there is a chance they could recover, but if they are worth the valuation they were a year ago, i am not sure. but i don't think he will be pennies on the dollar. francine: but will this change the culture? tom: exactly. francine: we have been talking about the software they have been using and drivers, employees, that were
freelancers. how will they overhaul this? jeremy: it is a cultural transformation they have to go through. a lot of this is about the tone at the top. travis is no longer there. khosrowshahi there. the chief security officer has been fired. they have replaced a lot of the leadership team in the last year -- they have left or have been fired and this gives them a chance to turn the culture around. francine: we have a great article, saying khosrowshahi looks less like a turnaround artist and chief apology officer. who does he need to apologize to? jeremy: he needs to apologize to a bunch of people. yes to apologize to uber's users
and apologize to the stockholders. they need to apologize for the fact they were using data they did have two present regulations checking on the company. tom: they were talking about the past.ick's where was the board? jeremy: it seems they were asleep for a while, and are now taking action, but it seems belatedly. tom: this story just want go away. we will see if this goes away in even 24 months. we have a very important discussion with the dollar next year. thein, a former chair on president's council of economic advisers.
nyu's business school yesterday. now, we are back with our own guest host, hans redeker. hans, when you listen to that kind of warning for janet yellen, she probably would have been more prudent in raising rates. hikes nextbe four year, are they right? hans; we are more modest on that -- we say there will be three hikes. the speech was very important with respect to its content and what it means for the markets going forward. mrs. yellen says that is dangerous, when you have inflation not reaching a target within an economic upturn. if you fail to reach a target within an economic downturn you could get a lasting decline and inflation expectations. you have to see that within the context of what happened in the last three to four weeks.
we have seen the u.s. five year break evens. they are falling by about 14 basis points. this might not sound like a lot, but it is in the wrong direction , given data we have seen from the u.s. as well as with respect to the inflation rate coming out of china and japan. everywhere we have higher inflation rates. you have highlighted oil today and the commodity market. their prices are going up, too. nonetheless, the five year breakevens are all falling. that is because of the dominant u.s. wages and rising inflation expectations in the u.s. we have to wait for wages to pick up. she knows too she has to do a policy supportive for wage growth. that means you give the economy more room to grow, and you do that by getting into a revival of relatively low yields for the time being.
tom: let me show the chart here has beenredeker talking about -- we are going to go to break, but i want to show the chart first. every hope of the fed was to move up here, but instead we have this disinflationary trend, somewhat towards where we were in 2016. we are in new york and london today with hans redeker from morgan stanley. edwards is outside parliament. look for that on radio bloomberg daybreak. this is bloomberg. ♪
am tom keene in new york. a lot of politics going on as well with much more including the british budget this morning. right now, our first word news in new york city with taylor riggs. taylor: president trump hopes for a quick deal to rewrite nafta and it's slipping away. the end of the latest round of trade talks with little progress. they say mexico and canada are not engaging on key issues and they made it clear that a new deal must shift trade flows into the u.s.'s favor. president trump has given a boost to alabama republican senate candidate roy moore. supportot explicitly with but he denied contact teenage girls coul.
syrianeeting with the president monday, russian president vladimir putin meets with the leaders of turkey and i rocked today. assad forces have had an upper hand since putin interviewed in 2014. in turkey, the lira fell to an all-time low against the dollar. the central bank is trying to hold against the plunge without raising interest rates. prime minister emphasize that recent developments are temporary. improvements, but there are serious problems in the mid-and long-term framework. in turkish markets, there are quite serious movements in the recent period. we need to understand these very well and we need to have a calm approach. taylor: he said that public-sector balance sheets are stronger than ever. 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: it could be make or break for the robust chancellor as he prepares to deliver his budget today. he will try to strike a balance between meeting his fiscal targets and those who have signaled they are tired of austerity. let's go straight to anna edwards. over to you. anna: let's get straight to the former u.k. chancellor. thanks for joining us on bloomberg television. do you expect to see something big and bold from this chancellor or is he too constrained politically? >> i cannot think of a budget that's more difficult for a to deliver that this one. it's extremely difficult for him. you have the uncertainty of brexit. problem of the overhang of debt from the financial crisis still with us even though conservative mps are
any impatient demanding this and that. frankly i think the chancellor has been treated appallingly by colleagues and conservatives demanding this and demanding that. the most important thing to remember is the next election is always for five years away. this is not the time to panic and not the time to start fighting for the next election. we still have for the financial crisis and overhang of debt. we are not yet at the point where debt and relation to gdp is actually beginning to decline. perhaps it will decline this year or next year, but this is not something to just forget about. it's well for the conservative mps to say they are bored of austerity. we are not watching comedy on television. we are dealing with finances of this country. i believe the chancellor has been treated very badly. anna: you say this is not a budget on election footing, but
many conservatives are concerned about what they saw in june particularly that those in middle brackets and middle age groups drifted away from the party toward other options and that is something they seem to be addressing, for example on the housing front. norman: i think housing is the most important social problem facing the government and i think it's right to announce some measures about that. all i'm saying is they have to be within the overall framework of the responsible budget that will seek to reduce the deficit deficit.to reduce everyone on the clackum bus says yo they know you can't spend money that you haven't got, but yes, we have a desperate problem. being that the measures announced today will not be too much on the demand side because i think we have had too much of that in the past. what we need are measures to increase housing. anna: is it central to have
