"bloomberg daybreak." i jonathan ferro with david westin. alix steel is on assignment. points on stable, 13 the dow, positive three on the s&p 500. switching up the board, outperformance and commodity 3.5%. 44.84, up by the dollar weaker against every currency except the pound. carol: the -- david: the market taking a breather after the russia. here's what you need to know, terms treasury am a former goldman sachs partner, is said to be the pick of donald trump's advisers to service advisory. they are waiting on a decision from the president-elect. markets taking a breather in their reaction to u.s. elections in the dollar rally ends. meanwhile, emerging-market

stocks and currencies gaining for the first time in one week. of 8:30ail sales out a.m. eastern time as they prepare for another big day of fed speak, including vice chairman stanley fischer at brookings at 1:30 p.m. eastern time. we will bring you that live on bloomberg television. president-elect trump quickly trying to fill the cabinet, having appointed chief of staff and cheap strategist. chiefion i want -- strategist. attention is now on former stephen berdych and return to michael mckee and marty shankers. i love that title. marty joins us from washington. tell us about stephen. pick. unusual he is a foster. a fortunateilt goldman sachs and then went into the movie business and produced avatar, the highest grossing film of all time.

last year, he stumbled across donald trump and according to a great piece, he decided maybe if i go to work and help raise him money, he should win, i could end up as treasury secretary. and that seems to be how it is playing out. jonathan: we were told by donald trump president-elect that he the swamp and then he makes appointees that make hem think that the swamp is not sold. mke: i would not call steve nuchin the mainstream finance guy that jamie dimon would he, so as president obama said yesterday, let's wait to see what happens. out, what isght it up next looking ahead at other appointments. a treasury secretary

that needs to be appointed, so what is next? mike: the other big talk around the public and in new york is rudy giuliani, the former mayor as top candidate for secretary of state, another head scratching because he has no foreign policy experience, donald trump has no foreign policy experience, so how does one guy the other? the other top choice spent a lot of time in foreign-policy establishment but is not considered mainstream in that. he is the guy who suggested at one point bombing iran -- [laughter] to bring them to the table. he had to be confirmed as u.n. ambassador with a recess appointment because he said it wasn't likely to approve and. there is -- approve him. their controversies around the choices. jonathan: we have been told one million times on this program to behe weeks, one week

precise, is that candidate trump will be different from president at fouren you look back years time. he ran against wall street and now he is set to a point, according to many, someone that for goldman sachs. that sounds except that we have seen a few times before. appointments be any difference what we have seen before? marty: he has to strike a balance between people who have -- corepetence into confidence in people associated with insiders. i would say that donald trump did not make wall street a major theme in his campaign. much more so, bernie sanders and hillary clinton. shockingthink it is that he reaches out to someone who works on wall street. frankly, there is a benefit to having experience on wall street in your treasury secretary because they have to figure out how to finance this nation and work with wall street to reassure them that they know what they are doing, so it may

not be that astounding a pick. schenker,t is marty senior executive and mike mckee, politics editor. the new treasury secretary will have a new play, and on his is goingr -- and ed over that agenda. let's go back to marty, what is on the agenda for the treasury secretary? he said financing the government. how concerned to they have to the have to be with the bond market? ed: when i suspect is to confirm what donald trump's economic policies will be. he said there will be an increase in infrastructure spending and tax cut. financed. need to be we have seen the bond market selloff in anticipation of andter supply of treasuries trying to balance that increase in interest rates that are likely to come from the potential supply with other

demands on the government and treasury. not an easy task. jonathan: we're back to january with the back of the niels. they aren't -- with the yields. they are incredibly low. they mature and then they come back again, so these are incredibly low. at what point is it a problem? 2% on the 10 year is not a problem yet. ed: i don't think until we get north of 3% that we think about constraints on lending. there was a tremendous global demand for fixed income product. we have had no trouble selling bonds up to this point. that is driven by demographics and institutions that serve the people. i think the demand will stay with us, even if rates go higher and get cap. david: what about the dollar? it had a nice run up and taking a policy. historically, treasury has not do youned, but what

anticipate the policy of the trumpet administration to be with respect to the dollar? the old saying that the strong dollar is the best interest and makes the american people richer. it also makes it harder to export with earnings of companies that do business overseas, so mixed blessings. i suspect he will have it strong dollar policy. we donate so strong that it constrains growth in the u.s. jonathan: whoever takes over the treasury looks at what donald trump is done on the campaign trail, which was to say to china that your currency manipulates us comes a holiday managed that over the treasury? ed: the dynamic of trade will be complicated but it is not in our best interest to. start a trade war with anyone at the end of the day, -- interest to start a traitor with anyone. at the end of the day, we will have to have turned work. have many don't instances where the president and campaign has been so clear,

and he said he would do it on the first day. can he rack off of that? ed -- can he back off of that? ed: it is possible. we'll have to see what his policy will be. jonathan: a lot of people hoping that would not happen. ed keon will be sticking with us. time to look at headlines outside of business world with emma. emma: the president arrived in athens today, the first stop on his trip all in office. selection, trump president obama may have limited ability to influence talks with basis creditors -- with greece's editors. or the 200 apartments rated linked to true religion. the government has banned the organization. the german interior ministry said they radicalize young people and recruit them to go to syria to take part in the civil

war. the obama administration delayed a decision on the controversial pipeline.ess the army corps of engineers will talk with the native american tribe that could be affected by the pipeline, which has drawn scores of protest. they were then decide whether to grant a permit to complete the project. global news in more than 120 countries. i am emma chandra. jonathan: thank you. plastic a big week for the miners on stoxx 600. mining of bige -- week for -- lastly, big week for the miners on the stoxx 600. switch out the board, we get to the network manufacturer output. if you look at margins trailing estimates, this stock down to over four percentage points. on the winning streak on the upside, home depot. comparable sales, upside to price. up by 1.2%.

thanks. david: thanks. financials getting a boost since the u.s. election results, but is there room to run? plus, key player in deciding european banks. head of the european commission's single resolution board joins us. this is bloomberg. ♪

jonathan: this is "bloomberg daybreak." outperforming, s&p 500 financials index up 11% over the past five days. our next guest has been betting on banks. keon.with us is ed a lot of excitement with the steepening yield curve. it seems to continue to support

the financials, at least in the near term. ed: the financial sector may have been the only part that is genuinely cheap heading into the election by historical standards. almost everything else looks expensive. secondly, a steeper yield curve is good for financial stocks across the board. aird, there is the hope of long way to go that the policy of president-elect trump will be more kind toward regulations and august stringent as some of prior -- and not as stringent as prior. david: it is inexpensive, low violation. it turns out, a good story. at what point do markets overreact? ed: i think we have a substantial way to go. thatould change in a heartbeat. there could be statements out of the new administration suggesting regulations will not be loosened as much or they will try to constrain the decrease in rates.

there are chances for things to go wrong when you start off cheap and you have tailwinds, that is a way to go. jonathan: sounds like a mount up. this time lastly, donald trump was the candidate with the fluid disability and now have clarity. i think the consensus about what is coming down the pipe, does not that worry you? ed: think about what it would look like it futures were down five points at 1% and the consensus has to notice 180 degrees. know forot say we sure. we definitely do not know what the policies will be. we will see how dramatic the change is in the market. until we get more information, there is risk to turn around. david: and the president is not all powerful trait bank regulation, there is a dodd-frank and you need congress corporation.

and also, steepening yield curve, in order to have that deficit financing, and but point is the market say it is not that easy? some ofou think about the things trump is talked about, infrastructure is a signature democratic program. my guess is a newly elected president who has led his party to victory across three houses will get pretty good support on congress. jonathan: what will the big headwinds are that self exist? exist? -- that still you can recalibrate but if you don't see it coming look at an aggressive snapback. is that a major headwind still? if financial trademarks over the long-term, you need to see the yield curve steepening and concrete steps saying that we will have lower regulations is -- then historically. becomewhen do we concerned about the story that -- about the debt?

when is that a concern for the marketplace? ed: you look at prices. if the national debt is a problem, you will see interest rates go closer to more historical averages. we are knowing near that, not just the united states but around the world. we have capacity left as a nation. jonathan: only get the japan-like situation and you never actually get the growth. what are the chances that happens? you get big spending and debt overhang but it doesn't gain traction and all? ed: you can get growth up over 3% for time. we do have the demographic headwind. 3.5%al reserve suggested to 4% growth in that post-world so ii time was less or so, it would attempt to get strong for multiple year periods but at growth, creating

high-pressure economy that janet talked about, to draw people before us and help not only to butease short-term long-term productive capacity in the united states. jonathan: great to have you with us. coming up, shares of deutsche as they faces year mounting legal costs and stricter regulation. to of the key people crucial deciding the future of european banks, the head of the single resolution board and she joins us next. from new york, this is bloomberg. ♪

jonathan: this is "bloomberg daybreak." i am jonathan ferro. equities on the run foot globally, futures up 15 points on the dow. positive for points in the s&p 500. outperformance on some of the energy producers. hitting the y, crude up, the vtr

up 3.3% in the bond rout 3.2% up and- wti the bond rout stabilizes. that fore possible equities squat to recapitalize the bank and there is recurring talk about efforts by deutsche bank ceo to ensure that it has sufficient [indiscernible] the personis overseeing the capital adequacy of european banks and any liquidation if things go wrong. elke koenig is the european singleion, head of the commission board and served as a financer, so thank you for joining us. --'s talk about specifically not about whether it will happen -- but you have said before that your goal is basically for private solutions to the difficulties of european banks. is this what your board wants to see happen? elke: well, i think we are

commenting on not one individual bank to say that upfront, but i have said that what i see with the resolution board is our job for --re the king and -- our job to be forward-looking and have plans for the u.s. and markets, too, and to open up the avenue for private solutions and private solutions would always be coming first before you have an authority like us stepping in. david: explain in the united states-encourage that private resolution to some problems? is that through capital requirements? elke: capital requirements in europe are set by the supervisor, which break the euro areas is the single supervising mechanism for the largest banks in frankfurt, or i am currently.

