tv Bloomberg Daybreak Americas Bloomberg March 31, 2017 7:00am-10:01am EDT
the trump administration set the stage for next week's meeting with the chinese president. check first, then we will talk business. the eu says there will be no the brexitbefore bill is a great. finance minister takes the run down with him. ferro.rning, on jonathan we will be talking to peter -- outcome, the national go around the world is thereuestion is going to wait before they conclude that review. dudleyill hear from bill exclusively here on bloomberg tv. jonathan: this is how the market
is set up. futures in the united states a little bit softer. the euro tracing lower for the third >> straight day. take a look at dollar range. but that 6/10 of 1%. we had a stronger dollar up by 2.5%, but the rand still getting hit. since 2015.loss dollar, oil, bates, they pretty much go nowhere. signaled the eu theresa may will have a year to work on a trade deal. joining us now is bloomberg executive edit from london. great have you with us.
>> as you said, the eu cannot the two play hardball with the u.k.. they will not negotiate a free-trade agreement until an the bill that the u.k. owes the eu. that, if you look at donald trump, he talks about we will talk to you about your free-trade agreement if we see progress on these issues like the bill. he does not say everything needs to be wrapped up before he going to trade. think it outlines what an actual roadmap could look. for business leaders,
they want to understand what commercial ties look like. how long will it take to a bit of an outlook on what the budget and brexit bill looks like? >> it looks like negotiations will start until the end of may. that will be a major step in the sense we will have the eu sitting around. in the run-up, that's when you would expect to see the outline of the red lines coming into closer focus and maybe we will see some give and take a listen as the end of may when it comes to a question of the bill. jonathan: looking ahead, the prospects of a transition agreement, what is the appetite
for the other side of the channel? >> theresa may in her speech to parliament made it clear she would be interested in a transition. -- if you look at her from the eu side, and kill back some of the rhetoric and the process of a transition are not bad. pastinly, the nude in the two or three days is as good as you probably could have hoped. great to have you with us. london,us now from
chris we want to begin with you. the want to invest in trade around the mood music question mark >> i don't think so. the market has been sure currency for an awful long time. i think it is interesting. i think selling is a stale thing to do. the reality is i think the more we work our way through, ultimately in the end we will be at somelook through it stage. the reality is the british economy will continue on largely as before and in the medium term personally, i think the offer an of a deal economy that has a better half in the medium term than the
european union. i think investors are starting to realize this. i think it is a pretty robust level and i think there is upside for the sterling versus the dollar. consumere saw today is spending slowing. with a going higher from here? >> yes. we think the noise will quiet down a little bit for negotiations it is not going to happen in public. i think the market is already short sterling quite a bit. evenink sterling is cheap assuming a worst-case scenario for capitalscenario flows. for us, if you're going to get a shift back, the data has held up well.
swell.ct things to up a little bit, the --k has to hike in we think sterling is stable versus a strong dollar this year and that means outperformance of a euro. what are we come a day three of these negotiations? on wednesday, we talked about the mood earlier. how do you want up investing around a conflict will never see in the shorter term even if you are a believer in the immediate term? >> has her guest said, this is
just negotiating noise. what you need to do is think about the art reality of what the deal may come out. a lot have been saying for a number of months the reality is it is not help anyone if we end up with a cliff edge. the u.k. is the second-biggest economy in europe. invest as youy to are saying is ignore the noise. also, think about the u.k. economy absent all of that. the fundamentals are reasonably good. party you saying the brexiteers were right? oft the value of the asset england not go down as a separate from the eu?
>> i think what people have not the -- mprehended is if you look at the track record of the free-trade deals, you'll see it is quite poor. we saw only recently how hard it was to conclude a deal with canada. the reality is a protected trademark in the u.k. inside of it is not allowed to negotiate its own free-trade deals. missed with the u.k. has is being a very strong trading nation. we have done it in some areas, but not across the board. i'm encouraged. europeanutside of the union, the u.k. can prosper. we caught up with the chief
of the investment bank in this is what he had to say about london's financial center. quite we have short list a number of locations. madrid is one of them. it is early to determine where. comes ank it competitive advantage if you are in a location where most of your employees want to go. you will have less disruption and you will be able to attract more talent. it has not materialized yet. are you as confident about the city and financial services as you are about the united kingdom and its totality? >> no. i think there are three sectors that struggle the most in the kind of deal we are likely to
get. having said that, i think london sectormain the financial of the europe. i think people exaggerate the demise of london as a financial center. london has been to this many times and it keeps picking itself up. ofhink it will remain one the biggest financial centers in the world. both stickingare with us. thank you. coming up, d.c. a conversation with peter navarro global trade. week with thext resident of china.
jonathan: south african assets are crumbling with the brand having its biggest slide since 2015. toant to cross over johannesburg. great to have you on the program. it has been a soap opera ever since that weekend in december a threeime ago when we had finance members and then it carried on. what led to this in the last 24 hours? >> it has come indeed. quite an eventful 12 hours.
one that could be a myriad of regions. dynamics. power he has hired the former financial minister, also made changes including the energy portfolio. quite a lot of drama. a lot at stake at this point. the credit rating agency as well. is a downgrade inevitable and what is the past for the next move at this point? >> we've had news commend. they have not really said anything in terms of their assessment of the next few months. what we do know is they say they will be keeping a close eye on
development that will be emanating from the reshuffle that came from jacob zuma. he came up also in the statement saying he believed that south africa is not for sale. advice to his successor saying he hopes they will managers the treasury in the country's credibility in a way that a good credit rating avoids download. the market reaction as well as political indications will affect the country's credit rating. jonathan: thank you. we talk about people with difficult jobs. amazing -- >> it is amazing anyone would take the job at this point. this really encompasses the issue with em.
you have a political risk and search for yield. -- hows this work clark does this where out? i think the interesting thing is for investors is the bottom of story is generally not so great so investors have to pick -- pickse and decide your poison. i think if the rand weakened more we will have a. of volatility because people need yield and there is not a lot of good options, especially in the region where there's no bottom .f noise you have to take a view on
commodity prices if you're thinking about south africa. the beneficiary in the last 12 months globally has held the rand and emerging-market currencies. i think with the fed trying to raise rates, i would be slightly for somea commodity -- of these commodity prices. i think we would be less inclined to jump into em currencies and i think the rand with this finance minister around the currency has had a tod run, maybe it is time take some chips off the table. trade's put aside the here. you see this with a company and you have really good assets and bad as rent. do you invest in the assets for the management -- or the management?
>> you need a roadmap on what you think will happen. if you have that view, clearly it does not make sense to come back in. for those that think the fed is there iswly enough, mostly outside -- the case is still good. like it ist looks incredibly difficult to establish in 2017. that you just rips. reentero decide when to at this point and this is enough. >> i think you will see that kind of mentality dominate for the next few months. >> if you are worried about taking too much risk, where do you go for yield?
regardless of how much the fed actually hikes? for yield iot go would go for trade. we see an acceleration of u.s. volatility. that saying since 2007 throughout the crisis in the end the velocity of money is trending up which means the yield trade is over, basically there will be phases where i would not be reaching for yield. >> the search for yield is over? we appreciate that. an extensive interview with bill dudley. plus, more fed speak.
♪ >> this is bloomberg. i'm david westin. be sitting with us. this dudley interview in the broader context of this week. there's a time we do not know where the fed was going. is this all correlated at this point? >> they talk to each other on a regular basis and have a good idea of what each other is thinking. of billrticularly true dudley. he is vice chairman of the open , who setmmittee monetary policy. by tradition, the new york the
the questiont -- now has shifted on wall street from when will the raise rates to how far and how fast? those are questions we will put to mr. dudley this morning. david: we be curious about what is happening this year or at the endpoint? what would like to know the endpoint is because then you can back off and try to figure out the timing. the other question is not just and what they do about the balance sheet. he has a little bit different idea of how you approach bringing the balance sheet down. we will want him to explain that to everyone today. this go withes what janet yellen or stanley fischer said? >> the three of them are the
core of the dead. withn came out this week his speech had nothing to do with monetary policy. can get something out of dudley you will have a good idea of where she is. david: we are about to get to out of therders white house in regards to trade. it is interesting because the fed with task with trying to figure out what would happen to the economy on the fiscal side, but the potential for trade disruption is huge. that is a cloud hanging over. the question for peter navarro going forward is what do you actually want? do you want a situation where we rip up all of our treaties and
do bilateral treaties? how would that help us? hase's no question china unfair trade advantages. do you attack those with a scalpel is a here are the things you must change or put out a broad tariffs and risk retaliation? david: thank you. we look for to the interview in about 90 minutes. jonathan: that interview peter navarro coming up right here. the focus is on d.c. and the markets still very much the story. from thent, two hours futures. you're watching bloomberg.
alix: you are crazy. that says it's not. investors come in. jonathan: that's been supportive of emerging markets as well. about two hours away from the update, futures are looted softer. s&p had its biggest weekly gain since february. that is the best quarter since 2015. stocks have performed in a way that may be many anticipated. elsewhere, not so much. treasuries start of the year at 244 on a 10 year. this came in to the market a couple of weeks. we rolled from 262 down to 2.4. yields are lower on the margin by single basis points. the dollar index shows some strength again this morning. it's the fourth straight day, the longest streak since february.
