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tv   Bloomberg Surveillance  Bloomberg  October 13, 2017 4:00am-7:00am EDT

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♪ francine: nuclear dear -- nuclear deal limbo. the qe question. the ecb is set to consider cutting its monthly bond buying next year. good morning. this is "bloomberg surveillance ." we have a packed show for you. an hour brexit show. we will talk about iran.
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this is what i am looking at. most in europe give us the action today. chinese exports seemed to be underscoring the resilience of the global recovery. we are also looking at crude, claiming -- climbing above $51 and record -- climbing above $51 a barrel. bitcoin at a record. let's get to the bloomberg first word news. nejra: european central bank officials are considering cutting monthly bond buying by a half, starting in january. the program may be kept active for at least nine months. they said reducing quantitive easing for 30 -- 230 billion euros a month is a feasible
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30 billion euros a month is a feasible option. the president of the atlanta fed sees -- says he is not sure the fomc will raise rates in december. this quantifies a strengthening inflation. >> i think there is much more to learn about what is happening in terms of inflation dynamic. i would say that inflation is starting to pick up. china's overseas shipments rose from a year earlier, narrowly missing estimates. imports rose. that resulted in a trade surplus of $28.5 billion. asian trade is holding up. brexitu.k., opponents of say they will sue the british government if it fails to
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release internal reports on the impacts of leaving the european union. they are asking for 57 studies that cover 85% of the economy to be released within 14 days. u.k. talks with that you have reached a deadlock. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. president trump is expected to unveil his plans regarding the iran nuclear deal later today. he is expected to say that a deal does not sufficiently serve u.s. interests, but will stop short of abandoning the deal entirely. it comes after the trump administration is set to roll back obamacare with an executive order designed to draw people awake -- draw people away from the coverage market. let's bring in stephanie baker.
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jonathan bell also joins us. reporter: what he is expected to say as he will be -- if he will do certify the iran deal. het he will decertify -- will decertify the iran deal and kick it to congress. we have seen him do this time and time again on issues that are frustrating for him and he can't get done. he takes it to congress and expects them to take action. will alsoe speech contain harsh language about for and its support terrorists. that will serve to dial-up the rhetoric and tensions between the u.s. and iran. francine: there are no other
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world leaders on his side, either? reporter: no. by a large, europe stands by the deal. there are question marks over the move on this. it undermines the credibility of the u.s. in terms of, can anyone trust that a deal signed under one president will be honored by the next? ist is the worry doma line that down the line is this could undermine the credibility of the u.s. government. compass threatening obamacare -- trump is threatening obamacare. reporter: he took that action hours after he signed an executive order. the steps he took yesterday were essentially to take apart piece, and hee by
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is doing it in stages. the executive order allows small andnesses to band together ensure people across states. the upshot is that people will probably end up with less comprehensive coverage, and many will end up paying more for their insurance. that, it will cause insurance premiums to rise filling from people. instead of his campaign promise to get rid of obamacare and lower premiums, many will end up paying more for insurance. francine: i know there will be a lot of copywritten and a lot of people up in arms. what is a need for markets? jonathan: stock split hit immediately. hospital stocks, health care stocks. bign't think this is a issue for the rest of the market.
4:07 am francine: if health care is messy, what does that mean for health reform -- tax reform? had he started with text from, he would have gotten an easier ride in health care would've gone differently. reporter: sure. on his andustration that congress has not been able to get its act together to repeal and replace, but he keeps taking difficult issues back to congress and just before we are entering midterm elections. he is comes getting things for -- he is competent things for his own party. francine: do you wake up in the morning and read what prompted did next, or is it something that is just noise if you are an investor? jonathan: there is a big impact in terms of the tax package. what will it include?
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i think that is something that probably should affect the market and do something that is important. i suspect there is going to be a deal done at some point. that will probably reduce corporation tax. that gives a boost. the market is looking at, when will that happen? you have a potential for a fiscal used in the u.s. at a time when you think, do they really need a fiscal stimulus? we already have pretty good growth and that seems to be continuing. francine: a lot of market action is psychology. does health-care affect animal spirits in the u.s.? jonathan: in terms of health care, i think it makes little difference. the margin me we can it, -- the margin may weaken it.
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this is the way he is trying to do it. francine: anything else watch out for the weekend? when are we talking about tax and? think thenext week i senate is expected to consider a budget that would be essential for tax reform to go ahead in terms of reducing spending enough to allow a tax cut to go through. that will be the thing to watch. much,ne: thank you so stephanie and jonathan. jonathan bell stays with us. we will also bring you president trump's remarks on iran live at 5:45 p.m. london time. .lenty coming up considers cutting monthly bond buying. we will discuss that next. we will be speaking to a former u.k. ambassador to the you about
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the way forward. barclays ♪ -- this is bloomberg. ♪ ♪
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francine: this is "bloomberg surveillance." but that straight to the bloomberg business flash. nejra: basf has agreed to buy parts of bayer's units. the acquisition announced today is expected to close in the first quarter of next year. has steel's scandal expanded to its core business. triggered has
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-speculation that the steelmaker may get broken up. samsung has posted record -- has posted record profits and announced one of its top executives is to step down. tripledg income almost to $12.8 billion. that topped analyst estimates. leaves the south korean company. on an has put roy price leave of absence after a producer told the hollywood reporter he sexually harassed her. a woman told the publication that he made inappropriate advances to her at an event. price can be reached for comment. -- price couldn't be reached for comment. that is the bloomberg business flash. francine: this is what you
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should be watching as we had in -- for the wall street open. u.s. inflation its election.ding staying in europe, the ecb is concerning cutting its monthly januarying starting in and keeping the program active for at least nine months. thecing quantitive easing 30 billion euros a month is said to be considered a feasible option. still with us, jonathan bell. this is a little movement on bonds on the back of this. what do you worry about? jonathan: with the ecb at the moment, the direction is interest rates are going to remain low for a long time. we are going to see tapering of quantitive easing. growth is taking a.
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-- growth is picking up. upd yields are going to go gradually. it is a really flow move, not like the u.s. where it is already in to rate hikes. we are a long way away in europe. talking about tapering purchases , there is going to be tapering, but as mario draghi said yesterday, even though quantitive easing comes, you have low rates for a long time. we are a long way away from having to worry too much about where bond yields are going in europe. in the u.s., i think we start with a bear market your -- with a bear market. have the spread between spain and germany. this is for the 10-year. is there anything you are buying at the moment?
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jonathan: generally, at the moment, i would not be buying investment grades. -- investment grade bonds. there is little upside. now?ou getting paid enough you're getting paid more in italy, but both countries there is a risk you could have a political move that would mean wider spreads. youcine: what worries about about the central bank experimenting? as we start normalizing, willoughby messy -- as we start normalizing, will it be messy? jonathan: we have already started tapering. they didn't collect tapering, but it was.
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they actually need to start tapering purchases anyway, because the quantity of german booms that are out there to buy. that are outds there to buy. divide than they would like normally. someere is a downside at point, you can start easing policy in again. at the moment, that is difficult. the spread between the 30-year treasury and the five-year treasury. when do we start seeing real repricing u.s. treasury? jonathan: the problem we have had is that growth has been low into-- we are nine years an economic recovery. the u.s. economy has only grown by 70% in that period. that what predicting
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we are going to experience is lower for longer, very low economic growth. on the back of that, you have long data bond yields flattening with the curve. at the moment, we are seeing a bit of inflation. the cpi number today might start picking up. unemployment we think is at the point where wage should start writing. the key is what is happens with wage inflation. if it picks up, that is where you have the yield start widening again. i think we are in the beginning of a long bond bear market. francine: jonathan bell from stanhope capital stays with us. we are talking about bitcoin next. coming up, as bitcoin continues to search, we will discuss the cryptocurrency.
