francine: donald trump announces an appointment. be chief ofus will staff. bannon takes over as strategist. xi jinping says cooperation is the only option as he speaks with trump. that's that the new president will need to spend big to fulfill his make america great again promise. this is "bloomberg surveillance." iran francine lacqua in london.

we enter the first full trading week since donald trump's election. his white house team is beginning to take shape. key appointments -- republican national committee chairman reince preibus will be chief of staff, and stephen bannon, former executive at the right-wing website "breitbart news," takes over. the bond market wrap continues as investors position themselves for a trump presently. we analyze the new appointment and what it means for the policies of the world's largest economy with a great panel of guests. we are joined by president aidan partner at morris reid. chief investment officer garments and -- thank you all for being with us. first, let's get straight to the bloomberg first world news. here is nejra cehic. nejra: china's economy held ground last month, following new measures to cool property markets in almost two dozen big cities. industrial production rose 6.1% from a year earlier, just missing estimates.

retail sales climbed 10%, shy of a 10.7% estimate. japan's economy expanded more than forecast in the third quarter, with a rebound in exports compensating for weak spending by people and companies. gdp grew an annualized 2.2 percent, versus a median estimate of 0.8%. however, consumption grew just 0.1% and business spending was unchanged. japanese prime minister shinzo abe has a this morning that the transpacific partnership is in a difficult situation with the election of donald trump, and that he wants to discuss free trade. u.k. prime minister will give her first major speech on foreign policy since taking office in july. it will be her first analysis of donald trump's election victory last week. she will argue that changes in the air and that it is the job of politicians to respond to voters who are unhappy with shifts in society.

global list on a four hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am there a change. -- i am nejra cehic. i want to showe: you the 30 year yield on the 30 year treasury market. this is a picture for the data check. it is quite far, but i think things are down. this is the picture for emerging markets, down from 0.8%. stocks in europe are gaining. five days from the u.s. election results, and we are starting to get an idea of how president-elect donald trump will govern and who he will work with to deliver to his pledges. let's clip -- let's kick off the show with michael mckee. what can we read from these early appointments? michael: it looks like donald trump is trying to thread the needle between what he needs to do and what he has pledged to do. reince priebus is a well-known washington insider, and the job he has as chief of staff is a

typical insider job. he is supposed to be the gatekeeper to the president, make sure the president gets the proper views from everyone within the administration, and gets capitol hill to negotiate to get the views put into law. steve bannon is a bomb thrower from the all right website -- alt-right website who came on board to steer donald trump into the presidency. not clear how those two will get along or how it will work. people in washington were dreading the idea of bannon as chief of staff area that he is not chief of staff, but according to trump, they will share power. nobody is sure how that is going to work. francine: what policies did he give to the "60 minutes" program? michael: a lot of things on the campaign trail, he seems to be walking back now. they are not going to be deporting 11 million aliens off the top. they are going to start with 2 million or 3 million who are convicted criminals.

the wall is going to take a little while to put together. maybe we don't build a complete wall, just sort of electronically. he suggested he is going to keep some of obamacare. that could be difficult to do, given the way the system is set up, he is not going to scrap the whole thing yet. basically, he is starting to sound like more of a washington than the radical candidate who promised to "drain the swamp" out on the campaign trail. francine: what is your take on his attitude toward protests? michael: that is interesting. he is starring to suggest -- he told "60 minutes" that he is going to be a more moderate, more presidential figure going forward. then he starts tweeting about "the new york times" and complaining about the protesters, saying they are paid professionals, and "the new york times" is using -- losing subscribers because of their lousy coverage of him. at the time of this report, they are actually gaining subscriptions. he says he is going to keep tweeting.

we are still waiting to see which donald trump we are going to get. great coverage. thanks you so much. his twitter account is pretty special. let's bring in the first of my guests this morning, the chief investment officer of c cla investment management. gentlemen, thank you both for joining us. james, how much do we know about what he is going to do in terms of spending? how much do we know about what he is going to manage, build, and how will the fund it? james: we know are markedly little detail. we clearly have a great sense of direction. he is a man who has survived largely on instinct as opposed to detailed planning. the direction of planning is obvious. he will be spending much more money on infrastructure. he will be attempting to kickstart the u.s. economy with fiscal policy and relies far less on monetary policy. will see the markets close on this through the bond yields. i think the steady upward

taken the bond market has been worrying. it may be that with republicans in control of the house and the senate, the actual restraining factor on the return of the bond market vigilante, which we have not seen in nearly a decade -- that they will be what determines the size of the spending program. francine: at the end of the day, this could mean that president trump may not be able to spend like he wants to, so he may not be able to stimulate the economy . guy: i think there will be restrained from the traditional will and i think pence represent that as vice president, the fiscally orthodox small government wing which is still powerful. i think that will be another restraining factor. it is interesting. it does seem to be the event that really tipped the bond market over. it will be heard around the world, i think. francine: are we jumping the gun too quickly? are we expecting too much? we are expecting inflation goes

up, that the fed will have to hike two or three times next year. o hikes next year. i do not worry about what is going on. i think this is a logical normalization. i think the two year yield in the second half of next year will be 2.5% to 3%. that allows me to feel optimistic about the prospect for the s&p 500, which i suspect next year will get to 2400 points. rather optimistic. francine: morris reid, partner at public strategy company. morris, you were on the clinton campaign. is that right? do we knowl, what about what a donald trump presidency will be? morris: we do not know. this is a man who has not spent much time in washington, d.c., is an outsider. i thought his selection for chief of staff and also his selection for the chief strategist was pretty interesting. he has got the best of both worlds. that is what you are going to get with donald trump you have a person like reince priebus, who

is perceived as an insider, but he is really not. he has only been in washington for a little bit of time, so he does not have a lot of washington experience. he is a stabilizing force to the republican establishment. the guy from breitbart is a complete outsider. that allows him to continue to have the outsider edge, the different opinion, to keep the trump mystique alive within the white house. francine: but a different opinion to what? to guide donald trump as to what the electorate is thinking, or to go more right wing? morris: what these guys were able to do is cap into the mood and the pulse of the country. i think having someone like him will allow him to stay connected to those outside the beltway. a lot of times, you get in the white house and you stay within a bubble. this guy strikes me as a person who is really antiestablishment, anti-washington, who is going to focus on making sure they stay connected with the constituency that got them in the white house. francine: you just have to take a bet on whether he will make

america better, right, or not? this will partly be on whether donald trump can unify the country, but also be a president and actually unite the country, and take care of the ones that have been left out. what do we know about that? will he be able to pull that off? at the equityok markets, that is what they seem to be telling you. the volatility the whole of the election cycle was only a whisker below what we saw in brexit, and substantially what we saw in the earlier -- substantially below what we saw in the earlier european crisis. this is sort of a balanced set of outcomes, is probably where we are heading. francine: the regulation does not help the common person --deregulation does not help the common person on the street. guy: it will it leads to higher growth, company startups, more jobs, improving wages, which are the issues trump stumped for in the campaign.

morris: the best way to fix this is jobs. this is the one thing he promised that she is going to come create jobs. the best way to -- francine: low-quality jobs. morris: we do not know. or was an idea that he would create the wrong type of jobs. the best way to unify the country is to deliver on his promises. frankly, the democrats do not want to be seen as obstructionist. they have to be able to play along like newt gingrich did when bill clinton was in the white house. they have to present ideas. you cannot just be the party throwing bombs. you have to be a participant in pushing things forward. francine: can you really reinflate the u.s. economy? the u.s. economy compared to the rest of the world has not been doing so badly. james: the u.s. economy is doing well, compared with many economies. i would say euro land is a big relative loser. but the big challenge, i would guess, is the case of globalization has been a challenge to the ordinary person the world over. it has been a challenge in terms of jobs, in terms of living

standards. this has been accentuated by new technologies as you take jobs away. this is going to be not one presidency to fix. it will take several. seven, guy, and morris reid. they all stay with us. stay with "surveillance." a $1.2 trillion bond rout continues. we analyze how donald trump's election is moving stocks and bonds around the world. plus, with many of europe's biggest economy holding key votes over the coming year, we break down what the new white house means for the region and its investors, and as president how donald trump will be. how will it play on the markets? we speak more with morris reid. ♪

francine: this is bloomberg surveillance. here is nejra cehic. nejra: ¢ electronics has agreed to buy harman international -- samsung electronics has agreed to buy harman international. it will enable samsung to expand its high-end car audio. a slumpit fell 58% on in power prices in europe's biggest markets. adjusted net income decreased to 27 million euros, missing estimates. germany's largest power producer reiterated its forecast for a profit of 500 million euros to 700 million euros this year. the market is -- novartis is in talks to buy annual

