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tv   Bloomberg Markets Americas  Bloomberg  September 27, 2017 10:00am-11:00am EDT

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vonnie: we will cover donald trump's big tax beach this hour. we start with breaking news on data just out. julie: pending home sales coming in weaker than estimated with a decline of 2.6% in august on the year-over-year basis. that decline is 3.1%. bigger drop in this forward-looking indicator of pending home sales. the estimate was for a decrease of only half of 1%. ifwill be watching to see there's any reaction in the home builders. to get this somewhat choppy data on the housing market. stocks have been holding up relatively well this morning. we are seeing gains across the
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board almost in ascending order the nasdaq gaining the most as we continue to see a comeback in technology shares. have seen strength in small caps consistently over the past month. the larger cap averages don't quite retain those levels. a chart of the small caps and one interpretation of them. jim paulsen wrote in a report caps perform especially well when traders and investors expect inflation to accelerate. this is the ratio to the s&p 500. when it is rising small caps are outperforming. we are looking at a market-based inflation gauge. one measure of perceived inflation. essentially we have seen a
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bounce in the blue line at the same time we have seen small caps outperforming larger caps. speaking of inflation as well we are taking a look at the bond market this morning. we have quite a notable measure in the two-year yield. 1.4 7% this behind it has been since 2008 on the heels of janet yellen's speech yesterday in which she seemed to indicate the fed is going to continue with interest rate increases even if inflation remains muted. the 30 year yield also seeing a move upward. asis helping banking stocks they continue their rise. another group doing well today is chipmakers and chip equipment makers. this is in the wake of micron technology's earnings. it saw a better supply trend.
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mark: we are up for a fifth day. best run since september the 12th. big news today, alston shares up by 5.5%. siemens and the french company agreed to merge their rail business. to create this european transportation giant aimed at countering competition from china. itsens will transfer business making trade and transit cars and signaling equipment to alstom in exchange for a 50% stake in the enlarged company. 3 billion euros will remain based in the paris area. interesting comments from john
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mcdonnell yesterday. he said at a fringe event in brighton but if his party were in power we are going to be a radical government. labor has played out scenarios where if his party wins there is a run on the pound. corbyn agreed that the main opposition party should look at scenarios including a run on the pound and capital flight from britain in the eventuality that labor was to win the next election. it's interesting to see when we last saw runs on the pound. that was 1992 when the pound crashed. sterling fell by 4%.
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the last big sterling drop was the day after brexit when it fell by a record 8%. keep an eye on the french spanish 10-year spread. france is increasing its lead over spain for investors in government bonds. pushing through this once unthinkable overhaul of french labor code. this secessionist threat is gaining momentum in catalonia. investors demand to hold spanish 10-year bonds over french 10-year securities approaching its highs level in 14 months. want -- won'tt -- it? the road to tax reform has kicked off. we have just got the text. the republicans nine page outline of the tax overhaul plan . it shows white house and congressional leaders's vision for cutting taxes. this is the nine page plan. we are going to go through it with an adjutant in washington, anna edgerton in
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washington, d.c. we begin with the individual brackets which are going to be reduced from three. now there are seven tax brackets for individuals and we them to being condensed into three brackets with the top paying 35%. what we heard last night's there's going to be an option for a fourth tax bracket that congress can choose to include for the top earners in the united states and that is something president trump and white house officials have said they don't want to cut taxes for the wealthy. they want us to be focused on the middle class. so far we haven't seen much from congress that indicates they are willing to leave the top earners out of a tax cut that going to touch most americans. vonnie: it's looking like it's andg to be 12% of from 10%
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25% on 35%. when it comes to the middle class relief we're looking at a bigger deduction and this is what you had reported. we have confirmation in this document. $24,000 for married taxpayers filing jointly. 12,000 for single taxpayers. whole process republicans have tried to focus on making this a middle-class tax break. they are very aware that democrats are going to accuse them of trying to cut taxes for the wealthy and the wealthy will see some benefits. they are planning to eliminate the alternative minimum tax which is something that mostly hits top earners and planning to repeal the estate tax with republicans referred to as the death tax. there will be benefits for top earners. in terms of messaging republicans are trying to structure the bill in a way that they can sell it as a big benefit for the middle class. jonathan: what do you know about repatriation?