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this is bloomberg. ♪
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♪ this is "bloomberg surveillance." whetherng to evaluate bitcoin and other cryptocurrencies should -- said trading and regulation are important
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factors. for more on this, ed robinson joins us. jonathan bell is still with us. what do we know about bitcoin? is it a currency, something else? i think what the market is telling us is that bitcoin is legitimate value. it has proved impregnable. might be hacked here and there, but the system of processing bitcoin has been impregnable. that is persuading a lot of traders on the for free and now on the periphery and now the mainstream. francine: when you look at the chart, looking at record highs despite people trying to crack
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down on it, is this about market share? will bitcoin win if it has a bigger market short cash market share than other cryptocurrencies? reporter: it commences to 2% of all crypto market capitalization 52% of allnds about crypto market capitalization. the regulatory question, that is the big one for any investor looking at it. and regulators actually crackdown on something that is this decentralized? some colleagues wrote a story this week on the whack-a-mole process going on with regulators trying to stop initial coin offering. they will just go. if they can to be in china, they will go to gibraltar. it is hard to stop something that is decentralized. would it get legitimacy it needs? reporter: the bank of england's
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on the front foot. they are doing a lot of research and development on the research -- on the currency. whether they actually adopt and jump into that end of the pool, i think it remains years away. it would be a radical move. it seems far-fetched at this point. francine: do you believe in it at all, jonathan? jonathan: no. believe block chain has uses. this door of value is an interesting question. store of value is an interesting question. it is highly volatile. me is does ito fit the purpose of being a currency? i don't think it is.
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i think the cost of transactions in bitcoin is too great. it means you can't do more transactions. , is it the same way in the way that shares of company our store of value? it doesn't fit a normal store of value to my mind. francine: thank you so much. up next, it is our brexit show. we will focus on the u.k. in our brexit show next and speak to a former ambassador. this is bloomberg. ♪ retail.
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under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. francine: welcome to our weekly brexit show, live from our headquarters in london. let's get around up of the brexit news. thea: theresa may started
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week facing growing demands to quit. he said he has a list of colleagues who want to choose a new leader of the party and prime minister after she failed to win a majority in an election. theresa may won support. praise terse strategy after she outlined contingency plans -- leaving the e.u. the you without a deal. -- leaving the e.u. without a deal. refused to say she would uniono leave the european in another election.
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meanwhile, her deputy told channel four news he still believes the country is better off inside the e.u.. that is your brexit news roundup. francine: brexit talks have hit a wall. the sticking point is money, how much the u.k. owes the european union. they concluded the fifth round of formal negotiations. on this question, we have reached a state of deadlock, forh is disturbing thousands of project promoters in europe, and it is disturbing also for taxpayers. >> there is a new momentum, and i remain convinced today that with political will come up
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precise of progress is within our grasp in the next two months. >> while there is still much work to be done, we have come a long way. >> no deal would be a very bad deal. we want a good deal, but we are playing for everything. from more on where the talks will go, let's bring in david. jonathan bell is still with us. what did we learn this week? it feels less personal than it did at the beginning. they can't agree next. -- they can't agree with where to go next. it seems this week the balance fizzled. the strong words from michel barnier yesterday, the word
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deadlock, and his pessimism sent down the pound yesterday. the upshot is that no progress areasen made on the three . francine: do we need to wait for -- to sign a better agreement? is it just a facade? reporter: they've european facade is projecting an image of unity. merkel is concerned with her own coalition talk at present. we may hear more with the big e u summit next week. they have already said that will make no concessions at that point. barnier -- in two months.
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that is for the timeframe is that. francine: have you cut away the noise of negotiating blow-by-blow from what is happening and how many people leave the u.k.? jonathan: a lot of this is game three in the sense of the negotiation. -- game theory in the sense of that negotiation. francine: what happens to the pound? jonathan: it would fall. against the dollar, you would fall between -- you would fall below 120. is that likely scenario
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we get some sort of transition period, and on that, sterling probably could rally a little bit. rallying, we start then the risk of a hard brexit, and we see sterling fall again. where does this go from here? weathan: before the vote, were 155 against the dollar. below 120.nificantly brexit, -- on a soft brexit, we can head up to 140 easily. anna hard brexit, -- on a hard brexit, we go below 120. francine: every day it seems to berumor bill -- it seems to a rumor mill on how things are going.
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do we know if anyone stop is safe? reporter: all the rumors were that we would have a cabinet reshuffle in the u.k. really, it is anybody's guess at this point. is it going to be johnson? is hammond interact? -- is hammond in or out? we are going to have to wait and see. francine: i had a lot of chief investment officer sing this a second referendum is more likely now than a month ago. is it something you think about? is that priced in at the margins? jonathan: i always held out there was a chance of a second referendum.
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it is not certain, but there is a good chance. it depends on the domestic politics. at the moment, the conservative party don't want a change, because any change could damage a prospect. when we get three years down the line, who knows what position we will be in. francine: what are you looking out for the next couple days? over the weekend, we'll is have a lot of speculation from the press. what is boris johnson doing? we are looking out for any signs forward these talks are heading. -- for where these talks are heading.
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do the other leaders in europe given to demands and start talking about a transition? then i think we will see the markets turning positive. anything could happen. francine: thank you so much, david. jonathan bell from stanhope capital. by a formeroined ambassador to the e.u.. this is bloomberg. ♪ ♪
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francine: we'll come back to our weekly brexit show. i am francine lacqua. -- welcome back to our weekly exit show. i am francine lacqua. whiteget an assessment of the the talks have become stalled -- let's get an assessment of why the talks have become so stalled. we are joined by nigel, a former u.k. ambassador to the e.u. in the united states. thank you for joining us. advocate isou moving me test pieces around to make sure the u.k. does a good deal? d need to get along with the e.u. or need to be tough? the u.k. has come off worst over the last year since our new government was formed since the brexit process started. what we need more than anything
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is to get a united position. it has to be united around what makes sense from business and long-term for the country. around probably with the lines being advocated by the finance minister, and that i think with -- i think would lead to a more sensible approach. francine: you don't think that u.k. has a unified position? the prime minister went out of her way to do the speech in florence. nigel: it was united to an extent. the cabinet backed that speech in florence. answer all the questions, and he didn't transform the negotiating dynamic in the rest of europe. i don't think it could've possibly done so. there were questions left over. willingto be much more to accept that the transition
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and the length of time needed to create our new relationship with the e.u. is going to take longer than the rest of this negotiation and to short transition period. ofneed to flip our way thinking away from jettisoning our relationship with the e.u. in favor of this mythical set of where thede deal to core of our neck -- our economic relationship remains in europe, because that is where we are. francine:? what is that mean? -- what does that mean? nigel: it means as close as others. to norway and i would in the early years prioritize keeping what we have gotten them a moving slowly 20 worries rather than jettisoning everything. francine: with that include paying money into the e.u.?
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-- with that include paying money into the you? nigel: i didn't vote for brexit. we are not only paying as much -- the e.u. the prime minister has already said -- in the future, if we are participating in research, education, parts of the economic relationship, then we're going to -- if you were to go from country to country to try and send goodwill for the u.k., who do you think? sebastian: i think this has made naive by the u.k.'s
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approach to the negotiations so far. i think things will break up a little bit. francine: wide? -- why delusional nigel: we haven't faced the reality of the negotiations. we have to think about a range of scenarios. we have not been facing the reality of our situation and looking pragmatically at our long-term interest. who are the countries that would give the u.k. a better deal? the countries we would normally expect to be helpful would be the northern european countries, which are naturally more open in their trade and investment approach. more connectedly to the u.k., so germany, ireland
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, scandinavian countries, netherlands. some of the central european countries, too, if there are worries about their own citizens , i think there would be -- they would be allies. we are not going to do that if we carry on banging on about no deal being better than a bad deal, if we carry on being uncertain. if we are uncertain about the centrality of our relationship with the e.u., we are going to be -- 70% of our trade is either with the e.u. or with countries which they e.u. has an agreement with. nigel, former u.k. ambassador to the e.u. stays with us.
