planning a megamerger in a deal that would combine assets worth $100 billion. deflation defeated. china's factory gate prices rise for the first time, showing further signs of stabilization in the world's second-biggest economy. and hello, tomorrow. the science and tech summit in paris, bringing interviews with investors and inventors. i'm francine lacqua. tom is in new york. we have an interesting day ahead of us because of megamergers, that we need to put the focus on france. tom: and i see that. catherine mann will join us in a bit, but when everything is said and done, finally a quiet day in the markets. francine: yeah, for now. then we will see what else we will get in the next couple hours. the markets opened an hour ago.

let's get straight to the bloomberg first word news with taylor riggs. taylor: republican presidential nominee donald trump is pushing back against allegations of sexual assault. the womenhe says accusing him of misconduct were lying at a rally in florida and in two appearances in ohio, calling them vicious and false. he is back on the campaign trail today with two appearances in north carolina. in europe, the president of the european union is offering a stark choice to the u.k. -- hard brexit or no brexit, take your pick. donald tusk delivered his hard-line stance in brussels, signaling that the departure may take longer than two years, and it is when theresa may realized it will be painful for britain. and thailand is beginning a year of mourning for the world's longest reigning monarch.

he died yesterday at the age of 88. the government signaled that his only son will ascend to the throne. he was a symbol of unity in the country rocked by 10 coups. he has been ill for years, making limited public appearances and spending most of his time in the hospital. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: thanks so much. let's go to equities, bonds, currencies, commodities. day, but iner review, equities are a little bit weak yesterday, including a visit by the yiels stronger over the last 48 hours. elevated. the big 16.17, the dow just above 18,000. note that with all the back-and-forth in currencies, euro-swiss is stronger and much

more about weaker euro. it's not a big deal but it is may be something to watch into monday and tuesday. let's look at the american economy and the spirit of american retail. inflation-adjusted control retail. what i mean by that is that the american consumer, all that noise, building material, we will get to in a moment. there's a level change off the trend in the financial crisis that is unprecedented, to see that pullback in retail. you can see the parallel nature. let's bring in our macro risk advisor. i brought this chart of just for you. the american economic association, a million years ago, is up on stage. anthony, it's friday, do something.

i saw this chart -- you can bring this over to all sorts of things. a level change, then the great american recovery. sure. i think that chart shows we had a pretty significant shock. i remember retail sure. sales -- that was inflation-adjusted, yeah? tom: inflation-adjusted, but still -- >> yeah. we have had a recovery. there's a big debate about whether we should be drawing lines like that, potential growth has also come in a little bit, right? which is why even though we have had that big shock and recovered, we're starting to see things like inflation picking up. tom: i want to bring this up. bring the chart up one more time -- the price of bringing that line back to what we knew is higher inflation, isn't it? did we overheat the economy?

are you worried about overheat, overshoot in the higher inflation? >> i'm not worried about it. i think we will over and shoot. i think it's interesting that core pc inflation, for example, is on pace to get to 2% by the end of the year. but if you look at the performance of core inflation, we are already getting there despite significant dollar appreciation. tom: there's a lot of gloom this week, but you are the anti-gloom. you pound the table saying no. jpmorgan, 3% statistic for gdp. what did they get wrong? >> if you have been listening this year, you have the losing money. you have to put your money where your mouth is. look at industrial stocks -- they have been rallying. all the worry was around global growth. e.m. stocks have been doing better than developed market stocks. tom: 3% gdp in the u.s.? >> for a couple quarters,

probably. you have to member that we had a significant inventory shedding, and that will help us get up to 3%. tom: i'm trying to be optimistic. the doctors are in the national league. francine, the dodgers -- mega baseball game. they go want to play the chicago cubs. it's nirvana for baseball, francine, in america. francine: nirvana for baseball? i'm so happy to your that. this is the breaking news of the morning. i spoke to emmanuel macron, the former french finance minister. he said he won't decide if you will try to become president by january. you focus on baseball, i'll focus on the presidential election. with us now is catherine mann, who joins me here in paris. thank you for joining us. >> glad to be here. francine: we talked about all

the biotech startups. so what you are focusing on his trade. you clearly told us -- trade is populism,, because of because people are holding back -- what will de facto change that? >> growth. growth is what drives trade, and trade is what drives growth. there is a synergy, and in particular, more investment. investment is very trade intensive. the very slow investment that we have seen around the world for many years now, trade has finally caught up to the slowness of investment. of course the consequences of people, potential output, possible new developments in other countries, trade is a key element. francine: what is the one thing we need to spur growth?

if you could change one thing -- core inflation? what is tricky? >> right now, what's most important to spur growth is fiscal spending. on bridges in some countries, on innovation in others. both r&d and hard stuff. what we see here today in the french science and technology, my husband is a serial entrepreneur, and being here brings back memories of doing this kind of thing when i was a lot younger. coming to these events, showing your stuff, doing that innovation, making a difference for what's going to be true and what's going to be investment in the next year. this is also a key for getting us back on track to a higher growth rate and higher trade. francine: but the problem is -- you talk about entrepreneurs, we had a whole panel, there's a f ear of failing and a lot of european countries, and it's difficult to take risk. growth comes from risk-taking. >> right. one of the things about france

is that there are a lot of entrepreneurs. in my neighborhood, there are five or six. the issue is that it is hard to grow . and the essential thing to promote growth and investment and productivity and higher potential output, you have to be growing a small business. and that is where some of these regulations become a challenge. the regulations make the incentive to remain small, and if you are small, you can't have a global marketplace, you can't get to scale, you can't hire new people. it's innovation in small businesses, then growth. francine: what is the linkage between the market and growth? thomas saying we are having a quiet day -- doing a quiet days so people can get things done? >> well, one of the things is that there's a big disconnect between what goes on in the financial markets and what's going on in the real economy. that disconnect has become very severe in the last five years, since the financial crisis.