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there is a big move to try and bring back some overseas profits. one-timegoing to be a tax on those earnings and do we know the rate that might be applied? >> we don't know the rate and some of those details are going to be left up to the tax-writing committee. was decidedamework so-called big six which includes officials from the house, senate and white house the details like what the rate would be for the one-time tax on overseas income is going to be left up to the tax-writing committee so there are still a lot of details that are going to be worked out over the next few months and hopefully by the end of the year. you.e: thank the new document just released before the president makes it official in a speech in indianapolis. it's called unified framework for fixing our broken tax code.
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let's bring in douglas holtz-eakin, american action form president. there are senators will not agree to this. i am looking at orrin hatch who doesn't like the idea of corporate interest going away. how will this document appeal to enough senators for it to pass? i think the biggest thing is the commitment to get something done. no one likes the current tax code. doing nothing is actually dangerous. we have seen lots of u.s. headquarter companies move overseas. those kinds of trends are troubling to everyone. a framework like this is appealing. it's a commitment to have a progrowth tax reform with incentives to invest in the u.s. fix the international tax regime. of course there are the places they will disagree and you have
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highlighted one and the tax-writing committees are going to go through regular order. they're going to mark up bills and take votes. that's where those disputes will have to get settled. florida's carlos carvalho says there are elements of tax reform -- what could they possibly make this a little closer? >> they will have to have a lot of loophole closures to make it deficit neutral. the international tax rules are intended to be revenue neutral in and of themselves. that means they're going to rules thaterosion close off the revenue loss. there's a commitment to do that. there's experience in the house. david kamp through that exercise several times. there are elements of very good tax policy that will level the from a taxld
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perspective and let capital markets allocate capital. that would all be beneficial to the united states. mark: if it's beneficial to the united states paint the picture of what it means for growth. what do these proposals mean for future growth in the world's biggest economy? i think this is good news for the middle class. not just was written down in doubling the standard induction. it's the fact that the u.s. economy has been stuck in a low gear with poor productivity growth and wage growth. reform removes a bias for foreign production over domestic production. lower the fact corporate rate dramatically and that's the single most antigrowth tax rate in the data. pass-throughes on businesses. those are all strong messages to the business community that there is a commitment to have more rapid growth and that would translate into better wage growth for the middle class.
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that's the key to being successful in this here at my guess is they are looking at something that can raise the trend growth rate by several tenths of a percentage point. david: what about -- mark: what about the small business community you go will we get more incentives for that section of the business community? >> there are a couple things in their targeted for the business community. on is a 25% rate pass-through business income. those businesses were always taxed at individual income tax rate so for the first time they're going to decouple the taxation of small businesses income of the individual rates. a commitment to full expensing of all investments. every other investment for at least five years. aresmall businesses who building and growing are going to have a chance to take full advantage of that. those are things that will find
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attractive. annie: there's definitely whole section on competitiveness and growth for all job creators. and some sections on individuals. there's a lot of flimsiness to this as well. there's a lot of details to be fleshed out. committee got those details to the ready? when we hear about them? >> there was a strategic decision made that they needed to do this differently than they did health care reform which was a top down effort drafted by the leadership. will have the unifying framework but they are going to leave the details to the tax-writing committees. hasn't tax reform happened for 31 years because it is in fact very hard. expect to see this process begin in the house and chairman brady dropping his legislative and loophole closures are everything in this business because the ultimate art of tax
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reform is to lower rates and broaden the base. vonnie: the lowest tax bracket moves up from 10% to 12%. is this something that will appeal to president trump space -- trump's base? >> because you double the standard eduction the average therate for those people in current 10% bracket actually goes down. you have a rate structure that is very simple with the option for a high-end. it simplifies the individual reform to the point where they can literally put it on a postcard. that's appealing to americans. they want a tax code that is thetramp. and simple because that means someone else isn't cheating when they are paying their taxes. a notion of fairness essential to getting the reform done. vonnie: thank you, doug holtz-eakin.