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we will continue our conversation with nigel. this is bloomberg. ♪ ♪
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francine: welcome back to our weekly brexit show. i am francine lacqua. according to multiple reports, a former obama administration official has said his colleagues mocked the special relationship with the u.k.. how much can britain rely on its u.s. ally after brexit. let's get special relationship perspective from nigel. happen, people don't talk in the way diplomats showed
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every time, but is there a special relationship and does ae u.s. think they have relationship with the u.k.? close it is incredibly and substantial to across all sectors. u.k. in the u.s. have a close an important relationship, but at the same time, it isn't the same as between churchill and roosevelt in the war. he doesn't count as much of the world as it did 50 or 60 years ago. if our leaders get together, it is important. it's not going to dispose the same amount of power as during the second world war or just after. other countries have become more important. the u.k. is a country over a period of a special relationship that has become less powerful internationally. we need to get it in perspective. it is very important to the u.k. the sad truth is that after brexit the u.k. will be a less
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influential and potent ally to the united states. it will be less connected third we will be less able to influence in our own backyard than we were before. i think we will be a less useful ally for america. we will need america a lot for security. we will rely on our trading relationship. i don't put all my eggs in the basket with the new free trade. francine: how long will it take? nigel: that is part of the problem. american negotiations have an international reputation for being hardheaded and soft negotiators. we have seen that already with america raising questions about how to handle the former european union free-trade -- in theand the wto wto. u.s. negotiated their interest, and it will take
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a long time and want to be a cakewalk. there will be a lot of things they will ask for that the u.k. will not be able to give. francine: what does it gain from perspective to have a relationship -- a special relationship with the u.k.? overtime, it would be important. for both sides, it is to preserve the fundamentally successful relationship we have got. we have a very successful trade relationship. the key to keeping that in the future, whether you are an american bank or manufacturer of motorcars, is for the u.k. to have a very solid and stable trade relationship with the rest
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of europe. francine: does the trump administration see it that way? is 20 send it -- is 2017 different? nigel: the trump administration has backed brexit. i think that a broad political level they want brexit to succeed. generally love favorable political winds from the white house. you get the political signal. the reason why the united states prefers dealing with individual the u.s. is that the gorilla in the room rather than the other country. i think the u.k. has got to assume it is going to be tough, there will be advantages from
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both sides, but the view that that america takes with britain and all are big trading partners will be defined by whether the u.k. has a fluent and smooth trade and economic relationship with europe. francine: you have been a diplomat for many years. language andic ties change with the tweeting a president trump? nigel: yes. he has introduced a new element. i don't think the tweeting by itself would be the problem. if everyone around the world felt it was backed up by a genuine concern to look at the and oncalmly, thoroughly issues like iran, climate change, there is a huge amount of concern that the best advice and best policymaking -- francine: thank you so much for taking the time to come to the show today.
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the show continues in the next hour. tom keene's -- tom keene joined the side of new york. -- tom keene joins us out of new york. ecb affairs are considering considering cutting their monthly bond buying in january. this is what i am looking at in terms of market action. this is bloomberg. ♪
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francine: nuclear deal limbo. what president trump is expected
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to disavow but not abandon iran in his speech. brexit deadlock. question.y afterb is set to question the reports. good morning. this is "bloomberg surveillance." i'm francine lacqua in london. tom keene in washington, d c -- in washington, d.c.. was good to see you in action yesterday. the border between politics and economics, it crosses this year. it measures how that will impact the economy. tom: without question. in over the 10 question -- 10 years i have been doing this, this is the most medical year. we had -- the most political year. we have the announcement later from president trump. at the meetings of the imf and world bank we will have conversations. i sold david lipton yesterday he
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is in fine spirits. we speak to david lipton at the seventh like our. -- at the 7:00 hour. or international affairs, that was a job that john taylor had a few republican presidents ago. francine: we are looking forward to your second day coverage from the imf/world bank meetings. let's get to the bloomberg business flash news. taylor: in his speech, trump is expected to disavow the nuclear agreement with iran but not abandon it. -- heesident will refuse is expected to ask congress to amend the law. in a statement, he said it is time for the world to join it on demanding that iran and its pursuit of death and destruction
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. it is now the deadliest week of fires in california's history. hundreds of people are still missing. in the city of santa rosa, almost 3000 homes were destroyed . high winds are keeping firefighters from containing the fires. ireland could be hit by a hurricane on monday. hurricane ophelia is a hurricane -- as a category two get it can .ecome -- category 2 it could become the strong as hurricane to hit ireland since 1961. francine, as you were mentioning, the european central bank is starting to back of quantitative easing in january. the ecb is considering cutting its on buying by half the $36 billion a month. the purchases would continue until september.
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global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. riggs.ylor this is bloomberg. tom: on equities, bonds, let's go it -- let's get to it. mexico, i will get to it in a second. curve flattening over the last few days. in lower euro moves forward. francine? francine: the bonds in europe -- we areg a touch trying to get the details of how this kind of asset purchase can go on in 2008. i am looking at sterling extending a rally after ge negotiated and may offer the u.k. a two-year transition deal -- transition to go -- transition period. kevin cirilli, what do we know
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the president will say? tevin coleman -- tevin coleman the president will be making these remarks -- kevin: the president will be making these remarks. this is not a full withdrawal but it does fill a campaign promise in which he tries to get congress to make this deal more strong for the united states but there is a lack of substance in terms of how congress might act of how republicans might act. we have seen them struggle with other legislative items. francine: we just got released from the white house. kevin: for businesses looking to make business deals in iran, they are already prepared for uncertainty in the region. this will only make it more difficult. from a broader perspective, the administration is trying to send
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a signal to north korea by suggesting that we are going to take things on. frankly, north korea could be next. tom: we will talk obamacare in the next hour at what i see is a similarity to the executive order. trump hash to be sure some material to work on. it is it anprocess, executive order equivalent? kevin: it is a way to look at it. in terms of iran and where this is all headed, again, i think the bottom line is this is a president who has criticized this deal legally. .- this deal frequently somebody on capitol hill saying this action is what they should not be taking.
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tom: what is so important is with health care, he does an executive order and then we have to write -- we have to wait for regulations. all of his supporters are going --go "j." gas going to go going to go "yay!" what is the next at? kevin: congress. israel is happy today. the democrats are not. francine: let's not forget on this health care, on this issue, u.s.?t impact the kevin: what is interesting is health care allows for small businesses to band together through associations that allow them to go across state lines for health care, extending market access. democrats are heading this and
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saying it will destabilize the marketplace and destabilize the risk for. yesterday i interviewed senator rand paul who is the author behind this executive order. what he says is let's destabilize it. they are hoping this destabilization could jumpstart or re-jumpstart the health care debate in congress to get something done. as of now, no new plans. general kelly suggesting new health care by the spring. tom: i am sure you'll have your own executive order for us. he is our chief washington correspondent. we'll have the coverage of the president's speech, his administration's view on iran policy. look for that. .his is a joy the international monetary fund meeting you can speak to any number of individuals, including madame lagarde.
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what you need to know is she listens to catherine mann. her monograph is a trade deficit sustainable flacco -- sustainable? she now holds court in paris. if you talk to -- have you talked to madame lagarde? catherine: we always say hello. optimistic.not as catherine: we are not as optimistic. the issue is we have a positive bump right now. we don't really see the data yet . we are interpreting the data differently. we just don't see the data coming in. things, see those two we are still worried about the man's. there's the issue -- worried about the man's. there's the issue that we need to see this to related.
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tom: you are the queen of hard data. what do you think of this hard data/soft data debate? catherine: we always look at survey indicators but there are a lot more now. if you don't see the money being spent, it doesn't matter how positive people are consumer indicators, those of been around for a long time. many countries have looked at whether survey indicators on consumer sentiment show up in spending. not so much. francine: how is that? whatrine: in terms of consumers say in what they do, they can be optimistic and they don't spend as much, because they open up their bank statement and say, got a problem here. i can also be pessimistic and they still go out and spend.