the disconnect has only become wider. the markets are volatile, dependent on low interest rates, and the real economy hasn't caught up yet. in terms of being able to grow and support where the markets are. the two of them are very disconnected. i think most on-chip renderers should look at the marketplace -- most entrepreneurs should look at the marketplace. they should focus on the growth. and policymakers should focus on what it takes to get businesses to grow. francine: carolyn man stays with us. we will be focusing on china next. i thought it was important when she said that the disconnect spurs growth. tom: thank you so much. i am looking at sterling, turning into the market. i don't want to oversell it, but we will monitor the market through the morning. we'll also monitor the comments of chair yellen, an important speech today in boston at 1:00. on radio, on television worldwide, a reason to stay with

bloomberg television and radio. this is bloomberg. ♪

tom: economics, finance, investment, from paris and new york. francine lacqua, a wonderful event on innovation in paris. will get to her in a moment. sometimes on friday, there are little stories we go -- yeah, i don't care. in three weeks later, why didn't i pay attention to that story? out of china this morning, the chinese government may mate two of the major companies. these two giant chinese companies -- helle without they do. china, the government, wants to merge them -- why?

>> it's quite a big merger. the wider backstory is that china is promising to shake up and reform its massive state owned enterprise sector, which is still a significant part of the economy. but it's also debt laden. the government is trying to shake it up, and progress has been quite slow. tom: does it get pushback? is there any debate, or does china just say, this is what we are going to do? >> they aren't even relying on foreign investments; they are doing this themselves. we have a big year of political change in china next year; all the analysts say there isn't much appetite for closing stuff down and putting people out of work. nonetheless they say they are sticking to their guns, saying that we will see more mergers like this and or consolidation.

but they still have a long way to go in terms of arming. tom-- in terms of reforming. tom: thank you. let's go back to paris. katherine man and francine. francine: thank you so much, tom. it was fascinating to hear of this megamerger. this -- is this a good omen? this seems to be the government trying to overhaul. megamerger czar -- what? a desperate measure or sinus sign of better things to come? consolidation,he but megamergers are necessarily the strategy to improve productivity growth. it's not exactly going to promote competition. may lead to higher prices, which may be a desirable in the short-term, but there is

a question about whether this is the right way to go. the next stage has to be focusing on activity and competition. francine: but it shows that they are tryi sure they are overhauling companies so much as overhauling sectors. in the end, we have to see overhaul in companies in order to get to a higher productivity, more competitive situation. i think there might be pushed back around the world, because if you have a megamerger in china, does that really enhance competition around the world or not? francine: there's also some news, for the first time in five years, they are factoring in inflation. what did i tell you? -- what does that tell you? >> some of the effects of consolidations that you don't have any competitors at all, and that is an environment where you can raise prices. in the short term that might look like a good thing, but unless there is productivity to

support higher prices and demand, that could ratify higher prices. this is a necessarily exactly the way we would like to see it. francine: would china export that inflation to the rest of the world? could, to the extent that it is a major player in sectors. yes, they can export inflation. it depends on what happens to the exchange rate, because of the combination of those things that ultimately impact the transmission mechanism of china prices out to the rest of the world. francine: catherine mann, thank you. we will be talking about brexit. ceo,so spot to the l'oreal about whether he was worried about a shortage of cosmetics and the u.k. tom: francine, thank you so much. neil, as we listen to dr. mann, she has been on a tear for the last six months. the idea of tepid nominal gdp forcing mergers. does nominal gdp get back to

where we want it, or is it in a new, lower-level where corporate officers have to meet to survive? >> that's a great question. my sense is that it will get back up to 4% to 4.5%. tom: ok, not great. >> ok, not great. if you look at the last expense, around 5% nominal gdp growth, to me, what gets us back up there in the near term is higher inflation. tom: what i note -- a couple weeks ago, the pepsi-cola earnings folks had 2% topline growth, and a manufactured it to 5% and 7% down the income statement. we'll do that with the banks. christine harper a bloomberg news will join us as well. later on, on bloomberg radio, fed hints. formerly with lehman, professor hughes of new york university.

the professor of the quality c. this is bloomberg. ♪

francine: this is bloomberg's "surveillance." tom keene is in new york, i'm in paris covering biotech and innovation. let's get straight to brexit, the one thing that is occupying a lot of curiosity. i spoke to the former french finance minister, launching a new political movement called en marche.

i asked if exit could be a plus for friends. >> it could be a positive, but it depends on two things. provide a ability to very effective package and deliver, because we permit a lot of things that we are -- without an actual compliance, and second, we have to monitor brexit. we are extremely attached. francine: that was emmanuel macron speaking earlier on. dr. mann is still with us. katherine, when you look at what he was saying -- first of all, he wants to negotiate hard. he says if they don't allow immigration then they don't have access to the single market. but he does think france can have an opportunity -- france has so much talent. can really regain it back? >> it's possible. there's a lot of financial

services that want to be able to deliver in the european context. banking, of course, needs consolidation. there could be some work done there. capital markets. talent coming from the u.k. could do that, but he is right. you can attract the talent, but are you going to have them stay? will they be able to grow their activities? i think that's a question for europe. there is a lot of issues with regard to the single market services that have to be resolved before there really is an opportunity to have friends be the base of opera -- have france be the base of operations. francine: i don't know if it is on par, but they have a huge presidential election which could also give them a platform for the far right. >> well, the political climate in europe is very challenging. the timing is difficult, of course. but we need to see the prospect in the longer-term. in the immediate, nobody will gain from brexit.