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american action form president. -- forum president. donald trump delivers his tax speech today. let's check in on the first word news. >> president trump is calling judge roy moore a great guy who ran a fantastic race after the republican primary for the alabama senate. trump tweeted he has spoken to him tuesday night for the first time. backed thellies have opponent in the race. republicans have conceded defeat in their last-ditch effort to repeal and replace obamacare. the bill's authors acknowledgment don't have the votes ahead of a critical deadline at the end of this week. as the u.k. and european union officials haggle over britain's divorce settlement documents show hire european pension costs will add to the totals. they grew by 5% last year. higher pension costs are already controversial part of negotiations and risk injecting
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additional tension into already fraught talks. the leader of the opposition jeremy corbyn closed his party's conference with a call to theresa may to step aside. the labor later appealed to his members to prepare to take over the government of britain. he is promising a radical left-wing agenda that would read national eyes railways, energy companies and water suppliers. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. espn is reporting that louisville is expected to fire basketball coach rick pitino. is part of the fbi probe that alleges coaches, agents and financial advisors linked to several different universities bribed collegiate basketball players. in this case it would be the louisville cardinals men's basketball team. we will keep you posted. this is bloomberg. ♪
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mark: live from london, i'm mark barton. vonnie: from new york, i'm vonnie quinn. this is bloomberg markets. time for futures in focus. the dollar is extending gains on janet yellen's speech yesterday and the u.s. tax plan. joining us from the cme to discuss this, brian battle. barrel or is $52 a there trading before inventories? >> it's going to be difficult with the statistics because of the hurricanes in the gulf. all of the supply refining and transportation statistics are going to be screwed up going
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forward because the average number is going to get cap for august and september. for the past two and a half years oil has averaged $53. demand doesn't seem to be a problem. the problem for oil is supplied. it doesn't seem supply is going to be an issue because kurdistan is voting to be independent maybe. all of the oil in northern iraq is in kurdistan. you can ignore opec because they have a cartel you have to have cooperation and they don't seem to be cooperating. we are nearing the upper limit on oil. 53 seems to be the average. we are awaiting results of the kurdish referendum and we could have that momentarily. how do you trade oil? do you take a step back and wait for things to shake out? >> hits going to be really difficult because of the supply
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interruptions, refining interruptions. you can trade if you are willing to have short positions. the nascent global demand for oil is average. treacherousa little because of the statistical noise we are going to have for the next two months. vonnie: once we have shaken out the impact of oil positioning where does the dollar go from here? >> it seems to be getting stronger. afraidellen said she is of not being aggressive enough. you're seeing it already in the two-year. almost 150 on the two-year and the bond market is taking that seriously. we are at 230 on the 10 year. the bond market is all what is -- already pricing and higher rates.
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the market seems to be anticipating the fed raising tax reformaybe this thing might be real and that will cause growth. vonnie: brian battle, thank you. still ahead, making the case for index funds. we will hear from abigail johnson next. this is bloomberg. ♪
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mark: this is bloomberg markets. i'm mark barton in london. vonnie: from new york, i'm vonnie quinn. the debate over active versus passive gaining steam again. spoke to david rubenstein about the company's entry into index funds. fidelity is famous for actively managed funds. actively managed means people
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picking stocks and so forth. in recent years index funds have come along. do you provide those and are not careetitive or do if somebody wants to go etf are actively managed? we want to bring products and services to people that helped them make their investment objectives. any reasonable product is something that we are interested in. line ofa very robust we areunds right now and doing great in that business. we've got the lowest fees. we've got great service. we also have a partnership to have a full range of etf's. some of them are proprietary. some of them are not. everything to have that someone could reasonably want on our platform and make it
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available to them in a way that is the most value added. mark: kurds choosing independence in this historic referendum. turkey might close the valve on oil exports. --t has been the threat of ahead of the referendum. live pictures. we will continue to monitor oil here on bloomberg markets. this is bloomberg. ♪
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mark: breaking news, iraq's kurds voted 92% in favor of independence. it's a historic referendum which has implications for the oil market after turkey threatened
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to close the valves on oil exports from iraq to the kurdish region. more than 93% of voters approving the referendum for independence from iraq. we are awaiting some big data from the u.s.. oil inventory data. showing an unexpected drop in crude oil inventory. was in line with the industry data we got last night. some analysts were skeptical the government data would indeed confirm it and it has. a drop of 1.8 million barrels of crude oil inventories. build in gasoline inventories. one million barrels were dropped. ticking higher than had been estimated. overall it looks like a mixed picture.
