david: from bloomberg world headquarters in new york, i am david westin. welcome to balance of power, where the world of politics meets the world of business. york, on the fed. in brussels, on coming to terms with the italian budget. let's start on capitol hill. anna: it looks like the most likely scenario at this point is a stopgap measure that will get us to february 8. this has been added to the house schedule so we are expecting a vote on friday before the funding runs out. this will bring up the fight again, but it looks like the government will be ok for now. david: president trump said he would not do an extension. what changed his mind? anna: the math is not in his favor. there is no way he can get the wall funding through the senate.

that will still be the case in february, and we will have a democratic majority in the house , but at least he will say it is not a unified republican government where the republicans control all the levers of the government. david: we will talk about the wall in a moment. away,d, we are not far 2:00 this afternoon. what will they decide? >> they will raise rates, that is pretty much expected. the key question is whether they will change the statement, whether the dots will move, and what chairman powell has to say. any indication from the language on gradual increases is interesting, but will likely reflect the desire on the part of the fed -- rather than a dovish signal. i think it will be interesting particularlydots,

what the core of the committee is thinking. ofwill try to find the dots a particular name and see if the governor's are moving to a more dovish sense, and we will wait for the chairman to see if he thinks we are neutral. david: just a few more minutes we will now, thank you very much . let's head over to brussels to hear from maria tadeo on the brussels deal. deal. we have a if you look at the market reaction, clearly investors like this. they did not want an escalation between the european commission and the italian government. it is a big economy and that pile, but a founding member of the european union, this could have been a bad thing. we have a big european election next year. the italian government now concedes a much lower deficit,

2.04. the commission wanted it below 2% but they are settling for 4 billion and cuts. is a budget that will not lead to growth, but they did not see the risk of serious noncompliance. one of the theories i have heard today in brussels is that perhaps we will not see a budget in place because there is the idea that in 2019, the italian coalition may break up goes the balance of power has changed. not to put too fine a point on it, do people believe the numbers? we had the premier come out and say, we will have growth and bigger savings than you thought, we will charge them taxes and sell some real estate. did he believe the numbers? maria: if you look at the numbers that they presented they have to again say in a public way they may have been

a little bit optimistic. they say it comes down to a global slowdown, but if you look at the data out of italy, there has been a slowdown perhaps triggered by the political crisis we have seen over the past weeks. in general, forecasts are more in line with the european .ommission and other economists do markets believe this? i think they want to wait and see. it is this idea that we are not going to go into full on political crisis at a time when qe is ending for europe. david: at least we will get brexit, whenever that is. let's go back to anna edgerton in washington. president trump tweeting last night -- the democrats are saying loud and clear they do not want to build a concrete wall but we are not building a concrete wall. we are building artistically designed steel slats so that you

can stick -- see through it. it will save us billions of dollars a month once completed. is there a compromise as to what this wall is? prototypetiful structure that is going up on the southern border. it is a way to save face, for democrats to say, we are stronger on border security. republicans and democrats agree this is not the most effective structure to protect the borders, so if the president calls it a fence, there has been a note -- money appropriated for a fence. it comes down to semantics and where this money comes from, which part of the government. sarah huckabee sanders suggested they could reprogram this money and get money toward the border security that they say is being used for a wall. david: what about technology? there are ways to have a virtual

wall that may be more effective. .nna: it is not just democrats an interesting member of congress to watch is will heard from texas. he has the most amount of border in his district and he says a wall is a fourth century technology that will not be effective to keep out drugs and people. he has advocated for a smart wall, which he is calling technology that democrats have gotten behind, that can be more confronting of modern-day challenges. david: this is essentially kicking the ball down the road to february, but how does the world look president for the president, other than losing a majority in the house in february? how do we deal with it? anna: it will come down to blame. he will be able to say, speaker pelosi wants to shut down the government over the wall. i just spoke with steny hoyer, the nubber two democrat in the

house. -- number two democrat in the house. 99% of they agree on government funding but they are being held up by the amount and use of funding in the dhs bill. said $1.3have billion, $1.6 billion, but it matters how this money will be used. david: they have six more weeks to haggle over it. edgerton so much, anna coming to us from capitol hill. it is time to check in with what we have going on in the markets. taylor: we are at the highs of the session. the major averages are up more than 1%. the stocks and the dow transportation index, the only indexes in negative territory. as we head into the fed meeting, a weaker dollar.