the single resolution board is actually the equivalent to the fdic, so we would step in if the bank needs to get resolved. we are not the day-to-day government constant supervisor. only at the point when a bank fails or likely to fail, then we step in and then you have to reappoint a private solution and then this would be dominated to go. if there is no private solution, which i think is likely in this case, it is up to us to resolve the bank and bank resolution with our materials and tools to use to go from failing -- bail-in to asset management companies and a dedicated insolvency regime and nothing else. it is not about resurrection at that point in time. it is breaking the link between sovereign and banks within the respective country

and private solutions. the push out for private solution is creating another politicaproblem. you take the italian banks as an example. the bulk of the junior debtholders is retail. the prime minister has a problem. pushinggree that it is done the private solutions and european level? elke: i would put it differently . side hasf european decided bailing out is an unfair mechanism, so taxpayers bailing out private banks has cost the market quite a fortune. we have to work to make bail-and happening. you never start with a clean sheet of paper and without history. that into a knowledge some markets, italy is only one of the markets, and in the past, there has been a perceived understanding of thanks aren --

banks are not the totally safe investment because there is a , therefore, or on this, making sure that you have suitable investors for those instruments is one avenue. has said, you are starting in some markets with legacy. italy not the only one. jonathan: are we looking at this place?wrong at the height of the european debt crisis, the problem was not putting sovereign and banks. it was that the ecb was not the last resort for the sovereign. that was the problem that the ecb was not backstopping, the same the bank of england was for the federal reserve in the treasury. the ecb has cut that link. it was not the regulation that did that. to need to rethink -- do we need to rethink once again? elke: i do not think we need to rethink in this area because clearly, the european central

bank has an amateur of dealing with topics as last resort. the difference between the bank of england and the fed and ecb is that the ecb is the central bank of the system, so there are national central banks beyond. in addition, when you go for the sovereign, there is the [indiscernible] which has been established in the crisis. i think there is a sufficient amount of instruments to be used. once more, or me, the most important part is to make banks safer, which is the job that is basically the supervisors and has happened quite a lot. for us to have resolution plans so if something goes wrong, you have options to deal with, and for us, keep in mind, there is a single resolution fund at the end, which could be used to make

a resolution happen after there have been sufficient sharing's aura can be in a bail-in -- or it can be in a bail-in. jonathan: great to have you on the program. fx market, dollar seen big gains from donald trump surprise when. we will be speaking to deutsche bank global head of research and whether the dollar went too far in expectation. that is coming up next, counting you down to the cache open, two hours and four minutes away. 500. -- rate on the s&p positive three on the s&p 500 very this is bloomberg. -- 500. this is bloomberg. ♪ wow, x1 has netflix?

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♪ the crown, marco polo, lost and found ♪ ♪ grace and frankie, hemlock grove, season one of...! ♪ show me house of cards. finally, you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. ways 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. emma: it is 7:30 on wall street and 12:30 p.m. in london. trumps treasury former goldman sachs partner steven mnuchin is

said to be the pick of treasury secretary. they're waiting on a final decision from the president-elect. markets taking a breather in reaction to the u.s. election results as the biggest global bond rout since 2000 and the dollar rally ends. marching -- emerging markets getting for the first time in one week. u.s. retailers at a: 30 as investors prepare for -- date: 30 as investors prepare for fed speak at brookings at 1:30 p.m. eastern, live on bloomberg television. that is what you need to know. jonathan: let's get to the markets. week of gains on s&p 500 since october 2014, water stabilized in equity markets. endbond rout at the front of the yield curve, well fit, softer dollar story. you see that on dollar-yen.

ansi get that weaker dollar, commodities make a snap back -- as we get the weaker dollar, commodities snap back from an eight-week low. last night, we heard from u.k. prime minister theresa may in her first major foreign-policy speech. that is her morning must watch. among other things, the defensive something not all that popular these days, globalization. prime minister may: if we believe that liberalization and globalization continue to offer the best future for our world, we must deal with the downside and show we can make these twin forces work for everyone. show the world that we can be the strongest global advocate for free market and free trade because we believe they are the best way to lift people out of poverty. but we can also do much more to ensure prosperity they provide

is shared by all. london,oining us from "surveillance's" tom keene. this strikes me that this is one of the most important and difficult issues we face around the world. when you look at brexit and the election here and the ones coming up, the ability of the elite to persuade everyman that this is good for them, globalization is good for them, a tall order. francine lacqua nailed it, the difference of the speech last night and the speech a few weeks ago to her conservative party in birmingham, they were starkly different messages. it is the reaffirmation of the new britain and idea that it is symbolism of the new runway a heathrowghout or -- of or bring alone, the idea that globalization is with the united kingdom needs. david: going back to that speech at the conservative party

conference, that was a high street speech, for the regular bloke on the street. how does she persuade or elites around the world persuade the common worker that this globalization benefits them and their pocketbook? tom: secretary clinton did not persuade in america. the backdrop for this is the debate of brexit. i was having dinner last night in a small indian restaurant and outside was an old mercedes, and all across the back was "leave, leave, leave, leave." people are still driving around with remaining bumper stickers on their car. this debate is not over, and the key idea moving forward for the prime minister is to try to coalesce on the article 50 and onto the high court study of whether parliament will be involved. it is very ambiguous now where prime minister may will be three

next david:n the year. she has not been forthcoming in laying out plans for how to remove themselves from the european union but in fairness to her, beyond ambiguity, is there an inconsistency? on one hand, we "leave, leave, leave," but then we want to be "global, global, global." tom: it goes back to what you said about the two separate world of the united kingdom. mr. trump faces that in america. i do not see any bringing together of those two groups. they will make it up as they go. in one thing i felt resilient london in the days i have been here, is dying to their making this up as a nation as they go. ferro pointedn out something he found online, there was an irony in front of a lot elderly, rich white men in

tie in guilds thrones, these big chairs and a glorious setting with armor around, talking about protecting the common man. tom: jonathan ferro has been there many times, representing but lord of ferrodom, ro knows everything was in this nation, as with what president-elect trump will base, is a moment of symbolism and that was captured last night. jonathan: i also know what indian restaurant you are in and itas not your average one, but i will not say which one. david: i have a favorite indian restaurant but probably not that one. thank you. two men from 7:00 a.m. with tom keene and david gura. this has always been a problem, in the late 1990's, the idea was shunned a that traditional outfit and would go in a lounge suit as he wanted to be seen as a man as a common man.

we are in 2016, that was in 1997. names are peter and do not change radically. david: [laughter] that is right. -- things do not change radically. david: [laughter] that is right. jonathan: back to the u.s., broader growth. >> greater federal deficits on the horizon. i think it is possible that inflation is more likely and inflation premium breaks even and the rates have gone up. i also think it is possible this e-mail -- they see more growth opportunities. hot place in reality, to supermarkets to know for sure. >> i think there are two things, we are in the west coast and caps on relationship in terms of trade, technology with asia, but the second is, the u.s. is the best game in town in terms of macroeconomic performance, innovation and things like that

compared to what is going on in europe. >> i was trained to look at drivers, or does driving the numbers? , there are driver many drivers, but the biggest in the united states today is aging demographics. jonathan: deutsche bank's global head of fx joining us now. the red line is like a ceiling to the dollar index over the last years. you hit 100 and bounceback again. i will ask the question, what is to say that will not happen again and again? we will break that eventually. we will pause right now, 100.5 would be a big moment to read if we start breaking about we willt eventually. we will pause right there, i think the dollar rally is full on. we are in a face now with donald trump where we talk about promise. at some point, it will be about delivery and not just delivery

but in the economic impact and said policy, etc. -- and fed policy, etc. well before that, we will be breaking through the sandals. jonathan: the idea that we will get exactly what he has promised and the fed will respond and then the dollar will go higher, how fragile is that consensus by now? alan: not as fragile as it looks. 25 stimulus in the order of gdp, so i think the genius is you ask but to the 5% and you get to prestress you ask for 25% but get 2% or 3%. it is when you go with the reagan tax reforms, so i think you get a sizable fiscal stimulus coming. david: what is the limiting factor on the dollar rising? it has historically been the fed. they will be getting it back down. if that goes away, at what point does the trump administration