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we are seeing crude take up a little bit. in terms of the reaction to that kurdish vote it seems it was at least somewhat priced in already as we have seen oil rising. even entering a bull market. bouncing back from its most recent low. perhaps if turkey does indeed go ahead with shutting off the valve so to speak we may see another higher in oil. is enough reaction running up to it. it takes a little bit of time to digest is crude oil inventories numbers. we will check back in and see how oil is behaving at our next market check. mark: we will keep you updated on the latest from that referendum. let's talk about emerging markets. ,oining us today sean taylor cio aipac at deutsche bank.
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let's start with geopolitics. the war of words between trump and kim jong-un is certainly escalating. do we get to a point where the escalation causes market participants to reduce risk exposure to asian assets? >> we have seen over the last month or two risk on risk off reduction depending on the news out of north korea. will be a lot of rhetoric up until the party conference in china in october and after that with trump's visit i think people are waiting to see if there's a solution after that. mark: asia as your preferred region. you prefer north asia. what's the rationale behind that call? >> salvation out performed -- south asia outperformed. back into seeing
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north asia where we are very positive. india continues to do well. particularly locals. underestimated the growth in china. it was a cheap market. it continues to do well this year. vonnie: any concern about the having applications for earnings for chinese companies are inward investment? get tooink we shouldn't much impact on the currency moves in china on earnings. free cash flow chinese companies are doing very well and we think that will continue relative to what's been happening in the last few years. the worry of currencies with the dollar little bit stronger that will definitely impact the more emerging parts of the index particularly mexico, indonesia,
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turkey, south africa, potentially brazil. we expect the dollar rally to be short-lived. vonnie: is there a way to solve for that by shifting around positions? will you just wait out the dollar rally? we are reasonably positioned for that. to see three.ay turkey underway, mexico. nasa negotiations are not going to be favorable for mexico and the peso has already rallied. we are pretty positive on the north asian markets where the currency shouldn't slip that much against the dollar. what about the gap in valuations between asia? does that have potential to narrow? discount.
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in the past when we talked about that there was a massive cyclical element. it was always less. the interesting thing about e.m. now is because technology and internet -- when you set to nuke -- neutralize it is pretty similar. the values in banks and europe. we think over time the discount will definitely narrow. a lot of that discount is in china, korea and russia. china is simply about soa reform and people being more happy with the debt levels. korea is about the discount. that might not go away for a while. over the longer run -- you mentioned the dollar.
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if the appreciation were to happen clearly as a risk what are the other risks? risk, thegest structural story of the m&a pack is the earnings data coming through consistently. the china growth and the global trade slows down and that would not be positive. there's always risk in each country. asia has gone through a series of political reforms and continuing that reform makes a big difference. whether it's a philippines or thailand or the situation and indonesia. mentioneditics as you . commodity prices is a plus and minus now. are positiveces for inflation in india.