declared set goals around fiscal targets at a time when you got these uncertainties? whohave one labour mp on said that we need flexibility because of the brexit uncertainty. percentage targets by a certain time is not helpful if they just get broken. norman: that's the road to bankruptcy to not have any target of living within your means. we have borrowed massively in the past and we think that's of the past and we can just forget about it. if we borrow more now, we are talking about intergenerational unfairness. if we borrowed more now, we are creating o or debt for those who will have to pay it off in the future. it is true that targets are often not that, but it's good discipline to have the targets because we have to live within our means. intergenerational
unfairness has been a theme that others have talked about a lot and wants to see addressed. do you think this is a worthy path to follow, a worthy aim for policy? norman: i like the phrase intergenerational unfairness and it implies that the problems facing young people are somehow canfault of older people or be solved by taking money away from old people. i do not think we won award generations of this country, but having said all that, yes we have problems that young people face today that previous generations have not faced, particularly on housing. i think rents are tremendous problem as well. we knew more red accommodation as well as more owner occupied accommodation. anna: any thoughts on areas that the chancellor should prioritize in this budget? tosaw back in march he had
use it on the tax increase on the self-employed, something he no doubt wants to avoid this time around. where would you like to see him focus? norman: i like to see that there is going to be some spending given that there will be some political initiatives. i would like to see it concentrated on housing because i think it's a terrible problem and the ratio of house prices to earnings is something that we have not seen for a long time. it's almost unprecedented. the only way to get house prices static or falling is to increase the supply. anna: brexit is also something that hangs over this budget. what are the chances that we don't see brexit? what kind of brexit do you think we are headed toward? norman: i'm sure brexit will happen. i think anyone who thinks it won't happen has deluded themselves. personally think the
negotiations are going somewhat better than you would get the impression from the newspapers. i think there is a better than 50-50 chance of an agreement. i personally think we could live with no deal, but that's a poor option than getting a deal. i would like to see zero to zero on tariffs and i would like to see access for the financial services aced on equivalent recognition of our regulatory regime in this country. i don't see why it should be regarded as equally valid by the europeans. anna: we will see what can be delivered before brussels. thank you, norman lamont. tom: anna edwards, thank you so much. an important conversation. with us is hans from morgan stanley. you mentioned the morgan stanley call of weaker pound sterling. how much will sterling upset lord lamont in the coming year? hans: you have to consider that
currency weakness is a measure which allows to return to equilibrium. i guess what lord lamont was pointing out here is very the u.k. and that is has borrowed a lot the past and we need to have discipline, but this discipline is happening in an environment of weaker economic circumstances. the question is what th is the adjustment mechanism under those circumstances? it's the exchange rate or maybe as well monetary policy if you cannot use fiscal policy as much as you may use under circumstances. that is actually one of the reasons why we think sterling is going to come under renewed selling pressure. tom: let's look at the chart quickly. here we are of the day of brexit june 23. let's remember the consensus call of sterling moved on here. that did not happen.
we have seen the sterling strength over the last three months. francine: this really goes back to the fact that this budget seems to be a signal from brexit negotiations to try to get voters. if there was one thing you would asked today of the chancellor, what would it be? hans: i would say that we need to have a clear strategy. alternative to what is your position your party is promising? on the left isee the alternative to that, or is it a completely different concept where this country is going to invest in its future? i think the better concept would be to make this country invest in its future in order to deal with the future. the more demand stuff i would is a short-term supported in
tact but there's a more demand side. the more i would get structurally bearish on the issue. it's about investment. it's about to make sure this country is well equipped for the future wherever the future is inside or outside the common market. francine: thanks so much. in the with us, but meantime, if you are a bloomberg user, typing tv so you can ask hans questions directly. it's pretty fun and you can try it out. this is bloomberg. ♪
comment francine from london and new york and tom is focusing on his thanksgiving dinner. it needs planning so i don't need to plan out the menu for you. the european central bank is likely to make several small adjustments rather than the major changes in language. this is according to euro area officials who know the thinking of policymakers. a boardalso coming as member says that policymakers will change their guidance to focus on interest rates more than bond purchases. redeker is still with us. what does that mean with the level of euro? we are seeing germany now and italy. if the ecb is doing it shyly step-by-step, this can only be a good thing. hans: i think the european central bank's cautious approach is the correct way to deal with this. you have to think about where that leaves the economy and what
does it mean for the structural flows into the eurozone? it and theked into quantitative easing approach of the european central bank, the asset purchases they have conducted in the past, about 50% of those purchases were coming from foreign accounts. that actually means we have seen foreign accounts reducing their euro denominated debt holdings, selling it to the european central bank, and it brought forth euro weakeness. it leaves all those portfolios in a situation where they are under euro denominated debt. when he have a stronger economy, you have fdi investment going to pick up and that is currently happening. that means that the structural flows are changing. you see that as well in the case of japan. it is much more in equity and fdi flow relative to a debt flow.