pharmaceuticals, according to people familiar with the matter. they could value him kneel for as much as $8 billion, depending on the structure of the agreement. representatives for novartis and amneal declined to comment. tom: the trump-triggered bond right -- bond rout continued. wipedvereign debt selloff global bonds as investors rotated into stocks. for more on what trump could mean for the markets, lets the to james evan, guy, and morris reid. stocks have a lot further to go, right? furthere will see progress. francine: unless what? unless donald trump does not follow through on his promises? james: we are too early for mr. trump to not follow through. there is going to be so much planning that this requires. pence is a skilled operator

as vice president, and i certainly believe mr. trump will get full political support, including from the democrats, to drive fast growth. i certainly think mrs. yellen in the open market committee at the federal reserve will hike in december. two hikes next year. remains: the fed independent? james: that would be my expectation, exactly. francine: guy, do you believe the fed will remain independent? and why haven't the markets for seen any of this? we will talk about the polls later on. weret seems the markets taken by surprise. there is a knee-jerk reaction, and then equities go up and there is a bond rout. begin -- rod right began before trump, with kuroda saying he wanted to cap the long end of the bond market. i think he builds on momentum that was already there to say that negative interest rate,

near zero bonds, and a flat yield curve are doing damage in the banking sector and across society generally. this really played into a lot of the skepticism trump had over janet yellen's policies. i think to an extent, the bond bears are pushing on an open door. i think we see more of site on the yields, i am afraid, before we see stability. francine: i have a terminal. i do not know if we can see it. we are seeing it gained a little bit. it is really quite significant. i will get it made an show it to you a little bit later. morris, you are expecting a little bit more of a -- on policies, we have the broad policies. but we are very thin on exactly the details of the policies. but you believe it has an effect on m&a? morris: i do. if you see where he is signaling, i think you will see domestic m&a. i am not sure about international m&a. i think he will be protectionist, but cautious allowing foreign companies to take over american companies, particularly chinese companies.

if you look at banking stocks, health-care stocks, some of the stocks affected by net neutrality, these are things he plans to deregulate. those stocks are going to boom. as you look at what he said on the campaign trail, and how you make a business case going forward, i think it will be an interesting time for the stock market. francine: but doesn't deregulation play to inequality? doris: i'm not sure that is what he wants to play with. he wants to get the economy moving. i think some of the things he said will jumpstart it. if he actually built a wall, it would be a catalyst for construction along the border, which would be an impetus to stimulate the economy. francine: how is he going to find that? morris: do not know that. the devil is in the details. but if you look at the record of what he said and tie it to the business case, the economy is going to, at least in the initial run, half a stimulus effect. francine: are you buying indices in the united states, or nondiscriminatory? james: i am definitely

stockpicking. i think this is an environment where one needs to be quite careful. positive to look for trends. i completely share the view that health care and some of the financials will do relatively well. infrastructure is going to benefit. so if we are thinking globally, wolseley's -- assets look well placed to benefit from profit -- from u.s. initiatives. francine: does that automatically mean european stocks will be harmed? james: not necessarily. first of all, the european banks -- at least equal moves to what we see in the u.s. banks. they are extraordinarily cheap. they love a rising yield curve. most of the regulatory problems have been in the u.s. a softer touch there will benefit them as well, so they will perform well. the dollar relatively strong against the euro, so exporters will do well. the risks will remain in the periphery. i think the italian referendum is going to haunt markets until december and possibly beyond.

i think the periphery names are going to remain weak. johnson, -- guy munson, think you very much. , investors lose faith in coal as europe enters a busy investment year. this could bring in another existential crisis for the euro. ♪

let's talk more about

donald trump's election and what it means for the rest of the world. the shock result could damage investor trust in opinion polls. that is the view of james bevan, with us today. he goes on to caution the euro another existential crisis, given the election cycle over the next 12 months. with guyak to james, withn and morris reid also us. we have gone from existential crisis to existential crisis. we had brexit. the polls may shift to something much more extreme when it comes to france choosing a new president, the italian referendum, and other countries. .ames: i completely agree i believe renzi will lose his referendum. there is a reasonable probability that marine le pen, on the back of the populist surge with brexit and mr. trump, will make significant gains in the french election. those are extraordinary challenges.

i therefore suspect the political elite will not be able to equal it on the challenges of the euro and we will have an existential crisis within the next 12 months. francine: we are looking at currency wars and protectionism? james: we have to worry about a retest of the role of the european central bank. we have to worry about how the political elite are going to involve the storyboard. moment, the clearing bank arrangements have germany lending 250 billion, italy borrowing a hundred 50 billion. this is not sustainable. francine: it certainly is not. james, morris, and guy stay with us. twitter as a form of communication, next. ♪ seeing is believing, and that's why

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visit an xfinity store today and see for yourself. xfinity, the future of awesome. speed always wins. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. francine: let's get straight to the bloomberg first word news. here's nejra cehic. nejra: china's economy have

ground following new measures to in twooperty markets dozen big cities. industrial production rose 6.1% in october from a year earlier. retail sales in two dozen big cities. climbed 10%, shy of a 10.7 present estimate. japan's economy expanded more than forecast in the third quarter with a rebounding kxports w commentating for wea spending. private consumption grew just 0.1% and business spending was unchanged. japanese prime minister shinzo abe has acknowledged that the transpacific partnership is in a difficult situation with the election of donald trump and he wants to discuss the president-elect's thinking over free trade. the u.k. prime minister will give her first major speech on foreign policy since taking office in july. it will be her first analysis of donald trump's election victory.

according to her office, she will argue that change is in the air and it is the job of politicians to respond to voters. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. francine: thank you so much. trumps campaign was marked by his combative approach to traditional media. that friction hasn't dissipated. yesterday, donald trump took to twitter to attack the new york times over a letter it had written to subscribers. while his relationship with the media has been tense, he's been a very active user of social media. in an interview on "60 minutes," trump talks about his followers and his views on the media. mr. trump: i think i picked up yesterday 100,000 people. i'm not saying i love it, but it does get the word out. it is a modern form of communication.

there should be nothing you should be ashamed of. it is where it's at. 'sancine: could trump presidency change the white house communication strategy? former deputy director of operations for the clinton campaign in 1996 is still with us, along with james bevan and guy monson. morris, let me start with you. twitter, is anyone going to take away the twitter handle of mr. @potus.will he use itris: i think he will use until there's a crisis. i think he will have access to it until there's a problem. this is one thing this guy has been able to do, to embrace the technology to his advantage, just as obama did when he was running. he's been able to use it, amplify it, and exploited.

i don't believe it is having an impact on twitter stock, so it is an interesting phenomenon. francine: we know, james, and you are a older at a lot of these stocks. facebook, we understand, there was an internal chat about whether they help in some way putting donald trump in the white house because there was no filter. because you can say what you want on social media. does that change your world? james: social media has been hugely important for a number of years. arguably we would not have the arab spring had we not the capacity for people to communicate each other through the social framework. i certainly think facebook remains an excellent long-term investment. i don't view twitter as being in the same class from an investment perspective. the capacity to monetize is farthest advanced and capable than that of facebook.

francine: do you think we will ask questions on whether this news needs to be curated for accuracy? james: public opinion is what is driving what people want to do. people are angry. they have been ignored by the political elite. they don't know what is wrong but they know something is wrong. within the united kingdom, only those within london, the m 25, have been able to enjoy an increase in real living standards. the rest of britain has been left behind. i think what social media really does is give a voice to the voiceless. in the past you felt like you couldn't express yourself. that is what social media has done. you saw that with the arab spring. one thing that is different with facebook and twitter is, twitter is one-dimensional. ist social media has done

given the underdog a voice. francine: yes, or it gives campaigns a voice, which may not be 100% accurate. the question is whether they need to be held into account because of that. morris: i think that if you are going over the public airwaves like television, there is a different level of scrutiny than one requires in doing twitter. twitter is a one to one or one to many. you have to follow the person in order to do it. francine: is there a problem with the polls? come the italian referendum where the french election, you have to make a choice on whether you buy european stocks or currencies. do you trust the polls? guy: i trust the polls, but i don't trust the final betting levels or outcomes they may show. clinton and trump were close through the whole campaign. one of the reasons the markets reacted so coldly is that they were well hedged.