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commodity prices very important for the state sector in brazil. it's much more balanced than it used to be a few years ago. emerging markets have gone up almost 30% until a week ago. there are now up 25%. we had a bit of a correction. quicklykets go up so people take profits. emerging markets, vonnie. vonnie: let's check in on the bloomberg first word news. here's emma chandra. president donald trump and republican congressional leaders announced the halt of the generation-skipping tax as well as the estate tax. they will propose a top individual rate of 35% that leads to congress the decision of whether to create a higher bracket for tom werner's. address theump will
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tax plan and you can watch it here on bloomberg television and listen on bloomberg radio. the president helped raise an estimated $5 million for republicans last night. there were about 150 people at the event. tickets cost a minimum of $35,000. a quarter for million dollars a couple access to a private roundtable with the president. germany the finance ministers is ready to give up his post ending eight years as the euro area's dominant finance chief. that's according to a party official. went on to say angela merkel's christian democrats led to nominate plans him at a meeting next month. u.k. prime minister theresa may says she is bitterly disappointed by the u.s. government's decision just let almost 220% on -- new jetliner.
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some 4000 of them in northern ireland. the commerce department ruled in favor of boeing. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. paul manafort's business dealings with russia. what it all might mean for the road into russian interference in the u.s. presidential election. this is bloomberg. ♪
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mark: i'm mark barton. vonnie: i'm vonnie quinn.
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this is bloomberg markets. shares aren't reacting too much. volkswagen is in the hot seat once again. joining us is abigail doolittle. they were fined by the eu about $1 billion for price fixing. this is not a new issue. it started in about 2010. lots of their rivals were already find about $2.9 billion. they includeit started in volvo. those companies are smaller. we have a great graphic that really points out the unit is relatively small. the car unit in orange about 57% yellow. business in we have audi at 17.7%. fraction .9% of
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the overall business in the unit. they bought them back in 2014. fine of $1e overall billion is relatively small. that might be why the stock is not doing much. how does this compare to the diesel emissions scandal? >> you won't be surprised considering how small the unit is relative to the rest of their business. it doesn't compare all that much to dieselgate. it cost him about $24 billion. about $24 them billion. and is a three-year chart we see that when dieselgate broke out that the stock was already trading on top of its highs. down from the peak to the trough 62%. recovering a little bit after the settlement started. could intentionally
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hurt, we have intelligence analysts saying it could be tens of billion dollars of claims they end up paying back to the trump companies that paid too much initially. right now it looks to be pretty small. that's why the stock is flat. mark: time for the bloomberg business flash. ford and lyft are teaming up to deliver self driving cars. the automaker and the ride hailing service announcing they will share data to develop systems and technology for a driverless automobile. easyjet is working with u.s. engineering startups to develop a fully electric commercial plane within a decade.
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the aircraft would cover 20% of passengers easyjet flies today. factory powered planes offer a way to reduce fuel costs which is typically among the biggest expense for airlines. upset over the protests by nfl players during the national anthem can get their money back. directv says they will refund money to anybody who wants to cancel their nfl sunday ticket package. it costs almost $300 a season. at&t offers various promotions and monthly pricing options. bloomberg istest this flash. is back on spotlight president trump former campaign chairman paul manafort. people familiar with the matter say he wanted a meeting with a russian oligarchs not only to appeal to a superpower but also dispute over a
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failed business deal. joining us now to discuss is winnie o'kelley. take us back to july. i picked the locks and went through all of his personal stuff. what do they find? >> we don't know what they found. we know what they are interested in now. there is an enough from the campaign that showed he was reaching out through an intermediary back when he was running the presidential campaign which seems quite unusual because he is quite close to couldn't in the soviet union. wasas been widely surmised he trying to broker reconciliation between the u.s. and russia, was he doing that. we know they had a long-running business dispute. they had done business together for years. he was looking at a way to reach out to him to see if they could finally resolved that. do we know if he still
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turns to him? >> he has been written about as one of the three people that couldn't turns to repeatedly. sorry mark. cyprus is also involved. there are a lot of shell companies involved. i had a variety of different companies arraigned in business together. are trying to get documents from cyprus. so far we don't know what they have. vonnie: wise the relationship important to robert mueller? >> he was paying and supporting metaphoric for many years. first to help in ukraine where there were furthering russian interest in ukraine. that relationship came to an end at some point. they continued to be in business
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together and this is a close ally of putin. code him any favors or was trying to exchange -- in my for him position at the campaign i can share with you information about what's going on for political briefings and maybe in the end we can work out this deal on the side that would be of great concern to mueller. we don't know what went on there. vonnie: do we know why metaphoric reached out last summer -- matt forte reached out last summer? >> various people were sniffing around on this business deal theybriefings had that had landa dispute. they agreed to go into a joint venture together and they were buying some assets and he had thought he had in ripped off. there was a dispute between whether metaphoric code him some money or not and now they have taken this completely out of public view by saying they are going to resolve it on their own.