normally we would expect a stronger dollar. stronger oil and a dovish rate hike could be putting pressure on the dollar. come into my terminal, g tv . we have talked a lot about the neutral rate. estimates have the neutral rate right around 2.50 and if we got a hike today we would be close to closing in on that rate. a lot going on with 10-year and two-year yields, and the neutral rate. i want to take a look at some of the individual stock movers we are looking at ahead of that meeting. pharma getting some pretty big news, alexa smith kline and glaxosmithkline and pfizer will combine their consumer health units and that will help pfizer focus on consumer health. they should have separate capital structures, so this will help them do that. 4%.lilly is up almost

they are predicting better than expected forecasts based on pharma sales and pushing back concerns.bout price i want to look at some of the other movers, ge is one up about 7%. they are expected to file their health unit ipo for global research analyst jeff sprague. it is upgrading this to a buy from a hold. most of the risks around ge are mostly pretty well understood, taking away the uncertainty. general mills up almost 7%. in april, they bought petfood blue buffalo. petfood is growing faster than human food, so that seems like a good acquisition. they are expanding that distribution -- the distribution of blue buffalo.

overall, a pretty good day for general mills. david: thank you so much. trade talks between china and the united states to resume, but what progress can be made? bonnie chin will be joining us next. this is bloomberg. ♪

david: this is "balance of power." bmw andry carmakers daimler are in talks to cool operate together on making some key car components. nothing to announce yet, but they are considering cooperating against the backdrop us a major changes in the auto industry globally, and a lot more cooperation. bmw arethat daimler and

talking about getting together on making some key car components. we want to turn to mark crumpton. trump changedt u.s. policy in syria, declaring victory over islamic state and ordering american troops withdrawn. the move appeared to take the pentagon by surprise and could make kurdish allies honorable to attack by turkish forces who consider them terrorists. the united nations says 100 thousand people have been killed and unicef tells bloomberg that more than 7000 children have been killed or injured. federal government has placed more than 14,000 children in its care in mass detention centers and residential facilities with hundreds of other kids. reportsciated press that confidential government data shows the shelters house fewer than 3000 migrant youths

when president trump took office. they spoke gave access to more user data than previously disclosed. the social media network allowed more than 150 companies to .btain personal data amazon was permitted to obtain user names and contact information. and spotify could read users' private messages. facebook said they had no evidence of abuse. the european union is stepping up its plan for a no deal brexit, confirming a plan to let e.u. banks use derivatives clearing houses in the u k for a year to avoid disruptions to contracts worth trillions of dollars. there are measures to keep planes flying, but do not give u.k. airlines the same flight -- rights they have now. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg.

the newatification of u.s.-mexico-canada trade agreement is one of the pieces of new -- unfinished business for the beginning of the year. toomeye with senator pat , who expressed some doubt about when and how the deal will move forward. mey: i am not extremely optimistic that we will see movement and if we do, the demands will be to take it into a further protectionist direction, not in the direction of greater economic freedom. chen. we welcome lonnie he served -- lanhee chen. i do so much for being here. lanhee: thank you. david: you heard what pat toomey had to say, he had some real doubts and he is a republican. what is your sense. -- what is your sense? lanhee: i do too.

the challenge will be what the democrats demand to move this trade legislation. there are a number of strong protections for labor and environmental groups in the u.s. and see a deal. some changes from nafta have been in that direction. will democrats demand more? that could hold this up next year. most analysts believe we are looking at the fall of 2019 forget action, which is why senator toomey and others wanted to move this trade deal in the lame-duck session. isid: president trump indicating he might want to play a game of chicken with the democrats and essentially give notice and pull out of nafta altogether and force them to ratify something. i do not work? lanhee: know that the democrats would care, because their view has always been that some of these trade deals are flawed, and they expressed no great willingness to be free traders in the

context of where president trump is. i'm not sure that would get them to where you want to go. the president is much better off trying to negotiate something with the democrats. if it is slightly stronger protections, fine, i do not think the president will mind. will the democrats use this as political leverage on the president? we will not know until next year. david: let's turn to asia and specifically china. .hat is a big issue looming we heard yesterday from the secretary of the treasury there on conference calls going between china and the united states looking to perhaps negotiations in january. do you know about that? lanhee: both the americans and chinese recognize there is value in trying to reach resolutions, especially on the immediate problem, the 90 days where the u.s. has temporarily agreed to hold off on the imposition of tariffs.