that is pretty much dead flat. the euro is up one spot. that is .1%. it's a reflection of its happening in germany as well. later this morning, president trump will two executive orders on trade. joining us on both bloomberg television and radio to take us through these orders is the director of the national trade council. welcome back to the program. we have had some preview of these two orders. i would like to talk about them. the one it's going to review country by country unfair trade practices, is that based on trade deficit with those countries? peter: that's correct. there are 16 countries with which we have significant trade deficits. the bigger picture here is the united states is the freest trade are in the world. let's be clear about that. on balance, we have the lowest
tariffs and the lowest non- terror barriers. we have the largest trade deficit. loss,ts are causing job causing our factories to move offshore. they are a reflection of that. historically what's going to happen with this investigation into trade abuses is the secretary of commerce with the u.s. trade representative will take a comprehensive look at all of the different ways the trade deficit might be happening. we're going to look at tariffs, nontariff barriers, forced technology transfer, all of these things in 90 days, wilbur ross will deliver a report to the president. the information will basically be the foundation which will guide our future trade policy.
the purpose of this investigation is basically to both the labor -- fulfill a promise to the american people to look into the trade abuses and correct them and do smart new deals in a way that will put our people back to work and bring our factories back offshore. david: trade deficits or something to take a look at. trade deficit does not necessarily equate to unfair trade practices. there are lots of reasons you may have a deficit. will you take a look and decide there are other factors? ." and that's a great question and you're right. take 10. we run a treaded -- trade but that is them, driven by oil and energy. that is no big deal. we have other countries which are cheating us blind.
problem withtemic relativee tax system to the rest of the world which runs and creates a disadvantage for us for our country. these are all the things we need to look at. trade deficits are not bad per se. when you run a large and persistent trade deficit for's proxys we have, it's a for all of the job loss, slow economic growth, low wages that we suffered over the last 15 years. president trump will deliver on this promise to turn that around and this will be a first step. no american president has ever looked at this problem and committed to solving it. the secretary of commerce is going to deliver a report in 90 days. we will start moving. david: what is the proper remedy
in so far as you find unfair practices? is it to enforce the existing laws more effectively? ,his goes to the second order countervailing duty enforcement. we haven't been enforcing them effectively? great segue. a let me describe that for your viewers. there are two ways that we can enforce against cheating. one is anti-dumping. that is defending our manufacturers and workers dumpst countries that products into our markets below cost. the other part of that is what called countervailing duties. that's when foreign governments unfairly subsidize their industries and we get products essentially at cost lower than they should be. the department of commerce has been able to find these cases.
we have 400 them active right now, covering 40 countries. the problem is the duties we are supposed to collect, we haven't always been collect in. since 2001, the have failed to collect $2.8 billion in duties. it's not just the revenue we lose when we fail to collect them, it's the fact that our industries don't get the kind of relief that they were promised when they filed their cases. protection,border the are giving them the tools to turn that situation around. this order decided been a great order on trade in the economy, it's a beautiful example of interagency coordination. the commissioner of customs and border protection, they all work
together on this. nowhere is this more clear than what has already happened over the last few years in charge of china and steel. i did -- it did wind up in a fit in the steel industry here. are you looking at those kind of tariffs? what about retaliation? you manage to go off in a direction has nothing to do with what we are talking about today. we talking today about two orders. one will look it trade abuses and in a conference of way we will collect customs duties. the principle here for the trump administration is tough trade negotiations. the information we are going to get from the investigation will inform that. the second pillar of the trade policy is enforcement and compliance. when you have cheaters sending after we have already
had duties assessed and they don't pay them, that's not the behavior we are going to tolerate. don't even go there. we're not talking about trade wards -- wars. non-tariffs and tariff barriers. that's exactly what we are talking about. peter: exactly. what we are going to do with this report is lay a strong foundation for measures and analytically-based steps to fight what is happening with unfair trade practices in this world. i go back to the beginning of what i said. we are the freest trade or the world. we have the lowest tariffs and the lowest barriers. that's not fair to the american people. we are going to look at the causes of these deficits.
there are some that are unrelated to trade per se. but it's trade and when there are unfair or nonreciprocal i can assure you president trump is going to take action. jonathan: how significant are distortions you're talking about currently? are distortions to the problem you're talking about currently? you are familiar with foreign-exchange? peter: secretary ross is going to look carefully at many factors. currency misalignments are one of them. we will look at that. we will come up with an assessment to see where we are. jonathan: is that something that will be brought up next week? peter: these orders are unrelated to the chinese visit.
i have nothing to say about the chinese visit here it -- visit. jonathan: there has been reports about national's like yourself and steve bannon. what do you make of those reports at the moment? is that just a natural debate that's emerging? peter: two days ago we were going over these executive orders and we agreed these would move forward today. that's pretty good. i know you want to sell soap here with salacious stories. i am here to talk about two historical events. the omnibus investigation is historical because no sitting president is ever look to trade deficits and trade abuses in this way and promised to take action. the customs and border protection's are his store because we have agencies working strongly together with the white
house, solving a problem with the stroke of a pen in less than 30 days when we are looking at this that's gone on for 15 years. i would say that's pretty good for president trump and his team. death by you put by china in the title of your book. baby you can put us in touch with that advertiser. let's go back for a moment. i want to understand this coordination. we have the issue of nafta that was reported yesterday about a notice going up to capitol hill. do you have to wait until after this 90 days in your executive order to review the unfair trade practices before you can move with now that? unless you know what the practices might be, how do you move forward with a renegotiation?
peter: it's not an issue. dose orders have nothing to with the china visit, nothing to do with nafta negotiations. it's a practical matter on timing. it is going to happen, there is going to be a letter that goes out that starts the 90 day. during that 90 days, we are prohibited from entering into any negotiations with mexico or canada. by the time that 90 days is over, wilbur ross will be thevering his report to president's desk. there is no issue there. david: when to anticipate that letter going out? peter: soon. david: a matter of days? peter: i am not the lead on that. i will defer to the leads on that area that will be a great story. maybe you could have a guest on to talk about that. alix: tomorrow is saturday.
we don't work on saturday. trump white house is 24/7 for the american worker. david: it's always good to have you on the program. thank you so much for joining us. jonathan: the trump white house moves south on the weekends. alix: i will work in florida on the weekends. jonathan: the dollar is a little bit softer this morning on the session. we have four days of strength on the margin. alix: coming up, an interview with bill dudley, the fed president of new york. that interview is coming to you at 10:30 a.m. markets plus monetary and the fat it, this is bloomberg. ♪\/
>> we will sit down with william dudley, federal reserve president of new york. that is your bloomberg business press -- flash. the french company and antitrust regulators have said they will sell the stony brook organic yogurt company. the giant mexican cement mixer wants nothing to do with pleasant tramps wall. -- president trump squall. there might be backlash and home.
hong kong has been one of the hottest markets for electric cars. electric vehicles have been exempted from attacks on new cars. that ends tomorrow electric car buyers will have to start paying the new car tax. that will raise the price of a tesla by at least 50%. that is your bloomberg business flash. to get further into the developing trade policy, we are joined by matt winkler. is chris in with us london. i want to start with you, matt. reasonable that a new president says i want to take a federal view of what's going on with trade and see where there are trade deficits and see if there is unfairness. matt: you have to look at facts. we have trouble with the facts. u.s. has been very
successful run in consistent surpluses and services for decades. that is not going to stop. that's a very big part of u.s. trade it, running surpluses, financial particular. excoriated last year by everybody. what nafta did once it created profitable market for automobiles in the world in north america. everybody is in that market. everybody is selling. jobs, profits, vehicles of every type. it never gets brought up in it's a wonderful development. that is part of the trade story. david: facts are always helpful. what you described could be read as a statement that those sources are people who voted for hillary clinton. what they said was i want to support the manufacturing
people, the blue-collar people. trade that is diminishing manufacturing jobs. it's robots. it's tech knowledge he. that's the biggest reason why the manufacturing jobs of your are not coming back. technology has transformed the way we do things. that is to make a big omission in the discussion. alix: you are the investor sitting in that chair. is the biggest risk we saw over the last six months the potential for a trade war. hearing peter navarro speak, do you feel a trade war could be that disruptive? do you think they are telling a different line? risks one of the biggest out there that may come to pass is america's relationship with china. trade is a part of that as is
the military angle and the geopolitical angle. the biggest powers in the world, there is a risk of tension. i have to say that the interview and the tone coming out of it was more measured and it theysts to me, i thought sat in a room and came to a compromise, which is a less aggressive stance toward this trade situation. i was vaguely in courage by the tone of the interview. it's not saying it's a good starting point seems more measured than some of the rhetoric we have had over the last nine months. alix: they have said this is not about the meeting with president trump next week. think the tone will be in that meeting? what are you watching for when the chinese president comes here?
chris: we will be watching the body nguage like we did in the meeting with merkel. we will see if there are any announcements in that meeting or if anything substantive comes out of it and hopefully it will be a meeting where the two sides get along well and share common purpose. there is considerable risk around it and i think peter someone who exemplifies that risk in that respect. it's important that it will be watched closely. it's good that they are having a meeting. jonathan: comparing the rhetoric down to the rhetoric of the campaign trail, are they backing away from accusations they made the chineses around and japanese currencies? chris: there has been a lot of backing away from rhetoric as are often is once the party is elected and whoever is in power finds the need to do things
differently. we saw this with china not being labeled a currency manipulator and rolling back from that. tone willthat consider. we will find out. david: i'm a little baffled why the currency alliteration issue. -- manipulation issue. china, if they took their hands off the wheel and let it go, it would go down, which would hurt us. in germany, they have the euro. it's not like germany can control it. what would we do? matt: i can't think of anything offhand right now. alix: there is rhetoric. map: here is another fact. since 2008 and the financial crisis and recession, the united states is the only developed economy with record gdp. mess that donald trump says he inherited. he inherited the only developed
economy with record gdp. california, we talk about the rust belt, california stronger than it's ever been before. it's about to be the fifth largest gdp in the world. that is because of brexit and the pound has declined. fou ohio's.s david: the people in michigan don't want to hear that they are one fourth of california. alix: you are biased. matt: they are working directly with silicon valley. there is a link there. it's not like these are separate entities. they are all interwoven with each other. david: australia. you have a new piece out today that analyzes what happened with australia and their trade. it is timely. it's a surprising piece.