the negotiations are difficult, the rhetoric is hard. so we have to look beyond that and think about -- what are the decisions that investors are making, both in where they will put their people and talent and where the will put their money. francine: is there any doubt in your mind that prime minister theresa may will put immigration before anything else? immigration -- that we are looking at hard brexit, meaning that they safeguard immigration and give up access to the market? >> that is the trade-off being presented to them by the european commission. the essential four pillars of europe. the u.k. did have a deal before that, and it is hard to imagine that they will get a better deal now. francine: tom, it's interesting. when you walk around here, people want to know a lot about innovation, but people do ask a lot about brexit, even at this

summit. tom: i'm sure they do. thank you so much. we will continue from paris. in our next hour, we haven't done this in a while -- really important. adam parker has to live with morgan stanley, challenging to say the least. we will talk to him about how that cautious call flows over into the equity markets. let's look at data right now. equities, bonds, currencies, commodities, very much currency makes the dow near that 17,000 handle. yen weaker through the week. euro-swiss, stronger swiss today, it's really off weaker euro. stay with us. i harrisn, in new york, this is bloomberg. ♪

tom: bloomberg "surveillance." francine lacqua and an important innovation summit in paris, timely to say the least. right now, to our first word

news. here's taylor riggs. taylor: tom, francine, some big pocketed republican donors are calling on the rnc to disavow donald trump, according to "the new york times," who says that the donors believe the allegations of sexual misconduct threaten to inflict lasting damage on the party's image. the report notes that several big donors have defected, including billionaire julian robertson, who was backing gary johnson. russian president vladimir putin is trying to gain ground on the battlefield before a new u.s. president takes office, according to top lawmakers in moscow, who say taking control of aleppo will give could more bargaining power in dealing with president obama's successor. russia has rejected pressure to halt its bombing campaign. the u.n. says 250,000 civilians are trapped in a humanitarian disaster. the u.s. will remain the most important partner for the philippines, even if the president improves ties with

china, according to the president's foreign secretary, who says the u.s. and philippines have "a special relationship." the nations are leading in formal defense treaties since the president took office. ministerish first nicola sturgeon says she will publish a draft of a scottish independence referendum. she says her nation's interests are not being protected and brexit negotiations. a spokeswoman for theresa may says the question of independence was settled in the 2014 vote. global news, 24 hours a day, powered by over 2600 journalists and analysts in more than 120 countries. riggs.lor this is bloomberg. tom? tom: thanks so much. it's tough to see this -- howard lot make and the good people at cantor fitzgerald, this is there community day. thanks to scarlet fu for helping

the wme out with this. we are thrilled to be a part of this. nei great to see you -- l. we were talking in the break about the fed, everyone will be frothing as we get to november, the live meeting in december. but the literature says a central-bank acts after the fact. they are waiting for the evidence to then make a decision, right? >> yeah. it's funny you say that, because they always tell us -- tom: they will be up front. >> right. not where the puck is at the moment. i mean, right now, the fed's policy is to be behind the curve. they want to wait for inflation to be above 2% before they raise rates again. that is part of their strategy.

that's just the world we live in. tom: it's great, and i love the let's continue with the puck analogy. let's bring out the darts, anthony, if you can. the year of the dot plot. the pucks are coming down. they will settle down. when does that occur? meeting by meeting incremental, or do you look at them and throw in the towel and say enough? >> the fed is always reluctant to make big, wholesale changes of that nature. tom: i agree, it will be incremental. >> you won't see a hold thrust to the market. they are probably hoping that at some point over the next year, but the market ben'ds up to the implied rate hike.

if inflation starts to pick up but the global economy looks better, you could see a scenario where interest rates are back up. tom: did you take a new bird to get here? -- an uber to get here? >> no. tom: i did. in paris, the ubers are mercedes and jaguars. i don't get why that is. francine: yeah. in paris, the ubers are fantastic. in london they aren't so bad. i'm pleased to say that we are .ow talking to the head of uber thank you so much for joining us. uber is a great company. people want to know more about it, but it has its challenges. one of the one things people ask all the time is when will it become more on demand?

when can we see autonomous driving? when will i be able to press a button and have a robot pick me up? rolled out our first autonomous cars a few months back, and it's difficult to understand how quick it will become mainstream. we are struggling with the unknown, and there is some hard science problems yet to be solved for that technology to go. francine: hard science and regulation. we will not break into dance -- there's a lot going on in the panel next to us. what about the regulation? will it take 10 years, 15 years when we see that first driverless car? >> it's going to depend on the city by city basis. we already see cities like togapore, t dubai, position themselves as self driving capitals.

francine: overall, how has your friendliness with regulators -- you have been accepted. >> i'm pretty excited by the progress i am seeing across the world, particularly in the areas i receive. i'm seeing countries like portugal already moving forward with new rules that embrace it, and seeing some great developments in northern european countries. a clear pushere's for countries to make sure they can make the most out of apps like uber. francine: is there one piece of regulation you would need, or are you trying to catch up with regulation in terms of licensing or anything like that? >> at a super high level, what we care about -- can we bring safe, affordable, reliable transportation? we don't necessarily need a piece of regulation.

what is the value you would put to drive other people around? countries are restricting the access to jobs, but some countries are making thos economice opportunities available to the masses, and this is where uber can unlock the potential. francine: you also went into the scope of delivering for the house. you are really testing that in europe. >> have exactly right. we have uber eats, that i'm extremely excited about. we're celebrating today the first anniversary in paris. as a result, we feel super excited. we're able to deliver in less than 30 minutes meals from some of the top restaurants in the city, and this is something that people value a lot. francine: how long have you been operating in europe? >> about five years. francine: what have you learned? wei think we have learned --

started with the u.s. approach to things, and what we have learned is that we need to invest and we need to make decisions that are long term. we need to collaborate with governments and city officials in a better way. i think we have done a great job , explaining what uber can bring, and i think this is why. francine: what about the middle east? i know some countries have their own services. i was reading up on gett -- are they real rivals? >> i think it is competitive industry, and it fosters our sales. we have to think about how we can do a better job. talking specifically about the middle east, it is a competitive market, and the opportunities are also normal, which can empower it. francine: thank you so much.

let's send it back to new york. i don't know if you can hear the hip-hopping. you'll hip-hop to the break, i hope. tom: francine, thank you so much. hop-hipping. janet yellen, 1:00 today. ♪

tom: bloomberg "surveillance," from paris and new york. francine lacqua, tom keene. neil is still with us. the idea we are talking about is the optimism on the markets. there is no optimism in investment. we need better investment.