worry about the dollar going too far a what did they do? alan: speed this matter and not just levels. historically, you look at the strong dollar and it has a negative impact on trade. you see the current account deficits spiraling out and that becomes a big problem if you get to that point. thisicts go directly with direction, the trade and exchange rate policy on conflict. index went up another 10%, we would have these negative trait affects and i behoove theld administration to push against it. jonathan: i will bring up the dotplot and each individual represents an official in the fed and where they think rates will be. traditionally, we are used to

the far right's coming down. will we see it just avoids on the back of a trump presidency? is that upset? i haveot sure because never really liked that long-term equilibrium. is the fund rate cycle, but they should be focused on two 2018.i think7 and they could go up with fiscal stimulus in 2018 and then you have the market chasing the dots. a change in dynamic that would be helpful for the dollar. david: how much of the dollar is tied up in uncertainty on if trunk and get when he once in terms of stimulated spending? if you knew he would get everything he wants in terms of tax, infrastructure, where would the dollar be going? alan: i would be worried if he got everything he wanted. i think he has to right size the fiscal package, in the order of

and that would, really good growth for maybe 1.5% to 2.5% and maybe 3% without overshooting the growth in bringing all that growth will word, only to have much sharper slowdown in the future. ruskin sticking with us. atcoming up, stanley fischer 1:30 p.m. on bloomberg television. we would take a look on what the trump presidency means across the globe. moreollar and yen specifically. that is coming up next. from new york, this is bloomberg. ♪

emma: this is "bloomberg

daybreak." coming up in the next hour, harry stern, the former minneapolis federal reserve president. -- gary stern, the former quinnipia minneapolis federal reserve president. david: the u.s. election has an effect on ranges of currency around the world. joining us, alan ruskin. after the brexit vote, the euro held nicely. how's it doing now? alan: it has a lot of challenges and the u.s. story is dominant. there is another element to this. trump has reawakened certain political fears in europe with big elections coming up. i think donald trump's victory is really opening the markets to

the idea that may be there possibilities in terms of [indiscernible] and not quite as small as previously assumed. jonathan: we have dominated the fx story by looking at dollar crosses and across on the andmberg this morning, euro swiss. it has been so well bid on on the last weekend and stayed there, even when the yen have weekend. what does that tell the euro switch right now? alan: around the brexit story, the anchor, but it seems like the pressure is so wayng that they gave it the in a sense. it does to you there is some intensity here. if you have got genuine political risk in europe, it relates -- i mentioned brands, but you have merkel, will she run again?

the italian referendum coming up is creating much attention. david: if there is political concerned about europe, you can go to switzerland. what about the yen? isaac weakening -- why is it weakening? is very much about the dollar. the yen was great that you could go along with a bit of the hedge into the election. 102,eek ago, it was 101, so we have had to rethink things. we have rethought things in terms of currency forecast. we previously thought we get below 100, the path dependent yen will trigger hedging activity and drive us to the low 90's. that seems to be off the boil and now we look back to orthodox interest-rate spreads, fiscal policy and what it means for rate spreads in terms of jgb,

treasury, etc. it seems like the path of least resistance is dollar-yen. jonathan: just trying to think about that in a little more detail, how is that going to result in the coming weeks? alan: it is not just unwind the carry trade. this is dollar strength across the board. really, onequestion of the more difficult questions out there, is really whether the unwind and the carry trade will persist. russia,es like brazil, indonesia -- these currencies were so popular before the election and now have unwound heavier day today but have the sense that with all this -- day to day, but with a sense that kerry will have a hard time being put on for assisting period of time. jonathan: should that be supportive of the euro? alan: if you put short carry

trade and you have flight to quality. normally, you see that kind of path, but i think the dollar's favorite right now. it is very dollar centric and what the market is focused on at the moment. kin, thank you. time for other stories making headlines. here is the bloomberg business flash. emma: home depot posted their quarters and it the estimates. the largest home improvement chain signaled confidence americans ok spending on renovation projects. they raised the forecast for the year. sales were up better than expected 5.5%. cigarette maker reynolds america has rejected a $47 billion takeover from british american tobacco according to people familiar with the matter. they want a higher price. the deal would create the largest publicly traded tobacco

american partysh owns 42% of reynolds. the jaguar is set for production in 2018, waste on the sport it -- based on the sport utility vehicle. it is pushing into a crowded field. mercedes will offer more andtric models by 2025 tesla hopes to boost manufacturing by 10 times the 500,000 cars a year by 2018.that is your bloomberg business flash . this is bloomberg. full deckcoming up, a of fed speak, including stanley fischer and u.s. retail sales. that is next. from new york, this is bloomberg. ♪

jonathan: time for today's trading, u.s. retail sales only for -- sales late for fed speak,

kicking it off at 8:00 a.m. eastern time. later, stanley fischer speaking in washington. earlier in europe, we had gdp data out of germany and italy, capturing divergence. joining us is bloomberg fx credit strategists. let's break down some of the data. we're not used to seeing german gdp underperform italy, but the spread story is curious. the yields blowout over german yield and political risk factor into europe in a big way. but do you make of this, rich? rich: a bit like the u.s., we look at macroeconomic indicators we like, but political risk trumps everything. true in the u.s., u.k. and continental europe. i think that will be the key focus going into 2017 and the tail end of this year.

a lot of political risk in europe and that has not properly been priced. as a result, political risk would be the driver for european yields and the currency. jonathan: simon, look at next income, spreads blowing out a bit but the euro weaker. president mario draghi has to think about this and has credit house that while it has bubbled doing the background? simon: credit has proved resilient. we have the corporate sector only one points 8 billion taken last week, but that is the weekly average and that was the lowest amount since early september. that is a decent underpinning for the demand and supply dynamics. credit weekend over the course of the last week with political volatility and that remains the case throughout the evolution of that story and headlines. better today with treasuries coming back in the hunt for

yield back on and summer spike in higher debt service costs concerns that hit some of the high-yield names the couple days ago. treasury at the front end of the curve usually means a weaker dollar, but that wasn't the story over the last week. we have u.s. retail sales in about 36 minutes and a load of fed speakers. a consensus over the last week that the dollar continues to go higher and it will not be headwinds in the fed will not step in. that consensus, so how fragile is it? rich: the dollar does matter. we know that because the fed has talked about it throughout the year. saying form the fed hikes this year last december and we will get one maybe and the dollar had a lot to do with that. it is important. there was reason to believe the dollar could continue to outperform other currencies. as a result, it makes monetary policy more cloudy in terms of

the direction. because the dollar really does matter. jonathan: simon, you would suspect that treasury yields and the rate of change we have seen will be a flashing light on the dashboard. i asked about the ecb and credit, what is happening in that ig-high-yield the united states and that we see more financial conditions off the back of a trump win? simon: at the end of the day, it is how the trump story plays out. the u.s. growth dynamic as it stands and optimism that it was baked into that speech for mr. trump should be net positive for credit across the ig and high-yield space. it is also the velocity of the change in rates, which will be instrumental in how risk appetite bidders. fowing -- appetite

ares. a buildup in the backdrop and background is negative for said at the high-yield and low rate credit and you get more defensive or more [indiscernible] rather than abroad based risk on. jonathan: special thanks to richard and simon. david: great team and fascinating discussion. thanks. coming up, gary stern, former head bank minneapolis president, will be here on the reaction to the u.s. collection. -- u.s. collection. later, stanley fischer speaks at 1:30 p.m. eastern time. this is bloomberg. ♪

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jonathan: from new york, a warm welcome on this tuesday, i am a jonathan ferro. alix steel is on assignment. futures stable, unchanged. we go nowhere on the s&p 500. the commodity producer, the energy producers with crude up by almost three full percentage point. the bond rout. quite as fastling as they was. what you need to know. trump's treasury and said to be the pick of donald trump's advisors. that is according to people familiar. they are waiting to a final decision from the president-elect. markets taking a breather as a result of the u.s. presidential election. the dollar rally ends. stock andarkets

currencies are gaining for the first time in a week. out and aboutles 30 minutes as investors prepare for another big day of fed, including stanley fischer who will be at brookings at 1:30 p.m. we will bring it to let. jonathan: taken to the top stories. president-elect trump is trying to feel his cabinet -- feel them his cabinet. now it is only the treasury. he is looking at former goldman sachs partner. and cbsto michael executive. michael, let's begin from you and break down the man was said to be the loading desolating leading candidate, what do we know? comes from ahin low light on wall street are's. he grew up in wealth and privilege and went to yale. -- a long line on wall

streeters. inbought a failing the bank california for $1.7 billion and a couple of years sold it for $3 billion. he went into movie producing business and helped reduce "avatar.' and wandered into the trump campaign by accident. somebody recognized him and pulled him aside and said would you like to help me raise money? financee trump's chairman. you should look at this on bloomberg.com, mnuchin not really having a position on the lot of what donald trump believed but thinking it could be a shot at being treasury secretary. jonathan: what to expect to be? --goldman sachsle,, hedman yale, goldman sachs, hedge funds.