generally portfolios are structured for either outcome. in the brexit case, there was a think tilt, which i came from the spread bettors and the odds. in the italian referendum, we just assume probably that the populists are going to succeed, and that is how the polls are actually structured. francine: is there an assumption that mainstream media, sometimes called elitist media, doesn't get it? like we saw the new york times almost apologizing for not covering a section of the population. guy: i think the five-star movement, trump, are not really susceptible to the analysis that has normally been applied. i think normal media doesn't catch a lot of their trends. this has been quite expensive for fund managers. they've relied on some old techniques and the world has changed. morris: i think people are

thinking that these guys have done something different. focus groups give you the most accurate and nation. it is very clear that there was pain and anxiety in the american electorate. it is clear that the midwest was having problems and the democrats may not win. look at the focus group data. i believe that data is still important. there's a reliance on polling too much. polls are a snapshot in time. that doesn't mean tomorrow will be the same. focus groups, the type of data is really important still. francine: are we focusing too much on the relationship of the president-elect and the white house press? there's been a lot written about the fact that they don't have access to him like in the past. should we worry? morris: we shouldn't worry. when he becomes the property of -- when hestates becomes president, he is the property of the united states. francine: even his staff that he appoints? have access toill

the president of the united states. i don't care who it is. francine: james, how do you go into the italian referendum, what do you read, how do you become smarter, or do you just had yourself because it seems we are in uncertain times? james: one needs to understand whether the risks are symmetrical. if there are significant downside risks, you need to be aware of that. i think that we are observing a shift in the populist moods of global democracies that is now very loud and very clear. that much i think is something we should bank on. francine: what is trump's duty to america when it comes to foreign policy? morris: first and foremost, to take care of america. the fact that he's saying america first, perhaps he is saying it too strong, but that

is what the president needs to do. secondly, he needs to make sure there is strength and stability around the world. i think trump will ultimately reign in some of the things he said. you already see it. what he said about obama care, he's raining it in. i'll give you a perfect example. when obama came to the white house, he was antiwar. he said he was going to close guantanamo bay. guantanamo bay is still open. it is very difficult to the a strong man in america. we have checks and balances. you have to play along with the system. francine: thank you so much, morris read, james bevan, both stay with me. guy, thank you. stay with "surveillance." plenty coming up including a conversation with china. donald trump spoke to the president of the world's second-largest economy today after branding it a currency manipulator during his campaign.

then, the democrats without the clintons. one the election results could mean for the party. and we get the take on how investors can monetize the trump election with larry hatheway. this is bloomberg. ♪

francine: we are a lot about donald trump, the transition, and previous being named trump's chief of staff, mr. bennett as strategist. let's check in on the markets. here's mark barton. mark: the reflation theme is continuing. we are gains in basic resource

stocks, and construction companies, all these companies which would benefit from a pickup in spending on infrastructure such as minors 2.5%. last week, we had the best week since july. those bond proxies, utilities and real estate. 30-year yield, part of that reflation. the yield on the u.s. 30-year is the highest level since january. crossing above 3% earlier. last week, the biggest move since 2009 on speculation trump would increase spending, which will boost inflation. $1.2 trillion wiped off the value of global bonds. pimco says the fed may move by three times come next year. it says long-term rates seem to have bottomed out. 10-year yields jumped by 37 basis points. it is worth remembering, hardly

anyone on wall street saw it coming. none of the analysts surveyed by bloomberg said yields would rise above 2%. functions which shows how all the main currencies have fared since trump won that election. the only currency out of 31 tracked by bloomberg which has risen is the pound. the selloff continues on prospects trump will continue spending, spur further policy tightening, curbing demand for risk. some respect for the mexican peso after an advisor to trump hinted at a softer stance on trade. emerging-market stocks, the lowest level since july. emerging-market currencies, the lowest level since june. 200here's copper. the rally continues. the reflation trade boosting

copper, highest level since july. look at the rsi. 86, it is over boards. we were at 90 last week, the most overbought ever. francine: thank you so much. chinese president xi jinping has told jumbotron that cooperation is the only option. meanwhile, the new white house is expected to bring about a dialogue between the u.s. and russia, a relationship which has become strained in recent years. let's talk foreign policy with morris read and james bevan. policy, look at foreign and i know he needs to focus on domestic policy, but the checks and balances, that is maybe for domestic policy. can he do whatever he wants in terms of foreign policy? do what is he has to in the best interest of the american people.

i'm surprised at the alarm about the putin thing. the obama administration wanted to have a reset with putin as well. some of the things donald has said are some of the things obama wanted to signal to putin. remember the conversation that was overheard. i think what donald trump is doing is saying, we want to deal with people forthright. i happen to believe that he may be anti-multi-trade opportunities, but i believe direct free trade opportunities are going to be the rage. he would rather do one-on-one deals. he's a deal guy. francine: what kind of deal will he get with the chinese? morris: i don't think it will be quick. i think it will be a negotiation. the fact of the matter is that everyone thinks china is manipulating their currency, so having a president who will negotiate this will be very interesting. it will take time and ultimately there will be peaks and valleys.

but i think it is a good thing that are more aggressive in dealing with china. francine: james, are you concerned that the foreign policy, if it is mishaps, and we've had strong language from some of his advisers, saying any country that has a surplus is cheating america -- if he does go down that line, what does it mean for world growth? james: if you look back to the world trade organization, the appetite that western democracies had to introduce new members, arguably people were introduced and did not have the capacity to honor the spirit of the wto agreement. and arguably north asian economies do not aim to maximize profit or in many instances make even a sustainable profit. therefore i certainly believe there will be a shift in the rhetoric about free trade rather than -- fair trade rather than free trade. i think that is good news for

the global economy. morris: there's nothing wrong with that. fair trade is what he's really saying. if you cut through the rhetoric, he's saying bad trade deals are bad. fair trade is going to be the thing he focuses on. i hope that he will focus on a strong dollar policy. this is one thing i've tried to push candidates to do. francine: you speak to advisers and they go as far as actually insulting other countries. you can get a fair trade deal, but it is going to be difficult for other countries to negotiate with someone that is too aggressive. what you say on the campaign trail is very different than when you go in the white house. you can't be as bombastic and flamboyant. they have to deal with people on equal footing because these are sovereign nations. francine: is europe the ultimate loser? we have nigel farage being the politician in the u.k. that has the strongest ties to donald

trump. where does it leave the rest of europe? euro systemkes the very much at risk. i don't think that means individual european companies for economies need suffer. i would say france is going to face a lot of pain. it has a relatively hamstrung economy, plenty of rules and regulations that make it difficult to compete, and i would suspect marine le pen would want to capitalize on those challenges. francine: what will the relationship be between angela merkel and donald trump? morris: i think great britain stands a chance to be the winner here. trump came over here and was pushing brexit. he will want to make sure that brexit works, for the fact that he believes in that, and one of the things he should be pushing is a free-trade agreement with the u.k. right away. some of the things trump wants to do are scary to some people,

but making sure your nato partners pay their fair share is a good thing to do. francine: as long as it doesn't jeopardize security. morris: but you are jeopardizing security by not spending the money you are supposed to spend. holding people accountable is a good thing. francine: do you think -- will the u.s. stop playing a big part in nato? there's one thing in holding others accountable and another saying i don't want to be part of this. morris: i don't think he said that. i think he said people need to pay their fair share. people are going to look at these multilateral organizations and make sure that our partners are living up to their responsibility as well. james: a big challenge is whether we use the devaluation of the pound as a position to reposition our economy. we don't have an economy at the moment that is able to grow fast enough. we have low productivity and adverse trends. we fritter the weakness of the

currency by awarding ourselves fancy aix. we have only ourselves to blame. francine: thank you for a great conversation. ares bevan and morris read both back with me and will talk about the democratic party. up next, as the world focuses on the new u.s. president, how will the democrats rebuilt for a future without bill and hillary clinton? this is a super moon. what is a super moon? apparently it is the most spectacular super moon since 1948. it will light up the sky, appearing 14% bigger and 30% brighter than usual. this is bloomberg. ♪

francine: as the world focuses on donald trump, how will the democrats rebuild and look ahead to a future without bill and hillary clinton? let's ask morris read. bevan is with us as well. morris, i don't know what

happens to the u.s. political system 12 months from now. first of all the democrats. morris: it is the end of an era. i think the clintons are going to do what they need to do. future, thebout the next generation of people cropping up. the democrats will need to regroup as they did when my mentor took over the party. they have to connect with voters, find candidates that matter to all americans, and really press forward a positive agenda. francine: does donald trump need democrats in his cabinet to make this work? morris: competition is good. i'm not one that believes you have to do those type of things, but donald trump won. he has a mandate. people need to give him a chance, but the democratic party needs to seize on this opportunity. there will be overreach and missteps. they need to have a clear agenda. francine: what does it mean for the republican party? will the be able to keep from this front of unity? morris: if donald trump is

smart, he will come out the gates with things people can rally around. you notice what he said about immigration. it is 3 million now, the criminals. if he doesn't overreach and he brings people to the table, he can build trust and momentum and perhaps this can sustain us. chances are that won't happen. francine: thank you so much. this is what the markets are seeming to believe. thank you so much for a great hour. "surveillance" continues in the next hour. tom keene joins me here. we have great guests lined up for you including larry hathaway . this is bloomberg. ♪

announcesdonald trump his first white house

appointment. reince priebus would be chief of staff. tells that president the donald trump corporation is the only option as they speak for the two time. wrathe global bond intensifies. this is a "bloomberg surveillance." lacqua in london, tom keene is in london. we start to have donald trump's people around him be appointed. headlines there would be protested everything. but really, and why i am in london, with you in new york last week, is the tie into the markets. a correlated move in the markets. not be a tipping point or a point of crisis but

we are seeing substantial readjustment. francine: america is where it is happening. and the white house. we are expecting the cabinet so that is what we need to focus on. let's get to the bloomberg first word news. trying donald trump is to balance competing wings within the establishment. he has named reince priebus to be the white house chief of staff. senior strategist sean been in -- the executive of trumps campaign. donald trump says he was saddened to hear that some of his supporters have attacked minorities since the election. don't do it.y, that is terrible. because i'm going to bring this country together. >> they are harassing latinos, muslims -- >> i am so saddened to hear that. and i say stop it.