i have just come back from about 10 days in the region, and there is pessimism in the region that a deal can get done. against what go the fundamental interests are for the united states and china. i hope these trade talks get restarted. my sense that -- is that both governments are determined to move forward for at least short-term resolutions, but these long-term issues around industrial policy in china, human rights, tibet, taiwan, these will be sticking points in the trade discussions going forward. thed: that illustrates point that it is one thing to have a 90 day period of time. i do not think anyone thinks you can resolve these issues that have been around for decades, in days. or twoe get one year years where we are not sure of the trade terms? lanhee: i think it is the case that at least with the most

immediate of these issues with period, he will get those resolved, but with lingering uncertainty as to how many changes will the u.s. demand to the made in china 2025? that is based on requiring u.s. become involved in joint ventures. these are not going away anytime soon. the chinese indicated their willingness to be slightly flexible, but once you get into the fundamental questions and say, we want you to permanently end these practices at address the situation in western china with ethnic minorities, and address taiwan, the chinese are going to balk at that. the question is how many of these issues can be resolved in the short-term, versus how many will overlay the situation in the next few years? technology is at the

heart of the decision of made in china 2025. is the president right of how asymmetric the relationship is? have they developed and of sophistication that we benefit to some extent from exchanges with china and technology? lanhee: the chinese have demand -- developed a tremendous amount of technological sophistication. on thef that is premised technology of the united states. question of who benefits more is tricky. we benefit from market access, but in terms of technological development, there is no question that the united states leads the world and the chinese are still benefiting from access to that technology, which is why they continue to access element -- emphasized elements of ip sharing and joint ventures as part of their industrial policy. is more fundamental question , where is china as a country

and economy? do we still consider them a developing economy, therefore we cut them slack on the wto rules imposed on more developed countries, or are they further along the spectrum and should be held to the same requirements as other industrialized countries? david: how do the chinese perceive themselves? was weeng xiaoping, it are really not surviving. a different tone has been taken under xi jinping. how do the chinese perceive themselves? lanhee: part of this is a question of nationalism in china. there is a desire to present themselves as being much farther along, so i think you are right, there has been a shift in town. things likeit's they want to take advantage of the rules for developing themselvesut present as a power on the rise, so we

will have to continue to watch. david: that is lanhee chen coming to us from california. facebook faces new calls for regulation before reporting -- after reporting it allowed wide access to user data. this is bloomberg. ♪

♪ david: you are watching "balance of power." our stock in the crosshairs is facebook. shares are at daily lows after an article reviewed that the social network they have shared more user data than previously admitted to. joining us is romaine bostick. romain: they had a consent agreement with the government regarding a flavius investigation on how they handled user privacy. they were not allowed to share

user data without their express permission. facebook said they did not violate this consent decree and have not shared user data in a way that would be out side the spirit of what that decree was. there is a reputational issue and a perception that facebook is playing semantics. investors are getting to the point where they feel like there has been enough of these stories of the course of the year, and it never stops, just keeps coming, one thing after another, and shares are selling off. david: we had a report from the senate intelligence committee saying they had not been forthright. our investors calling for a change fundamentally in facebook? lanhee: investors have been calling for it for quite some time and facebook would say they have made the changes. the big issue is investors want facebook to get ahead of any potential regulation or legislation that could come out of washington. fix yourself now be's for --

before washington decides to fix it. david: mark zuckerberg and sheryl sandberg are in the crosshairs. wyden introduced a bill, slamming zuckerberg and sheryl sandberg for not being as forthcoming, and he is calling on congress to move the privacy bill forward. david: thank you so much to bloomberg coanchor romaine bostick. shakeups in latin america. what is next in the region as populist leaders take the reins. that is coming up next, and this is bloomberg. ♪

david: this is balance of power on bloomberg television. we go now to mark crumpton. mark: mitch mcconnell says he will introduce a stopgap