the 200 yield term differential for 10 years between the united germany iseurope or not having the impact on the exchange rate. in the past, it was a good guide for foreign-exchange. you would have to expect a massively lower euro. the structural flow is changing and a lot of that has to do with the booming situation of the euro. tom: beautifully explained. basically it's everybody trying to get out the theater door. if you have to destabilize reality between flows and interest rate differentials, that does a pro like you just assume instabilities into 2018? hans: not necessarily. u.s. ismind that the heavily under owns. i can give you a few numbers when you look at real money accounts in japan .
their euro ratio is 90%. when you look at switzerland, their ratio is 83%. these are two countries that have significant foreign asset holdings. it is for me much more at what point are they going to reduce those euro hedges? the second thing is that simply you are seeing especially switzerland, they are not engaged in portfolio investment in euro counts of the past. there is a pent-up affect. the account surplus of switzerland is circulating between 10% and 13%. this recycling has been done by money market instrument in the past and that still need to be converted into a long-term foreign asset holdings. there's a pent-up affect. number three you look at the valuation of the euro. the euro is still cheap to our valuation metrics. normal valuation is much more
1.33-1.35 and i think that the euro strength is going to be a theme that's going to stay with us. if you think because of other reasons that you could happen equity market volatility isn't 2018, i think it's a second half issue and not a first half issue. in the first half, i think the euro has good upside potential. francine: what could hurt that upside potential? is it brexit negotiations or more technical? hans: there could be various issues coming forward, but imagine a situation where central banks are saying ok, we want to make sure we give capex. let's provide an environment where wages increase in that mean central banks will stay loose. in the u.s., we have seen for rate increases, but you have not seen financial conditions at the record high and the reason why
that is is that the perceived rate of neutrality is rising at a faster pace than the market rate. that is feeding into financial conditions being so supportive. you had what yellow -- you heard what yellen said overnight. is that going to change? i don't think so. that means national conditions keep on pressing as central banks look at to wages to make sure we are going to reach our inflation targets within this economic upturn. if you don't do that coming a have to deal with a lasting decline in inflation expectations, which is not good. that means equally in the next , maybe risky assets have more potential to build, especially on the emerging markets. that is going into risk rotation. emerging markets under those circumstances look absolutely attractive. differentials.te francine: hans, think you so
taylor: this is "bloomberg surveillance." i am taylor riggs and let's get the bloomberg business flash. china southern airlines is ready for an aviation boom. the president told bloomberg that the key to beijing's a port is set to open in 2019. luck and traffic rise, but the old airport must go by. with the new airport finished, according to our calculus is, at least we can cover supply. taylor: they think they can partner with american airlines. that is your bloomberg is a flash. tom: i want to bring up a chart.
i've never done this chart before. we do it with hans of morgan stanley. we have trade weighted sterling before. this is trade weighted turkish lira from the crash of 2000 year. here's the stability in the early erdogan years. and down we go. , thisare logarithmic acceleration really gives cause for concern. thatrade weighted image you see of a frontier market currency gives a starkly different picture, doesn't it? hans: that's right and there are many factors coming together. turkish to consider the geographical environment and the environment of serious tensions that have played into some extent. we add to our twin deficit problems. it should've been more hawkish. that did not happen so you have
an environment where the nominal yield advantage is even up by higher inflation expectations and this is happening in an environment where otherwise emerging markets have been performing quite well. this is explaining why we have the suggesting to keep turkish lira within an and atrforming position the moment so far, there is not yet a reason to upgrade the currency. were saying yesterday that emerging markets were doing well not because of structural reform or not because of economics, but they are up thanks to a lot of components of the indices, which are very technologically rich. past if you look over the few months, you can certainly come to that conclusion. just look at what happened to taiwan and korea.