,f it helps, and i will say it i will say to the cameras -- stop it. taylor: and itron protesters took to the streets again in a number of cities. the rallies were peaceful for the most part. a massive earthquake has rocked new zealand and at least two people were killed and there was widespread damage. area. 7.5 and hit a north damage could be several billion dollars worth. paris marks the one-year anniversary of the attacks that killed 130 people. paper lanterns were released into a canal and staying reopened the batter clan nightclub where most of the victims were killed. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you.

it has been way too long to see what garden summers outputs. this will be a great theme today. we have terrific guests to frame the correlation between markets. aura -- oil is the backstory. futures continue to advance. a remarkable performance in the dow. yields are higher. the screen. francine has a better screen. it may be speaks to the new volatility. there is the dow getting near 19,000. francine, i've had your euro-swissie up there for a reason. because thishere is presto -- because this espresso is so much better than

what we have in new york. better than new york, that is all we have to it. francine: of course it is. i think tom and i had a very similar call. industrial metals and emerging markets down 0.8%. you are seeing this trump tantrum with assets move on the back of it. let me bring up one thought here. and this is maybe the summary of all that we have seen over the last number of days on market correlation. this is a boring charge but it is not. this is major currencies, not up we go into a trading range. and this is critical. we have not broken out yet.

francine: i don't know what it takes to break it up. is it donald trump nominating his cabinet? tom: i say just general news flow. larry hatheway with us this hour. thecine: again, we look at barnes and whether he can actually fun to some of the policies he wants to fulfill. my chart. and actually, what is important is we have the u.s. 10 year jgb andd in red, the this is the german one. a lot of people say this is -- expected to come back. it is definitely bottoming out. that something that is important is that you can see it is starting to shift here.

and this is when governor kuroda capped the 10 year yield 5. before trump was elected. but it happened fast. tom: a lot to talk about this morning. and luckily we have great guests. joining us for the hour is larry hatheway. a global chief investment strategist at blackrock. does trumpl, what mean for interest rates? larry: higher. and the adjustment is taking place as we speak. all, borrowing. second of all, stimulus on top of a fully employed u.s. economy means the fed has to tighten faster. knowine: again, i don't how this was missed by the markets or whether they were already going higher, or if this is the fact that they believe he

will get everything done in terms of fiscal spending, building infrastructure and that is why it is going up? iswhat the chart highlights the bond moving higher. this has been going on since the summer. it started in june around the time of brexit. global growth holding up surprisingly well. we have seen signs of pricing pressure coming through. we are talking about a number of times on the show. gone on for a while. and i think what the trump victory does is that it amplifies the story in the market which is underway. we had a serious conversation on thursday and friday and we were adamant, life goes on. and i was yesterday at the revolution exhibit. this one is when the facts change, i change tour.

thefor you guys, it is when facts change. how much have the facts change? larry: they have changed quite a bit in the last five days. growth has held up better in the last three or four months hence a gentle rise in yields but this is game changing. this is about a large-scale -- large-scale fiscal package. with republicans controlling the hill and administration you will see tax cuts, defense spending and infrastructure. crucial.this is are we back to a 1960's reflation reset? is it within the scope and escape of lower for longer? we have seen 30 years of falling bond cuts. the environment of declining bond yields steers deflation. i think this is a new market environment. how rapidly inflation

will rise and also how rapidly yields will rise. there are investors who are happy to see yields moving up the there are potential buyers but there are is -- but the direction has changed. spend $1 he wants to trillion. how does he spend $1 trillion? it is $1 trillion he needs to find. you can tell me that in the last five days we every price everything because he will get the money for free? we simply don't know. we know that we will get fiscal stimulus. we will likely get higher interest rates going forward. a significantat proportion of that is likely going to have to be funded through more debt and supply of bonds. all of that suggest a deeper yield curve and the trends in yields to be higher their lower. yields areat where today compared to history, they

are still extremely low. francine: are we repricing everything to quickly? i think this is a correction that was due. we are only getting back to 10 year yields from last year. what we now have is not only the fiscal stimulus but we have rising wages. the last employment report, the last two, in fact, we have seen an interesting month on month increase in wage increase. it is also about a fully employed economy where inflation is beginning to materialize. the market must respond. is: the mexico depreciation really something. francine: you can definitely see a temper tantrum. turnill.heway, richard both are staying with us.

coming up we speak with pierre gramegna. we will ask him about foreign policy and whether a strong u.s. makes europe weaker. this is bloomberg. ♪

francine: this is "bloomberg surveillance." busy week.e a we look for donald trump's cabinet. tom: may a protest free thursday? francine: may be. on iner what is going mexico. let's get to corporate news with taylor riggs. taylor: samsung electronics is making a big move into the car business. it has agreed to buy harman international businesses.

that represents a 28 percent premium of their closing price on friday. they make high and car audio. siemens is expanding -- they have agreed to buy -- 44.5 billion dollars. that represents a 21% premium of the closing price on friday. -- double its stake two months ago and pressured the company to approve value for shareholders. japan's economy grew faster than expected in the third quarter. of 2.2%,at a rate three times as much as economists had forecast. japanese business spending was unchanged. the exports added half a point to the gdp. that is your bloomberg business flash. tom: thrilled to have you with in london.e we have two wonderful guests to

bring a market analysis of the last week and moving into this week and into december and january. richard turnill is here with us. larry hatheway has been a gentleman of wisdom over the years as well with gam. i want to talk about the mexican peso. a butterfly flapping. you have the mexican peso surging on. anthony, ring up the chart, if you would. two standard deviations. out three standard deviations. does that signal normal? or crisis? richard: neither. a significant amount of risk being priced in across all emerging markets. many emerging markets currencies have fallen. it is all about the rhetoric that we heard from donald trump and his team around the increase in pressure on trade.

some of that is justified. it is important to remember there are good things happening in emerging markets. earnings are upgraded. gdp growth is upgraded. domestic interest rates have come down. what we talked about earlier, the reflationary environment, rice's go up and emerging markets benefit from that reflationary environment. i love the idea. larry, help me out with extrapolation monday. bring this up again. i'm doing this in real time. he may not be extrapolating but everyone else is. larry: there are two things that are driving this. one correlation that we know is that when the dollar is strong and u.s. interest rates are rising, they are selling off. that is what we see with the peso.

more importantly, with the peso itself, it is the known unknown. it is known that trump once to build a wall and renegotiate nafta that it is unknown if it will became read out. so people are pricing that risk. francine: and overall, we will see much more of a correction. that means itg -- will be tightened. i think they are falling out of favor. in other words, the things that people want to take risk in is short duration. long dollar, long dollar-yen. ofrging markets are sort being essentially put in the middle of the pack and at the lower end of the pack. i agree with richard that the world is improving for emerging as a result of stronger u.s. growth. their day will come but it will take time. tom: a lot to talk about.

theill continue linking in markets to the politics. particularly of america. in the next hour we bring you david folkerts-landau of deutsche bank. david folkerts-landau on a market adjustment. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am in london with tom keene. to talk about

eu-u.s. relationships. byy have found to stand international agreements he has questioned. today, financial policy investors are making. joining us now is pierre gramegna. thank you for joining us. i have a million questions. what does a trump presidency mean for europe, economically? well, first of all, i thingse have to look at seriously and quietly. president trump has made a lot promises in the campaign, but since the day he was elected, the words he chooses and the ideas that he defends are pronounced in a more calm way and obviously, he is giving himself a presidential look and outreach.