couple of months ago, there was a conversation between president trump in the prime minister of australia. australia was berated for a deal that was agreed to the turnover refugees to the united states. there was an ominous perception about all this, that australia was moving evermore into the orbit of china because it's such a resource dependent economy. have moved further from that resource economy more than any developed economy. it has become a much more diverse economy. it is no longer so develop -- depended on resources. we see that in just about every industry you can think of. materials, which is a category that one looks at for resources, that has shrunk significantly in the market in australia. alix: i'm going to pull up a
chart. this is australia's iron ore exports to china. it has come down. cliff, theyls off a are quite a bit. that's going to hurt. it's go to another piece of data on the bloomberg that we look at closely. that is trade between australia and china. just a couple of years ago, we were looking at $140 billion total trade. now it's considerably less than that. last year and the year before, it's not likely to improve much from there. what we are seeing here is a steady and consistent diminishing of the importance of china to australia. it's very important. it still the largest trading partner, but it peaked several years ago. chris: i am not sure i concur actually.
you are right about iron ore in china. australia remains a major player on china. who are the guys behind the houses in australia for cash? housing marketey is bought by cash with chinese investors. that has to do with chinese money. jonathan: it's great to have you with us on the program. thank you very much for your time. coming up, and exclusive interview with bill dudley, the president of new york. you're watching bloomberg. ♪
jonathan: the trump administration poised to issue executive orders on trade. deficits are not always bad. willa check first, then we talk business. the eu says no discussions will happen until the brexit bill is signed. zuma via the finance minister. the rand down. i'm jonathan ferro with david westin and alix steel. bill dudley on the deck. monetary markets, where do they collide? points on the s&p 500, approaching the biggest weekly gain since february. by .1%. is stronger, up
all the drama in south africa playing out in the fx market. .ollar/rand up .2% the rand is getting hit, down as much as 10%, the worst week such 2015 -- since 2015. accrued is a little lower with a tough quarter, but a killer week. signingrump will be executive orders on trade, one reviewing to may be using unfair trade practices with the united states, another beefing up sanctions against those who do. we will talk with kevin cirilli. we just talked peter navarro. he says this has nothing to do with china. it cannot be a coincidence that president xi is showing up at merrill lago. -largo.sident -- at mar-a
the president tweeted out how difficult the conversation will be. to mr.with respect navarro, this has everything to do with china. there are no: sentences between last night and the executive order days before president trump is set to meet with florida. xi in everyone is awaiting treasury's annual currency manipulator report, and of china is on the report. this executive, action could coincide with that in that it could provide the administration cover to the cell a campaign promise without labeling a currency manipulator. david: you have been following nominee and the president. is it possible -- kevin: what we saw the campaign
trail and in the administration is that he uses the rhetoric to bring people to the table to get the upper hand in the negotiation. we saw this fail with health care. ,e was somewhat receptive publicly, but probably more tents behind the scenes. behind the scenes. people, like markets, have adjusted. washington has adjusted to that rhetoric and tone. david: those around the president like that tone. it easier when he goes in to negotiate with people. the president is the bad cop. the economicf appointees, people like secretary ross and secretary mnuchin have a much different rhetoric style than president trump. perhaps in the more traditional sense of economic appointees.
they have been able to fit that mold in the sense of their predecessors versus the president, who has taken a brash, bold political rhetoric. david: nafta, there was report on the draft notice on capitol hill that took a conciliatory tone. sean spicer has backed off of it . what is going on? white house press secretary sean spicer backing off from the trade agreement and the timeline. this is a situation where we have seen, immigration, national security, and trade where the proposals come out that are being considered, everyone takes a step back and says let's not put the cart ahead of the horse here this is something we are considering. that has gotten them into trouble to some extent in that no one knows if these
policy specifics is what they want. we could see the same thing with tax reform. david: we will check back in on tax reform later. thank you. alix: back to the rhetoric. peter navarro laying out the administration's initial offer when it comes to a trade deficit earlier. : trade deficits are not the bad per se, but a large, persistent trade deficit as long as we have, it is a proxy for the job loss, slow economic growth, low wages we have suffered for 15 years. alix: a lot of blame on that. china is ignoring it, calling next week a new starting point. writing us is david kelly. and from jeffries in new york, the jeffries senior economist. where is the downside risk in a president xi and president trump meeting next week? >> not as much as people think.
the u.s. and china are in a complicated relationship. while we can talk tough on the campaign trail, the u.s. needs to work with china and north korea on many issues. in the end they will find a way to get along. how does china react? is this a measured approach, the opening bid? i have to agree with david that china and the u.s. need each other. i do not think we will get into acrimonious discord. the worst thing that could happen in the early goings is that we have this currency manipulator report. if china were named a currency manipulator that would be a problem, because that would be a big blast. i think cooler heads will
prevail, because we need each other for trade. isathan: if your base case that cooler heads prevail if we don't get around trade what many people thought would materialize, what is the mispriced in markets? that the were assuming u.s. economy would lift off in growth. many are overestimating the potential for the u.s. economy to accelerate, and underestimating europe's potential. missnk that is the biggest price, a transatlantic mispriced where people are too pessimistic about europe, and to optimistic about the u.s. alix: we sell european equity fund's had an inflow of $1.5 billion with outflows from the u.s. on the show talks about going into european equities. it is not an underdeveloped trade anymore. say, what is often
the conventional wisdom? that people should be overweight europe. looking at individual investors the united states, they are not overweight europe yet. this has a long way to go before people are positioned in line with the rhetoric. david: is it possible that this is a government that is conservative that we hear a lot of noise, but in the end not a lot happens. is that possibly a good thing for the economy? it is a loud bark and bite when it comes to tariffs and immigration. we need more legal immigrants in the united states, not fewer. governmentndness for
gridlock. government policy is rarely aimed at the right direction. government doesn't get things done, that can be good for the u.s. economy. even with one party in the government we seem to have gridlock, that might be not a bad thing. jonathan: is government gridlock good for the economy? is a badn't think it thing, but there are issues that we should be worried the government will get nothing done, that is specifically tax reform and we talked about how the markets have gotten ahead of themselves as they expect significant reform on corporate taxes and personal taxes. if that does not come to fruition coming at have to look at treasury yields and think that we head back to where we were before the election. that is maybe a significant selloff. it would be something that is worrisome for the economy overall going forward. alix: thank you.
yearly profit eat estimates. and have outsourced design production of its products to other companies. credit suisse offices in london, paris, and amsterdam have been searched. dutch prosecutors are investigating dozens of people for tax fraud and money laundering. credit suisse says it is cool operating. making concessions for u.s. approval for a $10 billion of a soymilk maker. a french company and antitrust regulators have said it will allow the whitewave deal to close shortly. this is bloomberg. jonathan: the eu has signaled that the u.k. prime minister theresa may will have one year to work on a trade deal she wants for rex it. -- for brexit. tusklked about donald
wants the budget on the border sorted out before they have anything to do with commerce. takeong could it before you even talk about trade? thehe negotiations will go full two-year limit before they come up with a deal. the key point about the deal is that britain needs europe more than europe needs britain. any bilateral trade agreement, that party will get the worst deal. ultimately, this will hurt written more than europe. the eventual conditions will not be favorable to britain. that is almost inevitable when people voted for brexit. jonathan: it doesn't capture the story that britain needs the eu more than the eu needs britain. paint a picture for me to push back against that specific argument. that k.: what i mean is aitish exports to europe are
bigger share of british gdp than european exports to britain are a share of european gdp. it is not the trade deficit or surplus, it is that written needs the european trade more than britain needs the european trade, simply because europe is a bigger bloc. that gives the power in the negotiation. europe has to stand tough to make britain a cautionary tale. it wants to discourage nationalist in italy and france from leaving the european union. written has to find a way to come up with a deal that keeps scotland part of the united kingdom. there is a lot of pressure on theresa may. alix: we just heard from the prime minister nicola sturgeon formally asking theresa may for power to hold the referendum. we lay out the situation that you are creating.
the u.k. does not have negotiating power, do we need to prep for a long, muddy transition deal, or a bad deal? britain -- it will be interesting how britain negotiates. in the end -- i think the problem, regardless how people does needtain really as much free trade as they can get with the rest of your. -- rest of europe. they also need a free movement of people. it will be interesting how this plays out. the other thing to say is that the global economy, the global financial market, just sold instantaneously after brexit. this has always been a big splash for britain and a small ripple for the rest of the world. that hasn't changed. alix: you have analysts saying they are buying.