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go on either direction, the consumer spending indicators tend to overshoot what is actually coming out of the pocket book. certainly for business as well, are they going to see demand for the product? are they going to be able to make profit? that is about the money. that is not about the sentiment. francine: when you look at the federal reserve and the concern they have on inflation, but also the hope that they are focusing -- is it time to raise interest rates are not? cap pimco at the -- catherine: at the oecd, we have been talking for more than year about monetary policy being overburdened. need to move forward on the fiscal side. we will looking for 25 basis points at september. i will take it in december. there has been a disconnect in the markets between the real economy in the financial markets. there is missing credit spreads,
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there is missing inflation spreads. there's a lot of pressing of risk and the financial sector -- in the financial sector. francine: catherine mann, thank you so much. really quite remarkable statements. we want to focus on the banks. coming up, mike mckee will be income position with boston fed president. -- be in conversation with the president. this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." let's get to bloomberg business
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flash. make wayselling off to for its acquisition of monsanto. another german company has agreed to buy the business for $7 billion. the assets include a number of businesses. the ceo at samsung electronics is stepping down in a surprise move. he has been with the company for decades. he says it needs new leadership after the bribery scandal. samsung announced record profit today on booming demand for displays. of tv and his head film on a leave of absence over accusations of sexual harassment. price has not commented. the allegation comes days after justar allegations came
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let to the firing of harvey weinstein. tom: it is conventional wisdom. at one point it wasn't and the original point, many suggested today from catherine mann from oecd. china, america and our dysfunctional relationship. francine and i were talking about this long ago. he said it is a dysfunctional relationship p are we still dysfunctional with china russian mark -- relationship. are we still dysfunctional with china? catherine: the relationship is more balanced, but there are significant tensions. i the same token, they have a lot more tensions internal to their economy. that has implications for the global economy. tom: these meetings going forward are critical. kevin: absolutely. absolutely.:
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there seems to be some stepping back. [no audio] francine: one of the absolutely. there seems to be some stepping most just you put things simply -- you put things simply. if you could change something in china, what would you change? catherine: i would talk about that creation. it is a serious issue -- i will talk about debt creation. it is a serious issue. they talk about it. it is happening on the back of a very large financial bubble. --aging that transition is no other country has done and. china may be up to do it -- has done it. china may be able to do it. francine: as an initiative, do
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those things work? catherine: if you are changing debt to equity, they are going to be merged with another country -- company, that may work. twoou are merging leviathans, neither of which are going to be successful, then you are delaying the process. we also know that buying time can sometimes lead to a consolidation of a lot of bad assets in one place. that tends to devote credit to that company -- it is kind of like nonperforming loans. that has negative applications for the rest of the economy. tom: part of a trilemma is the the nymex desk the dynamics of a system. -- the dynamics of a system. do you have confidence in the chinese system over the next five years to adapt? catherine: they understand the
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issue. if they lose a little bit of moreol toward a market-oriented system, then that is a bumpy ride. that tends to lead to a bit more trying to consolidate again and maintain control, to smooth the path. going back and forth is bumpy, not only for them but for the global economy. francine: should we worry about u.s.?wars with the catherine: there is some trade issues on the horizon that are being considered. i would say right u.s.? now, with the issue on the global forum for steel taking the heat off the steel tariff, the oecd has been working on that we have a couple of more months for we need to see results. -- before we need to see results. the trade issues are a little closer to home for the united
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states and nafta. withwe will continue this the oecd and their chief economist. we drive forward the conversation today. us. weber will join looking forward to speaking to him about mr. draghi's challenges in the new, better europe. stay with us. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." good morning, everyone. bank of america and wells fargo, tom reported third-quarter's results today following jpmorgan in citigroup yesterday. across the atlantic, european banks have had a fairly positive place in 2017. growing economic recovery moving toward pickup and lending activity. capital requirements continue to be a sticking point and policymakers are hoping for a breakthrough. let's get back to catherine mann , oecd chief economist at we have been talking on how you would model a bank risk. are we too far off? are we over regulating? catherine: the challenges to come up with a strategy that would allow banks to do with they do which is to intermediate risks.
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that is what they do. they have to be up to do that. you want to mitigate the extent to which they could have a probability of a crisis. we are getting to that balance. it is different for different banking systems. finding a one-size-fits-all for the international financial system is really the sticking point, because the systems work differently because the country's work differently. they are not quite there but they are getting their. just getting dara: -- getting dara: -- getting there. francine: it is unlikely it is from the same thing. catherine: there has been a lot of attention about the banks. there is concerned about shadow banking, about the central counterparty but those were also on the table and for analysis and rules under the iosco.
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they have it in their sites. they are working on the conclusions. we have a couple of years before they would be up to put it into place. tom: within the mergers of banks and other industries, you have been brilliant on pushing back and saying, wait a minute, who was going to regulate this consolidation? is it ever more so now? catherine: in banks or general? i think the two of them are different. we have the oversight body for the financial system, so there's a lot of light being trained on that. what i don't think we will see too much about is looking at come petition policy in the international environment for mom-and-pop army in potato industries. you are announcing the bear -- mergers./monsanto nobody is looking at those.
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we are looking at banks, digital but no one is looking at the meat and potatoes industries that are consolidating across borders. francine: all right. catherine, thank you so much. we will get back to the chief economist. bmw and great wall are implement talks on the minicar cooperation. we don't know where this would take place or kind of cooperation we are talking about but it is something we keep an eye on. bmw has been one of the most prolific car companies when it comes to joint ventures. we will dig a little deeper. this is bloomberg. ♪
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tom: good morning, everyone. "bloomberg surveillance." our studios in washington and our studios in london. i am tom keene at the meetings
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of the international monetary fund and world bank. the conversation with david ,ipton of the imf and as well another david will join us. we'll speak to him about trump economics and david has that job that john taylor had years ago. david malpass with the treasury department. busy news around the world and america. our first word news with taylor riggs. teleco president trump has taken is most drastic step yet to roll back obamacare. a cutoff necessity to ensures to help lowcut -- to income people. meanwhile demonstration is cutting tens of millions of dollars that help people in role in obamacare. the president of mexico and canada are presenting a united front in talks with trump.
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president trump suggested that north american free-trade agreement could be broken into two bilateral deals. trudeau and pinion yet to says the deal -- it is another sign that chinese trade is holding up . exports are up more than 8% in september, slightly less than expected. projects its worldwide oil glut will be gone a year from now. the cartel expects its effort to get rid of the surplus to be successful by the third quarter in 2018. estimates suggest they will be successful. i am taylor riggs, this is bloomberg. i whatanks so much what
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to do is drive the competition forward in international economics. we do these at the meetings and we do it with catherine mann. now joining us, a gentleman who watched can burned vietnam a little bit differently. dr. lipsky joins us. what was it like parachuting into hanoi? the last episode of can burned was all about you. first -- of course, the transformation of that economy has been quite dramatic over the past few years, whether they will successfully implement more market-oriented economic development remains to be seen,
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but it has come it's immensely long way. -- it has come a tremendously long way. tom: this is what you're supposed to do. does president trump understand the value of these institutions? john: in the case of vietnam, extensive effort and technical assistance to help them develop the institutions, regulations, laws that would allow them to make a very successful economic development and a transition into a market-based economy. i'm sure, david malpass understands very well the work of the imf and other institutions. hopefully they will continue to provide the critical support necessary to make them successful. francine: hello, dr. lipsky.
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what you see as the biggest risk to the global economy right now? do politics take on a bigger role at this imf/world bank meeting jack is that dangerous? -- meeting? is that dangerous? john: the outlook is relatively benign. in fact, the outlook is favorable. at the same time, as you suggest, 06 is creating uncertainty of a new variety. as he so, things -- as you saw, things like nafta which have been taken for granted, now might not be taken for granted. in europe where the challenge of brexit. elsewhere, we have uncertainty about trade policies that could upend things we have been assuming were in place for the future.