and he has said he wants to cooperate with all the countries and i am pleased to hear that. all european countries are eager to work with the new president. worried aboutyou a new european existential crisis? will that come in the way of more extreme politicians coming to be elected in europe? or does this give breaks more of a voice? brexit more ofve a voice? brexit one answer to one hand, and the answer, if oriented to the u.s. president is that we need more europe. we need a europe that knows where it wants to go. and one thing that is clear to me is that we need a eurozone that is stronger. we have planned how we want to do that, and we want to be united in order to be heard. francine: are you concerned that

a trump presidency means that europe will be heard less? you have four and porous the -- you have foreign policy where the u.s. is stronger with russia, china and the u.k. and you guys suffer in the middle? well, the european union is 500 million people, even after the brexit, 440 million people it is the most important single market in the world. the closest business partner of the united states. i'm not worried about that. we have to continue working together on that. , we have to do the negotiation which hasn't even started yet. so he must not put the cart in front of the horse. for the time k, the u.k. is part of the european union. francine: you will be in the

negotiating room. what redlines are you setting in the negotiations with the u.k.? yes, definitely. we will be in that room. when it starts. article 50 will be triggered a couple of months from now. so in the first quarter of next year. in the meantime, it is difficult to know where exactly the united kingdom wants to go. on the other hand, we, as europeans, must also make sure that we have a common mandate to negotiate with the united kingdom. francine: the u.s. treasury has theicized the eu over taxation of, for example, apple. you see that changing over the trump presidency? i have seen that the new president has announced he wants to reduce taxation massively, for companies, from 35% to less

than 20%. that is a major move. so it shows there is going to be an increased competition about taxation between all the countries. and, as we know, there has been the initiative of the g 20 two g-20 to havee -- more common ground. in a europe and the world, so we need to sit down together and avoids that we have a race to the bottom. thank you, minister. that was the minister of luxembourg. this is bloomberg. ♪

good morning. "bloomberg surveillance" worldwide. what are they calling it? a super moon.

it is a new york with protests. to bring us up to date on the weekend festivities in the u.s. and new york with the first word news, here is taylor riggs. british government is optimistic about working with the trump administration. boris johnson spoke to reporters in brussels. to behink there is a lot positive about and it is important not to prejudge the president-elect for his administration. thes only a few days since elections took place. i think we need to wait and see what they come up with. so i think we should regard this as a moment of opportunity. taylor: trump is signaling that he is likely to be more flexible on obamacare, which he had promised to repeal. on "60 minutes" he was asked if he wanted to keep the obamacare provision coverequires insurers to

pre-existing provisions. >> yes. it happens to be one of the strongest assets. also with children living with their parents for extended time. we will keep that in. it adds cost but it is something we will try to keep. there were more anti-trump rallies over the weekend. marched in new york, philadelphia, los angeles and other cities. for the most part, they were peaceful. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. thank you. we haveing must-read, to go back to the trump transition and the election of donald trump. it, this is the title, "what america's economy needs from trump."

my very cloudy crystal ball shows a rewriting of the rules, but not to correct the grave mistakes of the reagan revolution, a milestone on the sordid journey that left so many behind. rather, the new rules will make the situation worse, inc. even more people from the american dream." the people are slowly getting appointed. mike: this may not tell them unify the nation. because it may not unify the white house. what donald trump has done is thet the job of a keeper to presidency. he has appointed steve bannon chiefhis strategist and reince priebus to his chief of staff. usually it is a one-person job.

they negotiate with capitol hill. that is the good part for trump. within the white house who objects to a lot of that. and doesn't like paul ryan. so it will be interesting to see how this works out and which one wins out in influencing the president. francine: what have we actually learned in terms of policy? ise: we have learned that he actually going to, at least, govern more as a practical president and as the bomb thrower on the campaign trail. he wants to keep parts of obama care. someso wants to do infrastructure spending, some taxcutting, and he doesn't want to build a fence. he isn't going to deport 11 million aliens immediately. so there was a lot that people expected on the capitol hill that he says he is going to do, but probably not what the people who voted for him thought he would do.

lawrence mckee, heway and richard turnill are on the short hill. help me with the short list. who is it? -- i'm notuld be sure that he would necessarily take it. there are two openings right now on the fed and donald trump could appoint someone to. i've been asking around and nobody has a good idea who might get the job because trump did not have a lot of support among orthodox economists around the country. so it will be an interesting choice when he gets to it. i imagine they are way down the list on the jobs he has to fill. tom: scope and scale your weekend reading that you have seen on the move in markets. in no way a crisis.

the peso, interest rates -- they might migrate out further towards more standard deviations? mike: that does seem to be the feeling in the markets. the united states is going to significantly reinflate and spend a lot of money. but will put inflationary pressure on the united states. the dollar is going to rise and it will make it harder for emerging markets. they will reflect that with money flowing out of there into the u.s.. the question is, what really happens on capitol hill? until we know, the investment seems to be betting that is the way it will happen. ,rancine: here in the studio larry hatheway and richard turnill. can we see some of the growth that we are expecting? guy, how do you

look at the political system in the u.s. now? larry: there is a guy, how do yu look at the duty to be president for all americans. it is also "making america great again" so in domestic policy it is largely fiscal stimulus and deregulation. foreign policy, doing no harm. that is the big concern here. aggregation of the various treaties, climate change, the agreement with iran, they are potential blockbuster events and i think the obligation there is that if one is going to make significant changes, also change for the better. francine: how does that impact the markets going forward and what kind of president trump will we see? the domestic agenda from president-elect, one that involves more fiscal spending, good news for growth -- but a foreign policy that is bad for

growth and relay away from trade agreements, we can expect to see more tensions. which is negative not just for emerging markets but also for global growth. and right now, what the market is saying is that there is much more conviction that the president will act on the former site of reflationary policies and will be more pragmatic on the second set. tom: i was watching england cricket. i still don't get it. i don't get cricket. you were on conference calls with blackrock. what changed in terms of investment attitude from this election or is it just analysis? richard: i will talk about what we're seeing in terms of client flows -- we are not seeing any crisis. no panic. no people moving money dramatically. i think that is an important point.

secondly, the investment attitudes, the reflationary attitude, it is becoming reaffirmed. you lookcause when forward, there has been big risks that could derail the economy -- brexit and trump -- neither seem to have derailed the economy. when you look forward, you say, what is coming? and it is increasing conviction that this trend will continue. it means that with an equity market, areas like financials do better, bonds struggle. mike mckee, we have david folkerts-landau coming up with us later. are you seeing anyone make radical adjustments? i don't see that. mike: the radical adjustments came the day after the election when people decided the economic good times would probably continue and that we would see

money from the fiscal side. so that is the story. and until donald trump and members of congress change that narrative, you don't see any reason that we will see something like that. tom: michael mckee, thank you. it is time for a correction. francine: but you are learning cricket. tom: i'm trying. it goes all the way out to the border. francine: and a game last three days. -- what is it about the game lasting three days? we will be here in london all week. an important week for london economics. next we will frame the election in the united states with someone who has given us terrific perspective on china. jonathan fenby will join us. this is bloomberg. ♪

francine: the world is a little bit more crazy when tom keene shows up in london. he is here. we are talking china, foreign policy and european union. in his first conversation, -- has said it is the only option. trump promised one of the strongest relationships. jonathan fenby is the china head. still with us is larry hatheway and richard turnill. still with us. jonathan fenby, thank you for joining us. we problem is, first of all, don't have enough details from the trump side as to who he is

speaking with. but we know he spoke to vladimir putin and he spoke to china. is this a good or bad thing? , one ofsolatory message the first calls he accepted? jonathan: of course. they want to work together. no one will say anything different at this stage. the real question -- we don't know what trump spina -- what trump's china policy will be. it is dividing up the economic and geopolitical strategic side of american policy. and he will probably play those two off one another in the weeks and months to come. francine: what is the one thing that you want to hear about, that will put you at ease with donald trump's foreign policy? the rhetoric, agreements, talking about trade -- what is the one thing that will reassure the markets that he won't damage

foreign relationships? jonathan: what he doesn't say. don't talk about 45% terrorists on chinese goods, which would set off a trade war and would be destructive for u.s. companies who are using china as a manufacturing base. if you follow with that kind of campaign rhetoric, it would be worrying. and the other thing he shouldn't japan that he will leave and south korea to look after themselves and go nuclear if they want. so what we want from him is to take his time, he cautious, and work out what actually would be the cost of the campaign rhetoric, and why he has to dial it down sharply. ago,jonathan fenby, long republican foreign-policy was -- they were trotting out and there was an immense tension between taiwan and china. are we going to see a new tension? a new going to see