they will buy the pound. and two agree000 with those calls? david k.: sterling sold off a lot, that is helped the british economy grow and do better in terms of growth. a buying opportunity for sterling-based assets. in the long run, it will diminish your living standards. british pounds will buy less overseas. i get why people think the british assets are cheap. i would like to see how this plays out a few more rounds before having a firm opinion that britain will ultimately do better than i fear. jonathan: a splash for britain and a ripple for everyone else, maybe it won't be disruptive for europe. is that a relative trade or a serious investment about the trajectory of europe over longer-term horizon? david k.: it is a long-term
view. europe is recovering. the recent history of the european economy is a series of unfortunate events. they have continually shot themselves in the foot in causing recessions. if they can avoid doing that, there is no need for recession in 2011 at all, if they can get the ecb to back peripheral country debt. if they can avoid choosing themselves in the foot, they are on the brink of a long and s -- long expansion. .he euro is very cheap they are running a trade surplus. there is not that much need to cut back in terms of fiscal spending. europe has a lot of running room. there is pessimism about european politics. i believe it will hold in europe. europes fear that the
hanging over from south african assets has materialized. who replaces him? >> we know that the finance minister will be replaced. presidentow is the says a swearing-in ceremony will take place later today. the south african congress is calling for unity. they say they will possibly meet to discuss the matter and see the way forward. is reminiscent of the time the president fired the former finance minister and had to retract his decision after the pledged to reverse his decision due to the market reaction. alix: is the president going to keep his job? >> that is the question with the
amc saying they are calling for unity and will be holding a discuss the implications. we're not sure if the president is strong in his position not only in the country, but in the ruling party at this stage. jonathan: david kelly, there has trade blanket long e.m. that has outperformed in equity and foreign exchange. is this a reality check? david k.: yes. the reality we are checking is that people need to be active in e.m. this is no place for passive strategy. there are potential minefields always in emerging markets. they are more volatile. you need to make a decision to be in aem as a group and employ an active manager to avoid these potholes. david: as we have learned, there
.m.a political risk with e does that put a discount on those assets? david k.: it always had and should. e.m.'s are relatively cheap right now. we have seen a compression of e.m. gdp growth. we are seeing a reemergence of growth. up. gap is widening the other thing that is important is u.s. interest rates and the u.s. dollar. a spike in u.s. interest rates emergingollar puts countries on the defense because they are trying to protect weaker currencies. think about the trade issue here and why do we have a trade deficit? the dollar is too high.
if the trump administration tryingo a policy of not to defend a strong dollar, but a weaker dollar policy, that would be better for e.m., because it is less of a threat for devaluation of their currency. from u.s. interest rates, a strong dollar, and the reemergence of stronger e.m. growth is a reason to be overweight in e.m. in general. david: it is ironic to talk about political risk, given what is going on in washington and france. has the spread come down, e.m. versus d.m.? there is political risk in developed countries. european risks are overblown, but in italy in particular, because of changes in the voting law, if the five-star movement gets 40% in the next election,
that could cause problems. there are risks in developed countries as well as emerging market countries. long-term growth is important. buy u.s. or buy e.m.? more k.: buy both, but e.m.. coming up, vincent reinhart. you are watching bloomberg as we wrap up the trading week. futures a little softer. negative three on the s&p 500. ♪ careful joe, they've got you outnumbered.
something for everyone is awesome. find your awesome with the xfinity stream app. more to stream to every screen. thank you so much for that down home welcome. show me female vocalist of the year. thank you so much. thank you so much acm's, i appreciate it. show me acm best moments. i could never have wished for, asked for and dreamt of anything more than this. catch your favorite moments from the acm awards and an exclusive encore performance by kelsea ballerini following the show on xfinity x1. the acm awards. live on sunday, april 2nd 8/7 central on cbs. jonathan: from new york city, this is "bloomberg daybreak." i am jonathan ferro. futures are negative, down 12
points. the biggestowards week of gains since february. potentially closing out the best quarter since late 2015. the ftse is softer by almost half of 1%. up 1/10 of 1% in frank bird, germany. personal income for the month of february at 0.4%. bitonal spending, a little of a downside surprise and 0.1%. the median estimate at bloomberg was 0.2%. the year on year comes in at 2.1% here the court month on month read is 0.2%. 1.8%, the on year median estimate was 1.7%. that is in line with an upward provision. alix: i think we got it.
visibly earning more, spending less, inflation picking up. across.off picking up the dollar is range bound for most of the morning. vincent reinhart, the standish mellon chief economist in boston. you heard me describe what i saw, making less -- making more, spending less, inflation picking up. : 1/10 here, 1/10 there, it was down the fairway with market expectations. the important number for me was ondline inflation on a year year basis above the federal reserve's goal. the federal reserve's long-term goal is to present. that is something the f1 see will have to think about. iserwise, household spending subdued and hard to understand
given the creation of wealth. that is what it is. alix: you have core is still 1.8% for pc. e. how much of that 0.2% will persuade the fed? vincent: not much. they talk about inflation expectations. they believe it is well anchored at 2%. are informative, but not determinative. what it does send a message is that inflation rises and they are pretty much close to coal and there is a reason -- to goal , and there is a reason to normalize monetary policy. jonathan: the headline will be deflation gate hit its first goal since 2012. it is the first time since 2012. a be there is not a rush, because it has taken so long to
get to target? vincent: that is exactly right. this is a slow pace doors policy renormalization. they painted the target. a 3% nominal funds rate. absolutely want to be sure it is market participants are comfortable. it is not a federal reserve that surprises anyone. david: we will hear from bill dudley in half an hour. what message will he take from this, and where is the fed headed? it is consistent with what the fed has been discussing for the last several months. they put more emphasis and calibrated the markets toward the dot plot pointing towards three hiking total. frontthing, the core pce encourages steady the course. alix: the dollar says no.
that case,ver 2% in both are making a relatively hawkish stance. >> i think the dollar will react future fedpast and policy changes. we are looking at almost two hikes priced in for the rest of the year. driving dollar strength going forward on the data, it will be dependent on how that shifts. the risk looks to be well priced in at the moment. the next trigger will have to come out of washington. no butn: the dollar says treasuries have been saying no for a while. looking at the five-year, it has been rolling over. a nominal basis come the 10 year yield has been doing this and ending where it started. why is the data telling is one thing and the market price telling us something else?
a couple of points. 2016 is when the fed realigned its policy guidance closer to the market. 2017, and inconsistent story getting closer to where the fed guidance is. that marketsrt is are forward-looking. investors may have gotten ahead of themselves thinking there would be too much coming out of administration in terms of fiscal policy and regulatory relief. the dollar depreciated. appreciated.t i think what you have is a rumor,bit of buy on the sell on the fact. alix: if you have inflation over moving lower,vens
it implies the market does not believe inflation can sustain above 2%, echoing with the brookings institute put out here and you will have to target 3% inflation to sustain 2%, which means lower for longer. is the market dealing with that scenario versus the data in a short-term hike? >> it might just mean that break are cheaper. inflation is on the rise and it is a good opportunity. if you cannot defend 2% as your anger, how will you convey you will raise it to 3% -- as your r him how you convey you will raise it to 3%. all central banks have painted that number on the side of their building. it is difficult to dislodge that without a credibility loss. the answer is a slow path. get used to it.
they will raise rates slowly. inflation will move up slowly. the risks are on both sides of the forecast. david: what are you looking at on the bloomberg? explain it. dollar/yen.ing at the month that we had, it looks like we had some rebalancing and other pressures pushing dollar/yen lower. it looks like a turnaround in the leaveollar/yen is typicalcycle and is a that we have had such a prolonged time with the fed being low. going forward, dollar/yen has been the barometer for the inflation trade, the motivated by trump being elected into office. that has come up. entering the second quarter, it
is typically a point in the calendar where you have fiscal .ear-end turning over in japan a seasonal portfolio taking place. i am curious, given where u.s. treasury yields are turning now, if there will be enough appetite from the real money accounts in see that portfolio be as robust as it has been in the past. david: take out the so-called trump trade entirely. this is steady, slow growth confirmed by the numbers. what happens to dollar/yen at that point? >> it is a function of how the fed is being priced going forward. we are pretty much price to perfection. reallyrading basically well in line with what 10-year treasury yields are.
think there is scope for limited upside given the portfolio dynamics. at the same time, the fed in play for much of the year helps to introduce a floor under dollar/yen. the next impetus will be what happens on the portfolio front. that will be taken in conjunction with with the hedgingcost is going, the outflows from the u.s. treasury. that will be something to watch going forward. jonathan: we want to wrap things up. consumer confidence was at the highest since december 2000, just before the house care failure. it is built up to an extreme position relative to the hard data. you expect that spread to reconcile in a way that people don't want, the soft data coming to the hard data? >> that is the risk. bloomberg intelligence split up
the surprise index between hard data and soft data. hard data is moving sideways, soft data contributing to the sense that the economy is doing better. we got ahead of ourselves, expecting too much from the administration. they will deliver some, not as much. that is reflected in consumer and business confidence. remember, first quarter gdp, there is a pothole. we will be talking about real gdp growth in the neighborhood of 1%. that will be disappointing. jonathan: great to have you on the program. that wraps up the latest data around the united states. the fed preferred inflation read. alix: you stole the headline. jonathan: let's get to your headlines. here is in the chandra. will testifyynn
before congress in the russian investigation. immunity fromants prosecution. russian interference in the election is being investigated. mike flynn was forced out after misleading the vice president about contacts with the russian ambassador. the eu is signaling the u.k. will get one year to work on a post-brexit trade deal, only if prime minister may settles the eu financial demands first. they want negotiations to run in parallel. drafted eu guidelines says trade will be discussed after progress on other issues. will order amp study to identify trade deficits with other countries. that comes after the announcement he will meet next week with the chinese president. president has frequently blamed china for the trait deficit.