that's not to say there have been any structural improvement. that's a big mistake. remember that emerging markets adds to adjusted dramatically on the 14 and 15 circulation. markets at the time had much bigger account deficits and they had to adjust and bring balance sheets into order. tom: we have to leave it there. deker, thank you for the briefing this morning. the international perspective of oppenheimer funds ryan 11 and anna edwards at parliament. this is bloomberg. ♪
austeritys instruction box and will meet challenges head on. anna edwards is outside parliament. this is the fourth wednesday of november as america -- is over the river and through the woods. outside i can't remember which right now. while the president is going to saladlago, mr. trump's and creamy key lime pie. no one has key lime pie on thanksgiving. the rest of us will not talk politics at the thanksgiving table. good morning, everyone. from new york and london, this is "bloomberg surveillance." politics used to be a sport at thanksgiving. i make a joke about it, but really seriously it is something to avoid at the table.
that is how fractured the nation's. francine: would you could say the same -- which you could say is the same in the u.k. when you talk about brexit. families have split over it and you can see it being fractured here in the u k as well. i love the fact that you can't have key lime pie up thanks giving. tom: uncle well, past the lasagna. did you offer that idiot? i feel like that will be heard around the nation this thanksgiving. how about our first word news? she will be donning as well, taylor riggs. taylor: in germany, chancellor angela merkel's supporters are betting that a new alliance could create an impasse over creating a government . her backers except that increasing pressure will force democrats to drop their opposition to another alliance to a christian democrat led bloc. the alternative could be another election which might be risky. in lebanon, the prime minister
has put his resignation on hold. took back in lebanon and part in an independent state television. he resigned while visiting saudi arabia. lebanese officials accused saudi arabia and officialn a forcing o resign. eight people have been rescued from the crash of a u.s. navy plane in the pacific ocean. carrying 11s passengers and crew and was on its way to the uss ronald reagan, which is operating in the philippine sea. the navy forces are looking for three other people on board. it is the first full day and 37 years that some always not being led by robert and got mugabe. interimmoon will become president and he will be the ruling party's candidate in next year's election.
federal reserve chairman janet yellen warns that it's dangerous to let inflation drift any lower. she says that raising interest rates to quickly could leave inflation below the fed's 2% target. she said there is some hand that expectations for future price increases may be drifting down. global news point for hours a day powered by 2700 journalists and analysts in more than 120 countries, i'm taylor riggs. this is bloomberg. tom: how about a data check here? quiet data check on wednesday. i notice oil elevated as well. francine: that's what i'm looking at. european stocks were up and now moving sideways. the story because of what janet yellen is saying, warning against rapid rate increases. the euro is getting a touch. heading for its highest close in more than two years. we await the decision by opec. tom: time now for a surveillance
correction. he did not like what i said about uncle will. you turn to uncle will at the table and go you voted for that idiot. alpha new jersey notices that brandon is at the other end of the table and uncle will is up.ng, lock her that's a fair and balanced table at the surveillance household. let's go to anna edwards outside parliament and its trade weighted sterling and it's a really shocking chart. we have shown this many times before. 1992 lehman low's. got the pumpkin orange and the down we go right here. this is stunning sterling weakness over the last 25 years. francine: budget day here in the u.k. the chancellor of the exchequer
has a lot on his plate. his budget has a lot to do with productivity growth and it factors in the government lack of a parliamentary majority and the enormous uncertainty around brexit. for more, and edwards is at westminster. i know you have spoken to great people on the ground. what exactly does the chancellor need to do? does he need to move away from austerity, but also not opening the floodgates of the treasury? anna: indeed we spoke to the lastr chancellor in the hour of programming and he said that he thinks this is one of the toughest lunches he has seen delivered. he has seen quite a few budgets delivered himself. he says the amount of pressure that the chancellor is put under to deliver more money to various departments that have seen their finances under pressure because of austerity policy, but this is a chancellor who is known to want to stick to his rules
. he wants to stick to a structural deficit target and bring it below gdp by 2021. it also seems that the kobe are that's at the forecast had been overly optimistic on productivity in the past. he will have his hands tied a little bit in terms of what he can deliver come up there is some expectation that maybe he will try and address some of the things that may be disappointed the electric -- electorate in the june election like housing. tom, francine? francine: if you look at this budget, it's very political. is there a danger that it's too political because of the election where the tories did not do so well? anna: it's interesting that lord lamont had a view on that as well coul he said we ar. he said we are far away from another election. anding is entirely certain u.k. politics and he said it's not the time to give away, but it's difficult because the chancellor has been a little
gaffe from recently. there was a u-turn on self employment taxation. he made awkward remarks about unemployment this last week and that did not go down too well. remember that the government does not actually have a majority. the have a deal with the party from northern ireland to be able to get big policy statements through. they lost cabinet ministers recently and they do not want to take too many risks are losing anymore. tom: anna edwards, thank you so much outside parliament. brian levitt from oppenheimer funds joins us on this wednesday before thanksgiving. you say equities is still the place of choice and yet in every nation we have the political distractions that anna spoke about. you maintain optimism on revenue growth, earnings growth in international.