is there a prescription to get to better business investment? >> well, business investment has been quite weak for the last six quarters. i think what's important for people to realize is that the weakness in business investment really started in the middle of 2014 where we saw this big, increase in the dollar. a lot of the market moves that have been defining capital markets for the last year and a half. stronger dollar, lower commodity prices, flat equities. we have seen and unwind in a lot of those moves this year, and with the lag, we should see some pickup and business investment. tom: what is the actual motivator -- >> there's an accelerator effect. tom: come on, what is that? >> is his investment picks up when people feel better about the future. basically, expectations of growth tomorrow prompt increased business investment today. so as growth picks up, investment tends to rise. that's the underlying driver for

business investment. a lot of the weakness is a function of the lack of a global accelerator. tom: that's where i wanted to go. bring up the chart. that red line is what he's talking about. there is no accelerator effect. there has been a decline in year-over-year business investment going back to the rebound from the crisis. this is arguably the money chart the year of wed have to fix this, not that any presidential candidates are talking about this. it's about the global impact that flows over into the u.s. >> the global economy has been very weak for a long time. i think a lot of that has to do with -- we have seen a mix of growth away from china, for example, but that has put businesses in a cautious mood. that's one of the big reasons

why investment has been weak. -- moreically,-- mo capex,lly, mining rigs, one of the things we haven't shown appear is research and develop and spending, which also falls under nonresidential investment, and in the u.s. that is exploding, 8% year-over-year. tom: very cool. >> there's a competition will changal change. tom: i want a banner that says the dutta dollar affect. ok, the here's the dollar down here, oil trading partners. i get the idea that there is the developed world in less developed world. here's the big move up, the big dollar surge. that's the big fear. do you think the dollar gets in the way of dutta optimism?

i'm practicing for sunday football. does this work? does this continue forward and breakout here? because't think so, many of the developed economies are doing reasonably well, which should push investors to rotate away from u.s. assets to some of these more developed markets. you you mentioned -- tom: in my doing ok with the football? >> it's important not to reason from a price change. one of the things is that because the u.s. has been doing the dollar iss -- the result of strong growth. tom: this is why we love to have you on. the dollar is not so much an exogenous foreign dynamic as it's endogenous inside the u.s. economy. a better economy, feel good

flows, dollar up. >> i mean, go outside and ask. tom: outside is not the real world, its bloomingdale's. [laughter] >> go across the bridge into queens, then, i don't know. go over to queens and ask them, tell someone, the dollar is getting stronger, well prices are falling. will that boost confidence? of course it's going to boost it. goes on to the mariner echoes building and they will give you a nonsensical rigmarole about inflation expectation. even as the dollar was strengthening, core inflation was stable. now that the dollar's flattening out there is more room for inflation to pick up. tom: fired up here. i'm going to put that on twitter today. coming up, i has really been looking forward to this. a partner with a look at the equity markets, given a very cautious sum. that will be in the next hour.

this is bloomberg. ♪

francine: good morning. this is bloomberg "surveillance"

from paris and new york. tom, let's get straight to the bloomberg business flash with taylor riggs. its annual sales forecast for the first time in three months as growth slows in the financial services sector and clients spend more sparingly. interest sales rose 7.5% in the 12 months into march. a july forecast called for growth of more than 10%. of the company also said second-quarter net income topped estimates. uncertainty stemming from the u.s. presidential election may be an argument for delaying the rate increase, according to the philadelphia fed president patrick parker. nfl and see voter next year and is worried about potential policies that would "have the sort of effects depending on the votes outcome." he did support a rate hike in september. and chinese buyers are stepping up home purchases in hong kong, according to bank of america merrill lynch, which says prices are becoming relatively more

affordable compared with some other major mainland cities. the lender says hong kong's housing affordability ratio, which measures mortgage payments as a proportion of median household income, gives that 58%. that's compared with 80% to 124% in three first-tier chinese cities.and that's the bloomberg business flash . francine: taylor, thank you. we spokeparis because to a lot of innovators and the head of uber. one thing i also tried to figure out was funding. if you are a young innovator or entrepreneur, what access and grants do you have, and how can your bank support you? we have an exclusive interview i asked if hisre on board as business model is changing. he said that they need to become more digital that they are.

well, specialized entry points for those guys -- they aren't going to jump the bank like a regular small-company. they need special platforms. they are running out of time. you have to understand that we never visit the bank physically. it's a totally different approach, a totally new customer. francine: and what does that mean -- we talk often about the european sector over banking in europe. does it have an impact? approach, the loan approach, would have to concentrate, because this is the old industry, enough to move something that is totally new.

a state-of-the-art meeting, it can change rapidly -- this is something that would never stabilize. it is moving every two years, so you have to adapt quite fast. francine: you spent a lot of time with innovation, innovators, entrepreneurs. the u.s. scales up -- this is why we have uber. a find an idea and they put money into it. >> one of the weaknesses of europe is that you do not have an integrated domestic european market because of local legislation, because of languages, a number of factors. in the u.s., you have a good idea, you have the ecosystem. when you are in europe it is much were difficult. this is one of the challenges. we need to build that huge european domestic market. trying -- wewas couldn't really talk about ranks specifically because he was in a

quiet period, so they can say anything that relates to his business. but overall he talked about the dialogue between the millennials and how they can access -- remember, they are different to us, they are less loyal, they want things faster, and they change bank accounts more often. tom: thanks so much. i go back to the idea of two major bankers telling me they underestimated the use of digital by older americans. they thought that was something all their experts got wrong. neil dutta finishing up the hour. neil, i want to go into the weekend of reading of what the great mystery is. you're an optimist on the european economic experiment. what's the great mystery in the u.s. economy right now? >> the great mystery is why productivity has been so weak. there is one school of thought that says we have exhausted all

the gains from technology. view.pply-side stagnation i think the evidence for that is thin. the reason we have had such weak investment is because we haven't had much capital deepening. that explains most of the shortfall. it beans capital spending has to grow faster. we have had a very robust recovery in the labor market -- tom: are they good jobs? that was the debate last weekend. i thought there were a number of good articles -- good jobs we are creating? >> a level of consumer confidence is telling us so. tom: i will go with that. consumer backed. we showed this chart yesterday -- consumer confidence is back to where it has been, except for that one off magic moment in the late 1990's. was the late 1990's a one-off moment for american confidence? >> i don't think so. i think which you had was a