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francine: we will get back to brexit. i don't know if it is the beginning of the end of globalization are the beginning of a new globalization or whether we were jumping at shadows and globalization is fine. john: i think globalization is a fact that will continue for a variety of reasons. we can't take for granted the orderliness and organizations that have made that work successfully over the past decade. there needs to be a rethinking and recommitment to some kind of more coherent form of global government that would make globalization work better. tom: this is the heart of the matter. , are weglobalization going to see a multilateral approach? or a regional bloc approach? catherine: we have moved away
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from a multilateral strategy quite some time. tom: john lipsky told me that if use ago. catherine: there has been a focus on plural lateral agreements. they tend to focus on things that are the easiest to do. [no audio] more towards the regional is not the direction to go. obviously individual i lateral -- individual bilateral is even worse. the opportunities for arbitrage, this puts the companies in the driver's seat. you don't want to do that. tom: dr. lipsky, you helped work .ith salomon brothers but he lived -- both of you -- the world economic
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outlook that we have? john: of course, crises come because when they are not anticipated. here, the problem is when we have already mentioned which is upending trade agreements which have been a part of the bedrock of the architecture of the international economy. hopefully, we will see things against theng back against wto and their dispute resolution mechanism or other bedrock but not so well known aspects that are critical to make a globalized economy work well. francine: john, what role do you think markets should have? what does all of this cheap money mean for how they perceive risk in trade? factsone of the notable of the global economy has been
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the unprecedented accommodation of the key central banks and the rise in debt over the past few years since the crisis. , given the benign outlook for the underlying economy, central banks seem to have a space available to them now to start backing away from a bad accommodation and a gradual way. if so, -- in a gradual way. if so, that will not be the resource of upset. i would be amazed if central precipitousact in a or decisive way in a situation in which -- [no audio] on the other hand, if there was a loss of confidence because of political economy conflicts, i say that could be a source
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of problem. [no audio] francine: in terms of function -- so markets respond to the incentives that are put out instead of regulations and instead of regulations and institutions -- [no audio] thefrancine: in terms of more cn the environment, the more likely that this is can go on with what they do, and that means creating products, innovating and creating jobs. tom: this is a different imf. .t is the most political debate what is your biggest fear of this administration? mr. malpass is a sustained. voice. he doesn't seem to have control of the white house's dialogue and your world. what is your fear?
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john: i don't have any insider knowledge but i would say from stepping back, you wonder about the clear commitment to the existing architecture of key international institutions, the wto, the role of the imf, cooperation within financial regulations. hopefully there will not be any doubt about commitment. tom: essie across the headlines, german foreign minister has restated support for the iran nuclear deal. today. see that later on we are going to continue with dr. lipsky and dr. mann. this is jim jordan -- this is a joy. don't forget your morning briefing coast-to-coast on bloomberg radio. bloomberg daybreak, a terrific move forward in an update on morning news.
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-- and an update on morning news. this is bloomberg. ♪
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francine: this is "bloomberg surveillance." this friday, coming up, coverage of president trump's speech on his administration's iran policy. that is that 12:45 p.m. eastern and we understand that president trump is expected to refuse to certify that this accord with certified is efficiently in favor of u.s. interest. we understand he will fall short of abandoning it. in the meantime, in the last
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five minutes, the german ministry of foreign affairs says support foring the the deal. iran is a good step in the right direction. let's turn to brexit. european commission president, jean-claude juncker has warned the brexit process will take longer than the nikkei thinks. just then the u.k. thinks. -- than the u.k. thinks. lipsky.e mann, and john catherine mann, let me kickoff with you. every day, there is speculation on the cabinet of the prime minister theresa may or on they are going pear-shaped with the eu. do you have the confidence that there will be some kind of softening of tone from the eu
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before march of 2019? catherine: we have a long time for tone to be developed. cannot problem that they seem to get to talking nicely. it is not in anybody's interest to have a bad cannot seem to break. talking nice would be a good thing. there is a lot of jockeying for position but talking nice would be better. >> does talking nice lead to a better deal? out whatd to figure the u.k. wants to do next? catherine: talking nice will lead to a better deal. it is in the interest of both communities to have a better environment that will allow the european growth to continue, and would support the u.k. economy as it adjusts to the new environment. talking nice is good from the
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standpoint of business and politicians should be focusing on business and workers and talk nice to me to better. tom: john lipsky's career has oh is a been about finance. do we see a consolidation of do we see a consolidation of banks? john: depending on where you are looking at yes, in general, that ought to happen. just a word on brexit. deadline forhe some solution to be reached because [no audio] from the eu, deadline however fr businesses, you have to make decisions well in advance of a day like that. they cannot wait and see what happens. progress,sn't notable not just with a certain talking
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nicely but with some kind of nicely but with some kind of sense of where -- [no audio] making a decision on where to locate activities. they are going to have to make their own assumptions about where things are going. --: brian moynihan caught up you said paris, right? explain to me why everybody in london on to move to paris? catherine: for the croissant. the french culture and everything. it is an easier city to live in. tom: it is where the kids want to go. we now go to francine lacqua in london. his paris the city of destination for london as they exit -- is harris the city of destination for london as they exit?
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i am not even going to go there. when do we find out about how much damage brexit does to the key economy? catherine: we are seeing data come in saying there is damage. it is a challenge for both bank of england and for the fiscal budget. yearhappens over the next is really an important part of how damaging the crisis is going to be. we did some analysis over a year ago. we haven't changed that analysis is we don't have any information about how an agreement might look in 2019. there was quite a bit of damage for the u.k. economy. francine: john, could this be taken as a blueprint for other nations russian mark is this something -- other nations? or is this something different? john: brexit is a template?
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.rancine: the blueprint john: there is no blueprint. that is part of the problem. we are not sure what it is going to imply in terms of the relationship. there is a fundamental asymmetry . how that turns out is critical to the british economy, but less so for the europeans. that is going to add a degree of difficulty. we haven't talked about it but responding to tom's question about banks, the british also off fromng setting it the rest of the european banking market. at the same time, if you look at the imf reports, the global financial stability report says -- the eurozone banks have a problem of profitability that they need to solve in the next few years.
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these places need to be inward looking. tom: we saw the conversations yesterday urgency. with dr. mannue and dr. lipsky here in our studios in washington. don't forget an important conversation. our michael mckee conversation with the fed president of boston, eric rosengren. washington, from london, yankees, astros -- go yankees. i can't believe i'm saying that. >> what has come over you? ♪
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tom: we thank you for watching us worldwide. greatly appreciate it. the meeting of the international monetary fund and world bank in washington. i am tom keene and francine lacqua in london. we are trying to give you the best conversation we can on international economics. john lipsky with us. us from thenn with oecd this morning. question, madame lagarde
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mentioned this to me, having dinner with secretary mnuchin and the debate over tax reform. question,dr. mann, what can tho you -- -- to cajole cajole the united states to a better position? catherine: it is in just the that -- just the united states, many countries have moved away from a fiscal austerity which is something that the oecd has been arguing. now that we are there, it is a question of what do you do with your space? and how are you going to deploy it? many countries are in a position where they need to have rater potential output growth, they have to focus on things that are going to be good for long-term growth for the economy. focusing on infrastructure is one thing but not all countries need that. we have innovation and childcare gender fields training.
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francine: i have been told that when it comes to infrastructure, because of the time it needs and sometimes very difficult kind of projects, it doesn't have -- and a most never has the benefit that people think it does. catherine: it may not have the benefit but it is the timeframe. when we talk about fiscal banks, we're talking about the quality of public finance. [no audio] the issueswhen are not for forastructure, but they are changes in regulation. [no audio] justes in skill makes -- skill mix. tom: one more question for john lipsky -- good fair -- skill c. john: he has detailed knowledge of monetary policy around the
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world. knowledge of all these institutions around the world. he knows the actors. he has a unique point of view about monetary policy and has spent his professional life thinking about how to do it better. he would be a great. tom: spoken like a stanford alum. we underestimate john taylor's international experience, particularly after september 11. we think catherine mann and john lipsky so much for being with us . coming up, yes, on the dollar. jacob franklin -- jacob frenkel of jpmorgan international. ♪ who knew that phones would start doing everything?
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entertaining us, getting us back on track, and finding us dates. phones really have changed. so why hasn't the way we pay for them? introducing xfinity mobile. you only pay for data and can easily switch between pay per gig and unlimited.
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no one else lets you do that. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to tom: they are unlawful payments as president trump asked to
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dismantle the affordable care act. we will the skin you -- we will discontinue the payment immediately. pelosi in schumer say the point was sabotage of obamacare. it is spiteful. it is a world bank tradition. he does the white house walk by. john's taylor -- john taylor always play by the rules. madame lagarde takes dinner with secretary mnuchin. this is "bloomberg surveillance." we're live from our studios in washington. i tom keene and francine lacqua -- [no audio] washingtondavid malpass will joh the trump administration. he has the job that john taylor had a number of years ago. francine, what is your observation of these meetings? francine: i want to bring in something else which is impacting a lot of the markets we follow.