all in equities given the distractions we heard about from london. brian: absolutely. we have been dealing with -- what are we not dealing with political distractions? tom: has it gotten worse? brian: maybe it's gotten worse than the last four months, but i would argue coming into this year that there was a lot of concern about europe and the elections and france and perhaps a breakup of the common currency. that all passed without political incident. some of the distractions of what's going on in germany and talks of budgets in the united kingdom come i would take my statement back and say no, we probably in europe have probably progressed somewhat better than we expected that the naysayers expected heading into the year. tom: away from the digital stocks, you are at ann arbor. you go 60 miles northwest of ann arbor and they're supposed to be little switzerland with an industrial growth in america. are those equities priced reasonably or do you have to go to international? value the equity cyclical
oriented stocks are priced reasonably in the united states. toyou compare the go stocks the big technology stocks to the value stocks, they are as expensive to values they have been in a long time, but that does not mean value needs to outperform. there likely needs a catalyst. higheratalyst to sustain growth united states, but you make a very good point about international markets. not that long ago people were worried about valuations in europe and you see what happens with credit growth and earnings growth. emerging markets also have rallied significantly this year. they are still generally cheap in the developed world on historical basis. francine: what does it mean for the future? is there a correction looming? is there something that you worry about and could come for the lack of tax reform? brian: there's always correction looming. you can go back to the early 1980's where you would see a correction greater of 5% every
year. i would suggest the reason we haven't had one is there has not been a lot of economic volatility or monetary policy volatility in the united states. i don't think a correction would be coming if we don't get tax reform. i would suggest that if the market was really bold up on tax reform, you would've seen small caps and value stocks being the big winners this year. actually it has been large caps and growth that have been the big winners this year. i would think that a correction may come if the federal reserve potentially gets too tight or signals additional rate hikes in the coming year. other than that, without significant monetary policy all totally, the markets are that volatile. tom: i just looked in the bloomberg. in the french market, the cac 40 is up 30% this year in terms of u.s. dollar terms. we forget that. francine: that's an excellent point because yesterday i was looking at my chart, which was
the amount of treasuries held by china. that also went up. the guest was reminding me that's also because of what the dollar has done. everything that's going on with equities is dollar dynamics? brian: it's not entirely dollar dynamics. what you have in europe is credit and earnings growth which has been supported for asset prices. you make an interesting point. what was the turn for international markets was when the federal reserve backed off from its tightening stance of february 2016. that's what stabilize the dollar. the dollar has been weaker since that point so that has provided a nice tailwind for u.s. investors to invest internationally because you are not only getting the price returns as earnings improve, but you're also benefiting from appreciating currencies across europe and many of the emerging markets. tom: we will come back with brian levitt.
tom: "bloomberg surveillance." on wednesday before thanksgiving , usually on wednesday eu buried the bad news and it all comes out at 4:00 p.m. on a thinks giving wednesday and no one will see it. john deere comes out with really remarkably good earnings. the same-store sales to last year with the same truck sales and equipment sales are really quite good for john deere. samuel allen talking about a
lift. it really is a global proxy. francine: it is. i love the story in general wayuse if you look at the this producer of agriculture equipment is trying to diversify , they are almost more -- they're trying to become more like amazon, which basically means putting smart technology on tractors so that the way you see your land going forward will be a lot more sustained. i think we are getting a little bit of breaking news from the european central bank. this is from a bloomberg scoop saying the ecb is set to stay corporate buying bond programs intact. this is significant and something they have done in the past. usually they do these studies to counter some of the criticism on ecb boards that may come from germany and may come from some of the smaller countries. it is just something we will keep an eye on.
when they come up with a study, a kind of legitimizes what they're doing. tom: something on corporate bonds and we will have more on that through the week. brian levitt with us from oppenheimer funds and in the jumble of all the data is the linkage into a flatter yield curve. you are in the equity space, but you look at everything. curve a flatter yield means for global financials right now? it's got a be tougher, right? brian: it is tougher. -- what islikelihood the likelihood that we flatten the yield curve significantly further from here? what the 10 year is telling us is that the u.s. bond market investors do not believe that there is significant reflation. all this excitement over growth and all the prior concerns about inflation have not manifested and the federal reserve continues to signal equilibrium. tom: let's say you come in with a pot of money and go through your perspective.
are you investing in quantitative tightening? is that just some esoteric idea of economics? brian: i don't think it's esoteric idea of economics. i think we may need to temper our expectations some as we go through tightening. it sort of like when you're driving with your kids and they say to you are we there yet? and you say no and then they say are we getting closer? the answer is yes, we are getting closer, but that does not mean investors should be participating in the equity market. equities are still more attractive compared to most other asset classes. even as the u.s. goes through this quantitative tightening which is going to be very slow and gradual, we are seeing synchronized growth around the world and generally easy policy around the world. that still is a good backdrop for equities. francine: i feel like ask you this question every time, but i think it's probably the most significant question. what is the lesser of two evils?