peter navarro says the study will guide the president's trade policy. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. alix: coming up, danny blanchflower, the dartmouth college professor of economics, will react to our official interview with bill dudley. danny blanchflower is as dovish as you can get. his reaction later in the show. this is bloomberg. ♪
of new york president. youremma chandra with bloomberg business flash. an unexpected rise in quarterly profits. oxcome gets half of its sales run apple. hong kong has been one of the hottest markets for tesla's electric cars because electric vehicles are exempt from attacks on new cars. that ends tomorrow when electric car buyers will have to pay the tax. they'll raise the price of a tesla by 50%. the narrow bread will be the first major chain to lift the amount of added sugar in it soda machines. they're trying to steer customers away from sugary drinks. they plan to offer averages made without artificial ingredients.
i am emma chandra. this is bloomberg. david: we spoke with peter navarro, the director of the national trade council. although trade deficits are not --, they are not to blame they are to blame for u.s. job loss. peter: these deficits are calling job -- causing job loss. historically, what will happen with this omnibus investigation into trade abuses is the secretary of commerce, wilbur ross, and the u.s. trade representative will take a comprehensive look at the different ways that trade deficit might be happening in the trade space. david: joining us is lou take hickmore. there has been global growth finally.
europe and elsewhere. how concerned are you when you hear peter navarro say we have to look at all of the trade relationships and look at trade deficits as a corporate? -- as a culprit? in the u.k. we are resetting our trade relationships with europe and the world. the u.s. doing the same at the same time is not great in terms of global growth. there is an underlying change that had been going on before trump with globalization getting to its natural peak and coming down the other side. it might be that this is a good time to revisit lots of trade relationships. the next days, it will be fascinating what comes out of the u.s. it is good to do this review and take the time to have a good look at it.
i will be fascinated to see what comes out at the end. david: we had a guest that thought the brexit could be good froor the u.k. because they could free you from protectionist attitudes. but there -- would there be more global trade after brexit? economy, wee u.k. are an open and internationally focused economy. a lot of the trade rules were designed by british trade experts. i think, we will have to take a year and a half of negotiations to have a really good sense of what we will be left with in europe. elsewhere around the world, the growth will be more important for us as we go forward. we have been dropping down to 35% trade with europe. that will drop further. there is a good chance it is a good thing. we will wait and see. jonathan: the global trade
story, there is a bearish rhetoric, a bearish narrative that hasn't materialized. , none of this has materialized. what is the biggest misprice? luke: u.s. treasuries are still too low in yields. we could say europe would get pushed up aggressively over the next six months to a year. repositionedetting around the world, how'd you pay for those deficits? one way is you sell your debt out in japan. on the quarter and rebalancing , we goes on in japan have seen reissues in europe and the u.s. from asian investors, continuing to finance the deficit. if the deficit goes down, that is not great for u.s. deficit either. jonathan: we talked about the inflation dynamic.
let's bring everything into the conversation. vincent: if treasury yields are mispriced, i would like you view , because thats spread is wide and you see the distortions a show she hated -- .istortions associated markets are pretty much well aligned with federal reserve guidance. the treasury yield curve thoroughly reflects an appropriate view on monetary policy. "premium" should not be zero. that is where estimates are now. it will rise over time. that is gradual. in terms of gross mispriced things, i look more to europe than the u.s. the bloomberg terminal, check out tv jack as out online come interact with us directly.
alix: we will hear from the new york fed president. vincent reinhart is still with us. more on the balance sheet question. how big should the fed's terminal balance sheet be? vincent: what matters is their policy rate and re-normalizing. the $4.5 trillion balance sheet, almost a quarter of gdp, is probably too big. the reason it is too big is it makes federal reserve officials think that they have another around with to influence the economy. that might be a bridge too far. over time they will stop reinvesting and get to a sample plerbalance -- a sim
balance sheet. alix: that is what created what we are seeing in the treasury market, the stock market. you're saying that will not impact anything? vincent: it is less important than their policy rate. for an official institutions hold more treasury securities than the federal reserve. i'm sorry -- david: i'm sorry, i'm interrupting you. go ahead. vincent: more than half of treasury securities are held in official accounts. and you add up the fed and foreign reserve managers. it is not a free market. it is a manipulated rate. part of the reason of the loan ownership.flects that it is more striking in german bunds. not so important
how big the balance sheet is, and you would like it to be smaller, how they unwind it makes a difference? taper 10we saw the trumpian just the threat of slowing purchases had large dislocations -- the taper threat ofust the slowing purchases had large dislocations from the market. they said they would do it when rate normalization was well underway, it sounds like sometime in 2018. full disclosure, i wrote a couple of papers a dozen years ago on how to do unconventional policy. we did not include a final from then how to exit policy. we are seeing the unevenness of that. the have to tell us the plan and well in advance. they can go slow when they keep
that plan. alix: 40%, staying and zero bound going forward, creating a risky asset poll. do you agree? are terribleomists at forecasting inflation. if you look at the charts of inflation forecasts 18 months ahead, they are very wide. the forecast, if you anger it at 2, is very wide. there is not a good probability that is inflation would go into negative territory. alix: we have to leave it there. you are staying with us. udley next. this is bloomberg. ♪
white house trade advisor peter navarro tells bloomberg deficits are always bad. quarterly review, u.s. equities headed for their best three months in 2015. are investors beginning to move their money across the atlantic? u.s. inflation reaches the fed's target for the first time in five years. the fed president joins us exclusively with his rate hike forecast. from new york city. a warm welcome to bloomberg's daybreak. i'm jonathan alongside david and alix. 30 minutes away from the opening bell. here's how the stage is set as follows. a whip through the check for you. beginning with equities. futures down about 13 on the dow. lmost a tenth of 1%. we could be closing out the quarter for the best quarter since the back end of 2015. if you switch out the board quickly, here's the situation, treasuries unchanged. pretty much unchanged in the
quarter. we began at 2.44%, potentially we end at 2.42% on the 10-year. the euro a very brief squall squeeze, 0.677. alix: on this last day of the first quarter here are the movers in the market you need to know about. f.m.c. will swap assets with dupont. $1.2 ide unit spend about billion over to dupont. assets, shedding some part of the e.u. position for the dow chemical deal. black berry, profitable in all part quarters in 2018. a fourth quarter earnings beat estimates in margins improved to 68%. nd alcoa up 1% upgrated -- upgraded to b.m.o. to $45. there was a rumor yesterday that alcoa was going to buy out rio tinto. not commenting on that. that would be some kind of head line.
jonathan: that would be some deal. before we we get to mr. dudley, inflation back to tearget for the first time since 2012. does that mean the fed is behind the curve or validate the fed being patient over the last five years before they finally did start to make a move? david: interesting to hear what mr. dudley had to say. i would guess we were right. alix: the question is sustainability. i go back to the brooking institute. it was fascinating. if we spend 40% of our time you have to inflation your -- you have to raise your inflation market. jonathan: isn't it amazing to talk about normalizing the balance sheet and treasury still 2.42 on the 10-year. we cross over to bloomberg's economic and policy correspondent michael mckey who stands by. michael: good morning. we're at new college, a small liberal arts institution here in sarasota that is the honors college for the florida university system. it is also the alma mater of new
york fed president bill dudley. we thank you for having us at your alma mater this morning. thank you for joining us. the mood on global wall street, the question on global wall street has shifted recently from when is the fed going to move to how far, how fast? to put it in terms that have come up in the last week or so, are you a two more this year kind of guy or maybe a three more this year kind of guy? how many times do you see the fed moving in 2017? william: it depends on the data. trying to predict what's going to happen what i see today. look what happened in 2016 in the fall of 2015 the median consensus was four hikes. in 2016 we did one. 2017 going into the year the median was three. so far we have done one. where the f.m.c. is a room place. a couple more hikes this year seems reasonable. if the economy is stronger than
expect we could do more. weaker, we could do less. michael: what tells you it's time to raise rates? it took a long time to convince wall street you were going to move in march primarily people were saying nothing changed in the economy between december and march. william: nothing changed. growing above trend. generating sturdy job gains. we had been trying to communicate to people if the economy stayed on that trajectory we would remove monetary policy accommodation. the march move was consistent with what we said previously because it was performing in line with what we were anticipating. mcmikal: would you consider moving in may? or do you want time to see what happened with this rate increase to see if there are changes in the economy? there is no press conference so mechanically it's more difficult. william: i don't think we're at the stage in the cycle where there is a great urgency because the economy is growing a little bit above trend. inflation is still a little below our target.
for example if you look at the core personal consumption expenditures, it's running about 1 3/4%. there is not that huge rush. the economy is not overheating. at the same time, policy is accommodated. and we're pretty close to full employment. so it makes sense to very gradually take back accommodations, get monetary policy closer to neutral as we go through 2017. michael: where is neutral? how high will you go? william: i think the consensus among many people is that the neutral federal funds rate adjusted for inflation is somewhere between 0% and 1%. at our 2% inflation target talking a neutral funds rate of somewhere in the 2% to 3% range. light now we're 91 basis points or so on the federal funds rate. we have maybe 100, 150 basis points. it all depends "on the economy." if the economy is stronger, that would suggest we have a little more to do.
if the economy is weaker probably not so much. michael: what about the base? william: if you look at the last year we have been growing above trend. generating very sturdy job gains. the unemployment rate hasn't moved much. that tells you there is actually a little more excess slack in the market than you would think looking at the unemployment rate. the fact is people who have been discouraged, workers are coming back into the labor force. that allows you to generate sturdy job gains without putting pressure on the labor market. michael: is it the level of fed funds that is stimulating job growth? in other words, if you raise rates are you going to cut that off? william: i think you are perhaps going to slow that down. that would be the goal. i don't think it's a question of the spigot wide open or shut. turning it down a little bit so the economy isn't less risk of overheating as we go forward in 2017, 2018 and beyond. michael: fiscalpolicy.