really strong period of growth driven by meaningful productivity. affect also had an policy on things happening abroad. that helps drive the unemployment rate below 4%. tom: i left the dutta daughter effect, the inside dynamics. neil dutta. go to queens. to figure out your economic american economics. -- your american economics. neil rosen. w1:00 p.m. this afternoon. this is bloomberg. ♪

tom: this morning, finally a

quiet in the markets. isgoldman sachs says there no bottom for sterling, what does currency unrest mean for all of equities? adam parker of morgan stanley in this hour. francine lacqua is in paris. jpmorgan, wells fargo, citibank too-big-to-sale extravaganza. we are live from our world headquarters in new york. friday. we got to friday, october 14. i am tom keene in new york. she is in paris. francine, why are you in paris? are you shopping? why are you doing this? francine: i cannot. please look at the pound in your data check. to do anyoor shopping. i'm covering this conference about innovation, but we also managed to speak to newsmakers, a possible presidential former ceo of bnp

paribas. then we had this megamerger. in china, what does that tell us about what chinese authorities are doing there? thanks to enda curran for being with us from hong kong in the last hour. now here is taylor riggs. taylor: republican presidential nominee donald trump is pushing back against allegations of sexual assault here yesterday he said he does not know or never even met some of the women who have accused him of misconduct. he denied the claims at a rally in florida and at two appearances in ohio, calling them vicious and absolutely false. he has two experiences today that she has two -- he has two schedule experiences today in north carolina. hit the campaign

trail yesterday in new hampshire on behalf of hillary clinton. what she offered was anything but a standard speech. obama: to dismiss this as everyday locker room talk is an insult to decent men everywhere. the man that you and i know do not treat women this way. they are loving fathers who are sickened by the thought of their daughters being exposed to this kind of vicious language about women. taylor: mrs. obama told the crowd trump's words "shook me to my core in a way i could never have predicted." donald trump delivered his hard-line stance yesterday on brexit at a speech in brussels. he said it is time british prime minister theresa may realized a withdrawal will be painful for britain. it is beginning a

year of mourning for the world's longest meaning that longest reigning monarch, who digested a at the age of 88. the government signaled his son will ascend to the throne. the monarch was a symbol of unity during 10 coups during his reign. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom? tom: thanks so much. markets are quiet, but where we have been this week makes up for some challenges. use lower that yields lower. -- yields lower. churning oil, a little bit elevated. the yen weaker. i would note, the swiss is stronger against the euro.

sterling, 1.2217. backine can afford to get from paris to merry old england. go to adam parker. this is the idea of retail sales. forcontrol group adjusted inflation -- what a shift off the financial crisis, but a nice parallel nature of recovery. there we go with a good consumer and a good america. that means it is time to bring in adam parker, who is in an interesting position. let's go to this chart, dr. parker. you know the statistics of this. you're on trend, you get a level change, and you get back to a parallel nature to the trend, but you do not recover to the trend. do you need to? adam: i don't think so. you need to believe that you are not afraid of the bear case. you're not afraid that things will get materially worse. metricsthe consumer

show that consumers are in a good case. tom: you come over to morgan , and whatteve roche they built there is always fractious. how do you put up with ellen zentner and hans reddick or an -- and hans redeker and the call of caution? how do you deal with ellen zentner? adam: we have a great group of macro colleagues. equity investing is a little bit different. i have to buy today, sell it to a sucker. are you looking at me -- tom: are you looking at meac of --m: i am always going to be what is interesting is we forecast earnings at the overall year on february 10, we thought there would be modest growth. the market goes up 20%. the base case that economists and currency folks outline are

not driving the stock line. it is how acute the bear case would be. pepsi-cola, 2%, 3% nominal gdp and lousy revenue. the manufacture with good earnings and good cash flow. is that the story for next year? adam: i think so. we think there is a 2% dividend yield, a 2% plus net buyback, and then this call option. that looks better than almost every other asset class. negative corporate bond yields in europe is one of the lead stories today. of: within the statistics your expert app, there is a bell curve. stay with me, we are doing a bell curve. it gets messed around and most

-- and mushed and squished. are we in that level of instability? adam: i do not think so. ultimately for u.s. equities, the case is simple to be bullish. expectations are low for earnings, potentially achievable. you may have a soft spot with the economy in the less few weeks, but ultimately you have a fundamental argument of expectations being achievable. we have this relative argument -- 17% oftion being all stocks trade at $100 million or more in the u.s. i do not think people are positioned for a big upside. the u.s. market is a pretty good risk reward. tom: as we go through the hour, francine will get to that in a bit. adam parker has this tattooed on his left arm. -- rogerhe famous

ibbotson of yield management -- this chart, everybody on the wall 20 years ago, 30 years ago. here is guadalcanal in world war ii down here. i'm sorry, folks, we are on trend. there are all these reasons not to be in the market, and we have been on trend even through a bit of malaise here, a bit of malaise here. do you share long-term optimism in equities that is displayed in the ibbotson chart? adam: we think the long-term is around 10% nominal, 6% real. our ultimate view is that it will be lower than that -- 6% nominal, 4% real. , tend to be more optimistic and i hear things like productivity is weak from economists. i do not even know what that means. i love that line. i think it is more -- what i mean by that is, i love the line that productivity is everywhere

around us except for economist numbers. i love that. we are going to come back with adam parker. francine in paris as well. later today, chair yellen, i believe on labor. janet yellen will travel to the land of the dissenter, eric rosengren, in boston, the 1:00 hour. this is bloomberg. ♪

francine: this is "bloomberg surveillance," live from paris and new york. we are in paris because we are at a conference. we caught up exclusively with the former french finance minister who quit in april