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during the campaign it was worrying enough to metaphoric and he said i need to find a way to reach out and contact him. vonnie: apparently he said reporters in kiev were sniffing around and that's one of the reasons as well. during the campaign the reason he left the trump campaign was because additional information service about money he had gotten that came out of the ukraine and whether he had reported that income, who was behind it. that was what forced him out of the trump campaign in the first place. vonnie: will we ever find out what the special counsel finds out? >> i think we will. blumenthal expects charges against men afford. we are waiting to see what happened. vonnie: winnie o'kelley, fabulous story. thank you very much to winnie o'kelley. saudi arabia has joined the rest of the world in opening its roads to female drivers.
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the royal decrees impact on the likes of uber and toyota. this is bloomberg. ♪
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vonnie: live from new york and london, i'm vonnie quinn. mark: i'm mark barton. this is bloomberg martikets. its status asnds the only country in the world to allow -- to have restrictions on women drivers. joining us now, bloomberg news reporter in riyadh. what has been the reaction in saudi arabia to this news? >> it has been very mixed.
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there was definitely a lot of joy and excitement. whoe were a lot of women really want to drive and have been waiting for this for a long time. really excited to get behind the wheel. when this will happen next year. there also is a lot of resistance and there are some people who were shocked that it happened so soon. they thought it might be something that could happen five years from now. they never thought it was going to come now. there are a lot of people who think saudi women aren't ready to drive or this is not culturally appropriate for they are worried this could lead to moral corruption and the downfall of society. there is a lot of quite dramatic theories floating around and there are even some women not supportive of it as well. it's a mixture. some people are really excited. others are a little bit worried. any projections for what it might mean economy wise? how more likely women will be
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able to work if they can drive to and from work? >> there is the simple fact that a lot of women who are already spend a huge portion of their salary on drivers whether that is a private driver for ordering the uber every day that i do. that money theoretically will be saved for them and they might be able to put that back into the economy. women who aren't working now there is a possibility that they might be more encouraged that they might find it easier to get to work. possibly that could push some women into the workforce. the bigger question is female unemployment is actually already quite high and unemployment is aswly picking up in general the economy is suffering under low oil prices. the bigger question is whether they're going to be enough jobs
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for the women who do want to enter the job market. mark: this is all part of the to overhaul the economy and society. will there be people trying to stand in the way of this and how does it impact the larger overhaul of the economy? in many ways this decision to allow women to drive despite the symbolic ofs very the overall issues the plan is going to face. there is conservative resistance from some quarters. other groups in society. and there's a lot of excitement reallyher people who are happy that things are finally happening and reforms are moving forward. the is the moment where rubber is kind of hitting the road. they are getting into implementation which is sticky
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and has a lot of challenges. we are going to have to see over the coming years what happens on the social changes like women driving and on the economic changes which are a vast project and not easy. mark: thank you for joining us. coming up, it's a european close. where about four minutes away from the european close. 35 minutes until the end of the session. stocks gaining for a fifth day in europe. the best run since september the 12th. the close is next. this is bloomberg. ♪
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mark: it is 11:00 a.m. in new london andp.m. in 11:00 p.m. in hong kong. from london, i am mark barton. vonnie: from new york, i am
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vonnie quinn. close" onuropean bloomberg markets. ♪ mark: here are the top stories we covering from the bloomberg and around the world. we have details of the republican tax proposal under president trump. we are live on capitol hill to find out what he said about repatriation, tax rates, and more. economies taking news today, wolfgang schaeuble headay leave his post to -- and macron unveils some ambitious budget targets. in corporate news, nike runs into more headwinds as shares fall following another lackluster forecast.

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