spending bill that would avert a government shutdown and keep agencies running until february 8. speaking on the senate floor today, mcconnell accused democrats of acting what he called -- acting or what he called political spite. the house willl, now take up a bill to overhaul criminal sentencing procedures. the senate overwhelmingly. passed the bill. the bill would curtail jail sentences for nonviolent offenders. the united states is making a potential overture to restart talks with kim jong-un. a new representative says washington will review policies preventing americans from providing humanitarian aid to kim's regime. discuss ways of getting nuclear negotiations with the

north back on track. global news 24 hours a day, on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i mark crumpton. -- i'm mark crumpton. this is bloomberg. ♪ david: this week, we have been looking at what 2019 might hold for various parts of the world and for u.s. foreign relations with those parts of the world. i monday, it was china, yesterday, the -- on monday, it was china. yesterday, the middle east. today, latin america. we welcome now council of america's vice president mike french worth. -- mike farnsworth. let's look at mexico. we have a new regime. we have a new president of mexico. what to expect in 2019 from him? >> new president as of december 1, that's correct. we are looking at a bit of

uncertainty in terms of mexico's economy and the signals he has given so far, an approach toward development and developing infrastructure, not necessarily based on the economic fundamentals but on social development, priorities that he has. certainainly looking at changes in the reform agenda, may be walking back some of the energy reforms of the previous administration, the education reforms. these were prized by investors in the previous government to help make mexico more competitive globally. these are issues we have to look carefully. on top of that, the uncertainty that surround the u.s.-mexico-canada trade nafta,nt to replace whether that passes and what time frame that happens as another set of uncertainty. the relationship with mexico is broad, deep, integrated, but

there are headwinds. david: the wall that president trump wants, what difference, is obradorl mr. lopez make? is indirectly paying for the wall through the new u.s.m -- usmca. put him off the hook because he does not have to come up with the cash. >> i don't think there was ever any chance that mexico would physically pay for the wall. this has been a political issue for some time. but the mexican government has issue.is as a u.s.

if the u.s. wants to build a wall, the mexican say, well, let them do it. it is their sovereign right. they don't agree with it necessarily. but on the economic front, if there is a greater physical barrier, we have to make sure, in the effort to try to seal the border from some things that maybe the white house doesn't want to come into the united states, we nonetheless don't seal it to legitimate commerce and trade. the borders are the windpipe of the u.s. economy. if you start closing those down, you start to affect the u.s. economy in a negative way. that brings a level of uncertainty. at the political level, president lopez obrador wants to leave open his own country. david: let's go to brazil, which is also going through a change with mr. paulson aro -- mr. bols onaro. what are we expecting from brazil in the new year? >> a very different approach. he won't be.

inaugurated until genuine first. but the signals are a different approach economically. both presidents, of mexico and brazil, they are outsiders from the political system. they promised change and shakeup. both will bring it to their respective political systems. the president-elect of brazil though clearly is talking in a way of trying privatize assets and open up brazil's relatively status approach. investors see that in a positive way initially. we will see if that reform agenda gets support in the brazilian congress and how it is implemented over time. there are issues, brazil does need reform, for example, in pensions. the truth of the matter, without even being inaugurated, he has seen positive support from the private sector. david: during the election, it was difficult to determine

exactly what his economic policies were. the people took solace that he had mr. guardia as is visible economic advisor. will he follow or go along with -- mr.. mario wants guardia wants? >> he's not in office yes and it is always a bit of a scramble among advisors in terms of whose voices prominent and really has the ear of the president. the truth of the matter is we don't really know at this point. it is positive he will be listening to a more orthodox branch of economic development. who haveking at those a military background to state approaches. we have to see how that plays

out. there will be somewhat of a discussion between those types of approaches. the president himself will have to figure that out. david caldwell 2019 be the year -- david: well 2019 be the year of -- will 2019 be the year of turnaround for argentina? >> the country is in recession. it is an election year. investors will be waiting to see who comes out on top. governmentach of the has been positive. argentina is a country that has gone through some boom and bust cycles. investors have seen this movie before. they want to make sure this is sustainable before they really commit for the long-term. we will see more of that in 2019. the elections will be clarifying in that regard. david: thank you so much for joining us.