did you adjust niff your forecast to account for something happening in 2017 or 2018? william: not explicitly because i don't know what it is. how big it is. or when it's going to a i do think that it's true that likelihood over the next couple years is fiscal policy becomes more expansive. until i see more visibility in terms of what it is, when it is, and how big it is, i'm not going to incorporate it into my growth forecast. the fact i think fiscal policy is likely to turn stimulative over the next couple years, that affects my view of the risk to the outlook. this creates a little more up side risk to the outlook than before. michael: consumer and corporate confidence, very high since the election, but dow see evidence corporate leaders telling you that they are acting on that confidence? are they investing? william: i would say at this point there has been a huge increase in both consumer and business sentiment, but it's not translating at least yet into the hard data. this is one reason why when we
get the first quarter g.d.p. numbers at the end of next month they are probably going to be weaker than one might expect given the very large improvements that we have seen in consumer and business -- jury south. is the rising confidence going to translate into greater economic activity or not, we'll see. michael: do business leaders say they have to see something concrete before they spend? william: they probably would like to see more clarity for what's going to happen to the corporate tax regime. that's important. generally the mood is pretty upbeat. michael: do you think that fiscal policy being talked about can generate 3% or better growth on a sustained basis? or are we a 2% economy? william: if we can do things that push up productivity growth, we can also push up the sustainable growth rate of the economy. think about this, sustainable growth rate of the economy is basically how fast is the labor force growing plus productivity. labor force in the u.s. is only
growing about a half percent a year. to get 3% we need 2% growth. not impossible. we did it in the late 1990's. you have to say these policies have -- are going to have to lift productivity some way. michael: what kind of policy would do that? william: there is no question that infrastructure spending over time would raise productivity growth. better education for people. more job training. in other words, lift the capabilities of workers. some types of deregulation might also help on the productivity front. things you can do to lift productivity. the question is how much will you get from those things? michael: the fed's balance sheet just under $4.5 trillion, back into prominence members of the open market committee talking about t big implications for investors when you start doing something. the first question is when do you address it? how do you know it is time to start doing something? william: we have said publicly a number of times we're not going to normalize the balance sheet
until the federal funds rate normalization process is well advanced. the question is what does well advanced mean? generally, if you talk to people in the market, they think that will start sometime with the federal funds rate between 1% and 2%. not quite yet. wouldn't surprise me if sometime later this year or sometime in 2018 should the economy be performing beyond expectations we'll start to gradually let securities mature rather than reinvesting them. we have been very clear that the balance sheet is really not our primary tool of monetarypolicy. short-term interest rates are a primary tool. if pea do do something on the balance sheet it will be something that will be passive and running in the background. we would want to do this in a way that was just a very, very not a big deal. michael: you suggested yesterday, tapering your reinvestments rather than just ending them. given the taper tantrum we saw a couple years ago, wouldn't the markets take it as a sign it's
ending and adjust accordingly? william: i'm not worried the markets will react to the changes in our balance sheet in a violent way. already factored in, most people think sometime late this year or 2018 we're going to gradually start to allow securities to mature and end -- gradually end the reinvestment process. the taper tantrum in 2013 was as violent it was because people conflated the idea we're going to reduce the pace of asset purchases with pulling forward the timing of monetary policy tightening. in this case for my personal opinion if we start to normalize the balance sheet, that's a substitute for short-term rate heights it would also work in the direction of actually tightening financial conditions f and when we decide to begin the normalize the balance sheet, we might decide at the same time to take a little pause in temples raising short-term interest rates. michael: do you stop reinvestments in mortgages only? or also treasuries? if you look at currency and
circulation and other fed obligations, your treasury holdings are equal to what you would need as an asset to hold against your liabilities. william: that's for the committee to decide' we haven't made those decisions. michael: does it make sense to focus on mortgages? is there a problem doing that because of payment? william: i don't think there is a strong need to differentiate between mortgages and treasuries. speaking for myself. it's up to the committee to decide. michael: how do you envision conducting monetary policy in the two ture -- future? do you go back to a fed funds rate? do you continue with the current system of interest on excess reserves and repose and the feds fund rate trade somewhere in the middle of it? when do you make a decision on that? william: we don't have to make that decision for quite some time. current system is working very well. there are some questions would the fed be able to raise the federal funds rate in a reliable and predict able manner with large balance sheet. we created the overnight reverse
purchase agreement. and we have the ability to pay interest on excess reserves as sort of the ceiling. and the federal funds rate has traded right in the middle of that range. when we raise our target by 25 basis points, the federal funds rate rises by exactly 25 basis points. not from my own perspective having run the open market desk in 2007, 2008 when things were more turbulent than now, this works well from my perspective. michael: at the end of this year you'll have a bit of a little problem in that the two leaders of the federal reserve, their terms are going to be up and we have to find out if they are going to be reappointed f donald trump were to come to you and say is janet yellen, is her policies, are they my friend? what i'm trying to do for the u.s. economy, what would you say? william: absolutely. the fed has a clear mandate from congress. maximum sustainable employment in the context of price stability. how is the fed doing on that mandate? we're at 4.7% unemployment rate.
inflation is a little bit, if you look at underlying inflation, a little below our 2% objective. we're not very far off. we're adjusting monetary policy untilal careful, measured way. i don't see any reason why people wouldn't look at yellen and say she's doing great jofpblet michael: bill dudley, thank you very much. from your alma mater in sarasota, florida. from sarasota back to new york. jonathan: thank you very much. i want to bring in our guest now from new hampshire, danny, college professor of economics. still very much with us. want to begin with the balance sheet story. the story on rates, a couple more hikes this year seems reasonable from mr. dudley. that's expected. on the balance sheet, roloffs could possibly begin late 2017. how are they going to communicate this effectively without a market disruption? >> that was the news out of bill dudley's interview.
two parts about the balance sheet. one is that he kept talking about late 2017 not something in the fullness of time in 2018, and secondly said he was pretty agnostic between treasuries and mortgage securities. i had been working on the assumption they roll off mortgages, stop reinvesting in mortgages first because they don't like holding those sorts of securities. they never have. so that part was news. i think it is important to communicate that to markets pretty soon. i.e. they are going to have to have a couple paragraphs in the minutes and they are going to have to have some staff studies out explaining exactly what they are going to do. if they intend to go as early as later in this year. jonathan: does it become even more redundant given this balance sheet normization process could be a substitute for rate heights -- hikes?
>> i think the point is right the comments on the balance heet were important, the reality is we just don't in a moment i remember in 2008 when the -- at the fed, the talk was -- what should we do about q.e.? what should we buy? what are the effects of the q.e.? the answer at that point was, we really don't know. so vince is right in the sense we like to communicate what's going on, but the reality is we have no real blueprint on what to do. it's clear that dudley day was important he said they think of it as substitutes. the answer is they are scrambling around in the dark. they are going to have to start to think about what happens as we sort of disentangle, what happens if we stop twisting? which assets should we buy? let's be real, there isn't any really economics to till. we didn't have the economics to tell us what to buy on the way in. there is no real economics to tills on the way out. so it's absolutely clear they
need to get some kind of blueprint but they just don't know. but eventually you have to sort of disentangle yourself from that big balance sheet. it wasn't obvious at the time we when we did it where there were actually interest rate cuts should come ahead of the balance sheet. this is in new territory. obviously the markets are going to try to follow what's going on. but this isn't easy stuff. >> danny just gave away the dirty secret of central banking that it's really hard to quantify quantitative easing. easy when you are talking about basis points. balance sheet -- danny: direct. think about what monetary policy is doing and what is quantitative. what is the balance sheet doing against low interest rates? the two sit together. we can't really separate out the effects of one against the other. so essentially what they will do
is they'll do a little bit, see what it does. try something else. nd see what it does. this is scrambling in the daveraget that's what happened on the way n you decide to buy a particular asset. see what it does. buy another one. it will be a slow process. i think it's really important for us to understand there is no blueprint. they simply don't know. they don't know what to sell if you like. they don't know what speed to do t they certainly don't know whether they should go to mortgage backed securities or treasuries. which one should be sold first? they don't know. they have to try to work that out. jonathan: that takes me to the question is it important what the blueprint is as opposed there is one clearly articulated. there are some things in the world as long as you tell us what you're doing you are fine. david: whether you drive on the right or left. it doesn't make a difrpblts is this one as long as they announce and make it clear, then the markets will adjust? danny: they can't announce a
plan because they don't know what the effect of quantitative easing is. they don't know what will happen as they start to reduce the size of the balance sheet. so really all they can say is we're going to do this. this is where we're going to start. and we'll follow the data and see what the markets do and we'll try and explain how we're going to do it and where we're going to start. understanding that this may be reversed very quickly in the sense that, yes, we start to do mortgage backed security and that has an effect we haven't thought of. we'll have to switch. i don't think they can literally map out a plan for it because we have never been here. remember, all the other central banks are actually still buying. e.c.p. is still running a quantitative easing. it's not just what happens when you do it. it's what happens when you start to reduce the size of the balance sheet, when everybody else is -- remember, right now today the bank of england is buying u.s. corporate bonds. jonathan: before we get -- just