tension in the relationship between taiwan and beijing? jonathan: i think you have put your finger on a very important element in the relationship. , which is situation being largely overlooked. it is very different because what you have in taiwan now is the party which won an overwhelming victory in presidential elections in january. and they are pretty autonomous minded. they don't like the mainland and they don't want anything to do with the mainland. and it could be for other nationalist reasons. putting pressure on taiwan after having put pressure on hong kong and it would be a big press for the white house. tom: tell me about the adjacencies in asia. we are not pivoting forward. how do you presume adjacent countries to china would react

to the trump election? jonathan: japan is very worried. prime minister abe was one of the first people to ask for a meeting with trump. they depend on the treaty relationship and the u.s. fleet and air force keeping the equilibrium in east asia. they are very worried. south korea is also in an uncertain place. president, big demonstrations against her over the weekend and her popularity is said to be down to 5%. rumors about who is influencing her. and over the border, the young leader in north korea who may feel he wants to show off some of his new weapons and twice before trump gets settled into the white house. francine: when you look at investments and foreign policy, , does it change a lot change investments or strategies on china or pressure -- china or

russia? larry: these things are difficult to pull together. and there will be other directives. but if i think of one thing that falls out of this from the capital markets is that countries everywhere are now going to have to look more after their own security. i think that will be the reaction. europe has two strengthen security. japan, korea -- they have to think twice about how much of their own security they want to pay for and there are obvious investment implications on the cyber security and defense spending. they will receive a boost in this environment. tom: i look at a three-way relationship of the u.s. dollar. g5. dollar to the g3, g4, u.s. dollar to the e.m. and the u.s. dollar to asia. do you look at it wrapped together? richard: what we have seen in

the past is a gradually rising u.s. dollar. not a brutal move. the dollar is rising because u.s. and global growth are improving. that has been an environment in asia,rging markets specifically, have done very well. tips into ait' disruptive environment is the dollar as a safe haven environment as trade tensions increase. and the rise in the dollar, that is one of the risks that asian markets face, going forward. if we look at asia, one of the key methods for investing for some time was to focus on the markets that were less vulnerable. a domestic with recovery story under way. in india, you actually have a very important reform story

under way, as well, and potentially avoid the areas that are exposed to global growth. tom: one more question off your new book -- what would charles de gaulle do? to president elect trump? jonathan: he would have a few choice words to say at home and then he would probably go to washington and offer his advice on the state of the world. .rump is quite goal list tom: we continue this morning jonathan fenby's colleague. global view with a and american view of our new president-elect. this is bloomberg. ♪

tom: francine for a week in new york and then i wonder -- i wander over to london. this is fun. there francine: is a global

reaction. francine:we used to ask ourselves how you price risk. and with the donald trump presidency -- you see a global market bond. europeans may the people -- to: let's have you come over the politics. this is the italian 10 year. lob quadratic.k that is a mathematically elegant chart. that is the renzi moonshot. francine: the problem is that renzi has referendums. he says if he loses he will step out. turnill, let's review what we said in the last hour. republican fiscal stimulus, that comes over globally. what does that mean for europe if they enjoy an interest rate reset? increased risks across europe. not just the italian referendum year, keybut the

elections in france and germany. investors are looking at those elections. gone down.lity has there is more risk around what is happening in europe. that, the trump election victory amplifies the differences between what is going on in the united states. a reflationary trend which has been happening for some time. more fiscal expansion post trump victory. in europe, growth remains low with a little sign of inflation. and very little flexibility to implement the type of policies you will see in the united states. it is likely, given what we've seen, that the italian 10 year, the spread between italy and germany widens. in terms of what it means, people have wanted to short bonds for a while. short italiano be

interest rates as well. because if it goes wrong then there will be a move back into the bonds. looked at as almost a perfect vehicle to express a short duration view and also guard against what might go wrong in italy on december 4. francine: what does wrong mean? larry: that renzi loses and resigns. and the five-star movement might well weigh in. i do only think about populism in europe, it is different than trump populism. andh means leaving the eu the difference between the u.k. leaving the eu and france -- there is no central bank to back up the bonds. tom: is there a currency war of the head? -- currency war of the head?

richard: we certainly don't see it yet. we do start to see currency pressures in asia rather than europe. you are likely to get what it has been asking for for a quite a while. a weaker euro. tom: we have to leave it there, i'm so sorry. richard turnill and larry hatheway. what a great start to the week. coming up, david folkerts-landau on trump and global economics. this is bloomberg. ♪

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the president elect speaks. the markets like mr. trump and expect republican reflation. the left, they agree to disagree. coast to coast protests. the election headline, it was not rigged. good morning. this is tom keene and francine lacqua from london. it was a great missed call with brexit. ie world is coming to an end, don't observe it. francine: the u.s. two-year yield rising 1% for the first time since january. you and i were both on the 30 year move. the first time since january that the 30 year treasury yield went above. tom: let's get to the news. and then become to david folkerts-landau and rip up these scripts.

the first word now with taylor riggs. trying donald trump is to balance competing wings within the republican party. he has named reince priebus to be the white house chief of staff. his chief strategist will be steve bannon. he is the favorite of the tea party wing of the party. trump said he was saddened to hear that some of his supporters have attacked minorities since the election. he was asked about the attacks on an interview on "60 minutes." say, don't do it. that is terrible. i'm going to bring the country together. i am so saddened to hear that. and i say, stop it. if it helps, i will say this -- and i will say it to the cameras -- stop it. anti-trumpnwhile,

protesters took to the streets in a number of cities. new york, philadelphia, los angeles and others. protests were peaceful for the most part. a massive earthquake has rocked new zealand. there was widespread damage. areaasured 7.5 and hit an near christchurch. damage could be several billion dollars. paris marks the one-year anniversary of the islamic state attacks that killed 130 people. paper lanterns were released and staying reopened the that the klan nightclub where most of the batams -- reopened the clan nightclub where most of the victims were killed. global news, 24 hours a day. powered by our more than 2600 journalists and analysts, in more than 120 countries. i am taylor riggs. this is bloomberg. tom: we look at a 1% two-year yield. futures up 10.

green on the screen. been a backstory. it will be interesting to see where that migrates with the data reset. next screen, i want to get to the euro-swissie. a stronger swiss franc. francine: i think there is a big move in treasuries with the two-year. tops 3%.ar , global bonds.y dollar climbing. that gives you the full picture of the donald trump election. tom: here is a chart on fed meetings. we have shown this for 1.5 years. you can see the massive spike up right to the 1% line and that was the extrapolated target that never happened. well, it has happened now with a vengeance.

this is like dow 10,000. francine: i like the fact that you look at the two-year yield, i benchmarked the 10 year yield. tom: this is even more than when we started the show this morning. francine: going up to 2.25%. tom: look how japan can't get going. francine: the problem is that the trend started when governor kuroda started talking about capping the 10 year. you can see this is clearly donald trump selection move. -- donald trump's election move. tom: we are thrilled to bring -- a wonderful time to synthesize and summarize where we are. researcheutsche bank -- i think you could say he is in charge of the bank, but we won't say that.

if we get a trump rise in interest rates, does that do the work for janet yellen? is that alds, substitute for rate increases? david: no, it isn't. still feelsthe fed pressure to normalize and have ammunition to go the other way shouldn't have to do that. so we are so far off what is normal that we clearly expect december will be hiked and two more next year. it will not impact the economy very much. but the feel-good factor is perfectly justified. you look at the half a dozen issues that the president-elect -- if he only achieves 10% of what he wants to do, it is very positive for the u.s. outlook. tom: can you fold the market reaction in extrapolated were

correlated over to increased gdp, and is it increased inflation or increased real gdp within the mix? david: increased real gdp. a supply-sidelly .ttempt you get regulatory reform, tax reform, trade reform, and protector spending and all of stimulated be highly over the long-term. it won't happen until may or june but it will be over the next 18 months. at the same time, given that labor markets are near full employment, i would expect that it will translate pretty quickly in increased inflation expectations and inflation itself. it definitely has a real underpinning. it isn't just anticipation of inflation. francine: if you add in his

promise to spend one trillion dollars on infrastructure -- going back to interest rates, how many hikes are you expecting next year? david: two. but i will caution, we are in a new environment and there are things that we can't quite forecast to change that. but if things go roughly the way i think they will go, the president-elect gets 10%-30% of what he wants to do, then i expect two. there does come a point, the of ministration is aiming for higher rates to normalize. beyond a certain point, 1.5%-2%, you try to slow down. francine: let's say three by the end of the year, they do not hurt the common american -- does that go against taking care of the people who are worse off? david: we have two factors.

at the same time, we have further increases in employment and growth of income and it will offset that to a large extent. so by and large, we are probably in the minority here -- but i strongly think on these changes that are in the works. ,om: the late rudy dornbusch who you and i associate with the phrase "overshoot." far,e overshoot and go too rate wise? did a very careful steady. he looked at the populace governments in emerging markets. and he found that almost universally, they didn't follow through with their promises and the country was worse off after four years. that the u.s. is not an emerging market country. tom: exclusive.