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this is according to three officials and direct contact with the ecb, how they are considering cutting qe in the next half of 2018. let me tell you, if you look at bond within desk bond movement -- bond movement. tom: is to draghi front and center in conversations here in washington. banks are staggered and their easingo cut consultative .esk quantitative easing taylor: in a speech today, trump is expected to -- but not abandon it. the president will refuse to certify that the accord refused statement, the president said it is time for the entire world to join and on demanding that iran and its pursuit on death and destruction.
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it is the deadliest week of fires in california's history. at least 31 people have been killed by wildfires raging through california's wine country. hundreds of people are still missing and the city of santa rosa, almost 300 homes -- 3000 homes were destroyed. ireland could be hit by hurricane on monday. hurricane ophelia is a category two storm which top winds of 100 miles per hour. it could become the strongest storm to strike ireland since 1961. the stormsters says could cost ireland more than $800 million. this is a bank may back off of wanted easing in january. the ecb is considering cutting its bond buying the $36 billion a month. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries.
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this is bloomberg. equities,ies, bonds, francine will mention those bond yields flattening. some interesting dynamics of the two-year spread. francine: what i'm looking at is european bonds. if they continued asset purchases for nine months, even as it reduces the amount of buying, stocks advancing overall in europe, but chinese trade data underscores. tom: very good. we need to do politics first. the ecb news. his name is kevin cirilli. he is trying to keep up on the .ath of the defeat of obamacare what a fascinating story. my morning must-read, you've got to start with mr. cirelli. what is interesting here is the
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path. the young and healthy are people who flock to the skimpier coverage making the obamacare markets older and thicker. it doesn't do anything on its own and then it moves on to say until the administration opposes some actual regulation, it is just a set of marching orders. is that it? kevin: typically we see this in the financial space. the president said, administrators, directors, get to work. rules.s craft some what it does and the mmr is great, it will add some the stability to the markets because it is want to allow for small as this is to ban together to get health care. i ask this question to senator rand paul yesterday, are you going to destabilize this?
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>> he said they should be destabilized. tom: he is the guy from kentucky. what about senator portman in ohio? how does a moderate republican senator react to this event? and the pending process? kevin: we have seen it where they have shied away from doing any type of major conservative overhaul of the health care system. yesterday, speaking to the reporters, general kelly saying extending the goal post we are not going to have major health care reform until the spring because they've got to get through tax reform. francine: what do we know about iran? kevin: president trump is good to speak at 12:45 today. major iran address peter we should note that he has to
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recertify the iran nuclear deal twice in his presidency. this is the moment where he is the certifying and taking it to congress. they are going to have 60 days to renegotiate this deal. it will be interesting to see what they, with because likely we are not hearing much right now on what lawmakers will do. francine: what does that mean for businesses? will they stand back? ceo, we used a put to see what happens next? kevin: it will be interesting to see how these businesses open today. there is a lot of uncertainty injected into the marketplace. they have not been forthcoming with what their plan is going to be. tom: kevin cirilli, thank you so much. it will be an eventful day to and we continue
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our coverage of these meetings with jacob frenkel. that bailey describes his conservation to international -- that barely describes and we coe our coverage of these his contribution to international economics. here.ful to have you and aslook at the ecb francine mentioned, it is moving the bond market this morning, how critical is it that central banks do and initiate quantitative tightening in a sequence and not altogether? jacob: the sequence is not coming because it reflects the economic reality. united states is the most advanced in its recovery. jacob: the sequence is not by all criteria, the united states is ready for normalization. in there sequences normalization.
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they were put into action in a sequential way. you've got the zero lower balance. then came forward guidance, trying to influence long-term interest rates through expectation and the like. then came on to ted of easing. -- then came quantitative easing . now the economy has recovered. labor market functions externally well. the u.s. should move toward normalization. at the same time, europe is not fully ready. it will. there will be a period where it will look like the emerging policies but it is a reflection of non-synchronized recovery. economics, doe you have a confidence that we can tighten? that we can do qe -- qe with
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stability? jacob: one of the challenges was the answer to one of these questions was given by reference to monetary policy. monetary policy is only one. the answer to your question depends where the other instruments of this orchestra start playing happily. tom: we just heard that from catherine mann. francine: jacob, good morning to you. jobs?s the most difficult if you look a stability, does the fed unwinding of the balance sheet, does become more messy and ecb? -- messy than the ecb? negligible.nnot be putting liquidity
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into the system, somebody else will be reflected in the market of the -- in the prices of the marketplace. it is important that those changes are well explained so we will not have again the tantrum that we had before. that it is understood that is going to be -- that it is going to be very gradual. there is an urgency in past.ying the francine: talk to me about the market function at the moment seeing that the fed has been telegraphing this move since the beginning of the year past. , but the markets don't quite believe it. how should a central bank can indicate better? jake -- central-bank communicate better? jacob: by acting normally with our three elements that determine the credibility of the message, the transmitter, the
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message itself and the receiver. if you're talking to much a not doing enough, then the credibility of this message will be questionable. inle i do not believe automatic pilot, the reality is if the fed really means to project to the marketplace that time is better and normalization is in place, then december is a must. not because the summer is a must because otherwise three months different will change the picture of the economy but credibility is a key. tom: we will advance of this come session forward. -- this conversation forward. what kevini know cirilli will be doing, listening to the president of the united states remarks on iran. stay with us.
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this is bloomberg. ♪
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taylor: this is "bloomberg surveillance." let's get to bloomberg business flash pure u.s. regulators a looking into whether guggenheim partners in a probally steered money into business run by former barclays ceo, bob dimon. indication that regulators are looking to dimon or his company. a londonappealed regulators decision to revoke its license and seeking more settlement talks. uber can continue to operate. the car service was banned on
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september 22 over safety concerns and attempts to avoid regulation. that is your bloomberg business flash. .om: taylor, thank you so much i'm going to lean over your to the uber terminal and bring up a very important aper in the journalism just the journal of economic -- the journal of economic. i'm going to lean over your. they'll be jacob frenkel of 1971. the former governor of the bank of israel. the papers that you wrote and the body of your work in chicago, are they applicable today to central banks or is it a new economics that the people -- that we talked about have to deal with? jacob: [no audio] what is important is that these
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statements which i'm not sure i understand now really focuses on the long-term. focuses on the fundamentals of grow in theconomy long-term. it is not budget deficit and it is not mickey mouse anti-cyclical measures grow in e . growth means medium-term perspective. a means saving, investment. investment.saving, tom: can they work in the medium term and long-term, or is a crystal of news and information flow so much that we now have short-term central bankers? jacob: they have to focus on the long-term and short-term will be at their disposal. the main issue has been the with a of policymakers crisis prone mindset because we have a big crisis. therefore the short term was the
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focus. it is trying to -- it is time to declare a new phase, medium-term strategy. the phase of saying independent bank -- saying central-bank of independent means. washington is dealing with the whole [indiscernible] estimateanks is the that causes the system to look into the midterm. francine: this time because of their unwinding, and to focus on the short to medium-term risks. they need to be careful of distortions in the asset markets. do you believe that that is not their job? they should go ahead on their path. they start normalizing as they were. they should be up to walk and chew gum at the same time. the compass should show where
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the long-term is but the actual steps are always in the short-term. the effectiveness of the short-term measure is going to be much more enhanced, if markets understand that they need a direction. there is a destination and there is a determination to get there. the short-term and long-term aren't the wind. -- are intertwined. francine: where is the real danger for the market? jacob: i come now from the monetary policy. every central-bank is focusing on achieving the so-called 2% inflation target. it, concerned that you do no matter what. suppose you do not raise inflation rates, suppose central banks are unable to raise inflation rates sufficiently quickly, does it mean he
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continues to flood the economy with quick liquidity? what it means is, we need to focus on the financial markets and ask, why are we delaying normalization? are we creating additional distortion to the financial markets? i believe we are. tom: we will continue this discussion. jacob frenkel will stay with us for the hour. it will be a theme of our michael mckee, our chief correspondent. he is in washington. look for that in the 7:00 hour. this is bloomberg. --is erin judges new york dg'es new york.