want to give people an idea of the scale and magnitude of the story. bloomberg quickly captures how much the fed holds of treasury. right at the top as the biggest holder in treasuries in the world. if you go to the far right side to the maturity distribution of the fed holdings, this is so lumpy, vince, 2018, 425. 2019, 352. they are talking about doing this at a pretty lumpy time to be executing it. how do you allow that stuff to roll off over the next three years, vince? vince: that was the surprising part of bill dudley's remarks where he said he was pretty agnostic between tresh's and mortgage backed securities. it's also clear they are not going to just stop. they would taper those reinvestments to make it as easy as possible. and i think the important part is they have to say, we're going to start, we have a plan. however that plan is subject to
surprising. in some sense the fed's biggest communication problem they keep saying everything is data dependent. what they really mean is we have a plan we're going to stick to the plan, unless there is news. unless we're surprised. data dependence makes it sound like they are making it up every meeting. they are no. they have a plafpblet they are going to execute the plan unless they are surprised. alix: danny, jump in there. danny: i agree with that. but i think the problem in a sense is they do have a plan. but actually janet yellen, again today bill dudley essentially admitted that raising of the rates and where they are going isn't really justified in the data. though so that's quite interesting. what's happened in the data since december that actually justified the rate rise in december and justifies further ones, it's pretty hard for you to find it. i think you're right. they have a plan to say it's
data dependent is iffy. i'm a strong believer you should in the labor market look at the employment, pupetlation rate not the unemployment rate. if you do that, you are 8.6 million jobs from full employment. that's part of the problem that i don't think they are actually -- the data justifies this. vince is right, they have a plan, but the plan actually doesn't look to be data dependent. and we have a history. for the last eight years they have been saying the same thing and have not been able to deliver rate cuts. rate rises according to the plan. i think the plan is iffy. alix: it's more like -- david: we should be encouraged bill dudley did say he thinks there is more slack. he's looking at the -- danny: absolutely. alix: there is no urgency -- there is no that urgency. the other issue to me is that balance sheet rollout. you saw jon pull up that function. as they roll off in the short-term, expand their
duration risk at the end of the day? how much risk is the fed going to be left with over the medium term, vince? vince: look, the fact is the fed doesn't have a whole lot of capital. a central bank that issues paper money doesn't need to have capital. they may have losses. indeed in some sense they want to inflict losses on themselves because they want to raise rates. and they have a long duration portfolio. in the scheme of things it doesn't really matter much. what's more important actually is what it does to interest cost to the treasury. yesterday the congressional budget office released their long-term debt projections and that was a very scary path where you talked about 150% of net debt in the hands of the private sector to g.d.p., and you saw an increasing interest cost. it's what the fed does to the overall cost of treasury debt not whether they make money or
profit or loss in any given year. alix: it's interesting to me that mentioned you could substitute balance sheet normalization or the start of that for a rate hike. janet yellen has specifically said we're not going to use the balance sheet as a fed hike tool. is this a switch in how the committee will be using the balance sheet and it's monetary policy, vince? vince: i think what it dolestels you -- -- what it tells you is -- alix: danny? anny: i think this is right. let's understand who bill dudley is. bill dudley's words about what's happening on the balance sheet are important. he's the president of the new york fed. and he in a sense he has the say so over this thifpblgt the one thing i think i should interject, i thought this was very measured and calm. very different in way from
william's and rosen and fischer, all being very kind of time dependent, we're going to raise rates. i thought this was very calming and sensible. pretty -- pretty much saying to the other people we can't move on a time dependent thing. we have done that in the past. that wasn't credible. i thought this was a pretty important interview where he said to the others, calm down, folks, we're going to look at the balance sheet. but dudley is the person who is going to drive the way in which he balance sheet is reduced. david: it was a very good interview. jonathan: i wonder how difficult it must have been on the m.p.c. for anyone -- danny, gaming to give vince the "final word." vince, what are you looking for from the minutes next week? vince: i think bill dudley's discussion of whether the long run real federal funds rate was south of 1% was pretty significant. he was talking rates down.
he was emphasizing, as danny said, the gradual path of rate renormization. he was talking between 0 and 1. dot. n't identifying a 3% it will be interesting to see what the conversation was. jonathan: danny of dartmouth, always great to have you with us on the program. looking forward to see you next time. vince from standardish mellon. the futures a little softer. the dow down 20%. s and 5500 futures negative four. ♪
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poised, to still close out the week with the biggest gain since february. and the biggest quarterly gain on the s&p. you hear the opening bell ring in new york city, switch out the board. treasuries been on the mark. where do we begin the year? 244. the consensus call was short, short, short. it turned out to be a flat, flat, flat. very choppy. equities doing their thing. the f.x. market follows under changed. we just showed on to the d.x.y. it that's the stage. 20 seconds here. here's the cash open. alix: a little softness across the board. the nasdaq up by .1%. sloipping from that record closing high. the dow off by 37 points. the dow is down for the month. the s&p on the brink. it looks like that couldn't case today. however, for the s&p this is the sixth straight quarter. the longest quarterly streak in about two years.
remember, yeah, a weakness at the end of march, the quarter was stellar. s&p hit record after record after record. the nasdaq having the best quarter since 2013. we'll look at some of the individual movers. apple not moving quite a bit. it did have some news today t got an upgrade. raised 7%. hang high had surprised earnings. apple represents 50% of its sales, they reported a surprise 30% earnings gain. that stock slightly lower. advanced microtwices, mycron, outperformed over there. and blackberry up 10%. they are going to see profit in all its quarters in the full year 2018. best day in two years beat on all earnings estimates. total turn around for that company. last day for the first quarter, let's see where we stack up. this is a function g.r.r. go on your terminal.
tech, health care, consumer discretionary, and staples. energy the worst off down by 7%. telecom off by 4%. utilities making a come back by 5%. it's an interesting breakdown. you have a little bit of risk. and you still have safety in the market as well. the trade with tech and energy at the back half of 2016, at least tech the winner up over 12%. jonathan: joining us now is bruce, chief investment strategist. and john here at the desk. bruce, begin with you and reflect on the three months have gone so far. potentially the biggest quarter so far since december, 2015. what's the take away from the last three months for you? will you be applying it in any way, shape, or form in the coming cause? >> i think the take away is confidence has returned not only to the stock market but also returned to the economy. confidence may be running ahead
of reality, but nevertheless consumer confidence, business confidence, typically are leading indicate kators for the economy itself. i think -- indicators for the economy it sefment i think that's what's driving the stock market. jonathan: the confidence story versus the hard tata. this coming to us from bloomberg intelligence. the spread is follows. you can see it clearly, can't you, it's the orange line. that's the surprise index for the survey data. you strip that out, bouncing along the bottom. a lot of people this morning talking about how the top one will reconcile lower. the bottom won't reconcile higher. what do you think will happen? >> i'm simple. all i see is earnings expectations seem to be rising. for some reason they seem to be rising. that tends to think we're getting not worse. the corporations are seeing a friendlier environment. alix: we have seen first quarter revisions down by 1%. it's higher than the five to 10-year average, but they are coming down. does it get worse? john: it will get worse in the next reek or so.
but they'll still be ok. i heard somewhere i think earnings were expected to be up close to double digits with the s and p in the first quarter. that's the highest we have had in the last two or three years. i think things are getting better after eight years of being at the bottom. david: where does it come from? top line? cost savings? john: yes. more top line than it's been. david: revenues going up? john: yeah. they didn't go anywherefore a while. earnings didn't go anywherefore a while. that weighed on it. people were afraid and there were reasons perhaps we were close to the end of the earning psych if not the economic cycle. that seems to have changed. alix: i feel like the rhetoric over the past couple months has been banks, health care, and tech. is that still going to be the trade in the second quarter? >> i think those three sectors are still going to do well. it's health care, information technology. i would also include the industrials in that area. they have done very well over the last 12 months or so.
i think the carrot is still out there. with the carrot being tax reform and infrastructure spending. until those things come to the forefront, i think it's buy the rumor. david: bruce, you named three sectors particularly depend on washington. whether it's the banks with deregulation or the yield curve. industrials with the possibility of infrastructure spending. or it you are talking about places susceptible to changes in washington. bruce? >> soarry. yes, i think once again you are talking about expectations, and i think that's the heart of the matter, currently. what's happened with the consumer and business expectations, they typically run stronger than reality. that's normal. but it's also a fact that expectations are leading indicator for the economy. so once again i think the carrot is still out there.
tax reform, infrastructure spending, and improved topline growth leading to groment line growth. i think that's what's driving the stock market and will likely prevent this consolidation or correction phase from becoming something much worse. alix: so if it's by the rumor, what's going on with small caps? says buy it now sell the rumor. john: i think it's mid caps i would rather focus on the small caps. with mid caps you have the best of both worlds. a little bit of liquidity of the large caps. it's normal for them to outperform. that's been -- i think that's changing. i think you do buy the anticipation. i really do think you always have to buy some anticipation on wall street. i'm terrible at predicting the future and hate to do it and avoid it whenever possible. it's going to happen in the future. it's not the past. jonathan: everyone's looking for this policy correction. he doesn't think it's going to
materialize because everyone is looking for it. where is the head winds to the bullet case you set out today? john: i think the head winds all along have been since february that investor confidence had reached the highest level in three years. and what this typically means is there's been a drawdown in liquidity. we have seen that take its weight on the market and loss of momentum this month. i think that's likely to tifpblet maybe right through earnings season. maybe deeper into the second quarter. i think once expectations are cooled and even if pessimism comes into the market later on this quarter, the next quarter, i think the market would be poised for a good summer rally. alix: let's talk about positioning then and where people are positioned ahead of what we call rally. john, active managers increase in overweight sickicles biggest jump since 2008. you have equity flows up last week.