we have an update on facebook. the social media site is now being sued by the district of columbia over the cambridge analytica scandal. extendinghares are their decline on the news, down more than 4%. live from new york, this is bloomberg. ♪

david: you are watching balance of power. we are 90 minutes away from the next federal reserve decision on rates. donald trump has been outspoken on what he wants them to do or not to do. we asked pat toomey on his

thoughts on where the fed is and how he reacted to trump's tweets. >> we are closer now than we were a couple of years ago. the president has his views on this. the president is not shy about sharing his views. powellportant thing for and the fomc is to ignore the noise. do with the data suggests them to do. david: andrew 11 is professor of economics at dartmouth -- andrew levin is professor of economics at dartmouth. thank you for joining us. good to have you with us. . you heard what he said. ignore the politics, ignore the president, adhere to the data. basically, the fed fund rates has gone up.

this basically shows that one more rate hike will take it up to that level. is that with the fed is looking at? >> i'm sure they are looking at that. but it is worth emphasizing that the range of uncertainty is much broader than that. the truth is the neutral rate could be 2% for the federal funds rate. it could be 3%. it could be above 3%. y way chair wa powell described this is they are in a dark room trying to feel her way -- feel their way. tiny one more time is just a guess. it could be more than that -- tightening one more time is just a guess. it can be more than that. it could be less. gradualportant to go and not locked themselves into any rate cycle. they have been communicating for

a while that they were going to hike today and markets are expecting it. even if the data is more uncertain lately, some signs of downside risks, some tightening of financial conditions. in ideal circumstances, they would have the flexibility to say, look, we are waiting six more weeks for more information. starting next year, they will have a press conference after every meeting. that is a significant step forward. it will make the fed more agile. every meeting will be a live meeting. they can easily say, look, we weeks.ting a few more we think we are going to hike now, but we are prepared to reverse course down the road if we need to. that is the kind of flexibility that will be critical to the fed and to the mac in public. david -- to the american public. david: does the head have to take into account the importance of -- does the fed have to take into account the importance of the markets needing a sense of

direction? do they locked themselves into today? >> the approach going forward that chair powell can foster -- the fed is like a team of physicians, like a family doctor wisehair powell is the family doctor talking to the patient and the patient's family, explaining what we know and what we don't know, what we are sure about, what we are not sure about, what are the risks and what is the contingency plan. risks and what is the contingency plan. they can have a strategy but not just a benchmark plan. the dot plot they have been using for six or eight years, it just emphasizes the most likely outcome. that can be very misleading because, at times, where there is more uncertainty, where there are more risks in one direction or another, if this happens, this is how we would respond to it -- that kind of strategy

inld be helpful communicating as clearly as possible. fed says itow the does not pay that much attention to the markets, like economic data -- but rather economic data. the fed almost never hikes rates when the stock market is coming down. is that a coincidence or is there some connection one way or the other between those two indices? first of all, the federal reserve's job, it's legal mandate, is to foster full employment and price stability. it looks at everything. all the indicators, all the financial variables, all the economic variables, all of the global economic variables in making those decisions, how to promote employment and price stability.

it's not just the stock market. it's other types of bond prices, bank lending rates, financials more broadly. what is fair to say is, over the last few weeks, financial conditions in the united states have tightened significantly. the federal reserve should be keeping that in mind, not just in the decision the make today, but, like i said before, like the wise family doctor given an change course,nd be flexible, be flexible in responding to new information coming in. the analogy you pointed to as being in a dark room, not knowing where you are. where is the greater downside risk? is this asymmetrical risk or asymmetrical -- is this ammetrical risk -- is this symmetrical risk or asymmetrical? five's more balanced than

years ago. it seems pretty clear that the risks are tilted to the downside. i don't know if the fed will acknowledge that today. they may be reluctant to go that far. but i think that is a fair statement. there are significant risks to the downside coming from china, downwardom europe, the oil prices. the ideas of inflation seen pretty far-fetched right now. aat are the contingency plans have in mind to make sure they are able to promote full employment and price stability if in fact some of those downside risks materialize? david: it is clear that the narrative will be as important as the decision, perhaps more important. as you look at the leverage being used, they have used