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tom: good morning, everyone. from our studios in washington. which i guessrade can be global trade but right now, cover of the new york times. a photograph here of the president with mr. trudeau and is a good time to speak of nafta with jacob frenkel. an expert on international economics and former governor of the bank of israel. jpmorgan bank international. anda is part of the oxygen air, does the president have any chance of doing away with a
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trade agreement as important as nafta? jacob: i would hope not. nafta has been an extra in a achievement. -- has been an next ordinary achievement. millions of people have been put out of policy by opening to trade. my hope is that this debate about nafta is really a debate about how to improve positioning the united states and the terms annegotiations, but not issue that can uncouple the trade existence. trade is the mechanism i which we can help the world and therefore ourselves to continue our growth. francine: do you think we need to rethink capitalism and therefore globalization that go gas globalization? -- globalization. jacob: what are the real
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to a to trade? the main challenges of why we are doing all the good things, there are some segments in the society that are not fully benefiting from it? we need to recognize it, to identify and to ask ourselves, how should we address it? i know how we should not address it and we should never throw the baby with the water to by saying because there are some negative consequences to some good measures, we will not do the good measures. improve the good measures. retraining, elements of that type that can protect the weaker part of society. we should be aware not to destroy incentive. if you're going to protect somebody, yet do budget it properly in advance and decided
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in the context of priorities of the government, but you should make sure that it does not destroy the incentives to study, improve improve, to raise productivity in be usefully employed. -- and be usefully employed. tom: mexico and canada together pushing back. we will continue with dr. frankl with jpmorgan international. ethics meetings, it is a good time to speak with the first deputy managing director. it was a john lipsky. it is now david lipton. on the dinner of the secretary of treasury. this is bloomberg. ♪
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♪ good morning, everyone, bloomberg surveillance. francine lacqua in london, tom keene in new york.
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let's get right to our first word news. taylor: president trump has taken his most drastic step to roll back obamacare. the administration cut off a subsidy to help lower income people. that came hours after the president signed an executive order designed to drive people away from the health law's coverage market. cutting tens of millions of dollars from groups to help people and role in obamacare. the president of mexico and canada are presenting a united .ront over the future of nafta justin trudeau flew to mexico city to meet with the president. trump suggested the north american free trade agreement could be broken into two bilateral deals. it is another sign that chinese trade is holding up. exports rose more than 8% in september am a slightly less than expected, and imports rose 19%. --c projects the world wild
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worldwide oil glut will be gone in a year from now. the cartel expects its efforts to get rid of the surplus to be successful by the end of the third quarter 2018. reduction curbs are due to end in march. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. francine: thank you so much. let's turn to brexit, jean claude juncker has warned the brexit process will take longer than the u.k. thinks, saying new problems are being discovered each day. this comes ahead of a summit next week and followed yesterday's deadlock on talks. joining us is howard davis and still with us in washington, d.c. is jacob frenkel. what a wonderful array of guests .ith us in washington, d.c.
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so howard, welcome to the program. i know it is an early start. when you look at brexit negotiations it was quite frightening to hear michel barnier saying there is a deadlock. u.k. insiders are pinning their hopes on e.u. leaders. do you believe e.u. leaders will be softer than the commission currently is? howard: eventually they might be , but i suspect they will not be at the forthcoming summit. my judgment is that we have not quite done enough. i think theresa may's florence speech was a good step forward and i think she was quite brave itmaking that speech, but was clear from the conservative party conference she still has other people in her party to bring along with her, which is constraining her freedom of negotiating maneuver. i think that what is going to happen is at the next summit will say, nice try but not there. and then i think there will be a
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process of engagement with the national government to see if some momentum for these talks can be delivered, because i think some of the others can see that allowing this game to continue week by week in brussels is not really very constructive. i am not too pessimistic about where we are. francine: what are the chances of the u.k. crashing out of this? howard: they are not trivial. this week in game london has been that the treasury should be providing funding to allow people to prepare for no deal. some people see that as a negotiating tactic. i see that as a sign of despair. i think we need to have a final deal. it is not a trivial possibility but i do not think it is the most likely outcome. tom: asking when jacob frenkel is moving out of london but i probably would get in trouble if i did that. i believe the royal bank of scotland will not move out of
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london. howard: we are out of edinburgh. tom: point taken. i want to go back to patrick o'brien and the acclaimed novel of the napoleonic age. a selected chapter in every book, time is of the essence. give us a measure of time is of the essence for the british financial system. >> when i talk to people about their plans -- and we have to have plans of our own because we have business in the e.u. 24/7, so we will set up an operation in amsterdam to manage that. people typically tell me in the fourth quarter of this year or the first quarter of next year they will have to make decisions because if they feel that there will be no deal or a hard deal in march 2019 they are going to have to have people in place to cope with that. that means renting offices, finding school places, all kinds of tedious but practical things.
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those decisions i think will be made in the next three to four months. unless there is some sign of decent progress by the end of the first quarter next year, we will see quite a lot of moves out of london. tom: jacob frenkel wants to jump in. the tactical reality of a chairman of the bank gets in the way of the strategic slowness of the politicians. we are at a point where the two are knocking heads. jacob: the process originating from the original vote reflected this kind of lack of synchronization between the depth of the issues and the depth of the discussions that had to be in place, the quickness of the vote, the superficiality of the information, and suddenly you wake up and say, what have i done? let's try to put the genie back in the bottle. humpty dumpty also tried it. francine: it is also unclear to me whether there is, if there
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were another vote tomorrow which way that would go. it is unclear that a lot of people in this country -- the brexit vote. jacob: i agree with you because what we have learned is in many of these votes, people did not vote on the issue that is on the ballot but rather on a more general issue of feeling, how do you feel about the government? that is one of the difficulties in societies and countries that are not used to it. the vote is not about the question, how do you feel about the government? francine: is there any doubt in your mind that brexit will not happen? howard: i think it is very likely to happen because i cannot quite see the political narrative that leads us to another vote. the government does not wish to run the risk of another election which labour might win the might win -- the
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leadership is not enthusiastic -- so it is interesting to see how we get to a second vote. i am puzzling at jacob's notion of putting humpty dumpty back in a bottle. not sure how that will work. tom: we are waiting for bank of america earnings and it would be rude to speak with jacob frenkel and howard davies about another bank, but i will speak about the news report of impatience at a given bank, barclays, speeds things up, or deutsche bank, speeds things up. dca new urgency to get it going where the new strategic plan for commercial banking in europe is a faster adjustment than what we saw months ago? howard: i think there is a general mess about banks which is more to do with fintech and their future business models and whether the big i.t. countries -- companies will eat the lunch of the commercial banks.
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that is a general underlying question which analysts look at banks and worry about. tom: you brought yourself on a bank that fintech is front and center, forget macro economics. fintech is the catalyst or timeline for a new baking world -- banking world. jacob: it is a new phenomenon, it has a lot of details and a blockchain technology, what i observed is there is a group called fintech and another group people who come from the technology and say i have a machine and am looking for a problem, and people who are coming from a problem and say i need a diplomacy. they need to meet. their language must be coordinated. and the regulatory framework that may be approaching the dealing with the entire fintech thing is critical. they will fall in order to make progress, for each to understand
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it is not a technology that is supposed to crowd out somebody else but rather how to improve the functioning of the financial system with the technology. it will allow the banks and the technology to cooperate, the regulators to cooperate, and explanations to be there. i am not afraid of progress, but i need to address it properly. francine: jacob, speaking of --ch, what do you see as what is bitcoin? is it a currency? 6000. gone to almost is it something we should look at? jacob: it is a phenomenon. we can discuss the specifics of bitcoin. challenges, the fact that it is not scalable, very anonymous, and there are mechanisms and ways to improve the functioning. i think that many people who are talking about bitcoin talk from
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ignorance and talk from a way of , how can i protect my own turf from what i perceived to be competition? i think about bitcoin as a generic name. encrypteda lot of new currencies that are blockchain based. tom: i got an email from jamie in new york and it says, do not let jacob answered that. howard.: let's ask sir what is your take on bitcoin? howard: i am a bit cautious because jacob has warned anyone who does not really know about it from talking about it. i cannot claim to be an expert. i can see that i cryptocurrency like bitcoin -- and jacob is right to say there are others -- the useful in a blockchain context and speeding up interbank transactions. i can see a utility in the financial system of that. whether bitcoin and things like it can become a reliable store of value for investors and
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replace other currencies, i that -- that i am much more doubtful because they are volatile and uncertain. i am not quite sure i see it arriving as a store of value. jacob: there is no mechanism that affects the supply of it. if you design a system in which the supply itself is a response to the degree of volatility -- in other words, there is a project. tom: jacob frenkel is going back to chicago. we need more microeconomics in bitcoin. what a wonderful day to have them with us. thank earnings coming up shortly. --omberg daybreak: asia, bloomberg daybreak, coming up. ♪
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♪ this is bloomberg surveillance, francine and tom from london and new york. we are waiting for results from bank of america. let's bring back howard davies, rbs chairman. we also have jacob frenkel. when you look at banks and the banking landscape and the need for m&a and regulation, what worries you about european banks compared to u.s. banks? howard: the problem in europe is that europe is much more heavily bank based financial system than the u.s. the european economy depends very heavily on banks and therefore bank regulation and capital does have a bigger effect on the economy in your than the u.s. it is a banal point that it is true.