are we going to see a real rotation out of the u.s. into europe or u.s. cyclicles will be the play? john: they are both true. i think it's a situation with europe where europe, u.s. is better good. in other words, nobody -- we're not bad and they are good. they are not as advanced as we're. there is more of a change coming there. the markets are cheaper versus hick torqual new orleans. -- norms. i try to avoid predicting the future. the present is still a good environment here. alix: asking the same question over the last couple days, flows. you have cyclicles positioned. consumer confidence is high. and recent buying has been retay. at what point do you say look, this is overcrowded? >> i think once again you have to look at this through the lens of fear and greed. what takes place typically you buy the rumors, sell the news. if you are looking for a top in
the market, i would think it would come when it became obvious to everyone that tax reform was coming and infrastructure spending was on the table for real. and i think before -- until we get to that point, i think the market's probably safe. david: when are we going to see volatility come back? >> i think you'll likely see it come back later this year. typically the first year of a presidency, first six months of the year the market does pretty well. then it becomes more problematic in the second half of the year. so if the federal reserve board gets a little more aggressive here, raises rates, the news is out on tax reform and infrastructure spending, the market gets fully invested, i think the third quarter of the market could be vulnerable and volatility there for increase significantly. jonathan: shortest possible passion, absolutely possible. i'll put three options on the table. buy u.s., buy europe, or buy e.m.? a relative trade. first to you, bruce, which one?
>> i like to buy the u.s. jonathan: john? john: u.s. jonathan: thank you very much for joining us. later today, 30 minutes dedicated to fixed income. coming up at noon eastern time. the weekly event right here at bloomberg tv. the market's 10 minutes into the session. here's the scores so far into t we're softer. down by .1% on the dow. negative .1% on the s&p 500. you are watching bloomberg. ♪
time. alix: off its record closing high of yesterday, the sector nearing some levels we have seen not seen since the dot-com bubble of the late 1990's. having its best quarter in five years. danny fish joins us now. he manages thep janice global technology fund which has an average annual return of over 14%. tech also the best performing act juror in the s&p, up over 12%. how much more juice is left in it? >> thank you for having me. we believe that the text sector continues to be positioned really well given strong secular growth dynamics. in particular we think about what drives technology spending and number of investments in our portfolio not only the next quarter throughout the 2017, but through 2018 through 2019.
some of the megatrends that are actually going to start to come into play. a few of those megatrends are this confluence of internet of things finally coming to fruition combined with emerging technology and artificial intelligence and machine learning all laird on top of cloud. you kind of put those three megatrends together and it creates a pretty nice backdrop for the sector. alix: is this like a go buy apple, microsoft, google, amazon kind of call? broad based? or reliant on those big four or five? >> actually, there are a number of ways to play the themes. we think about it as selectively you want to look at which large platforms are well positioned. two of our largest holdings are microsoft and google, for example. and the thesis there is just in general as we think about generally speaking as you see these types of trends develop over time the larger companies
have actually been disadvantaged, just as they succumb to what's called the innovator's dilemma as they try to innovate. what's interesting through this cycle is the big are getting bigger. their competitive advantages are getting stronger. if you think about the amount of data that these companies are collecting, the talent that they are actually hiring into their organizations. and the network effects that they create as they get larger, you can paint a scenario where google, amazon, microsoft are all just much more important companies several years out. then there's also a number of lateral ways to play the theme as well. if we think about the internet of things and sort of edge computing, we have a number of investments in semiconductor companies we think benefit from edge profiting and those investments would include microchip in the microcontroller ace as well as zylynx in the
fpga space. david: let's assume for the moment i concluded artificial intelligence is the waste place i want to put my money. what are the companies i go to? particularly ones i haven't thought of. >> right now if you look at specific technologies, there are a lot of smaller companies, private companies. really the ways to directly play the theme at the moment are -- if you think about google, google is interesting because they have reinvented their search algorithm already using artificial intelligence. so it's an example of using their core competency and thinking of ways forward that they'll continue to leverage that. amazon's a perfect example of i.o.t. and machine learning, artificial intelligence coming together with alexa, and at this point in time those are the most obvious ways to actually play the trend in a direct way.
david: that drives you back to the big guys. there aren't the smaller ones i should look at. >> well, as i mentioned there are a number of ways to think about the space and edge processing as i talked about, but in terms of actually trying to directly invest in a.i. and machine learning, to your original question, the big guys are really the way to invest. as i mentioned, it's really interesting because it's a unique cycle in that just given the nature of those businesses and the way that they have scaled and the network effects that they have created, they are the best way to play this over a multiyear period. david: one last question. mobility. suppose i really want to go for mobility. where do i go? >> well, there are a number of place that is we could go with
that question. you-all come back to the two ames i threw out before. it kind of thinking through at ways to enter directly play the theme on processing at the edge. that's the way i think about mobility. not necessarily just autonomous car. it's not a mobile phone. it's not some sort of industrial piece -- piece of industrial equipment. it's sort of what actually enables all of the above. and those are a couple of vendors that actually should participate in that game. alix: thanks very much. denny fish. thank you. bloomberg terminal, check out tv go. click on our charts and graphics. interact with us directly. go to tv go on your terminal. if you missed any of that market interview with bill dudley with michael mckey, go back and watch the whole thing as if it were live. they are looking at the balance sheet potentially normalizing in the end of 2017 or 2018.
jonathan: from new york city, this is bloomberg daybreak. about 21 minutes into the session. here's how the stage is set this morning. futures were a little softer. equities are at the open as well. down about .2% on the dow. about .1 on the s&p 500. still set to close with the biggest weekly gains sense february. the best quarter potentially since 2015. switch up the board quickly, f.x. market this is what it looks lifpblgte euro firm, as we approach 107 once again.
the cable rate goes nowhere. and treasuries a bid. basis point of 2.4%. a yield that began with 2.44. a conversation now about normalizing the balance sheet yet treasuries still look stable. early on we talked with mr. dudley, chief of the new york federal reserve. this is what he had to say about the balance sheet. >> wouldn't surprise me sometime later this year or sometime in 2018 should the economy perform with expectations we'll start to gradually let securities mature rather than we reinvestment. we have been very clear the balance sheet is not our pry requirery tool. short-term interest rates are. woo-f we do something on the balance sheet it will be something that's passive and running in the background. mr. an: back in 2013 bernanke talked about banishing
have to blow and things blew up. now it's very, very different i wonder why it's so much more stavenlt that one line he keeps using this is not our primary tool. it's this idea it's going to take years and years. not going to be this rapid roll off. and you're not going to maybe notice. at least for now the market's calm. i wonder how you communicate that when they get closetory pulling the trigger. david: it doesn't make difference. they can hold on to it. it seems like money burning a hole in the pocket. alix: how do you telegraph to the market so they don't wind up getting stressed and upset. at the same time you remain data dependent. you keep going we'll tweak how it goes depending how it happens. jonathan: they depend -- it is a substitute for rate hikes. i wonder how much weight you can put on the summary of economic projections for anything beyond this year given that could be the move for 2018. alix: there is no consensus on
that. because fed chair says it's not a substitute. but dudley thinks we won't hike. david: long-term economic projections. talk about washington. whether that makes any difference. looking forward. today's big day down there there are executive orders, two of them coming out, about an hour right now, dealing with trade. we'll bring in our chief washington correspondentent -- correspondent. they'll review all the countries and figure where there are trade deficits and unfairness going on. what do we expect to hear further on this subject? >> first and foremost he'll come out and talk about how he wants to take a look at all of the trade agreements that the united states has with our counterparts around the world. that said, david, of course it comes out hot on the heels of when his tweets last night against the chinese government in terms of what he feels are unfair deals with the chinese about one week before he set to meet with the president of china in florida next week. second point i would make ai
just spoke with sources in the manufacturing world who are going to also be in the roosevelt room later this morning with president trump. he's looking to top consumer and economic confidence which is at a 20-year high according to new urvey out today. he's looking to say that his administration, his policies are trying to create that consumer confidence, that builders confidence he likes to frequently talk about. but this is all about trade in terms of an international market. when you look at the international complexities of it, we haven't seen many specifics. david: we know what he has to do to please the manufacturers. what is he going to do next week with the president as you refer to it in florida so he can go back to the constituents, workers as well as producers, and say i delivered you something on china. >> they have had a storied relationship even from the transition period to the early months of this administration when you think back to of the
chatter that happened with taiwan. when you think back to the politics of what has been going on in north korea. south korea. this is a president who has not been afraid to ruffle feathers with the chinese. but they also have to come together on some front. that why-s why i think today's executive orders while looking aggressive on some points are not as tough as calling them currency manipulators. jonathan: that does it for us from the bloomberg daybreak team. thank you very much. happy friday. ahead of the weekend, this is how we close out. we begin the fifth trading session of the week like this. softer down .2 on the dow. .1 on the s&p 500. from new york city you are watching bloomberg. ♪
bonnie: we'll take you from new york to london in the next hour. and cover stories out of johannnessberg and washington, d.c. first breaking economic data. fed presidents speaking today. >> we have the university of michigan sentiment index, the final read for march. it's coming in at 96.9. that is a little lower than estimated at 97.6. it looks like the first consuper data we have had some time that's perhaps below expectations and the earlier read on this. it looks like that the expectations is what was perhaps revised. remember this data coming on the heels of numbers this morning showing washington than estimate personal spending for february. and the fed's preferred measured