is this what we're expecting to see more of in the cabinet? shouldi do not think you expect anything but the unexpected as we heard from reports of rudy giuliani on the final list of secretary of state. unconventional choice. i think with this transition team, you just better expect the unexpected. there are shakeups and this transition tame. , reported ands proactively left at the request of the team members. what is going on? marty: our ace reporter broke the story a few minutes ago and we understand it was a clash with the members of the transition team that donald trump himself was not involved in. we are chasing down what is the hind in that conflict. he and mike pence are good friend. they entered congress together. at this kind of odd. jonathan: michael, we have gone

back and forth. donald trump said he will drain the swamp and afraid that caught the attention of everybody. what does it mean exactly, we cannot pinpoint. it is the guys on wall street. the conventional characters. on whether youip trying to do exactly what he said he would do? not have a grip on it yet. what trump has said is you cannot staff a government without going to people who have expertise. over the course of his administration, he will put in place anti-lobbying rules and term limits on people will conserve that would in essence drain the swamp. so soon.ot happen jonathan: great to have you with us. mckee.nd michael the new treasury secretary will have a lot on his agenda. here to talk about it is jeremy hales, he joins us from london

pretty great to have you with us. the appointments that will eventually come from president-elect donald trump. as you watch bill, what are you looking for specifically that would of the -- as you watch at them, what are you looking for specifically that would be about the market? guest: the key things where looking at is fiscal stimulus. for a long time, we have been stuck and as malaise of slow growth and the u.s. struggling to get above 2% and monetary evident.s fell the fed has been dovish. only one hike. policy could be much more powerful and we are looking confirmation of the stimulus that donald trump talked about. infrastructure spending and tax cuts and how that might to be

legislated. david: break that down. you talked about tax cuts and infrastructures lending. of the two, do the markets need more -- one more than the other? jeremy: i guess, different opinions from different people. my point of view, what is needed is a shift from relying only on low interest rates and recognition there must be things that could be done now until very recently that was low government bond yields. the government should be able to find projects worth doing. a low yields. i would say the most powerful stimulus could come through infrastructure spending. there's a case for tax reform on the corporation tax side. from sources i spoke to, a new hia policy, letting them bring currency into the u.s. and

personal tax cuts. all of it adds up to turned away from just relying go monetary policy and low interest rates, which is boosted asset markets but done relatively little for economic growth. more toward fiscal policy which many other proponents of the pieces believes could drag us out on the low growth malaise. today,n: from the fed and rosen speaking right now, not shooting down december and he prefers hikes to be gradual. after this point, a very strong dollar and yields backing up in the federal reserve officials not stepping in. it feels and seems like it will be the treasury's problem to address the dollar. what are they going to do with it when a president-elect donald trump said he will call china a currency manipulator. how do expect the treasury to handle it as the fed appears to be stepping back?

jeremy: i think the dollars potentially going to go a lot higher if we go down the route of extra stimulus and that will raise equilibrium real interest rates as should boost economic growth. that will bring the fed into more than before, faster than before normalizing on a more accelerated path. that mixture of growth stimulus could be very powerful for the currency. it's made not to be much that the treasury and anybody else could do over time. the -- realplate is template is the night and 85 cycle when president reagan cut taxes and the dollar had a very strong up cycle. i do not think you can draw that analogy too far. .ot facing 20%

something similar along those lines is how i think things play out. as far as the chinese, most people think the chinese policy is overvalued. china is trying to really prop up the currency. really it would be a bit of a a fourth avenue to go through the manipulation route with china at this point. david: tie this together and make a more specific area if i am an investor and i awake and got this morning, mi rebalancing my portfolio? if so, in what ways? jeremy: we think so. if you're going to have higher yields and a stronger dollar, that is not normally good for emerging markets. we rebalanced our recommendations away for that reason alone. on have trump's threat policy and the whole of america first dynamic, which is anti-. we go toward dm.

with the yields rising much higher with fiscal policy in place for the first time in a awaytime, zachary balances for fit -- that rebalance is away from fixed income. anything i said about equity, it faces competition from high-yield. far isbeen attractive so going to suffer. going to see equity meeting to lean towards cyclical and value plays and away from growth and yield plays a go up. i think it is a replaying and a rebalancing the back to economy markets away from emerging works a break david: thank you for being with us. jeremy hale, head a macro standard g. what is making headlines. -- head of macro strategies. emma bank barack obama has began his final overseas trip.

he is with the greece. the president may have limited his ability and that what the donald trump's election. with ent obama is meeting sipras. minister hasomy been detained over claims he took a $2 million bribe overstate run oil company, rosfnet. officials that he was caught in the act. aaa produces -- expect it will be the biggest holiday traveling time in a 90 years. -- in nine years. 2007,ld be the most since the year before the financial crisis began. global news 24 hours a day, powered by more than 2600 journalists and analysts in more

than 120 countries, i am emma chandra. this is bloomberg. david: thank you. we want to see what is going on in the premarket. we turn to abigail doolittle. abigail: british-american. the shares trading higher, reynolds, excuse me. it is trading higher. it is that the company has rejected a bid from british tobacco saying to the price is too low. british tobacco already owns 40% of the american company. many analysts think british tobacco could up its bid. also trading higher is america depot, it put up a better-than-expected third-quarter and reaffirmed a full year of you which is better that -- full-year view, which is .etter than the previous it is driven by increased productivity and ticketed transactions.

they are set to open flatter on the year. advance auto parts trading higher this morning on a better-than-expected third-quarter, surprising some analysts to upgrade including susquehanna. suggesting that of advance auto parts could see the upside of more than 15%. david: thank you, abigail. coming up, gary stern, of advans could see the upside of more than 15%. on the fed's will. this is bloomberg. ♪

jonathan: this is bloomberg daybreak. equities stable. down futures are up about eight points. as a the pe, positive -- s&p,

positive cointreau points. energy stocks outperforming oil and gas. -- positive 4 points. yesterday, the rout continued. yields a little lower by five basis points. a weaker dollar story. david, the pound, the cable rate. we will take a half step back to crew. opec countries are taking final steps to reach a deal very bob dudley santa down with erik schatzker and saudi arabia -- sat down with eric shen -- erik schatzker in saudi arabia. >> we will see. i do not have any special insight. we will see. it looks like a time when there is very serious discussions. a lot of volatility in the price.

erik: do you expect an agreement? >> i do not know. reports, it the confused me a bit. we will see. the scenesp behind talk. i am not crazy. erik: what happens to the oil market? to the oil price? bob dudley: we probably stay around the price we are. really pessimistic right now about a potential agreement. you see a with a price. we will see volatility. stands joke that opec for oil-producing exempt from cuts. a you cannott opec get the pretense a patient, if the nigerians ask for an exemption -- and you cannot get an exemption, if the nigerians ask for an exemption, can opec cut 1.5 million barrels a day? bob dudley: i think there is a

lot of overproduction. they will try to reach consensus. we will have to wait. erik: what are the russians going to do? few private companies know russia as well is bp. bob: we work to their for 25 years. web a big stake in r -- we have a big stake in rosfnet. i have heard about extensions. they are sending mixed signals as well. erk: which one would you bet on? if it looks like the prospects of $40 a barrel, there will be consensus on opec. i am not behind the scenes. erik: does supply pictures the outy improved since

years meeting in september. knowing the oil markets the way you know it, how much would have to be taken out in terms of capacity to drive prices to 60 bucks for sustained period of time? the balance is generally in a balance right now. supply and demand, demand is growing in china and europe and north america. it is about equal. you have this tremendous amount of stocks and it would take a lot of time to drain them off. substantiale cuts, cuts from opec's, that was sent the signal. it is not that much spare capacity in the world. david: that was bob dudley with erik schatzker and saudi arabia. all eyes on opec. central-bank stories, a lot of people thought we had opec underwriting crude prices. i thought the u.k. cpi figures from overnight, not quite

overnight, they were quite interesting. the weak pound story that is not basted through headlines and a material way. david: i am surprised. butthan: fuel prices jumped the really interesting point from the inflation figures were in a put prices. they are surging and you're wondering to the shopping shelves. and the headline data, it is not there yet. lines.somebody's eating another data point on the health of the u.s. consumer. we will break down the retail sales numbers. this is bloomberg. ♪

david: this is bloomberg. time for morning meeting when we hear from key banks about what to they're looking at. october resells will be released