language -- as you look at the language being used, they have used language that is a must on autopilot. do they have to think about coming off of it in steps itself so they don't rattle markets? >> again, the press conference is critical. it will become more important extent because there will be a press conference after a meeting. the statements are carefully negotiated over multiple weeks. sometimes the statement only changes a few key words that are mysterious to people. the press conference is a good opportunity for the wise family doctor to explain clearly what we know, what we are not sure about, what we are watching closely, what we are comfortable with, and what are our contingency plans. there is an opportunity for chair powell to do that today. and he will be back in six weeks. only six weeks away to the next press conference at the end of january. he will be able to give more frequent updates, engaging with reporters and media people to

help the public understand how the fed is interpreting the incoming information. david: thank you so very much for your time today. that is very helpful. andrew levin coming from hampshire. the united states plans to sia.ctions on russ why were they triggered? >> the treasury department has sanctioned several russian entities over the last couple of years under the trump toinistration, empire due the election interference that took place in 2016 -- in part due to the election interference that took place in 2016. the are lax on rusal, russian aluminum company. the treasury department is putting on new sanctions on

people who were involved in the election interference effort in 2016 from russia's gru and the internet agency. we have seen reports over the past week that involve -- that outline how much russia was involved in the social media efforts and in trying to sway opinion in the 2016 election. these new sanctions announced by the treasury department indicate that the treasury department is not yet finished punishing russia for its 2016 election interference. as i'm reading now the bloomberg piece, it appears that still subjectis to these sanctions. what has changed here? sanctions --en to assuage the

treasury department? >> trying to figure out a way to punish the company without necessarily putting them fully out of business, there were some negotiations about whether mr. pasca would have to relinquish some of his ownership. trying to find tune the sanctions power they have without necessarily putting the company out of business. what we have seen from the announcements today, the treasury department still has some problems and issues with not only him but some of his associates. more information has come to light over the election meddling efforts that took place in 2016. that is part of the reason the treasury department has decided to put on new sanctions on some individuals while also trying to taylor and fine-tune the sanctions in place before this tailorcement today -- to

and fine-tune the sanctions in place before this announcement today. david: for more on this breaking news, the man i turned to for information from washington. wire.t got the is this making the sanctions more tailored and more effective? is it backing off? >> it is doing both. it is backing off. it is trying to modulate these tariffs, these sanctions. what is interesting to me is that this has become -- the treasury has become a shadow state department. they are actually conducting foreign policy in the treasury by using sanctions as a way to send messages to the russian government and to people who defy the aims of the united states. david: you could put it together with sphenous --

iphius. it had its budget cut quite a bit. let's turn now to paul ryan. when he was chairman of the house ways and means committee in 2011, he said the problem we have is spending, not taxes. we've got to get our spending under control because that is the root cause of our problem. today, paul ryan will be stepping down as speaker of the house. he is giving a speech a few minutes from now. paul ryan got the tax part done. i'm not sure you did so well on the deficit part. >> no. have $22eaves, we will trillion in national debt, which is quite a bit larger than it was when he assumed his seat in congress. and he was a strong advocate for controlling spending, the traditional gop orthodoxy. that sort of went out the window

with the election of donald trump. david: he is the last of a dying breed. he talked a really good game as a deficit hawk. >> he was a rising star in the republican ranks. he ran as a vice presidential candidate. cnbc, often a guest on extolling the virtues of controlling spending. that he did not encompass that. of course come -- but he did not a compass that. of course, entitlements were the hallmark of his pitch. they have not done anything in congress or the white house to address those issues. david: as he steps down, he did not want to run. he really liked the job of share of house ways and means committee. we are looking at live pictures now. is first love is tax policy -- his first love is tax policy. >> he was a policy wonk.

john boehner or's -- john boehner left congress and he was bag to take the job -- he was begged to take the job. david: thank you so much for being here. sign up for the balance of power newsletter. get the latest on global politics in your inbox every symbol they. our special coverage of the fed decision starts at 2:00 this afternoon. live from new york, this is bloomberg. ♪ ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom. ♪

scarlet: this is bloomberg etf iq. commodities casualties are piling up from crude oil to aluminum. we look at what defined valeant complex. -- we look at where to find value in the complex. is the season to spend. we dig into