the u.s. is not a banana republic. continue. david: so that argument is not valid. but it is challenging to get right. to reasonable distribution and lots of political influences, but i believe, that given the circle of people around him who have written on that -- they will get it right. they are aware of the risks and they will get it right. francine: is very concerned for bond market spending? normalized, you have the 30, 10 and two-year in treasuries. david: absolutely. there is a huge difference between the u.s. and europe right now, in the sense that the bond vigilantes in the u.s. are alive and kicking. and if you violate the basic

tenants of the interest rate dynamics, you will pay for it. so i think the 10 year will get -- will pose a restraint on what can be done and it will be there to police more radical approaches. which is not true in europe, where it has been removed from most of the markets. spain, portugal and france to some extent. francine: do you think the most he can do is 10% of his promises? when he comes to fiscal spending? or is it too early? david: i don't know. what i meant to say is that that i ready is reports about him not doing what he promised to do. of course he is not. but will it be substantive enough? it is pretty easy to do. not hard to do. i want to jump forward to

what we will talk about later in the hour. you mentioned police. thate distinction now there is no police? we are in a floating society and the globalization and speed of market reaction, where there is simply no police out there to help with the adjustment? david: i think it is one of the great failings of the international system. that we have allowed significant substantive countries to manipulate exchange rates, without crying foul. we have seen big asian countries piling up 3 trillion in reserves and we didn't dare to call it a currency manipulation. that opens the intervening and happene -- this didn't by itself. someone pushed the exchange rate down. but nothing happened. from that point of view, when

you talk to donald trump's advisers, they have a point. trade has been a free-for-all, reasonable rules or justifications, and it has done serious damage to the economy. -- to go to david: -- it just means there needs to be some norm and behavior -- tom: we will jump back in with david folkerts-landau. what a week in the united states. sunday evening, the president-elect spoke on "60 minutes." a washington that wakes up to a new week in america. stay with us on economic finance and investments and a new president. this is bloomberg. ♪

>> i am pro-life. the judges will be pro-life. in terms of the whole gun situation, we know the second amendment, and everyone is talking about the second amendment, and they are trying to change it. they will be pro-second amendment. the president-elect speaking on "60 minutes." those in support of secretary clinton and the future of america -- i am tom keene in london with francine lacqua. a global take this week. a good time to bring in the head of our government coverage. francine: always a good time to bring in marty schenker. tom: you were certain in telling

me that this would be entertaining, to say the least. will we see cabinet appointments this week? think we will. the fact that they have gotten the chief of done with reince priebus means that they are going to move on to the key cabinet positions. i would expect a number of them this week. that will be part of the entertainment of the week. my morning must read from -- a mustodell ski read. a history on other shocking moves. "we cannot embrace the politics because we cannot be sure it will produce franklin roosevelt rather than hepler. the second coming of liberalism represented by roosevelt, and the founders of the european union, has been destroyed by the economics of globalization." that thean awareness

speed of information and globalization has changed the political processes of washington? marty: i think they absolutely have. presidency ismp's proof of that. he conducted an unorthodox campaign. he did not spend a lot of money. and here he is, president elect. francine: what does who donald trump picks as staff yesterday tell us? he picks a clear outsider but also someone from the establishment? sort of a cat in the bag management strategy. and through his business life, he has tended to do that. put people who don't necessarily agree with each other under him and have them fight it out. whether you can actually do that in a presidency is another question. people have tried it in business and it doesn't work. francine: one of the most

contentious points at the moment -- do we have any clues on who we will puton who as secretary of state and treasury secretary? you have heard the names and they are just names. you have new greg rich for secretary of state but i doubt that. in these processes, they throw out names to placate people who supported him. the cabinet choices will say a lot about which direction donald trump is going. establishment or antiestablishment. , thank youschenker so much. look to lubricant news today for all of the news we will see out of washington. news todaybloomberg for all of the news we see out of washington. responsiveness and globalization, or is this like the 1914?

far from. we had a 180 million workers coming on scene in china to produce cheap goods. we put u.s. manufacturing from 18% to 11%. no compensation being paid to people who lost their jobs. i look at this and say, somewhere along the way, this was bound to go wrong. -- who was involved in the nafta negotiations has -- turned 180rees degrees. he is heated. my simple question is, what is the president elect's duty to america right now? he needs to grow america but what are the priorities he needs to get done? , something has to be done about trade.

i praise you that will involve wto referrals. immigration, no doubt. million has 11.3 illegal immigrants. no other country in the world has that. illegal immigrants. so something has to be done. obviously, you can't deport them but you could support the borders. then, taxation. the u.s. has the highest corporate tax rates and companies keep cash abroad. has a high income tax rate. if you live in new york, as donald trump did -- tom: did you know that? [laughter] infrastructure. look at these issues, and he

owes to do something in all of them. tom: we will come back and talk about these with david folkerts-landau. "with all due respect." these are historic times. stay with us. this is bloomberg. ♪

tom: thrilled you are with us, folks.

we are here with david folkerts-landau. this is the presidential moving average, the four year moving average of real gdp. and david folkerts-landau, this is the why of the election. this is not enough economic growth for america. david: no. it is not. not by far. i would expect and hope that the measures talked about now will put us closer to between 3.5%-4% by the early part of 2017. tom: doesn't boost consumption? consumption?ost hopefully tax changes and repatriation of foreign profits. they need a policy incentives out of washington to direct all the money coming back into american jobs? david: i believe there is a window to get these things done and the window is short.

it has to get done quickly and i believe they understand that. francine: quickly. trillion dollars is how much money a lot of american companies hold offshore. so to even get 10% of that back -- on ai cannot do that monday. let me do a data check. markets on the move. we want to remind you there is a re-pricing in the markets. near 19,000.res up a 1% to year yield. swiss franc is stronger. stay with us. this is bloomberg. ♪

tom: "bloomberg surveillance." we welcome all of you worldwide. night after night protests, protests substantial

down across central park, south and to where mr. trump lives, fifth avenue. we welcome all of you globally. we do for an exchange in a moment. right now in new york, here is taylor riggs. taylor: president-elect trump and china president xi jinping had their first conversation on the phone. they said cooperation was the only correct move. during the campaign, trump frequently bashed china. donald trump has made it clear what he is looking for when he selects the supreme court justices and other judges. the president-elect was interviewed for the cbs program "60 minutes p or cap -- "60 minutes." he supports overturning another supreme court ruling, the one that legalized abortion. iraqi troops are advancing on mosul on several fronts.

they have entered south of the city near where islam asked state destroyed artifacts at an archaeological site -- where itam it stayed -- where islamic state destroyed artifacts at an archaeological site. 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. francine: thank you so much. let's focus on the dollar advancing for a fourth day. in thell about spending reflationary possibility of the economy under donald trump's administration. by davidined folkerts-landau. thank you so much for joining us. when you look at dollar strength, how much more can it go? very clearly, donald trump can reflate the economy, getting back jobs into america and

getting back infrastructure. what can he do? >> if you believe in these policies, they can go up. inflation, how much will he get through congress? that is the first question. the second one is protectionism. protectionism is inflationary, but it is cost-inflation. if that is the case, that could hinder growth. from that point of view, there are so many? questionre are so many marks. if you think that protectionism could actually hinder the growth of the u.s. economy, you will not refund the dollar at all. i think it is quite clear that the high yields are putting the dollar up. three months, 12 months down the line, we could look at a completely different set of

parameters. francine: yanis falling today. -- yen is falling today. the short answer, as u.s. yields go up, it sucks potential and that is where you have some of these issues. it depends on which country you are looking at three commodity countries are perhaps a little bit different. if you look at new zealand, using one -- new zealand has had -- if you look at friday, they were backed by the idea that china growth could slow. u.s. imports more will country.a if donald trump becomes protectionist, he said on his website that he wants to be

self-sufficient on energy, that could be a blow to canada. question mark with how candidate could cut interest rates. tom: i think an important point -- jane, it is wonderful to have you here today -- when you talk about capital flow, it sounds where david i are folkerts-landau was years ago. is it about interest rates, or is it now a time when capital flows are ascendant? david: it is a combination. tom: which is most dominant right now? david: if you look at euro-dollar, clearly we would expect limited capital inflows are it ultimately, it is about how the two blocks perform over the next two or three years. i would strongly remain a dollar

bowl. ull. dollar b tom: than the facts change. exchange your extrapolation of the last few weeks? jane: without knowing all of the variables we are considering, certainly, yes, if we do have a stronger growth in the u.s., stronger inflation, then you have to become more dollar bullish. they spend the first nine months of the year shortening their dollar position. market beganen the to think about a little more inflation, the bond yields fled. if you consider the other side of the coin, the euro side, we are up against now an italian referendum. we have elections next year, french elections in the spring,