because he wanted to start a political movement, called "on the move." he has not said whether he will run for president when elections come up in may of next year. i wanted to drill down his view on europe and whether brexit could also mean further or more european integration. an approachwant where the brits will have the better of two worlds. it will be a big incentive for all members of the club to leave or to kill the european ideas, because the european ideas rest on responsibility and solidarity. that is a critical point, especially when you speak about immigration. it is impossible to leave the burden to some members. francine: you can hear that emmanuel macron wants to take a hard line. to do something and then

forcing other countries to do the same. so he is saying if they want to be strict on immigration, they will have to give up access to single markets. interesting, tom, in case he becomes a presidential candidate. tom: i would counsel on the goldman sachs note from yesterday, there is no bottom for sterling. i am in the sense, francine, into october and november, the markets tell a lot of these people what to do. they want toh, if listen. at the same time, we had theresa may talking about inequality and blaming a lot of the stuff that led to brexit on the central bank. she has retracted that a bit, but it is interesting how this new political force will view the markets or not. on brexit yesterday, the -- the shortage of -- l'oreal is the

biggest cosmetics maker in the world. i asked the ceo exclusively whether he was under pressure to raise prices in the u.k. because of tax appreciation. assessing the situation, the evolution. for some of our products, the cost will increase because they are important from other parts of the world. we want to respect our consumers. also the relationship with the retailers. we will do that very wisely. francine: we also talked once he interview was over, and said it is other people's fault. but i said that it was a referendum. this is going to be a huge problem for boe if we start

importing inflation. tom: thank you so much. with us, adam parker. do you look at sterling in a vacuum, or does hans redeker say it could have a contagion effect across europe, europe, and thus across multinationals? adam: we provide for investors a list of u.s. companies that had a lot of exposure to the pound. most currency people do a lot of technicals, so with the market telling them what to do, it is pretty accurate. ultimately the things that we stress about in the u.s. are, what could introduce volatility into earnings estimates? is it big moves and currency? that has not moved as much. that would make me more nervous. tom: let's go to the extrapolation of pounds sterling . anthony, bring it up. we have shown this a lot. down we go on brexit. there is a modest extrapolation

of where we were on the log chart. slope matters, dr. parker, but we are not sloping. we are quadratic and ugly, aren't we? that is an ugly week for sterling. adam: i think europe is more for vacation than for stocks. now it will be a little bit cheaper to vacation there. it is not big enough in terms of exposure to u.s. corporates focusing on it that much. tom: take it to the asian currency dynamics and the multinational expansion to e.m. and frankly to japan and china as well. that is another world, isn't it? adam: really what i am focused on is where earnings could get hurt. to me it is areas like machinery, household personal products, beverages, chemicals. areas where earnings could be impacted by a much stronger dollar. it does not seem like in the

last six months i should make that argument heading into october. tom: i want to rip up the script with dr. parker. i know you do not talk about individual stocks. what do you do with the stock that runs away like amazon? you are a blue chip, institutional. what do you do? adam: we have a discipline. we forecast return every night quantitatively. we focus on stocks that analysts right away, and we try to marry stocks that have quantitative reason. and stocks with high valuations often do not screen as well, so you might miss out on some all the way up. hopefully you miss out on the pain on the way down. tom: dr. parker mixes in two areas. too often people are just fundamental or just technical,

and sometimes that is a challenging outcome here at our challenging outcome is jpmorgan earnings in the hour. on to citigroup. hintz, speak with brad the professor of new york university. we will do that on bloomberg radio. this is bloomberg. ♪

francine: this is "bloomberg surveillance," live paris and

new york. we are here because we are talking about innovation, that we are also looking forward to a great conversation. i want to get our next guest's view on asset management and asset prices. tom: let's migrate to a nation torn asunder. you see that across any and all newspapers, those who support mrs. clinton and those who support mrs. client. megan murphy is flat out his office -- and those who support trump.. megan murphy is flat-out exhausted. jim fusilli wrote beautifully in "the journal," "this debate is bob dylan literature." i made very clear yesterday that it was widely deserved. others respectfully disagree. comthank god for the nobel

prize. and distracting from the insane world. all doi think we would well with bob dylan lyrics in our lives right now. tom: what does mr. trump need to do to get to the sunday talk shows? what would we observe friday and saturday to get to sunday morning? megan: it is unbelievable that it was a week ago that we did not even know that it was coming out that evening, which was this tape, and how much it changed the trajectory of the entire republican party and america at large. you saw echoes of that in some of the statements we have seen from trump, from clinton, and from michelle obama. tom: we talked about bob dylan, and the first lady, and we all can agree that -- i talked about the cadence and pace of his song lyrics and song writing. his donald trump on the same cadence and pace in new hampshire, or is it a new donald trump? megan: he has truly decided to

double down, making no pretense of being presidential. he does have quite an effective speech style, this measured pace of really ramming his points home. he has learned on the stump. tom: where are we in the polls? is it over? megan: it is never over until it is over. when you look at swing states like pennsylvania, which such a huge gap -- when you look at ohio, when you look at he is pulling out of virginia -- tom: is this uncertainty pulling over into the equity market, or are you removed as an equity strategist from megan murphy's world? adam: i was at a speech years ago where bill bennett gave a talk, and he said i take my dog to the beach every morning and we watch the sunrise. i just do not give my dog credit for it. i love that line because i do think the economy and the markets do oscillate independent of the political scene.