is it putting on too much taking his sweet time and hiking rates or is it the contrary, acting quickly to act with the tools? say that thed worst of all outcomes at this point would be tightening to quickly and curtailing what is still a reasonably sound expansion of the united states. for the u.s. central bank, short-term rates are already up above 1%. doesn't independent central bank really ever run out of ammunition? i think what we have proven is we know how to fight inflation should that rear its head and i still think it's a we hope so moment for inflation to remain either study or increase from here whereas the risks if we could tell the cycle and bring forth some deflationary impulses, that is always harder to find your way out of. francine: brian, what's the quickest way to have an impact
on inflation expectations? brian: i think if the federal reserve board to back off -- were to back off from its tightening posture and you were to see some fiscal stimulus out of this administration, i think you would see inflation expectations, up some, but i don't think this is going to be a significant sharp move up in inflation or the tenure rate. there are still long-term forces , which is not the least the aging population of the western world but keeps rates and inflation expectations generally low. tom: brian levitt with us from oppenheimer funds this morning. coming up on bloomberg television and bloomberg radio, a conversation with william cowan. he's a bloomberg television's attribute. his view on global wall street of 2018. stay with us. this is bloomberg. ♪
taylor: this is "bloomberg surveillance." i'm taylor riggs. let's get the bloomberg business flash. just breaking in the last few ereutes -- dea reported estimates beating by $.10 per share. alternate income of $2.6 billion and shares are rising in premarket trading. making it clear what they think of may whitman's
decision to step down as ceo of hewlett-packard enterprise. shares of the company are down in premarket trading. she will be succeeded by the president antonio very. over hewlett-packard and eventually split the company into a cap more than 80,000 jobs. for more than a year kluber conceal the hack that exposed the personal data of 57 million customers and drivers. outfite hailing services hackers to paid the delete the information and keep quiet. that is your bloomberg business flash. tom, francine? francine: for more on over, let's get straight to jeremy. i imagine this is a huge legal breach, but it's also a culture problem. how do they reinstate the trust? jeremy: it's a big issue for them and they have faced a whole slew of problems over the past year. it's really up to the ceo and
the board massive change the culture of the company. francine: how do they do that? who's the first person they call? is it the passenger or the regulators? jeremy: he's got to apologize to a lot of people. to thet to apologize passengers for the data breach and the regulators for failing to disclose the data breach. he has to apologize to employees for a lot of the bad behavior going on inside the company. there's a lot of people that he has to apologize to hear. do we know if the data was used and who the hackers are? jeremy: uber has said that the do not believe the data was used and they have not been able to prove for the hackers a re. francine: have we heard from the new ceo? ,his was not under his watch but travis kalanick, this was under him. jeremy: we've not heard from travis at all about this. we don't know what he knew and when he knew it and we don't know the board was informed.
we do know supposedly that the chief legal officer of the company was not informed by the chief security officer. that's a pretty incredible revelation. they paid $100,000 to these hackers to get them to delete this data and supposedly did not tell the chief legal officer this was taking place. tom: thank you for the businesses morning on uber, our technology reporter in london. we will continue with brian levitt of oppenheimer funds. much to talk about. emma chandra outdoing thanksgiving somewhere. austan goolsbee could be discussed anywhere coast-to-coast this banks giving. chairmanrmer of the presence council of economic advisers. ♪
let's set up into the sunday talk shows with kevin cirilli. i look at all of this. this in a short debate from alabama. ucla basketball. the president tweeting this morning. particularly i look at mr. mueller. will the president enjoy his key lime pie tomorrow? president earlier tweeting a lot about ucla basketball regarding the situation in china. weighing in on watercooler talk that a lot of people will be talking about likely around the thanksgiving table tomorrow. tom: bring up this mmr. having to do with korea. lot.ys a if this president gave an order out of the blue to bring fire and fury to the korean peninsula, it is likely the military would disobey it.
it is a relief to know it, but evidence of another problem. the president's word is worthless. his bluster is not evidence of command, but rather a form of abdication. what is the presidential power into december? kevin: yesterday president trump vladimir telephone to putin about syria. those in the administration argued that trying to continue with the coalition of russia and china to pressure north korea. beyond north korea with regards to syria. on foreign policy they are trying to have that situation. i'm hearing from sources on capitol hill the senate will vote on the tax bill next week. the president's phone was this weekend on the tax cut bill? call peopleked to
like senator susan collins. that thecerned individual mandate. and johnson from wisconsin. generally have tried to frame this as we are going to lose the tax package is not po lling as well as republicans would have liked. to the middle it class. this is going to be a benefit for them. is the focus much on nafta? we understand the talks are slower than expected. president trump was hoping for a quick deal. he probably won't get it. avin: you probably won't get quick deal. nafta talks have been barely moving. most folks anticipate when they get back together early next year that something will be able to come to fruition, or the
president will walk away. all we want is good politics for the president to take this kind of position in nafta. will letgood policy, i you decide. it is good politics that the base of the democrat and republican party are outspoken against this type of agreement. lions, vikings, you don't care. you are looking at penn state, maryland. kevin: my philadelphia eagles are going to be in the super bowl. absolutely destroyed the dallas cowboys. i am living the jury. we are in good shape. we are in good shape. lion/vikingsching as i'm having lasagna for thanksgiving. may penn state do well. happy thanksgiving. on this wednesday, here is taylor riggs.