-- retail sales will be released in a few minutes. we are joined by danny bender, welcome back to the program. start with the overall view on retail sales, what indications do we have? i expect it to be better than, worse than? >> maybe a little better. we heard from department stores that have indicated october sales improved including macy's, jcpenney. generally, i think a little bit of concern around to the election. you had vendors calling it out in the industrial some of the home improvement retailers. shapel, in pretty good and we cds and wage growth year over year especially lower income households, running above the median. when we look at credit, with the broad and healthy credit growth. i am encouraged by what we are seeing with the consumer and not

election is over, one less distraction. david: you probably want us to be careful. we know autos are down, correct? dan: yes. and youake a look mentioned several different department stores. we have walmart coming out this week. give us a sense at the bottom and at the top in terms of performance. walmart will show's to rent. they have shown improvement the last few quarters with trafficking. -- walmart will show improvement. that is reflected better values in the store and in stocks. they are running stores better. better front end customer service, shorter lines. even in the merchandising, you see strengths. that brings us to online. they are executing online. they had a bit of an issue with the platform earlier this year and the growth of the

celebrated. those issues behind us. they made an acquisition of jet.com. they are becoming the one-stop shop online similar to how people think about amazon. there is really any retailers in our universe doing quite walmart is doing. i am bullish on walmart. more cautious on the dollar stores. the dollar stores have been contending with more price competition, mainly for walmart. that been growing at fairly rapid rate as some of that may be having an impact on them as well. we would not mind seeing slower growth. you look at dollar general, square footage growth of around 7%. do better atobably around 4% and get the leverage point down. be better. would we are expecting modest gains from dollar stores. finally, let's be careful, helping me be careful

about how much is real success and growth compared to as petitions game. when we saw things like jcpenney, i was told it was disappointing in expectations. is there topline growth and more traffic? dan binder: it depends on the retailer you're looking at. walmart has positive traffic. i do not cover jcpenney's. obviously, those stores have been challenged. there is bit of an expectation. apparel is seeing in inventory has come down. as a result of lower inventory, easy comparisons, better profitability. david: dan binder thank you. dan binder. we -- david: thank you. dan binder. ♪ seeing is believing, and that's why

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making it easier and more fun than ever. there's more in store than you imagine. 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. jonathan: from new york city, this is "bloomberg daybreak." let's get to the market. futures, up 15 points on the dow.

equities stable across much of europe for the time being. switch out the board. byasuries, yields are lower four basis points. story largelyr and the g 10 space as we await u.s. retail sales. that drops now. 0.8%. the median estimate was 0.6%. the previous month as well, big up with revisions. strip out autos month on month, an upside surprise. median of 0.5%. another upside surprise. the market reaction, the weaker dollar story is no more. some oftreasury erasing the games especially on the front end of the curve. two-year yields up a basis point.

yields givenrve, up some of the early push. two or three base point. an upside surprise and a stronger dollar. david: right now, pleasanter noise. take a look at what this means for the u.s. economy. we are joined by bloomberg intelligence senior consumer economies. you are a little surprised because you thought it would fall short. we will focus on what category was the strongest was non-store retail or what was driving that. contradicts what management is saying at the micro love will about earnings and the demand that are seeing from the customer. david: why were you expecting a short fall? seema: the biggest category was a slight slowdown in autos year over year and building material.

you heard from whirlpool and sherwin-williams there was a pullback in that home sector. in.ought it might trickle david: we have home depot or -- home depot numbers. seema: they'll surprisingly strong but they maintained guidance. there are implications of a slow down. we have the previous month as well and a bit of revision. gdp did not capture the story in a big way. it showed consumer weakening a bit. figure.rted the gdp what does this say about spending? seema: it looks like it might be stronger, but i am concerned consumers are holding back on spending. we have a new president-elect. it is not clear what his plans might be and their core spending if they might have to spend more for health care or housing. until we know that, i would assume that consumers would be more cautious. david: thank you pretty

jonathan: a man who knows about data, he is been at the fed under three fed chairs. he served from 1985 until 2009. his name is gary stern. he is the former minneapolis president. you have the dashboard and payroll and gdp and retail sales. how much would you pay to that figure? gary stern: this number looks reasonable because it is an upside surprise, not outside us it may get revised in the future. revisedointed out, they the previous month. it suggests consistent with the labor market data we have been seeing, the consumer is in reasonably good shape. it to death the fourth quarter off to a good start. the trajectory, if you look at trajectory, consumer spending is quite positive.

the fourth quarter off to a good start. you look, a somewhat noisy figure. is there a lad as it shows up in gdp? lag?ong of a lack -- gary stern: it should show up in fourth-quarter gdp immediately. out with theirme first estimate in january, they may not have december, but they will have this. a gdp right away. that is why i am constructive about it. jonathan: let's construct what the consensus is. the consensus is a we will get fiscal stimulus and the federal reserve will push back with higher rates may be. the conversation we were having earlier, janet yellen put out at the idea of running a high pressured hot economy. is this the perfect opportunity to do this? shaping up it is

that way especially if you have sizable fiscal stimulus and i would go further and suggest that modest interest rate stemming from said been policy are not inconsistent with a hot economy. will turn out to be what kind of response, if any, do we get from inflation. quiescent,n remains if it remains subdued, that gives policymakers lots and lots of leeway. the other is it is not just a question of immediate inflation readings but what happens to inflation forecast. we will not know that until the fed chairs and their latest -- shares their latest with us. david: we have become so accustomed to relying on monetary policy to drive growth,

people are saying we are about to make a handoff. back to fiscal policy. are there risks in making the handoff clearly? if so, what are they? theretern: i do not think are any big risks immediately because i do not think the fed will be sufficiently aggressive to try to offset the prospective fiscal policy. is,question one would ask how effective will fiscal? policy be -- fiscal policy be? i am not particularly negative of the. -- negative about it. if it will come so aggressive and you're looking at future deficit that are really outside of historical experience unlikely in people's minds to change, that will not be productive. fiscal policy can it be expansionary, but it needs to be

judicious in my opinion. jonathan: i want to draw your experience in the said but to the 19 -- in the said evan -- the fed in the 1980's. how you model and made forecast when as they were proposals at the time, how did you forecast that? the federal reserve gets together at the end of this year. your running the minneapolis fed not understand how you do it when you do not know what is happening yet. gary stern: you give it your best shot. you may have all kind of qualifiers and caveats around it but we have economic models that enable us to plug-in significant tax cuts. significant spending increase and infrastructure and offense. -- defense. the models will grind out a forecast for you.

you can change or monetary policy assumptions if you want to. the thing is, you do not take the model results simply and writing them down. at least i didn't. i gave it some judgment at thought about how did i think of this was going to play out. was under no illusions i would be precisely correct. i hoped to be directionally correct. directionally correct at this point is if fiscal policy is expansionary and judicious and monetary policy pushes back but only modestly, i think you are going to have a higher path for economic growth at least in the short term. and you should probably expect more inflationary bailey said the short term. probably not right away because there's a lot of inertia in the process. david: let's go back to that inflation inertia and judicious was the word you use about fiscal policy.

how concerned would you be at the fed about a substantial policy right now when we have an economy many feel like is close to full employment. go into that world, doesn't that raise the specter of inflation? gary stern: it does. one should because she is about relying heavily on cost inflation -- should be cautious about relying heavily on cost inflation. if does raise the concern. on the other hand, the economy was operating in a very high levels of capacity through much of the 1990's. what we found, at least what i found was that there was more flexibility, especially in the labor market, then you might have guessed. not because people are flooding back into the market, more because a lot of people because of their schedules and so forth were very happy to have two or three part-time jobs. well that theyem

also improved their economic circumstances. we may see some oft again. be cautiously optimistic at this stage that this can play a positively as long as policy is judicious. jonathan: great to have you with us. federal reserve chair of minneapolis. more out of the fed, including stanley fischer at 1:30 p.m. and you go watch a that on the bloomberg television. aim to dismantle dodd-frank. we will discuss the president-elect's plan to replace it. could u.s. retail sales quite a noisy in on the back end, treasury gives up in the gains, a little bit higher. dollar back from 100. this is bloomberg. ♪

emma: coming up with the next hour -- forming ecb president. -- former ecb president. david: is dodd-frank at risk? president-elect trump has been vocal about it. what ours is plans about replacing the rules regulating wall street?

we spoke to alan greenspan and gave us his thoughts. i would like to go back to square one, repeal dodd-frank and come in with a large increase in equity to asset ratios for all financial intermediaries. there is very little else you need to do the regulatory system that would not be solved with that simple regulation. still with us is gary stern, former president of the federal reserve bank of minneapolis. we have had such a run of regulation over the past eight years. what will be left of it and president trumps administration? hard torn: it is forecast how far they will want to go and how it will play out. it is dodd-frank is on the table, as it apparently is, some aspects of dodd-frank have been effective.