you learned last week or 10 days ago that if it looks like trump is gaining share, the market is off a little bit. if you look like hillary is gaining share, it looks like the market recovers a little bit. beyond short-term trading, it does not matter that much. tom: are you going to nevada? megan: we are going to vegas. i have not campy -- i have not covered this campaign this long to miss out on vegas. what does mrs. clinton do? megan: she would almost just say give all the questions over to him. the floor is so low. you have to think of how crazy was widelyis perceived as a draw. weare at this position where are sort of devoid of policy

content, and people can shift based on appearances and sort of how they rally their base. it is not even a make or break moment for him anymore. to the point of the markets and equities, what they are watching now is congress and whether or not there is enough anti-trump backlash, to switch both the house and -- in 10 seconds -- we have a lot of point before we get to wednesday, right? adam: yes, same thing. much, meganou so murphy. you continue with a smart dialogue on the nation's politics. ,ark halperin, john heilemann tonight at 5:00 p.m. "with all due respect p.m. tonight. in paris and new york, this is bloomberg. ♪

tom: good friday. we particularly welcome those in asia. francine lacqua in paris, i am

tom keene in new york. let's get to "first word news." taylor: some deep-pocketed republican donors are calling on republicans to disavow donald trump. that is according to "new york times." notes that several big gop donors have defected, including billionaire julian roberts, who was backing -- according to top lawmakers in moscow, taking control of aleppo will give vladimir more bargaining power in dealing with president obama's successor. russia has rejected pressure to halt its bombing campaign. there are0 civilians trapped in a humanitarian disaster. bermuda's government is repairing roads and repairing infrastructure as they try to recover from hurricane nicole.

butas a category 3 storm, the heavy rain and 115 mile-per-hour wind eased overnight. schools and government offices are closed, but the international airport is expected to reopen. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. tom? francine? francine: taylor, thank you so much. markets, where talking innovation, we are talking startups. we are mostly forward to the founder and ceo of -- this is a huge asset fund manager. they have around 51 billion .uros, 27 funds thank you so much for joining us. i talk about the markets day in, day out. tom looks at the markets every three seconds. what are the markets getting wrong? >> wrong, i don't know.

but as bob dylan has been saying for a long time, times are changing. which markets have been fluctuating over the past five or six years, is seen as relatively shifting. conducting policies at a time for ae're asking restraint in spending. many have already overspent. what is happening is this wave me, the donald trump campaign right now is not actually indicative of an unwinding. i find it concerning that

theresa may in the u.k. is being forced to go straight ahead on brexit right now. we have elections next year in france. francine: but markets are ignoring these elections. they are ignoring political risk. edouard: i do not agree. , we have and germany these populist movements that are very powerful. what is happening right now is main street is banging the door on wall street. we want to change. change going to mature? we will have a little bit more , minimum wagesm is being increased further, and

we are seeing that hillary clinton has that in her program. we are seeing also some capitals to increase gains. what i find interesting is that donald trump's figures for , iteasing dollar spending is ludicrous, over 500 billion, yet hillary is talking about half that amount. francine: are you seeing a correction in the market? edouard: i think beyond the shift in levels, what is important is that there is this .ort of restructuring if you look at markets, the s&p has not done anything for the last year, more than a year. the european markets have come down.

of sectorbeen a lot rotation. what i see happening is that the bond markets will become quite volatile going forward. francine: more so than they are now? there is a yield that is flat. curve.s a flat yield edouard: bond prices, the rates rise because as you put out, the bonds are ludicrously low. there is this fiscal replacement going on. a little bit of inflation would cause a pickup over time. commoditiesce of building up.rove

we should have a shifting of the paradigm in a way markets. for the last six years, we have had the privilege of high , to the favor of the commodity stocks. oil stocks in particular, and gold stocks. those are the shifts we see going forward. do you see anything in a bubble? the bond markets are clearly in a bubble. francine: will they burst quickly? anybody i do not think sees this bursting happening. the central banks will do what they can to make sure that they do not go too far. verythe bond markets are vulnerable right now. will europe outperform

the u.s.? edouard: the u.s. has not performed -- the u.s. has not outperformed europe already. there is a safe haven. in this country and on -- bonds will remain lower than they do in europe and the japanese. francine: are you worried about the banking sector in europe? edouard: well, we have not solved much, have weight? francine: why not? the banking places -- there is a lot of restructuring going on. bad assets have been cleaned up through depreciation of bad loan entities. cured the banks the way the u.s. has done.

the last news i have heard, there was the announcement of a writing of the ship. -- a righting of the ship. the banks that are in trouble -- it is equities. francine: thank you so much. tom, we have breaking news? tom: we have an early release of jpmorgan. adam parker is with us from morgan stanley. jpmorgan, morgan stanley, two different firms. mr. parker will not comment. we will get christine harper to help out here as well. here is what you need to know -- double-digit, 13% on equities. 1.58 is a nice beat as well. beat beat, beat, beat, a moment for jpmorgan.

there is some noise in there as well. bloomberg headlines are saying they very careful -- if there's -- bloomberg headlines are saying be very careful. is a betterequity than good number. this comes after many years of crisis. leading is really global banks. wells fargo is doing better. they are out at 8:00 a.m., and then with the tumult at wells fargo, they have been challenged over the past two months. if you look back to the crisis, jpmorgan has modestly outperformed a depleted wells fargo. christine harper has been wired in. did you see jpmorgan earnings at 4:00 a.m. this morning a? christine: thank you so much. i am taking a quick look. r.o.e. is to dream about. it is everything that you filter in, with michael moore, with your american team, with your

european team here it is jpmorgan the premier bank in the it haschristine: surpassed the second quarter in being the best bank in the u.s. people will be looking at the legal costs they suffer. one reason you should be careful with these estimates is that analysts point out that jpmorgan frequently has some legal costs, some tax rate issues that do not quite make the analyst estimates lineup. the numbers that are up a beat. i am pretty focused on revenue because that is a good way to look at how they are doing. it looks like they are beating there, digging in on the composition of that. particularly trading is a big delta for jpmorgan. that is where they can go on the upside. tom: i have talked to jamie dimon about this before. is that wecriticism

do not say enough to scope and scale and the size of these modern merchant banks. one headline coming up -- "assets under management," which is a small part of what they do, are $1.8 trillion, basically 10% of the american economy. christine: a lot of people were not necessarily paying attention. that was supposed to be around 24, is what analysts were looking for. 28 and ato be between the low end 21 over the last two years. that is a strong number. i have not seen a fixed income number yet, so i will look at that pretty soon. there is a lot of great analysis on the bloomberg terminal, for those of you looking at that. jpmorgan, these kinds of revenue numbers are industry-leading. only $17 billion,