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what we are anxiously waiting for is the outcome of what forers typically call basil . they still has not been an agreement submerged in the news flow about the imf confluence was that the basle committee failed to reach an agreement. that is quite nervous in europe does the issues, the so-called output floors, how far can you discount your risk-weighted asset for the risk of your lending, has not been resolved. they have put a considerable question mark over the future capital regime of banking. i think it is disappointing that was not resolved and i hope the members of the committee understand they have really got to get on with this because at the moment we do not know going forward what our capital requirements will be. francine: how much of an issue is this for the rest of the banking landscape and what does it mean for regulation? jacob: one of the major lessons , we are now on
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the 10th anniversary, is the recognition of the centrality of the health of the financial system. it is not just banks, the entire financial industry in the united states, there is no question that the financial system today is healthier than it was at the time. bank, morel in the liquidity in the bank, lower leverage of the bank, three elements that have been very important. now, some of the regulations were introduced in the aftermath of the crisis, but some have gone much too far without long-term thinking. i am encouraged by the fact that some of those, including elements of the volcker rule and the like, are being re-examined. i think the issue is not more or less regulations but appropriateness. , anddavid lipton coming up
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we are waiting for bank of america earnings as well. we look at the idea of branches in america, and i do not know what branches are like in the united kingdom and europe. do you work every day on the idea there will be a shrinkage of the retail platform in banking because of digital? howard: yes, the number of transactions going through banks is falling sharply as many retail transactions taking place on digital platforms as rising. we are now cutting branches quite significantly, have been for the last two years, but replacing them with branches with more tech experts. the adverts of sharply and exponentially and talking to other major bankers come a there is still that human contact, that branding of image and trust, the idea of granite from anotherlars
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time. how we you keep the trust of the brand in the digital era? howard: we are in danger of showing our age, you and me. i am not quite sure the granite pillars are quite what it is about. i think the trust is important, but trust of course is really as much these days has to do with the integrity of your i.t. systems and their reliability and the fact that they are constantly available, it has as much to do with that is the notion of granite pillars which is not very firm in people's mind now. francine: how much do you look at -- there is a psd to coming our way next year, the payment system overhaul. is that an opportunity for a big bank, but inot a guess an app we use on our phone or someone like facebook or google or amazon? open banking, as we
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call it, is potentially a major disruptive impact on banks. we do not know behaviorally how people will respond. in principle, aggregators can come into the market and offer from allty to screen of your accounts from different institutions and put it together. whether people will be prepared to give a company they do not know the license to get at all of their financial information is not quite so clear to me. i think we have to be ready for that and indeed we are. that is something which at the board level we are discussing intensively. very difficult behavior to see how that will work. francine: how do you see this panning out? jacob: i want to come back to the style of doing banking. young generation does not go to the bank, to the branch. my children, i do not know if they ever saw a bank from inside.
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everything is done on the laptop. you need to know is a customer that when you make a transaction, it is secure because confidentiality is maintained, it is safe. those are the criteria. the rest are less important. tom: within this discussion, doing need a monetary person to run the fed or someone more modern and adaptable to the series, the business person versus a phd? economics does not exclude knowledge and understanding of the banking system, so i believe the key criteria is not the degree but the knowledge or professionalism. tom: we have got earnings now. francine: we are just getting third-quarter earnings from bank of america -- i'm sorry to interrupt. earnings per share for the third quarter, $.48. these are quite hefty to go
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through. first of all, there seems to be some quite light trading revenue. we did see a little bit of loan growth. this is kind of what i'm seeing at the moment. it does take us a little bit of time to go through this massive report to really look at what the various retail banks are doing. remember, this is the second largest financial issuer of debt so far this year. tom: i have got their statement up which comes out in a very clear, artful form with return on average assets, 0.9%, common equity 8.1%. my basic framework is it is a different snapshot from what we got from jpmorgan. francine: it certainly does seem that way. let's get straight to allison williams. what are you seeing? alison: i am still looking through the press release myself.
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so far, it just looks like revenue on target. i have not seen the equity trade numbers. tom: icy sales and trade revenue ago,15% versus a year which seems to be better than the decline at jpmorgan. down 22%. alison: that is spot on with analyst estimates, actually. it is interesting, the numbers for trading for each of the banks coming in right as expected. ,pmorgan had a steeper decline 30%, however they had a much better quarter a year ago so that was expected. if you combine jpmorgan and citi their combined decline was 22% and that is what we are seeing at bank of america. francine: if you look at the equity trading business, the revenue for the third quarter seems pretty much in line with estimates. we were expecting a 985 figure.
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is this enough to show they have not done so badly or will shareholders expect more? goes,: as far as trading shareholders will be happy. i think what investors will be looking for today are the consumer numbers, which i have not seen yet. we did see some deterioration .esterday of jpmorgan and citi i think deterioration is expected at bank of america. i also think it is less of an issue for bank of america because card is a smaller share of their business. it is over 20% for someone like citi mortgage but less than 10% for bank of america. francine: coming up shortly, bloomberg daybreak america's with david westin, jonathan ferro, and alix steel. david: we are speaking with larry summers former secretary who has called the trump tax plan and atrocity. he says he respects glenn
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hubbard, who says the plan will lead to growth. lame it just larry summers says it will not. we want to cut -- hone in on can you cut corporate taxes and contribute to the economy? tom: thank you so much. with us jacob frenkel and howard davies. the single best chart goes to both of their worlds, the world of macro economics and we will start howard at rbs, the world of banking. this is the quiet, the vix index way below the average of 20, the moving average almost down for the shock and all we saw in the 90's. the actual pricing of volatility is in the equity markets. it is quiet out there, we saw that with jpmorgan, with bank of america. like i am not going to nose into rbs' thing, but how do you get out of the quiet? howard: i think there are things
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to worry about. the most i worry about is what happens when the bank of england starts to tighten? we have not had a rise in rates for about a decade in the u.k., and we just do not know how people will respond to that. in principle you can say, our book looks good, people can see this coming, but how will they behave? we do not know. tom: we just do not know. stanley fischer sat in the chair a week ago and talked to me, we just do not know. jacob: we know one important thing. when the economy is robust and improving, tapering will be much better absorbed by the market than if it is not. that is what the focus should be , how do we make sure the economy improves its growth? this really is in washington, this has to do with congress. this has to do with structural measures, structural
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not just printing money time and again. tom: jacob frenkel, thank you, sir howard, thank you. coming up later on television, on radio, the e.u. commissioner of economic and financial affairs, a timely conversation on the view forward for his europe. any other good guests as well. let me look at the data right now from washington. equities, bonds, currencies, and commodities with curve flattening over the last number of days, and the euro stable after a set of days. yankees. go i cannot believe i'm saying that. ♪ retail.
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alix: president trump's administration takes a drastic step two obamacare, cutting off subsidies. democrats call it spiteful. ecb is set to circle january on their calendar. the central bank is encouraging at least a 50% cut to their bond buying program. bank of america cut estimates. david: occam to bloomberg daybreak. i david westin alongside alix steel. coming up, we will have larry and the david lipton, u.s. undersecretary of the treasury for international affairs. alix: no joke on friday the 13th? david: no joke. alix: equity futures pretty much flat. euro-dollar goes nowhere but the


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