many people would concede, even chairman greenspan's comments of the higher capital at major financial institutions is a good idea and have made in cetaceans sounder -- is to take -- institutions sounder and safer. alldo not want to treat institutions that have balance sheet more than $50 billion identically because they do not all represent the same systemic risk to the system. to improveom dodd-frank. one might wonder if the consumer financial protection bureau has been a net plus or not. the jury is still out on some aspects of dodd-frank. i think there's lots of room to improve it. if you repeal it, what do you replace it with, if anything? jonathan: the word at play is "dilute ." it is a careful balancing act for you want to build out more capital but at the same time, you are eroding risk-taking

capital. the eroding, as far as you're concerned, how negative has that been? we have seen some clearly drying up of liquidity in financial markets that is costly. we should not kid ourselves. we have seen some institutions neededk more than they to even given dodd-frank just to try to steer clear of problems that might conceivably arise. it is always difficult to strike the appropriate balance. we have seen this before quite honestly. you get a financial crisis, the pendulum swings out toward regulation and supervision. then, as we are seeing now, a reaction to that. the pendulum back and that is all well and good. hopefully, it will not go way back. we do not want to engineer or permit another financial crisis if we can avoid it.

getting the balance right will be tricky. we should not kid ourselves. we will not find the perfect equilibrium, perfect point disability. there is room for the pendulum to come back. ,avid: what is likely to happen if you were in charge, stress tests, stay or go? leave the: i would stress test. i think they have been helpful. to restoreelped confidence in many of these institutions. if you think about the environment when they were first put in place, there were a lot of questions about whether any of those institutions were viable. i think the stress test have been helpful. -- when: the other is we look back at the financial crisis, which banks went other -- under? gary stern: they give you the punch line. i do not think glass-steagall's will help as i do not think this was the source of the problem.

you look at the institutions that went under, lehman brother, aig, none of them were commercial brinks -- bank. it is true, some commercial banks got into serious difficulties and needed government support. their problems do not stem principally from the elimination of glass-steagall either. you can put the glass-steagall back in if you want. i would not have any expectations it would be helpful and maybe harmful. because i do not think blanding commercial and investment banking either was at the heart .f the problem in the past jonathan: another example was in the united kingdom. retail. nothing having to deal with what the regulatory and politicians call casino banking. david: they are different creatures. take a jpmorgan and your local

community bank on the other, different. donald trump and its people have been talking about them in different ways. : i would really relax regulations on community banks. i do not think they represent the systemic threat to anything. , ithey get into difficulty can be difficult for their investors and local communities. it is going to have economy wide implications. there are many institutions that are classified as systemically important institutions today that are really big community banks. those, i would relax relaxation as well. i do not think it is is costly to discriminate the institutions that really represent a systemic threat and those that do not. and the regulators ought to do if the regulations permit. that is one place to improve glass-steagall. david: is very helpful.

gary stern, former president of the federal reserve of minnesota. we have emma chandra with your bloomberg business flash. emma: home depot posted third third-party that beat estimates. raised its profit forecast for the year. home depot saying sales were better than expected, 5.5%. apple is considering a move into smart glasses, according to people familiar with the matter. google already tried and failed with a digital where -- wear. if apple goes ahead, they can wirelessly to iphones. shares of attire luxury o fell theferragam most in five months. wills led to concern it have to offer discounts to clear

inventory in the run-up to christmas. that is your business flash. i am emma chandra. jonathan: coming up -- the world's most traded currency, is it a fear gauge? from new york city, this is bloomberg. ♪

jonathan: this is "bloomberg daybreak." thatd u.s. retail sales were more positive. speak.of fed we will hear a lot from the federal reserve. is set to speak later. stanley fischer at 1:30 p.m. and robert kaplan will be speaking with an gapless. a load of fed speak. i know your expired.

david: i'm very excited. i do the popcorn ready for us. time for battle of the charts. joining us is julie hyman. go first. julie: i will start with a chart of based on a paper out, they publish the paper today. it is no longer the best barometer of what is going on in the market in terms of risk appetite. if it broke down post-financial crisis, when it was a good proxy for leverage appetite. now he says the new one is the dollar. this a chart of the vix, and yellow and the dollar in white. the dollar index has been climbing. since so much credit globally has been nominated in dollars, he calls it a barometer of global appetite for leverage. the dollar index is the new one and has more predictive power than does the vix which is more

reflective of volatility in stocks. volatility which has been suppressed and part by a central-bank action in the u.s.. we are seeing the dollar go up. is assertion in the paper that even though similarly there is not a lot of volatility and concern in the market, perhaps more than it appears. david: we love to talk about the vix. it is our job. >> a great chart. you have these products that affect what happens. here goes nothing. i'm looking at the fed model. one of the final remaining valuation cases that makes stocks look a little bit cheap relative to their peers. els inng to the ernie white. the s&p 500 and the 10 year yield which is in the teal line. this is high historically compared to the last 10 years. a higherions has been more than 70%, the spread is

wide. their earnings as so far above that it makes a compelling case. as was on the bottom panel, it is nearing quite a bit since the election. the 10 year yields have spiked up and is. -- it does not make does look as cheap. david: i like this preview win -- i like this. you win. radical to do away with of this. jonathan: coming up on this program in the next hour -- an important conversation. the man who oversaw the eurozone debt crisis. the former ecb president will be joining us from frankfurt. this is bloomberg. ♪

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from new york city, welcome to bloomberg daybreak. i'm jonathan ferro. along with david westin. alix steel is on assignment. futures are positive. points on the dow. five points on the s&p 500. treasuries were rallying. the dollar -- a stronger dollar on that cross. david: here's what you need to know. donald trump's treasury. former goldman sachs partner is said to be the top choice to serve as treasury secretary. waiting for the decision from the president-elect. market fallout from trump's win eases off.

emerging market stocks and currencies are gaining for the first time in a week. sales rose more than forecast. vice chairman stanley fischer will be at brookings at 1:30 p.m. eastern time. we will have coverage. abigail: we have u.s. equity futures modestly higher this morning. after that better-than-expected retail print for the month of october. the real strength for the nasdaq really being helped by a recovery in the big internet names. facebook and alphabet. we are looking at copper and iron both down sharply. copper is on pace for its best .onth

iron just recently hit a record high. it will be interesting to see whether or not that proves consolidation. u.s. steel and clips natural, all of these stocks have been on a monster rally up more than 25% each from last monday through yesterday's close. a bit of a breather for the metals and miners. who oversawe man the ecb at the height of the eurozone debt crisis. former ecb president jean-claude trichet. he joins us now from frankfurt. i want you to break an embargo for me. in about 45 minutes you will deliver a lecture on europe. i want to know what's going to feature more -- trump or brexit.

in my perspective both are linked clearly. they signaled that there is a level of frustration in people in the middle class of the advanced economies. it's not only u.k. or the united states of america. it is certainly a message coming from our own people more or less suggesting things are waiting to rapidly. of india, china, mexico, brazil, the rise of technology of i.t. all of this is creating a level andnxiety which is for real we have to accept that and give the appropriate response. it's a problem for all advanced.

economies. jonathan: when you ran the ecb it was always looked as an opportunity for more europe. is that still an opportunity or is that now the problem? in a way we had a lot of decisions which were taken in the crisis to cope with the crisis. decisions taken in the open governance. we have of course the banking union. these are very important decisions which were taken in the crisis and have to be implemented. me that more europe is absolutely needed in the domain of defense, security. police a federal border

clearly with the migration and so forth. we have a lot of things to . it is not really disputed. it's difficult. europe is a historical endeavor. we are making history in europe. one has to accept that. to make history is not easy. it's complicated. you do not have a blueprint. made of aas not blueprint. it was the u.s. citizens that created the united states. challenges butf as you know i'm optimistic on the long-term success of the european endeavor. that optimism. on the one hand, anxiety about too much change among the middle class which creates political exactly the sort

of further integration and developments you need in europe. how do you put those things together? is it politically doable? life in allhat advanced economy is not easy. it is complicated. and it will be complicated for a long time because the rise of india, brazil and mexico, china is there for a long period of time. you cannot expect that you would prevent science and technology to surge magnificently but of course with a lot of consequences. everything is difficult. what i am reasonably confident in is the fact that most of our challenges in europe are continental challenges and not single individual countries challenges. second i really trust that on

the continent and i include ireland -- in the u.k. there is a very strong sentiment that we engaged in a historical endeavor and that a deeper union is part of our historical endeavor since world war ii. it's a very long historical endeavor. proved resilience in the crisis in a way which was always underestimated in the u.s. and in asia. we proved a capacity to be resilient in the worst financial circumstances since world war ii. this is also part of my intimate conviction that we are resilient and that the project is resilient. jonathan: the resilience of the project largely attributed to the actions of the european central bank. the bond buying program that was

introduced by president draghi was largely the reason the financial crisis was effectively sold. i want to talk about how things have changed. back then the story was about financial markets pushing a country out of the eurozone project. now we are talking about an electorate bush in a count out of the eurozone project. that's a big change. pushing a country out of the eurozone project. that's a big change. the threats of the eurozone project is not coming from financial markets, it's coming from the electorate. do you not see that as a threat? >> i think you are right of course. the resilience of the technical part and economic part of the project has now to cope with this populist move and

protectionist move for that we see in all advanced economies. say that theto overall political stress that we had at the moment of the crisis was also very grave. take greece. a very strong was position to adjustment. it was a very strong position to the so-called conditionality which was coming from the imf and the european friends. still the people of greece very clearly said we don't want to lose our own belonging to europe and our own belonging to the euro area. trust that you could say what happened in the u.k. is likely to happen on the continent. the same populist protectionist

move is there. that's absolutely undenble. i don't think it would crystallize in the political will to abandon europe. we are more or less in a different universe. that can be explained by history quite well. the history of the u.k. is not the history of the continental europeans that i'm referring to. and i include ireland. in 2012 the solution to the eurozone debt crisis was an unlimited bond buying program. that insulated the bond market. what's going to be the equivalent for politics? we will see what happens. up to the governing

council to decide what to do on the monetary policy side and i in the ecbonfidence and the federal reserve. they have been very wise in the past and they will be very wise in the future. as regards the political aspect i think to prove that europe is useful you have this dimension of domestic security fight against terrorism, defense and control of the border which can only be done at the level of europe as a whole. i expect it is in this various dimensions that the political proof of the usefulness of europe will be given. at the polls and survey there is an overwhelming majority of people in europe to say that we should unite more

security, defense and fight against terrorism. we will see what happens. in any case it is history in the making. it is our own people who will decide what they want. ii,t forget since world war 66 years ago, something started. which goes on and on and on. and was obviously much more ambitious than was imagined at the very beginning. great to speak to you again. the former ecb president, jean-claude trichet. i believe we have some breaking news. david: news coming out of volkswagen. they have reached an accord to fix most of the tainted cars. the deal appears with regulators.

they will not have to buy back all of the cars. will save as much as $4 billion. this is a deal with regulators, not with car owners themselves. they still have to make a deal with the car owners. this could be a big break for volkswagen as they try to put his scandal behind them. a deal with regulators is being reported. jonathan: let's get your update on news. let's get across to emma chandra.emm emma: president obama is in greece. he may have limited ability to negotiate with creditors in the wake of donald trump selection. he also made a point to reassure europe about the u.s. commitment to nato. recognitionere is a that the nato alliance is absolutely vital in the

transatlantic relationship is the cornerstone of our mutual security as well as prosperity. mma: trump had questioned the u.s. commitment to nato. former house intelligence committee chairman mike rogers has abruptly left donald trump's commission -- transition planning committee. the move came at the request of team officials. rogers had been tapped to help guide the new administration on national security issues. russia's economy minister has been detained over accusations he took a $2 million bribe. the government says he was caught in the act of receiving money. he is suspected of demanding a approvingxchange for rosneft's purchase. i'm emma chandra. this is bloomberg.

up, a strong u.s. consumer. october retail sales rose more than forecast but will this momentum continue into the holiday season? previouslyff bezos joked he would like to send trump to space on a rocket. now he has pledged to work with him. this is bloomberg. ♪

david: mrs. bloomberg. i'm david westin. continuing to are spend. sales rose more than forecast. michael mckee joins us now. what do we make of these numbers? good.y are really not only did the october numbers

come in strong. from retail's up to 1% .6%. the control group goes directly into gdp. .3 after 8.1 report. we did seem to take it caused in late summer. consumers now spending again. jonathan: the headline number is the bigger number. fuel sales in that number. is fuel sales really influence the headline figure? >> it does influence the headline figure. economists look at the core group. food and out gasoline, building materials because they go into gdp through a separate measure. a .8is point if you get rise for october and .3 for september we are starting to see

consumers spend more which strengthens the case for the fed if they want to raise rates. december. now for i don't know who the 6% are. a --dn't we see that with the political polls? if that comes in anywhere near consensus you might as well. jonathan: we are almost looking past december now. asked the question are we going to keep running at a rate of 25 basis points every 12 months or are things going to change? you would expect a recalibration expectations and inflation expectations. how do they make those kind of forecast? >> they don't. it's like london in the 1950's where it was foggy and smoky every day. what we are hearing from all of is decemberficials

may be a good time to raise rates. the case for at least discussing it is stronger that has been. jeff black are from richmond saying we don't know what's going to happen in 2017 because we don't know what the fiscal plan is going to be. they are supposed to come up with a new forecast for the economy at the december meeting. i would imagine they would hedge those quite a bit because they could easily change by january. jonathan: michael mckee. , amazon andacebook alphabet have all fallen to its trump was elected president. what's driving the tech route. we are 10 minutes away from the cash of an. futures marginally positive.

, thee treasury market route stabilizes but the curve is flattening. we will break down the bond market in the next hour as well. from new york, this is bloomberg. ♪

jonathan: you are looking at live pictures of the greek prime minister as they begin a news conference in athens together with president barack obama. we will bring you the highlights later in the program as the president begins his farewell tour to europe beginning with greece. david: he's also going to tell them that trump is not going to pull all the data to make them feel better. have all fallen since donald trump won the election. on tech on his impact stocks we are joined by cory

johnson. what's going on? >> there's a general freak out in tech stocks right now. those stocks have been so expensive investors have held their nose and owned them. there's an understanding that technology might not fare as well under a trump presidency as others will. david: is it net neutrality? >> yes. net neutrality, trade, texas. technology companies pay less in taxes than other companies in the s&p 500. companiestes paid by -- tech companies was substantially lower than others. want to own and less tech in a broad-based portfolio. jonathan: everyone is talking

about these massive cash piles owned by massive tech companies. what's the story? >> you have companies like apple with a lot of money overseas. i think the temporary benefit of big as thenot be as impact of trade. we don't know what the trade hollis he going to be out of trump. does anybody think it's going to be better? you have companies like oracle which has 53% of sales are international. , most of the growth and sales are international. it could have a dramac impa on tech companies. david: there was a fairly comfortable relationship between the white house and tech. what it means with peter thiel being on the transition team. the trump people want to downplay the impact of the trump

family members on the transition team but they want to play up mike pence and peter thiel. certainly connections between google and the white house that have been so strong the last eight years are over. coming up next, the opening bell. andre about three minutes 55 seconds away from the cash open. stable through much of the morning. s&p 500 futures positive five points on the day. what it means for the bond market. the treasury curve flattens. yields coming in three basis points. the open is next. ♪

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futures marginally lower on the dow. ofthe s&p 500, two days marginal losses. 10 seconds away from the open. as you hear the opening bell ring in new york city. u.s. retail sales with a significant upside coming in at .8%. that is more than came out of the median estimate in the bloomberg survey. fueling some dollar strength with dollar yen now approaching a 109 handle. the story at the front end of the curve selling off as we approach the december fed meeting. 25 seconds in. let's cross over to abigail doolittle. we have the dow modestly lower but we have strength in the s&p 500 and the nasdaq. the big question is whether or not the dow can turn higher to turn its six-day rally into a

seventh day. it depends on whether the selloff in the bond market continues as that cross asset rotation provides a flow of funds. we have lots of individual movers on the open. we have home depot trading slightly lower reversing a premarket gain after the home improvement company topped third-quarter estimates. a conference call is going on right now. some information may have come out of the call that has turned investor views. strong results it appears that americans love affair with remodeling continues. we have dick's sporting goods trading lower on a third-quarter miss. is tradingto parts higher in a better-than-expected third-quarter report. susquehanna upgraded to a positive. and shares of the 3-d printe

company are plunging afterhey put up a breakeven third quarter. the street was looking for six cents per share. is coryoining us still johnson. we are talking about the effect on tech stocks. let's talk about trade. which of the big tech stocks will be hit worse if there are rigorous steps taken with china and mexico? think the most curious case will be apple. you have a company where donald trump has said it why don't they make all of their products in the u.s. instead of china? they make a lot of their phones in china. all of the components are coming from all over the world. the highestme of taxes in all of technology. have the highest balance of cash kept overseas. they have allocated some of that

cash to pay back some dead. a plan to use some of that cash. before we get into corporate tax structure let's talk about the politics very briefly. when trump talks about introducing tariffs are china looking at the flag bearers of industrial america not necessarily coming back and saying here at the blanket tariffs? >> there was an editorial in the global times that said china would take a tit-for-tat approach if the u.s. government introduces new tariffs. u.s. auto and iphone sales in china will suffer a setback. we will see what happens. the notion that it's going to specifically affect american

companies especially the ones that look very american to the world like apple is a real threat. david: what about netflix and that neutrality? -- net neutrality? the notion the fcc could be remade with new commissioners has been very active in the last eight years under obama. putting into place a series of rules to help guide the world of technology and have been very aggressive and that. the notion they might pull back on that neutrality could dramatically raise the prices of netflix. all oflix has to pay for the traffic they are putting on the internet and youtube their expenses could rise considerably. that could cause netflix to use a lot more money and limit their plans to develop new content which is where all their cash is going. from markets you've

got to process all of this and make a move. we will startrm thinking in more detail. corporate tax structure. the idea that all of this money is coming home and they are going to repatriate the cash -- how difficult is that process? >> we saw it under george w. bush. the effects were not what was promised. most of the money went to share andacks and dividends bonuses for executives. it did not in fact lead to it last time. there's no reason to think it will be any different this time. the overall level of corporate income tax. pay a rateporations that is the same. it will benefit disproportionately the ones that

pay higher taxes now. >> the ones that have been playing by the rules. you have companies like intel and hewlett-packard that have been very clever about the way they reorganize themselves in tax structure to set up in places like ireland that have low tax rates. that doesn't mean they won't repatriate. have lessan they will incentive for less benefit from a lower tax rate. david: some companies that play by the rules could really benefit. wall street is guessing right now and it is making some ridiculous assumptions. the notion that donald trump could somehow prosecute amazon for needing to pay higher taxes or antitrust is frankly ridiculous. there are people who have sold the stock based on that notion. wall street is reacting to things that may or may not happen and a lot of them probably won't happen very fast. david: thank you, cory johnson. jonathan: you're looking at live

greek primethe minister standing alongside the current president of the united states. saying the sacrifices the greek people have made will hopefully be rewarded with positive results in debt relief talks. we are about seven minutes into the session. the dow opening a little bit lower by about .2%. the s&p higher after two days of marginal losses. an upside surprise on u.s. retail sales driving the dollar a little bit stronger against the yen as we approach .4%. the way the bond market has the prospect of a rate hike in december edges ever closer. yields come in on the 10 year as well to to 2.24%.

of next we will debate this bond market. from new york, this is bloomberg. ♪

emma: this is bloomberg daybreak. i'm emma chandra. coverage bloomberg for to brookings. that's at 1:30 p.m. eastern time. jonathan: let's get you up to speed. equities on the dow opening a little bit lower. after two days of marginal losses bouncing back by a quarter of 1%. the nasdaq up by .6%. snapping back up

with apple as well. let's bring in abigail doolittle. have a rally in the airlines this morning. of ais an extension multi-day rally for these airline shares. delta is on pace for its eight the day in a row. the source of strength is the disclosure that berkshire hathaway took positions on three companies after a decades long aversion to the industry. the run from the airline sector is not over. the run he's referring to his right here. this is a five-year chart of an s&p 500 airline index. we see a nearly 400% move. the this morning we have airline index popping above that yellow line suggesting the buyers are really enthusiastic

following warren buffett. david: treasury yields fall as the bond selloff eases. morgan stanley head of global interest rate strategies. you have upset by a full percentage point. i'm not going to say that you were alone in having to change your view point. take us through your thinking of what has happened in the last seven days as you expect bond yields to develop. we obviously had a big surprise with the u.s. election. not only was it a surprise from the perspective of who won the presidency but also who took control of the senate. when you are talking about

prospects for higher fiscal stimulus in the united states protectionally some harry trade policies that could temporarily boost inflation naturally that will change the course for the treasury market and it has done so. interest rates have risen. the yield curve has initially steep and. flatten.rting to think what investors are focused on now is where is this going to pause? one of the things we pointed out by looking at charts is that level on the 30 u.s. 10 year is a level we have to contain some of the weakness in the bond market. i think we will have some consolidation around these levels and as we move into the new year through the

inauguration and we get to have some clarity on what the president is going to be able to do with his policies and agenda then we can have more clarity on the outlook. jonathan: you have been a big bond bull. there's a huge consensus built up over the last week. fair, pretty much nothing. this was not a trade last week. are you concerned about how consensus the trade has become? i think the consensus has shifted for good reason. i think there is some concern over the timing and the extent to which president-elect trump will be able to follow through campaign promises specifically with infrastructure spending and tax cuts.

that could occur earlier in his administration or later in the first couple years of his administration. i think there is uncertainty around the timing of that. there's also a lot of uncertainty around how the fed is going to react to those policies as they are put into place. that's what we have seen in the bond market. intermediate maturity treasury yields rising more than relative to what we have seen in the very front end of the yield curve. underperformance in intermediate maturity treasuries is really reflecting the uncertainty around fed policy at the end of the day. you have revised your forecast. hsbc has done the same for the near term. the inflation risk premium has driven up yields. on the research team at hsbc they think the treasury selloff is going to be self-limiting

taking more away from growth than any fiscal stimulus. and hsbc thinks the yields are going to roll back over again in the medium to longererm. the expectation of fiscal stimulus on the one side and on the other the self-limiting aspect of a selloff, how do those collide for you? >> that's absolutely the right way of thinking about it. you do have colliding forces in market places. that's a natural occurrence. when you are looking at the treasury market itself one of the things we are focused on is to what extent real interest rates are rising. financialt extent conditions are tightening. we have certainly seen a reasonable tightening in financial conditions since the election. we have had the u.s. dollar strengthened considerably. you have seen some increase in real interest rates. that is going to be the focus to

what extent do financial conditions tighten? to the extent they tighten a lot we would expect risk assets to take it on the chin. we haven't quite seen that yet. from our perspective there is still a little bit more room to the upside. eventually these moves becomes of controlling and that is a reasonable way of approaching it. jonathan: thank you, matthew hornbach. next its bloomberg markets. mark barton and vonnie quinn coming up. what's on the show? the big rotation out of bonds is finally materializing. trumpo of abn amro says wind isn't necessarily bad for emerging markets. he said it's too diverse an asset class to avoid generalities. sticking with the bond theme,

mutual global investors head of government bonds says there is more to come for global yields. he says refrain from hiking rates in december of midst uncertainty around the economy. a big day for data here in europe. we had eurozone gdp data out of france, germany and italy as well. as well as mark carney's testimony in front of u.k. lawmakers. what a day. what a show. see you in 10 minutes. jonathan: mark barton, vonnie quinn. the european close. coming up, we will hear from dallas fed president robert kaplan, said vice chair stanley fischer, and later this week, janet yellen. we are about 18 minutes into the session. equities in the united states opened lower on the dow. of 2.5 500 a gain points. this is bloomberg.

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david: trump tower here in new york city about 20 minutes ago, got a cup of coffee, talked to reporters. he said they are working on an economic plan with the transition and they want to make sure they have the biggest tax changes since reagan. a lot of exciting things in the first 100 days. it's interesting, first thing out of his mouth is taxes. it's hard. we are reading t lussier -- tea leaves here. jonathan: we are trying to put it together and what does it mean for the bond market. i find it interesting that he talked about the policy. wall inust a fly on the the trump palace.

now we will turn to fed. testifyingn will be before the congressional joint economic committee. we have been hearing from fed presidents about what they see as the major drivers of economic growth. >> a broader and deeper fiscal stimulus is on the horizon. greater federal deficits are on the horizon. it's also plausible they think inflation is more likely. have gone up.s more real gross opportunities on the horizon as well. how that plays out in reality, it's too soon for markets to know. >> there's two things going on. we have a very strong relationship in terms of trade and technology on the west coast with asia. the u.s. is the best game in macroeconomicof performance, innovation and things like that compared to

what's going on in europe and many other countries. >> i was trained to look at drivers. what's driving those numbers? the biggest driver -- there are many but the biggest in the united states today is aging demographics. david: we will be hearing from other members of the fed including stanley fischer who will speak at 1:30 p.m. eastern time. joining us now is carl riccadonna. talk to us about what we should be listening for. what's goingg at to happen in december or what may happen next year? >> i think we will get the all clear from janet yellen on thursday. at that point we can totally moved to the pace of tightening in 2017. i see little reason at this point that the fed should be backing off if you look at financial conditions on the bloomberg terminal. even though interest rates have backed up rising stocks have

actually improved financial conditions so there's not the type of tightening that should be telling the fed they should ease off. gives us the final blessing on thursday. it was jvc testimony from ben bernanke that started the taper tantrum. what's going to drive the fed next year is not this trump onomics stimulus. the pump economic -- trump economic plan may have more impact on 2018 fed tightening. growth story led will be what moves the needle in 2017. withhan: let's start december. this is a summary of economic projections.

everyone will stare at this. --you are a fed official based on what we know so far. president-elect trump is saying yes to infrastructure spending. delete candidate for the treasury position is talking about tax cuts. -- the lead candidate for the treasury position is talking about tax cuts. >>+++

necessarily fiscally conservative. we are going to see tax cuts and spending on military. this should tell you that growth will be faster than what the fed was initially projecting. the last update from the fed, they told us they're projecting 2% gdp growth next year. if this fiscal tailwind engages and they potentially have to update their growth estimates that will meet the fed will potentially have to move at a modestly faster pace. jonathan: carl riccadonna, i have some sympathy for them in december. a little bit of sympathy for the federal reserve. just a little bit. it's a tremendous vote of confidence from the fed and an endorsement to continue tightening at the december meeting. beengnal things have not abruptly realigned by what has happened in terms of macroeconomic conditions. jonathan: carl riccadonna, great to have you. wrapping up the outlook for fed speak and that wraps up this program. equities down on the dow. up by .2.0 from new york, this is bloomberg. up next is bloomberg markets with vonnie quinn and mark barton. ♪

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welcome to bloomberg "markets." vonnie: washington to rio and cover stories from amsterdam and london. president-elect trump transitions. reports of rudy giuliani or secretary of state. steve newton being recommended for the next u.s. treasury secretary. mark: speculation interest rates will stay lower for longer. the neutral policy past is appropriate. vonnie: according to bob dudley, the oil market pretty pessimistic