taylor: president trump hopes for a quick deal to rewrite away. it is slipping the u.s., mexico, and canada have been in the latest round with little progress. robert lighthizer says mexico and canada are not seriously engaging on key issues. he made it clear that a new deal must shift in the u.s.'s favor. russia's president meets with the leaders of turkey and iran today. assad's forces have held the upper hand sense pressure intervened in 2015. an all-time low against the dollar. the central bank is trying to stop the plunge without raising interest rates. spoke inprime minister istanbul emphasizing developments are temporary. there are improvements, but
there are a serious problems in the mid-to long-term framework. in turkish markets there are serious movements in the recent period. we need to understand these well and need to have a calm approach. taylor: the public sector are stronger than ever he says. global news, 24 hours a day, powered by 27 hundred journalists and analysts in 120 countries, this is bloomberg. budget day ins the u.k.. hammond will be under pressure to strike a balance between meeting his fiscal targets and voters who signaled they are growing tired of austerity. , over tonster you. >> thanks. an independent think tank in the u.k., the director of the niea.
good to have you with us. tell me about what you are expecting. will it be a day for a big, bold budget, or are his hands too tide? disco policymes to we want stability. we want a government that will make fiscal plans for the levels of debt that help stabilize expectations about business and households. moment ining at the endemic uncertainty or do we don't know where we are going to go with europe in terms of the plan for exit or when we are going to get there. would we don't is large variations in budget plans to add to further uncertainty in the economy. ideally a budget to reduce uncertainty and think about things that will stabilize rather than destabilize. anna: this is a government that in june did not do as well as they hoped in the election.
they lost their majority and a lot of voters that were in the middle age middle income bracket . do think we will see policy that is designed to bring those people back? is that where they will be aiming their policymaking? jagjit: i wonder. we have a fixed term parliament. it should last for five years. the previous one didn't. we have uncertainty over this parliament. onseems to be a 70% chance then election before the five-year term in parliament. i think we still want our fiscal policy makers to think about the medium and long run of the economy rather than fix is in the short run to help particular who have a particular angst at the moment. the idea of medium-term stability is the one they should aim for. i will expire what that means later on in the interview if you wish. anna: we will see how much time
we have. i know you want to talk about productivity. the budget may cut productivity in the u.k. explain to me what you think is behind this. mis--- measurement? jagjit: the productivity slowdown is a worldwide phenomenon in advanced economies and elsewhere. it seems to have slowed down worsen the u.k. than other advanced economies. collectively, a number of independent organizations have come to the view there is a permanent slowdown in the u.k. institutes have all come to that view. there is a number of reasons. easurement, a mis-m
lot of outcome is digital, and a lot is free when it comes to consumption. we could be under measuring productivity. a deeper point that firms have not been investing, they have not been developing the n the economy and public level infrastructure r&d infrastructure. relatede very closely and help explain productivity patterns internationally. things we have not done very well in our economy in the last 10 years. productivity growth has been relatively poor in the u.k. period.ut the post-war it has been exacerbated in the last 10 years since the financial crisis. part of the story is the financial sector, how it operates and allocates funds between savers and investors. anna: thank you for joining us. we are back with helicopters overhead in westminster on budget. tom: i love that.
anna edwards at parliament. up a conundrum globally. even in america, which is the new investment. someone is talking about hyper globalization. are we in a new regime of investment where we will never be the job creator we thought? >> we probably are. what we have seen in the united states is we have seen reasonable job creation, not the big pickup and wages. we have seen a decent capex cycle with improvements over where we were a year ago when energy prices were collapsing. in trend growth or significantly higher growth in the united states. we are probably not heading there now that we are nine years into the cycle. tom: that is an important point
francine: this is "bloomberg surveillance." .t is a busy week it is thanks getting any. all this week there was one thing on your mind. tom: there is always one thing on my mind. turkey, turkey, turkey. thanksgiving plans, let's eat out. ene, are youke listening? thanksgiving plans, let's eat out. francine: i'll get to the bottom of it and bring you the latest on that.
you are not cooking, you don't cook, you want to eat lasagna. tom: smoked turkey is what we are doing this year. i am actually really looking forward to it. a little shopping as well. emma chandra this is queens boulevard. 4 bit jillion people will pass by. changed world for big box, isn't it? emma: it is. there is optimism going into this weekend and the traditional start of holiday shopping in the u.s. analysts went from one over 10 and are feeling optimistic about sayping conditions as they the macroeconomic trends are good. people are ready to spend money. they are feeling confident.
a lot of stores are showing better inventory control. they have more integration with online services and in-store. there is the possibility we will see profitable, low single-digit growth over the next weekend. tom: bloomingdale's was putting the windows together. elephant in the room. how is the retail world defending against mr. bezos and amazon? emma: that is the question. that is a point of tension when you look at what is going on for traditional retailers. they have to offer services in-store and online in a way that amazon does it need to do. they need to meet consumer demand and compete with amazon. amazon last year took 40% of all e-commerce sales. over the holiday weekend that could reach 45% or 50% this
year. what they're doing it jcpenney is offering promotions, and maybe starting early. they want customers to know what they can get. the problem with promotions is that squeezes margins further down the road. tom: greatly appreciate it outside the retail juggernaut jcpenney. the points guy revolutionized the linkage of credit cards, to miles, to travel. bali, i think he is in on a $49 plane flight. you guys have changed travel single-handedly. it is all over. everyone has their hundred thousand mile credit card. what happens next year? continue to we will see large credit card bonuses. to: the banks are wedded
this. >> they're competing with each other, bigger bonuses all the time. it is becoming an escalation on all sides. tom: what is the airline angle defendar, how does delta against the others as one example? julian: u.s. airlines have had unprecedented profitability. in transatlantic they are under pressure from low-cost carriers like norwegian. went down inin flames. how does norwegian air avoid air berlin? it was never clear if it wanted to be a low-cost carrier in europe or transatlantic. he didn't know what to make of itself. that was the real problem with air berlin. francine: if you look at the low cost in europe and asia are we
going to see more or less of them? julian: more of them. we are seeing just as many, or starting to see just as many great airfares from here to asia as to europe. the other day to singapore for less than $500. that is pretty aggressive. tom: we want to feel your pain today. which is going to be the worst airport tonight at 7:00 p.m. question mark is their favorite points guy airport that is always lagging? julian: everyone in new york has -- foress for mccourty a laguardia airport. atlanta, it works. it is huge, but it does what it has to do. tom: thank you for the update. it.tly appreciate $49. kelly is in bali for
tom: may you have an exuberant thanksgiving. i have not decided on chart of the year yet. brian, this is the dialogue based off the great work of mr. yale.n at to 1999.rance of 2000 we are nowhere near dollars 30,000. there is no equivalent. all.: no equivalent at if you compared evaluations in the late 1990's to today it is not close. it is the height of a hyperbole to compare those two periods. top 10 names in december 1999, medium price per sales of 20 times.
today the top 10 names medium price of sales at 4.8 times. not even close. the markets, everyone talks about the risks for the downside . i think perhaps the bigger risk for investors is this continues to go up and they get left behind. to gone: i know you have to radio. good luck with your thanksgiving radio. when you look at technology, do you assume artificial intelligence will be the way that we live in 15 to 20 years? what is it mean for how you invest in tech? thecine: the chip -- brian: chip makers have done phenomenally well. investors should be watchful long valuations. when you look at the growth in those types of businesses from a justm up perspective, not blindly investing in a basket of chipmakers, that is where a lot
of the growth will come from. in this environment, would we continue to see is investors will look for growth wherever they can find it. those companies will be rewarded. francine: what are the trends in technology? is that something we need to look at? is it wearables or driverless cars? -- driverless cars, thereiverless are companies making chips -- this is a big growth business. what you're seeing in these parts of the market, active managers that are sic selectively going out and finding these types of revenues are winning in a big way this year. that is a move from where we were at the start of this year. if you are looking at growth parts of the market, part a i come in driverless cars, chip
makers, sensors, these are the big winners. funcine: oppenheim are senior investment strategist. of course, brian bull joined tom on radio. -- oppenheim or funds senior investment strategist. of course, brian will join home on radio. graphic rate increase and what is happening with the u.k. at 7:30 a.m. in new york, 12:30 p.m. in london. dollar falling, euro rising, european stocks drifting. this is bloomberg. ♪
then paying the hackers to delete it and keep it quiet. janet yellen has a message for jay powell, warning against rising rates to quickly. chancellor hammond looks to lay out a popular view for brexit. for our audience worldwide, this is bloomberg daybreak. i am jonathan ferro with alix steel. david westin did the smart thing and joined the thanksgiving journey a day early. will be working tomorrow. let's get you up to speed on the action this wednesday. very much the mission of getting to the close for everyone in the united states as they are celebrating a shorter trading week for the side of the atlantic. just short of 2600 on the s&p 500.