$18 billion in revenue. jpmorgan is the industry leader as term -- in terms of how much money they make. come backe going to with christine harper. adam parker is with us. charles peabody will join us as well. really looking forward to having him set up with jp morgan, then on we go to wells fargo and citigroup. from paris and new york, on bank earnings, this is bloomberg. ♪

tom: the beginning of bank earnings. adam parker with us from morgan stanley. christine harper from j.p. morgan. with newsne harper from j.p. morgan. , onees, you say cash flow

year, two year, three years out, these are going to be cash machines. is jpmorgan a cash machine? the sensehey are in that they are returning a significant amount of capital, as well as raising dividends and buying back stocks. tom: they have a 13% return on equity. the headline out today, it seems to be a giant norm us number -- with -- it seems to be a ginormous number. how are they returning on equity? they're big beat is in their corporate and investment 3.5er at they did about billion dollars in trading sales and trading. they were significant beats. i am guessing -- i have not had all the numbers, so i'm guessing -- fixed income was a big part of that. prediction twour

years, three years out? charles: i am looking for a downside toward tangible book value by the end of twitter and 17 -- by the end of 2017. i think we will see an inflection on the credit front next year, and normalizing credit cost is going to be very difficult for these banks. i think you will see good volatility followed by that. the strength you are seeing in investment banking now i think will not be there on a consistent basis. tom: bring up the chart, anthony, behind christine harper. the idea here of where mr. peabody is looking -- christine, with a lot of this, trading revenue, it is the steepness of the yield curve. what do jamie dimon, brian moynihan, and other bankers need from janet yellen? christine: jamie dimon was at the imf meetings, talking about

the need for a rate rise. they are hoping for that. tom: they need that rate rise. christine: although i will doubt that one element of earnings today is that one of the rates of business was a big driver in the beat. they talk about good client activity, markets remain active after the brexit vote, and in -- and in anticipation of the vote. tom: here is the reality that adam parker lives with, and other strategists, including charles reba -- including charles peabody. you can comment on the financial sector links that the steepness of the yield curve how will that be in a year? adam: i was joking around with you guys. i am a big patriots fan. some time right before kickoff, i will go through the bank earnings. is --tely, i think there

we are neutral to big banks in the portfolio, and you have a lot of shareholder return which is positive. that theouse call is 10 year yield is much slower. -- that the 10 year yield is much lower. tom: francine it is difficult to tom: it is difficult to call. adam: i think it is unlikely the stock market goes up. my call is right, if the big banks go down 20%, let's be honest. what matters is that the base case is ok. i think it will be. peabody, what do you model for dividend growth among the too-big-to-fail banks? charles: in the case of jpmorgan, they are bumping up for the stock cap around 30%, 35% earnings. earnings are flat to down next year. it will be tough for them to

raise the dividend much more than a single digit level. tom: charles peabody, thank you so much. compass research. thrilled to have him on as well. we are going to continue through the hour, and then on to bloomberg radio as well. i believe in the 1:00 p.m. hour from boston, the land of dissent -- rosengren will host janet yellen. that is an important speech, on radio and television in the 1:00 p.m. hour. this is bloomberg. ♪

francine: this is "bloomberg surveillance," live from paris and new york. tom, you would just posting the jpmorgan of this. we also talked about the banks here. innovation,ng is entrepreneurship, and biotech. but the banks have a crucial in termsay -- to play of funneling that money through i spoke exclusively with the bnp paribas ceo and asked him what his blueprint for the industry in europe, the banking industry, was. >> one of the weaknesses of europe is that you do not have

any integrity in the european market because of local legislation, languages, and a number of factors. when you're in the u.s., you have the ecosystem. when you are in europe, it is much more difficult. these are the challenges for europe. we need that huge european domestic market. talk or get did not into the nitty-gritty of bnp paribas. it is kind of a quiet period. how they can attract talent and retain millennials. tom: francine lacqua, thank you so much. we greatly appreciate it, in paris this morning. let me quickly do a foreign exchange report. 12243.g, euro-dollar, 1.15 as well.

adam parker, i love the comment jamie dimon made. bring up jpmorgan. i will call it a bounce back to a 68 handle. , adam, ton says enhance customer engagement. his corporations are removed from the engagement of our politicians, the engagement of our global economy, and all the doom and gloom that is out there. there will be failures and successes, but the companies you follow are just moving forward. adam: last week, the jobs report, 180 million people in the jobs report. the biggest look equities have 38 billion u.s. employees. i think the 20% that matters is better than the broader economy. it is funny that you have an innovation congress -- that you have an innovation conference going on in paris. i was in paris about a year ago giving a speech, and somebody

and said all the companies in the cac 40 were incorporated in 1968 or earlier. i was born in 1969, so i said in the u.s. we have created some cool stuff since i was born. i think it is interesting that you have so much more innovation in the u.s. tom: you are a chosen child. as were born the same year "national skyline." bob dylan. it changed everything. that is great. adam parker, thank you so much. francine, what did we learn in paris? francine: that there is no common view on how to deal with brexit. i spoke with the potential presidential candidate -- potential because he was a former finance minister of france, quit his party, and he

was taking a hard line on brexit. then we speak to the ceo's and they say we still need innovation coming from london, they still want to have that channel open. it does go back to how you to captureinnovate growth, and also how you do with brexit. tom: francine lacqua, thank you so much. we will see you monday, i believe, in london. francine lacqua from paris this morning. a lot coming up through the morning. this is an important speech. chair yellen travels to boston. rosengren is stunning with a descent last meeting. city and cleveland. janet yellin in the 1:00 hour, radio and television. on the labor economy and for america. good morning. ♪ jonathan: good morning.

here is the tone of the markets. futures are up 89. we have a huge upside on treaty revenues. jpmorgan is listing those. janet yellen's speech is a little bit later. yields are up for basis points to 178. alix: this is what you need to know. ap. morgan chase posted profit as bond revenue rises. we will hear from wells fargo and citigroup in just about our. we will get the september read on retail sales. janetl be followed by yellen is speaking in boston this afternoon. we are 25 days away from the election. donald trump goes on the offensive. david: let's dig deeper into this j.p. morgan's