too. we know we are up against a wave of populism, and i could have the capacity to rock the euro as well. -- and that could have the capacity to rock the euro as well. with respect to the renminbi, we have seen china gradually allow they renminbi to weaken. that has been expected. the dollar -- if trump becomes more protectionist, do we have trade back there? tom: i actually got this question on the airplane coming out here. , the american centric idea, coming out to london, i apologize to all of londoners because i misspoke there. i see currency depreciation that his wealth destruction. is it 21 mexican peso, outright

wealth this section for mexico? david: obviously. tom: know what is talking about this. it is wealth destruction for these countries. david: ultimately you want to look much more in terms of currency's impact on income and employment. concernedt be overly about depreciation, the impact on the value of domestic assets in terms of foreign currency, no. tom: i want to go in terms of speculation -- tell me about the hedging market for foreign exchange. a big part -- how does a multinational hedge their transactions in this environment? jane: one thing that we can agree on is volatility. this is quite difficult. certainly a lot of paying customers are already thinking about volatility with the

sterling alone, and brexit. that cost a lot of companies quite a lot in terms of the changes in their positions. in terms of hedging going forward, i would imagine that because of volatility, many really are hedged. this is going to be potentially very costly. if they have this wrong. that feeds back into corporate results. francine: i also do not understand, if you have to manage -- we talked a lot the italian referendum september 4, and the french presidential election. you believe?nt do if the polls were wrong on brexit and donald trump, if you go into a week before the referendum, the election, what do you believe? do you hedge naturally -- do you hedge nationally and do not take any bets? have a lot of this should been hedged for this already. at some point, the hedges roll

off. at that point, the hedges do get hit. for some customers, this could be a good thing. we are talking about wealth in the mexican peso. exporters are hopeful. certainly for many, those could be distractions. tom: strong dollar, oil under $43 a barrel in the united states. the knock-on effects here are substantial. can oil migrate stronger? david: it could, but i don't think very much. fracking isng from such that you see supply pulling back. range. be in the 45 so, no. with the u.s. supply coming on and coming off -- jane foley,

thank you so much. we will hear from her on "bloomberg surveillance" on radio in a bit. tomorrow on "bloomberg surveillance." -- paul de grauwe. we continue with david folkerts-landau from london. this is bloomberg. ♪

francine: i am francine lacqua in london, with tom keene here for the week. let's get to corporate news with the "bloomberg business flash." apparel hasican filed for bankruptcy protection a second time. the retailer and into trouble

after getting rid of $200 million in debt and emerging from chapter 11 proceedings. the company has agreed to buy the plan for $66 million but it is not buying any stores. according to people familiar with the matter -- a deal could amneal and $8 billion. donald trump us election may be a boost for the london housing market, according to property housing market operator right move. asking prices for london homes have fallen for five straight months. that is your bloomberg business flash. you so much.nk london house prices. it is amazing when you look at foreign policy, the relationship

with the president elect and the rest of europe. it looks like brexit and the u.k. could be the winner in this , and europe could lose. said that. always i never bought the london gloom. i just do not get it. everybody wants to come to london. francine: a lot of people in this country would welcome it. we are back with david folkerts-landau. mario draghi -- you have done everything you could with your mandate to try and reflate the economy, or at least show a steady recovery. you have taken the risk out of yield. that is exactly what you wanted. there are no bond vigilantes. how do you deal with a donald trump presidency? he is dealing with the exit of the u.k. from the european union, and we do not know what comes next. david: con until europe has been a challenging economic terms for some time -- continental europe has been a challenge in economic

terms for some time. it has overshot -- it is a mandate that overshot its policy. ending up with a couple of balance sheets pretty soon. we have a couple of markets that do not properly signal risk anymore. and we have 20%-plus unemployment. youth unemployment. france has 20% regular unemployment. this election has a tremendous impact on europe. think of defense. in the sense that europe basically does not have a top except for nato. if the president elect chooses to reduce his contributions to nato, that will pose a tremendous burden on europeans. francine: but could it be a wake-up call? will it spur european values or -- david: it should be a wake-up

call. it could be a wake-up call. europe has the potential to catch up. the question is, the political and range men's -- the political arrangements are so entrenched. i am very pessimistic about that. tom: bring up the chart, anthony. this is the italian 10-year. line,amazing, off the red the move up. if i talk about italy as an emerging market, to the rescue, it is supposed to come, european federalism. is it there? i don't see it. david: you have a country with a 130%-plus ratio, and he keeps accumulating debt. , completelyg disordered. given that the referendum outcome is in doubt, you see it

going up 100 basis points. as we come closer to referendum changes, mytrump worry is that you will see investors pulling back completely. then you are going to have an impact on the banking system in italy and the rest of europe or it's over me, italy is the country that i would worry about as a flash point. tom: what is so critical here, you have joe stiglitz as your morning must-read this morning. there was a joe stiglitz equation that even the most arch conservative economist or politician had to look at, which is that growth rate in the formula of how a country moves forward. as david folkerts-landau mentioned, the little g is not there for italy but is for so much more of europe. francine: as appalling as it may seem to more liberal factions of politics or what we are accustomed to, someone from the five-star movement jumpstart's growth.

or is that just unthinkable? is probablynk that not going to happen. but what needs to happen is, in down on they have to be realignment in the regulatory side, market efficiency, labor market efficiency. it has to be done with an outside agency. francine: what would be affected, and with the alternative be for it to be -- to sometimes choose to leave the european union? david: it could be a wake-up call if these changes could be made. but changes have not been made. it has not been done. tom: bring up the chart. this is the egyptian pound. are you equating italy with a depreciation managed by the imf of the egyptian pound? it is a little bit entertaining here, folks. i am not equating cairo to rome.

the imf reorganization of italy -- that is strong language. david: italy needs to reform its labor system, governor system -- government system, it's banking system. it is posing a risk for the rest of europe. it is not happening because of omt. once you take omt out of the picture, you will see rates going up. the only outside agency coming in, reforming this, can be the -- tom: we have to come back and have this discussion. i want to hear from you. francine: this is a picture for calling it the trump camper. , emerging markets tweeting down. the 30 having year yield. this is bloomberg. ♪

everyone.morning,

from london, francine lacqua and tom keene. euro-swissie flat. francine? francine: come up shortly, it is "bloomberg american -- it is bloomberg dere bloomberg daybre: americas. alix: also be followed in the markets. plus continuing strengthening of the dollar. we will tackle both of those issues, including steven englander, head of a division at citigroup. we will see what it means for financial conditions. they get from pimco will join us on how much more the bond term premium re-rates in a trump economy. tom? tom: alix steel, thank you so much. we continue with david folkerts-landau. with you onntinue italy, and your thoughts about what dr. folkerts-landau said

about the imf coming in. to me that is almost unimaginable that they would do that. point, weto david's have been trying to reform the country for 10 or 15 years, and you could argue that the former political class was not that keen on reform. but since matteo renzi came into power, we expected more. i agree with david that if you look at the donald trump presidency, and the fact that he have 22%ed when we youth unemployment, you will see a lot of people heading for a protest vote and it is likely he loses the referendum. be palatable for the italians to get into an imf program? no, very difficult. i wouldn't expect that europeans would put together something to it domestically. they have european rules attached to it.

.he imf sits at the center if the country has difficulties, that is where the reforms are supposed to come from. the outcome would not involve an imf, but that is where it should be going. tom: the heart of the debate going back more than 20 years is germany has the same currency as italy. and they are not the same economies, are they? 2000 whenm 1970 to the euro began, germany revalued against the euro by 80%. they cannot do it anymore. they have the same currency now. that means italy has to continue inhave a domestic evaluation crisis, that's a domestic devaluation -- a domestic devaluation in crisis. deep structural reforms, and they cannot do that by itself. italy be better

outside the eurozone? david: without reforms, yes. if it can pull itself together with extraordinary reforms, stay in. without it, the banking system has problems, there are government debt problems. tom: we have to leave it there. we could go two hours with him. we are going to do that tomorrow of theul de grauwe london school of economics. he will join us in london. stay with bloomberg through the day. good morning. ,l

from new york city, good morning and a warm welcome to

"bloomberg daybreak." rollover off the back of big action and the other asset classes. a stronger dollar story. treasury yields on the 10 year bringing highs for the year. president elect select reince priebus as his chief of staff when he takes over as u.s. president in january. and wiping out the global bond record last week, the 30 having year yield having 3%. for the first time since january. and the u.s. dollar index hitting a nine-month high. the emerging market inergy 10 currencies hitting yet. can the fed stay on track? that is what you need to know. david? david: