jonathan: welcome to "bloomberg daybreak." good morning. alix steel is on assignment today. it is a seven-day winning streak on the dow after a seven-day losing streak. 500. the s&p switch up the board. treasuries lower. yields up six basis points. the big move on crude yesterday, the biggest in seven months. crude at 45.10. david: here is what we know at this hour. donald trump's efforts to assemble his cabinet may be held up by the transition team. the dollar is rising and bonds are falling as the market expects a new certain rate hike by the federal reserve in december, pricing in a 94%

chance for a move next month. oil is falling this morning with rising u.s. crude inventories predicts itook will grow more than previously thought this decade and that is what you need to know at this hour. we continue to wait for decisions out of the trunk transition headquarters. yesterday we reported the team mnuchin forsteve minute treasury secretary. the president-elect yesterday tweeted "very organized process taking place as i decide on cabinet and many positions. i am the only one who knows who the finalists are!" joining us now is steve to bring this on the latest -- bring us the latest. is it in trouble or help the? pick as farrump's

as we know. the decision has not been officially announced yet so we can officially say anything. we do not know for sure yet, but of all of the picks donald trump is considering right now, my reporting entity reporting i have read suggests this is one that seems to be moving in the direction. david: if it is ranked among why is it taking that long? is there any dissension within the ranks? steve: there is definitely a power struggle going on within the transition team. to answer your question first, it is possible they want to bundle a couple of these. they want to make a larger announcement. there may be more decisions he wants to make or maybe he is deciding whether or not to choose mnuchin. as for what is going on in the transition team, the chris christie geriatrician or dynamic

jerry dynamic is real. now that trump's focus and team has shifted the transition team, that is a real thing. chaos may be a little overblown. some people are a little more drama out of this, but we know is it is still in the process. there is more paperwork they have to do in a restart. they are already behind. in the transition team, there is concerned there is a lot to do. david: before he was governor of new jersey, chris christie was prosecuted at home. many thanks. jonathan: what happened to jamie dimon rumors? and make a great treasury secretary, he sent.

-- said. david: two votes now. jonathan: two birds, one stone. something else out of the trump campaign with some allies are not key on the federal reserve balance sheet of bonds. economic spokesperson said it has a very harmful it needs to communicate a plan for downsizing its balance sheet. what is now is neil. great to have you with us on the program. here is the balance sheet and the balance on the right. it is a beast. in his massive. -- it is massive. the is a difference between selling what is on there and letting what is on their mature and rollaway -- there mature and rolled away. can put pressure on the

fed that they have a job to do and will fight to keep what independence they think they still have left, but i would observe when it comes to the balance sheet that we are in unconventional place. i think the bank of england at some point was going to be in the same position and has changed position. were probably like to get the balance sheet a little lower but i would remind you your reporting extensively from jackson hole that they spent more time talking about how they would respond to the next recession than how they would respond to further economic growth. i think trump lisicki will be good for you as economic growth with lower taxes and theastructure spending, balance sheet does not change a great deal. david: this is an unconventional time in the has been various talk about bringing pressure on the fed, which has been so

independent, including the five is question whether donald trump would reappoint janet yellen. how can that affect the balance sheet position? jonathan: we all know that chairman yellen has been very dovish. she has supported one side of the house more than the other, one might say. he needs someone who will help promote and support his stimulus policies. i cannot see why he would swap her for a hawk. itcertainly can make uncomfortable. as an outsider listening to the opening comments, it would be a if the treasury secretary is some one from wall street because we need to get finance out in business in. on the treasury thought, we need to have someone who knows how to

run a company. whether the sum of the triage feels to me like he got on a better footing than we thought with the republican party. maybe some of these thoughts interwoven is they have a unique opportunity to wipe the democrats out in two years time between now and the next set of elections. i wonder whether the republican party and trump are wondering what is the best team to offer. pursue their to question about wall street in the treasury secretary. has been some years at goldman. since then, he had a major role in a bank out west. he has been producing movies and running is supervising businesses, so is he a wall street person or a businessperson? neil: maybe he is a bit of both.

emphasis in government policy has to be more to the corporate world. jonathan: from the monetary policy world, there is an open door for president-elect trump to change the complexion of the fed in a big way. he has two open seats. he can do something there. there's a narrative in the market he will get the fiscal stimulus but then the monetary offset. you think you get that given what you said about the discussions around jackson hole? neil: no i don't. , and ithe is aggressive is obvious republicans want a cut in taxes and the rise in will have to make some decisions quite quickly but one has to say the u.s. is a very successful big economy. was really dollars is interesting but does not really move the dial. -- $1 trillion

is interesting but does not really move the dial. fiv$5 trillion will. growth isconomic still thougdull. david: you are staying with us. now let's get an update on what is making headlines outside of the business world with emma. emma: president obama is a living a speech to the people of these as he continues his final point trip as u.s.'s leader. the country was preparing to join the euro. china may use donald trump's election to assert its leadership in asia. pushresident is trying to

the deal that would omit the u.s. france, emanuel has announced he will win for president in two years election, ending months of year'stion -- in next election, ending months of speculation. he used to be an investment banker it is the second most popular politician in france. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. jonathan: thank you. a couple movers for you beginning with buyer in germany. only to market with $4.3 billion in convertible bonds. that is 400 basis points above comparable. the financing of the acquisition, how expensive will that be? really show you another stock

moving to the downside. third-quarter eps trading estimates -- trailing estimates. it will finish up with target. byget of by seven -- up 7.8%. expectation, a 1.1% decline. david: they had quite a good quarter it turns out. a rough road ahead. the dow since at a record high. willays a trump president be a bumpy ride. we talk about equities and where they beheaded next. later, hitting the bull's-eye. jonathan just told you about the big rally in shares of target. we will tell you what they are doing right and what is behind the blowout orde quarter.

this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. let's get you up to speed on the markets quickly. some big moves we need to talk about, not in equities, but here is the scene anyways. -7.8 points.es the dollar index, you have to go all the way back to 2003 for the last time the dxy was this high. about two or three basis points. the dollar strength story back in a big way going all the way back to 2003.

some serious strength. david: i should say. exactly a week since the election date. where have investors are putting money since donald trump's surprise victory. with us is neil. i want to show a chart here that is the etf funds chart. you can see the big yellow bars are the days right after the election. you can see it has come back. where do we see the equity markets right now? money has been flowing in. his it going to continue? neil: what i find interesting is you have seen the bond markets like the 30 years down nearly 15%. yet the equity markets are unchanged. we are nudging around 2150. i see more messages from the bond markets than i do from the equity markets. i think in terms of the flow, there was money sitting on the sidelines, and i would differentiate the different things. everyone woke up may be

disappointed that we do have president-elect trump, but he knew he was good for spending, the economy, going to be more fiscally generous to the economy. encyclicals got another boost. normally be strong dollar would have killed and you see commodities going through the roof. you are looking at themes inside market.ty is it rational china consumed 70% of the world's industrial commodities and america consumed about 8%? history will show china this year has spent $1 trillion on infrastructure. where the demand for commodities is coming from and it will not come from the u.s. jonathan: in the immediate term, a big question for the risk rally for equities specifically. seven-day winning streak on the dow. we have dollar strength, yields

rising, bridgewater money a comprehensive peace yesterday on a week since the trump victory. what does the short-circuit on the back of the strong dollar on the back of an em route? i think probably now that we have some clarity, we can see more m&a. i think a lot of strong companies can access cheap levels of credit. i think that type of animal spirit can still support the market. what we are also seeing is the dxy in particular is very long and we know the brexit decision and the trump decision has put even more pressure on the euro. with the italian referendum coming at the beginning of next month, i can see the component for the euro remaining weak.

the yield curve control in japan will weaken in the end so even against the two major work withs, the trade ing markets emerg is verrilli's watch because it will hurt emerging markets if the dollar continues to strengthen further. david: you mentioned the animal spirits. how hard can they carry us -- ho w far can they carry us? corporate investment, which has been lagging in this country, is a chance corporate ceos say they may be a demand there and start investing? next yearink trump needs a policy where he puts money in the hands of people who voted for him. that is wage increases which may be bad for corporate margins. the other side of this is until they have the money in their pocket, they will not anticipate the demand. constant pricing deflation from

amazon and the online retailers. think that environment changes. i think what will be interesting, your will tax it -- europe will tax it. can he go to apple and say give me 100 billion of your $1 trillion cash, but i will do something for you if you make iphones in pennsylvania. that will change the dynamics of the corporate investment culture. jonathan: great to have you with us. it is critical before the fiscal spending arrives and the tax cuts arrive, what will drive growth is changing expectations on the corporate side in consumer side. coming up, we will take you to europe while a nuclear to images to run for president in next year's election in france.

in one hour.erview from new york, this is bloomberg. ♪

jonathan: after months of speculation in france, emmanuel macron has declared his bid for the presidency as a pro-europe liberal. he is ranked number two in popularity among french politicians and will face anti-eu candidates in the french election. for more, we are joined by francine from london. let's talk about what we know about him and whether he can the likes ofn the lives of

maron. francine: you nominate people come and go to the polls and candidates. is basically by popular vote. about emmanuel pro-eu,he is a liberal, and he was touted as a socialist that was most business friendly. we are not sure at this point that a socialist that he gets the support of the socialists. he is running against francois hollande and others and with a becomes the most popular socialist, whether he will face off against someone from the right. i know he is popular, but i don't know whether he has the base support among the french

left to get up there in the ranks. we have a series of risk-averse and the most immediate one is what happens with the italian referendum. the prime minister made this a de facto vote on his future in many ways. where do we stand with that vote now? he iss the likelihood prime minister in the months to come? francine: 48 i think. the polls are very close. the u.s. election is also very close on a national basis. it was assumed hillary clinton would win it, but it was very close light brexit -- like brexit. markets believe the will think a yes vote will take place, meaning all of the proposals put on the place will be voted in.

so even if it does not get voted in, i don't know what the markets are expecting a moment because it is 50-50 and the markets are more weary of the polls. to your question, which is critical on whether he will stay on, we just don't know. five months ago, he said he was step down if his referendum and reform does not get through. he is kind of backtracking on that. it just means that if he loses the referendum, italy may be yet again in a political crisis, and that may give way to something seesextreme to come in and the opportunity -- seize the opportunity. jonathan: we have given elections next year and some kind of negotiations with the united kingdom. how does that happen? francine: this is the whole point. from the day the u.k. decided to leave the eu., it is what a lot

eu, it is what a lot of commentators have been saying. who is she talking to? this is what a lot of people are saying will take more than two years. you need to have the right people in charge so she can properly negotiate. jonathan: great to have you witnessed a break and what is happening in the world of politics in europe. she has to look after tom king throughout the week in london. david: that is a full-time job. jonathan: crews moved from a two-week high and open it wishes n accord to a cut production. this is bloomberg. ♪ seeing is believing, and that's why

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about his count and if up my power struggles inside the transition team. toush by the president-elect the team chris christie -- rid the team of chris christie. bonds are falling as the market now prices in a 94% chance for a rate hike next month, the highest level this year. rising u.s. crude inventories and continued negotiations over a potential opec agreement. the u.s. oil production will grow more than previously thought this decade, and that is what you need to know this hour. jonathan: thank you very much. futures near session lows. down 48 on the dow after a seven-day winning streak. s&p 500 -7 points. stronger dollar story in this market to think about a much stronger dollar story. the index rising to a 2003 high.

all the way back to june to see that kind of yen weakness. the international energy agency yesterday came out with its outlook for oil production, and that gives us our morning must-read. the iea increased estimates for u.s. production through 2020 crediting show production. a lot of attention is focused on the remarkable resilience of u.s. oil output through the current downtrend and is ability to a short investment cycle to respond in a matter of months to movements in price. joining us now is james, who leads our team reporting on oil in europe. with this report about u.s. shale? lot of things, the whole world of energy, but the focus right now is on u.s. shale oil because of what opec is doing, because of the trump administration coming in

promising to lift regulations a bit. they have been talking about the surprising resilience of the price slump. producers in texas and other parts of the country have been good at becoming more efficient at cutting costs. you see that now as rigs our being redeployed and there may be a production come back by the end of the decade. david: we are looking forward to these opec meetings upcoming. does the seal situation and the complicateistration what was already a difficult situation for opec? james: it certainly does. they warned that if opec drives can pullo high, shale back into the market, which would not be a good situation for them because they can put pressure on prices. victorythe trump complicates things, with iran, trump promises to a deal their deal with iran.

case,, it create case, increasing a lot of uncertainty with what the relationships will be. david: thank you very much. jonathan: thank you very much. let's continue this conversation. for more on the eia report and rob, he oversees $15 billion in energy assets. a lot to get through. why do we consistently underestimate the ability of shale producers to say low prices, pine, we will end up to that. why does the iea doing that and why do wiki doing that? >> we expected shale will come back. 5 million barrels in four years, 15 ataked in april of 20

9.7. we're down to eight. we have come off one million barrels. energy technology in the u.s. is the best and they are able to drive the cost structure down and that is why they have been able to make it any. >> seal is here to stay -- shale is you're just because the u.s. has done a great job being one of the lowest cost providers of oil. david: given that come how much difference does the trump administration make? a really embraced energy through the campaign. does it make a difference? >> here is how we look at it. whoever the president is, it does not matter because the economics never lie and what the isnomics tell us is the u.s. one of the lowest cost producers of both energy commodities around the world, and we are getting even cheaper so that is a great thing for energy demand

around the world providing low-cost energy for the world is critical and beneficial to the second going forward. jonathan: that is the fundamentals for a strong industry but the escalator is whether trump boosts infrastructure directly in the energy sector and support the industry anyway. which will it be? to focus one plans general infrastructure energy in america was going to build out anyways. they may be less of a regulatory burden, which will help the pipe to lay pipelines across the country so what will do is hopefully -- what trump will do is hopefully realign the focus. the most important thing for an economy to continue to thrive is

to have cheap and abundant energy as rob mentioned. you can have as much as you want. if you cannot get it to the right places through the infrastructure, that creates a problem. david: one of the issues has been coal. supporters of donald trump have been very pro-coal. how relevant does coal become in a trump administration? robert: it becomes irrelevant probably. gas,we look at nationa natural we have more than what we know what to do with, which is not a d thing. we have working on trying to export that utilize that our trade deficit because of the tremendous resource of natural gas we have. it replaces coal as a power source. it is a great solution because it improves emissions and reduces carbon dioxide emissions in the u.s. and globally. jonathan: one of the great things you do is take all of this and think about how to express it.

where do you go? libby i think the play in the energy space is the pipeline business. that is a business letter who got into office was going to continue to do well. now with the less regulatory burden, you will see $500 billion of energy infrastructure. does not need to be financed by the government like some of this other infrastructure. that will be built out over the next few decades. that is where the opportunity is in the mainstream companies -- midstream companies. david: yield is important to investors right now. the current income you can get in as important if you think the 10 year treasury rate will rise and federal government will raise interest rates. jonathan: we still have not discussed what has happened with credit and what it can mean for these players, and we have not

discussed opec. opec has pretty much put a floor in crude available to go we got. -- we thought. not so much. libby: we need to get through the opec meeting. is probably fairly well priced into crude. demand is staying constant. price is going down. inventories are going down. we are going to get back into balance fairly soon. it is quicker if opec cuts. it is longer if they don't. the trend is already in place. david: i wonder about secondary effects. their other things the trump administration are proposing like trade restrictions and tax cuts. where is there a divergence here? robert: hopefully the economy grows and if it does, the demand for energy continues to grow across the world. the energy sector is really a of acal component,

critical puzzle piece the matter what sector you are in. it connects technology, health care, consumer staples. it never gets enough credit for the value it provides to the sector and other sectors as well. david: who will do better and who will do worse? everyone will do somewhat better, but it has to be a divergence. libby: global multinational companies if we do have some , thatf trade restrictions may be an issue, but for domestic companies, everybody will benefit. nafta,e of issues with we are looking for big demand coming out of mexico for natural gas. tariffs are on incoming products. i do not know he will follow through with that.

we see the energy sector continuing to do well. dstreamtream space -- mi space will do well. david: how big of a disruptive factor could that be? libby: that is a good point. if we see natural gas supplies tighten in the u.s. and starts to live, that could add, but for the levels we are at now, that is not an issue. david: thank you very much. both portfolio managers. coming up next, target just out with quarterly results. the retailer topping estimates. same-store sales were down once again. we will discuss what the target story tells us about the state of the u.s. consumer. in one hour, a special interview. this is bloomberg. ♪

daybreak.""bloomberg coming up in the next hour, a special interview with a saudi arabian prince. david: this is bloomberg. target revenues are vetted and inspected for the third quarter, but same-store sales continued to slide as retail shares have been on the rise. they are up 9% tonight. johne joined now by bolton -- joe feldman.

joe.me to the program, watert want to pour cool on this because the earnings were impressive but how much of this is in expectations game? year-over-year, they are not up, but they the expectations game? >> yes. it is a sign of relief that things were better than feared. directional trends definitely improve. traffic was down 1%, but last quarter was down 2%. profitability picked up significantly. all of the different categories, growth and e-commerce was good. there is a lot of good things to pick out of it, but it was still a flat comp, slightly negative to be honest. david: take us under the here on here.- under the hood they have been challenging the pharmacy business. how is that looking?

joe: pharmacy did ok this quarter. grocery was still tough for them. the call is at 8:00 so i have to hear that. they said their signature categories which includes baby, as wellme and apparel, as wellness products like pharmacy, those categories comped at three points better than the average. sales growth was up 3.5% relative to the company at flat. where they have focusing, they have seen good trends. that is a good thing that we continue to see that so we are happy with that. david: are they giving up on electronics? joe: electronics has been a soft category for them. between best buy and amazon and walmart doing a very good job, it is not do a good job, but they have shrunk down that category a little bit within their stores and are not as

focused on in these days. david: what happened in the online business? where are they with respect to competing against the behemoth that is amazon? joe: sales growth was great up 26%, but it is still 3.5% of sales. you still have a very small base of business, but it was a decent contributor to them to comps, and they are seeing growth. the website continues to improve. the mobile site is very good, among the best in class. they continue to have opportunity to do better, but it pales in comparison to the size of something like amazon. even walmart does tremendously more sales online. david: they took guidance up for the fourth quarter. how far and why? joe: pretty significantly. they went up a lot, almost 20 or 30 cents. they beat this quarter by almost

$.20. even the fourth quarter guidance, which was 155 to 170, the street is forecasting at 160. profitability has been better. the product mix has been better. to beure categories tend higher markets they are getting good trends there, and they are controlling expenses. very good results from our perspective. happy to see it. david: thank you very much. now, it is time for other stories making headlines at this hour. emma: thank you. staying with retail, and other sino-american enthusiasm working with their homes is cooling off. the second largest home improvement chain cut its for forecast. year

parent company of snapchat has confidentially filed for an ipo. the disappearing photo app maker will try to raise $4 billion. the company is seeking a valuation of $25 billion. snapchat helps to generate more than $350 million in revenue this year. back caverly. it has crystals embedded in the headlights. it will not come cheap. $323,000.st production starts next year. this is bloomberg. david: thank you so much. coming up, the u.k. unemployment rate falls to its lowest level in the 11 years, there are signs that rising inflation may be

taking its toll. we will take a look at the brexit fallout next. jonathan: let's begin with the dollar index, showing? you have to go back to 2003. this shows the rent nine -- red line. dollars and headlines for financial markets today. futures a little bit softer. -51 on the dow. -7 on the s&p 500. we are on the back of a seven-day winning streak on the dow after a seven-day losing streak. next, i will bring this chart of the dollar index and the great dollar strength and what it means for markets next. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. time for today's trading diary.

we will be hearing from several members of the federal reserve over the coming days. neil speaking at the moment . patrick harper will speak at 5:30 p.m. eastern time. janet yellen speaking tomorrow. a big focus for this market is the dollar strength we have seen over the last hour and the last week. for more, we are joined by richard and guy. dollar strength is a big theme of the conversations we have been having through the last week. it has been taken another leg higher over the last hour or so. when does this short-circuit? what does this impact the rally we have seen the last couple of days? guy: that will be interesting to watch. there are indicators that the dollar is now the best indicator after the way the market is feeling right now. as a result, the dollar strength has indicated the market is feeling positive and should be

good for stocks. interesting to see whether that does become a problem further down the road. at the moment, it does not feel like it.rising yields will be something the market will pay attention to, and that may end up feeding back, but we are not there yet. the market is still feeling fairly positive. yields will go up. we will see that becoming a problem further down the road but not yet. jonathan: the dollar index at a 2003 high. a lot of funwe had speakers coming up. over the last week, we had a few as well but none addressed the dollar strength as the big issue for them and the odds of a rate hike still remain at 100%. think that is an interesting thing to point out because in the past, they have highlighted the dollar is a problem. .e have not seen that

it depends on how the risk dynamics play out and if it continues to perform well as it only strengthens and u.s. yields push higher, the fed will probably view that as a neutral thing. in the dynamic shifts, we will hear the that talk about the dollar more -- fed talk about the dollar more. jonathan: on the back of a big boost from fiscal stimulus, is there anything in the language of the federal reserve over the last couple months to suggest they would take the rate past where it is very shallow and push it up and make it moist steeper than it is at the moment given we do not know having the package is going to be and how much they can get through? >> it will be very hard for the market to price in at this stage. it will be hard to get this one to work straight away. probably thinking further down the road. for inflation that

you may see probably does not come until later. janet yellen, you were talking about this on the program yesterday. maybe that is something we need to factor in as well. the question is, what is hot in this scenario? aboutllard was talng the fact that 81 rate hike gets us back to neutral. december is a done deal. when you look at what is happening in terms of the pricing, nothing is there yet so dots.we need to read the jonathan: i wonder how federal reserve officials get together in december and put together a summary of economic projections given the go about as much as what we know from a trump presidency. the dollar index climbs to a 2003 high. david: bill gross has come out

with a letter, and it is pretty striking. it is entitled populism takes a wrong turn. he said there is no new trump bull market in the offering. he does not see higher deficits will result in lower taxes, raise interest rates and inflation. he does not think it will have a positive impact on the economy. bill gross coming out with a contrarian view about a trump presidency. coming up in the next hour, a very special interview with prince al walid. live from riyadh, saudi arabia. this is bloomberg. ♪

david: good morning, this i

bloomberg daybreak. i'm jonathan ferro. in the markets, here are your headlines. a seven-day winning streak on the dow. futures are weaker. the fx markets, dollar index has not seen the level since 2003, captured by the dollar-yen story. the week at the end against the dollar since june. david: here is what you need to know at this hour. donald trump's efforts to assemble his cabinet may be held on by a power struggle inside the transition team. some say a push by jared kushner to rid the team of those loyal to chris christie is hobbling the decision process. 13-year dollar hits a high and bonds are falling as the market prices and a 94% chance of a rate hike next month, the highest level this year. oil is falling this morning with

rising crude inventories over negotiations and a potential opec agreement. u.s. iea outlook predicts output will grow more than previously expected. bill gross is commenting in his november investment outlook. he says there is no new trump bull market ahead, something you brought to us a few minutes ago. tax cuts, infrastructure push will not spur economic growth. you have a market that is already higher, a dollar is stronger. you wonder if that offsets any stimulus that you would get from fiscal stimulus and the way. word is potential stimulus. we don't know if it is coming yet. the title of the note is populism takes a wrong turn, which gives you a hint on where he is headed. jonathan: i would suggest that you read it. if you really want to change expectations, drive this economy

forward, you have to dry the conversations in the boardrooms, and within the house, the consumer expectations. david: we want to continue on this discussion about a potential, inevitable president-elect donald trump. the decisions we are waiting for out of the transition headquarters, and it appears they have been delayed because of some infighting. yesterday, it was said that steve mentioned was treasury secretary. we are joined by steven yaccino now, our political reporter. goingt extent was steve to be in the trunk cabinet? campaign-finance director, so he was involved in competing with the hillary juggernaut of fundraisers, which in and of itself is a daunting task.

there were times in the campaign where there was a huge deficit between the trump campaign and what the clinton campaign was raising, but toward the end, the republicans joint fundraising team was keeping pace and was enough for him to spend a lot of money toward the end and close the race strong. first and foremost, he has that on his resume and is in donald trump's good graces because of that. in addition to that, he helped in with tax policy, involved the discussions about what the tax rates should be. as far as i understand, was influential in talking about not just the policy of it but also the optics of it, what donald trump should choose for his highest tax rate for you to not look like he was given to the rich and wealthy. track forit still on steve mnuchin to be named treasury secretary? >> i have not heard otherwise.

donald trump is tweeting today that he has not made any final decisions, and that he is the one to do it. onis also pushing back hard reports of infighting in his campaign. he is trying to say that everything is going smoothly. david: we are putting up the tweet right now. about one other position, treasury secretary is obviously front and center. but the attorney general will decide decisions about deutsche bank fines, which is important to a lot of our audience. where are we with the attorney general? >> we have heard a lot of names floated. chris christie was one name early on. jeff sessions, the senator from alabama, is a key contender for this. david: the first senator to support him. >> he was in early. he took a lot of javelins throughout the campaign for donald trump. , rickmbers of his staff dearborn, his chief of staff, is

a key player in a transition team, stephen miller is a policy advisor, came from the sessions camp. sessions has a lot of power on this transition team and the general consensus is what wants, he gets. ted cruz is another name being floated. really, i think it is up to jeff sessions, and what he wants, he will probably get. david: thank you. jonathan: let's continue this conversation. allies in the trump campaign are not keen on the fed's balance sheet. they say the fed bond purchases have been very harmful and needs to communicate lands for downsizing its balance sheet. the cohead of is multi-asset solutions. great to have you on the program. straight to the bloomberg, the

.ed balance sheet it is a beast. winding down could mean two things, you let things rolloff, securities mature, or you begin to sell. is that ever going to happen in a significant way? >> you cannot imagine to more contradictory objectives. on the one hand come you are trying to put forth an inflationary policy that is inflation stimulative, and on the other hand you are trying to wind down the balance sheet. it would be destructive for the economy, the housing market. i cannot imagine anyone letting that happen. stranger things have gone on. don't have a trump presidency yet, but already there is a lot of stimulus kicking around in the marketplace, but at the same going higheryields and higher. to what extent is that tightening the money already? >> as an investor, this is the most difficult time you could have.

on the one hand, the stocks, bonds, currencies and discounted a certain degree of success of stimulative policies. we don't really have clarity on how they will play out and when the unintended effects will be. so you are seeing a little bit of tightening, certainly that is the case. it is not at a point where it would negatively affect the housing markets. but if you rolled us forward and imagine what the tax policy could be, you could see a more negative impact. jonathan: let's talk about the trading environment. whether we are seeing capitulation or convention -- conviction that we will get something great, or capitulation that things may not be as bad as we thought they would be. >> great point. he of the areas that have rebounded are what i would term value areas, depressed by historical standards. many of the assets have this and counted -- discounted low

inflationary environments. simply a move off of desk doesn't leave has given a rise to a number of these stocks, currencies, etc. you are right, it is the rebound off the bottom driven by hope, even though we have yet to see much evidence. david: we hear a lot about tax policy. what are some of the secondary on taxes?her hats >> it could be moderately beneficial to small businesses. ,ne thing i'm concerned about which a chief economist mentioned to me, if we have a limitation on the deductibility of real estate taxes, combined with higher rates, the unintended impact on the housing market could be quite severe. if we actually implement it, the lower deductibility, the unintended impact is significant. david: this is some of the fine

print people are looking at. if you cut rates in taxes, you have to pay for it somehow. maybe interest rate tax cuts going away? arethan: do you think we overestimating the ability of a handoff between monetary policy and a fiscal policy in a smooth way? if it is an easy transition, you will get the school policy stepped up, and monetary policy will go back. we have been doing this for seven years. isn't that easy? >> it has been extreme and difficult, which is why it has not been successful too many times in history. i think japan will provide a little bit of a window where the situation is -- the bank of japan is committed to keeping rates low through quantitative easing, you will have some fiscal policy, and that is the way to do it. anathan: can you think of cycle this mature, this far on

in the recovery when someone has come along and said we are going to have a big fiscal stimulus package? this is not japan. this is a strong economy delivering decent growth, wage growth ok. not stellar but ok. can you think of an historical example? >> i cannot. very little labor slack, very little gdp slack. the only argument you could make is you have a low labor participation. if you engender consumer confidence, you could bring 5 million people back into the workforce, but outside of that ,rgument, which is to be tested i cannot think of an economic environment that would work. david: we will be finding up pretty soon. thank you for joining us today. now let's get an update on what is making headlines outside of the business world. emma chandra has first word news. house republicans are talking

with the donald trump transition team about the biggest overhaul in taxes in three decades. provisions incrap the tax code that they say put american companies at a disadvantage overseas. president obama is in greece, the birthplace of democracy, and today he spoke about the transition between his administration and donald trump. >> the next american president and i could not be more different. [applause] we have very different points of view, but american democracy is bigger than any one person. said that is why his administration would do everything they can to smooth the transition process for the next president. in france, emmanuel macron has announced he is running for president in next years election, ending months of speculation. he is a pro-eu liberal and has offered an alternative to the political establishment and the populace.

he is the second most popular politician in france. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. lots of free market mover to talk about here in a consumer discretionary space. onget, shares are soaring beating consensus by 25%. being helped by back to school. the full year is coming on holidayhan expected season sales. home depot saying that americans are spending less on their homes. is higher. and analyst says he has more confidence in the company's outlook or 2017 based on espn and streaming pay bundles. david: coming up, what is the

future of dodd-frank under president-elect trump, and what are his plans for regulating wall street? and a very special interview with prince all worried, the prince kingdom holding founder and chairman. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak. futures are softer, down 60 on the dow jones. the winning streak extended to

seven days at the close yesterday on the dow jones, the longest july. that is a question to answer later on. a stronger dollar story in the fx market with the dollar index getting back to a 2003 high. dollar-yen approaching the highest level since june. a big queiofor these markets and one sector in particular on the back of a trump presidency, is dodd-frank at risk? he has been outspoken on his plans to dismantle the law, but what are the rules about wall street? we spoke to alan greenspan last week and got his thoughts. >> i would like to go back to square one, repeal dodd-frank, come in with a very large in equity to asset ratios for all financial intermediaries.

i suspect there is little else you need to do in the regulatory system that would not be solved with that simple regulation. jonathan: with us now from new york is betsy graseck, morgan stanley analyst. for a dodd-frank pullback, what do you think they are? i don't know exactly what will transpire here with dodd-frank. however, as a bank analyst, the way i think through it is, let's look at what some of the suggestions are from the existing house blueprint. you have that from the house financial services committee. when i read through things like is that wei expect will likely see a continuation of a path that the fed started a few months back, which is reducing some of the restrictions on smaller banks. jonathan: on the back of the

rally that we have seen, does it have legs going into 2017? the idea is we get a steeper curve, softer regulation. is there enough for the rally to continue? >> it's a great question. we are overweight large-cap thanks at morgan stanley, stocks in particular we like our monte centers -- money centers, credit card names, b of a, citi, wells fargo. the reason why we are overweight and not calling it done here is for several reasons. number 1, 10 look at the rally in the stocks since the election, between half to two thirds of it is purely from the yield curve shift. the interest rate environment has changed and the outlook for inflation has changed, and that's being reflected in bank stocks. the second thing, as you mentioned, dodd-frank, we expect

to see that being able to optimize their capital structures more. this is not necessarily because a rule changes but has more to do with an expectation that th because of the political environment, they will be able to do more with ccar. going forward, there is more room, depending on what happens, with tax rates. if you lower taxes, that is good for bank earnings. i do not think that is in the stocks today. in addition, if there is any more expectation for yield curve shift, if there's an opportunity for a little less expense associated with regulation, these are not in the stocks today. david: finally, not all big banks are created equally. you think some of the better than others. bank of america at the top of your list. american express not as well.

what differentiates those banks? >> it is really about our outlook and the exposure to yield curve interest rates, capital structure. bma is more asset-sensitive than american express. when you look at that specific ally, that is the reason. david: thank you. coming up, trading the trunk rally. investors have added $14 billion to the biggest etf tracking the s&p 500. stocks have climbed, but is it all good news? we will discuss that. this is bloomberg. ♪

david: this is bloomberg.

i'm david westin. it is time to hear from key banks about what they are focusing on. stocks have rallied since the election but some more and the news may not all be good, that there are some downside risks to the economy as the president-elect takes office. since world war ii, eight of the 12 presidents have faith recession during their first year in office. joining us now for more why this trend remains prevalent is steven wieting, chief strategist at citi. i don't want to put a wet blanket on all of this euphoria make, but what are some of the downside risks? >> away from politics, our outlook for the u.s. economy has gotten generally better. a pickup in labor force participation, we know productivity growth has been very weak, but that may not stay that way. there are plenty of positives away from that. now you can certainly say a fiscal stimulus, some of which

has been bipartisan in terms of recommendation, but transitions are difficult. disability right now is way down. this is not the same as if you had taken the obama administration and added tax cuts. when we look at brexit, and this goes into the same types of politics. there is a grab bag of thing that the markets can like and fear. we have seen in the tech sector, do we have continuity in trade relations? that's very important to the near-term performance of the economy. david: is there a danger in picking and choosing? we talk about tax cuts, infrastructure spending, which equal in the equity markets like. but we don't talk much about trade wars. >> we don't, and it's highly speculative. we don't know what pace that congress led by the gop has four net stimulus.

cuts may, we think tax be the larger part of this, we havere likely, and the issues of absorbing this fairly late into an economic recovery where low interest rates have been so critical to certain parts of the financial markets paper particularly for the rest of the world. low american interest rates, low eurozone interest rates, this is a challenge for a lot of assets. david: as you plan your strategy with those uncertainties, do you take into account the fact that the president can by himself affect trade, but not taxes and infrastructure? >> that's absolutely a risk that we consider front burner. rhetorically, relations with 2016, aou saw in 2015, lurch in the chinese currency over fears of what could happen thereafter. it had a big effect on financial markets. activated, buts

these are the types of things that can come back again if the rhetoric changes. david: thank you very much, steven wieting. coming up, a very special interview, a conversation with prince one lead, the founder and chairman of kingdom holding. let's get you up to speed on the market actions. futures are softer. equities are rolling over in europe as well. a stronger dollar story. 109 handle.ith a this is bloomberg. ♪

jonathan: from new york city, this is bloomberg daybreak . i'm jonathan ferro. futures are weaker, softer on the dow.

we are awaiting some ppi data in the u.s. for the month of october. yields are up five basis points on the 10-year. we hadoach the 2016 high just a couple of days ago. the dollar strength story is fascinating, the strongest since 2003. monthnal demand month on coming in combating online, 0.0%. the median estimate was 0.3%. excluding energy, 0.2%. for more on the data, let's bring in steven wieting, still with us. the market check before the data ,rop, the stronger dollar story you wonder how it does shape

these numbers in the months to come? >> core import prices are falling again and this will represent one of the restraints. ideally, that is there when the u.s. needs it. if we are stimulating the economy late in a cycle, certainly, one thing we see with a stronger dollar and the potential trade rhetoric, some economies outside of the united states are becoming more competitive with their currency weakening against the u.s. it could end up making their exports much more competitive. that could bring up trade friction. i would say here again, and this time seasonally we are usually in a low for the oil price -- this is a time where we can print some pretty strong growth readings and inflation readings at the same time. bond marketugh the is looking forward to higher inflation. going forward, that 1 -- number may look different. inthere has been a move up

inflation expectations over a 10-year window. a lot of stimulus now, we always talk about the 1980's. our fiscal position is not what it was in the 1980's. the top marginal tax rate was at 70% of the beginning of the 1980's. if you look at what entitlements will cost the u.s. at this point over the next 20 years is very different than the last 20 years. jonathan: great to have you with us, stephen. between a trump victory and $45 crude, it is fair to say these are tense times for saudi arabia. the government trying to build a post-oil economy, it's a huge challenge and the effort has just begun. and it's not clear if a trump administration wants to change the nature of the relationship between the country and saudi arabia. erik schatzker is with the billionaire investor and philanthropist prince al-waleed bin talal.

thank you so much. your royal highness, great to be back with you in riyadh. >> always a pleasure to be here with bloomberg. let's begin with the obvious, the u.s. election and donald trump. i say that because i know you want people to know something about your relationship with mr. trump. what is it? >> my relationship is more than 25 years. we were partners in the plaza hotel when i bought it from him. now he is out but we began with them. we also did by his boat in 1995. so we have a lot of indirect contact. lately, after he became president, i did congratulate him because we had a small spat before he was elected, but i think now it is over.

i did send a message through his daughter, through a common friend, and also tom barrett, a common friend, is mediating, to find a suitable timeo we can meet together. as a your royal highness, global investor, because that is what you are., are you more or less confident........., had hillary clinton become president.? prince al-waleed: as a member of the royal family, i do not want to interfere. i have had good relationships with both administrations, whether republican or democrat. i am ready to work with any administration. what is important is the policies. prince al-waleed: are you more or less --erik: are you more or less confident for the u.s. economy, global economy, for the returns you can generate with your investments?

prince al-waleed: when mr. obama took the reins eight years ago, the u.s. economy was not in good shape at all. it was almost in a bankrupt situation. the banking industry was in shambles. the trump administration gets the u.s. in good shape somehow. erik: if we look at hillary clinton as the status quo, a continuation of what we had under president obama, whom you met, is in a photograph here beside us, and mr. trump represents something new and different, how do you invest accordingly? do you do anything differently than what you have been doing over the past eight years with mr. obama? doubt, thisleed: no election was unique, one-of-a-kind. mr. trump is very independent, although he is a republican. he is anbelieve

ideologue. he is not a mainstream republican. we have seen mr. weiner and mr. ryan, the x house speaker and one, having many behaviors. but that is healthy. united states only wants change. with all the things mr. trump did in the campaign, this was a recipe for any candidate to collapse and disappear, but you have seen how the perseverance .f mr. trump people only care about change. mr. trump represents that. to wait when he takes over in january to see his policies. can see,ed on what you and the fact that you have known each other for 20 years, is a recipe for growth, for continued gains in financial assets?

look up and has happened in the stock markets since he was elected. if you look atd: the stock markets as an indicator, it is almost euphoric. the last seven days, the market is going up continuously. it has been good for many of my stocks, like citigroup. but that is all short-term. settles, once the president-elect becomes president, and the policies become clear, sometime between january and june, that is when we will begin judging where we are heading with the u.s. economy. erik: you have been a longtime holder of citigroup, more than 25 years. as a result of donald trump winning the election and the prospect of less financial regulation, a rollback, if you will, of dodd-frank, does that make you want to increase your holdings of citigroup, or invest in other financial stocks? is that an opportunity you see a

point to take advantage of? prince al-waleed: it is too early right now. this has to soak in. reinsump has to take the sometime in january. it is still too early to judge. we are not jumpy investors, we are long-term investors. we go with a long-term approach. on a contingency basis, if you were to see donald trump, his new treasury secretary, jeb hensarling, for example, with support from the republican-controlled senate trying to roll back dodd-frank, would that make you reevaluate your financial holdings and perhaps by other ventures -- buy other bankshares? prince al-waleed: we see already that dodd-frank is being targeted by the trump administration. we will see it and able cancel

the whole thing just dilute it. one week is too early. erik: it is not us, the stock market. as you said, it is almost euphoric. prince al-waleed: for the long-term investor, we have to wait and see and be stable and take our time and not rush into decisions. erik: as you know, there is a lot of concern in this country and the region that a trump administration will be less supportive of the middle east because of concerns over terrorism, for example, integration, and the cost of military support. do you expect a meaningful shift in u.s. policy here? prince al-waleed: it's no secret the relationship between saudi arabia and the arab world in general and the united states has not been very nice in the last eight years or so. they have been very turbulent.

with a trump administration, at least we are going to get a focused policy whereby, at the end of the day, he will represent the u.s. to the hold world. -- whole world. once he begins to think deeply about the role of the arab world and saudi arabia and its support for the u.s., i think the relations will be improved between saudi arabia and arab world on one side, and the united states. erik: so regardless of what he tries to do, you see it getting better? prince al-waleed: i always like to differentiate between candidate trump and president-elect trump. we have already seen the change between the candidate and the president-elect. i can assure you that the change between president-elect trump and president trump will be different. erik: saudi arabia is slowly trying to wean itself off of

oil. hasdeputy crown prince initiated a plan to transition the economy by cutting government spending, attracting foreign investment, and raising revenue. it is an enormous and unprecedented undertaking. is it going to work? seene al-waleed: we have the brexit in the u.k., the surprise win of mr. trump in the u.s. the whole world is seeking change. arabia, underi the leadership of our people, can establish these new rules for study arabia to lessen its dependence on oil, which has asking for more than five years. budget constraints, increasing areas,s from valuable

these are all welcome and supported by me personally. erik: how do you demonstrate your support, what can you do to help him? prince al-waleed: i am in continuous contact with prince mohammed, and i meet with king solomon once a week. clearly, right now, we will invest in the projects he is talking about. ago,xample, just two hours the executive chairman of six flags, which is very public about coming to saudi arabia. we just told them that we are open to international. we know that they have holdings in paris. we are establishing with them .ight now to invest with them so we are supporting them by .aving the private sector help people understand how

difficult this balancing act is between the royal family on the one side, of course, and public servants and the saudi people on the other? prince al-waleed: some members are members family of the royal family but also government officials. in my case, i'm a member of the family but i'm also a private citizen. prince interacts with government officials, he interacts in his capacity as government official. erik: saudi arabia has a huge .nd deficits payment the company has been liquidating its foreign exchange reserves and selling bonds to close the budget gap, all while maintaining the currency peg of 3.75 reels to the dollar. why not devalue the currency now?

the newl-waleed: governor said there is no devaluation. there are so many things happening in saudi arabia right now on the economic front, financial front of the business front, and even political and social front. the issue of the pegging of the dollar to the real is stable right now. as a last resort, it is a clearly, i'mbut not asking for it right now. we have enough foreign reserves, enough capacity to borrow. that is good enough for the next four or five years. depegging thepeg currency is too early right now. they are undertaking huge programs including cutting revenues, expenses, even touching some of the salaries of the public sector. all of these things have to be

in the system. there is no need to add another variable. you mentioned the borrowing capacity. it's possible the kingdom may need to borrow $100 billion, if not more, on top of the $17.5 billion it issued last month. what if the bond markets do not support that much borrowing? prince al-waleed: it's clear the first $10 million was very successful. the $17 billion was subscribed four times. erik: did you participate? prince al-waleed: no, i did not. the bond market is a reflection of the belief of what saudi arabia is doing. clearly, a vote of confidence that the public market gave to saudi arabia. the policies of the prints are overwhelming, so i'm not worried about that we are still going to be less than 30% of our gdp.

we are still way below any dangerous target. erik: another step in the deputy crown prince's strategy is taking saudi aramco public. the timing could be better, like when oil was selling for $100 a barrel. the question is why sell the crown jewels at a discount? first of all,ed: i am in full support of that initiative. for thatcalled initiative five years ago, and i called it the nuclear weapon. selling 5% of aramco is ok. a more create more liquidity to saudi arabia which is badly needed. 5% or eveniversify 10% of aramco is very much welcome by me. if it is well understood by the business community and saudi arabia and the region, they will understand and appreciate it. erik: will you buy the stock

when they go public, do you want to own part of it? prince al-waleed: let it go public first. i will do anything to support saudi arabia and the correct policies of the prints. i do so wholeheartedly. we talked about citigroup before. they would love a lead managing role in that ipo, and it had a lead underwriting role in the bond sale. anything you can do as the royal him,y in your support of to win citigroup that lead managing role? prince al-waleed: i never interfere in the politics. citizens, private sector , all of my contacts with them, never at all. citigroup has to do it. they have to win on their own merits. erik: you are billing the

tallest tower in the world. there is a model of it right .ere, on the red sea i understand construction has not gone as quickly as some may have hoped. you perhaps. and that there has been difficulty getting banks to lend against it. where do things stand? prince al-waleed: let me correct you. first of all, there is a delay. issuestract face some but now things are ok. asew months of delays, but for the bank facilities, that is incorrect. we have signed already with a local bank to finance the whole thing until the end. the financing is guaranteed. we are back on track and we are finishing at least one floor within seven to 10 days. erik: really need to scale back the project, do you envision it he completed as originally invented -- envisioned? prince al-waleed: with the

signing of the loan facilities, we have what will take us to completion completely. a done deal. erik: let's turn to international investments. people know you for investing with disney, for example, citigroup many years ago. for a period of time, you were an investor of apple. one of the investments that has garnered the most attention lately is twitter. at this point, how big is your steak? between me andd: kingdom holding company we have a billion dollars invested in twitter. with the price it is at now, we are breakeven. so you are still in the money, more or less. i know you believe this company has a bright future, correct? prince al-waleed: i still believe so, yes. erik: why is that? user growth statistics have

gotten better but has certainly plateaued from the early days. the company is cutting cost which generally is not a sign of growth. furthermore, it tried to find a buyer and failed, so why so optimistic? the market ised: very much in a rush to go up rapidly. we are in a rush also. , a friend, took over just a year ago. he established many relationships. these have to begin. i am optimistic because you have seen the latest results of twitter. clear this is our breakeven range. anything above that is we know for us. areaill believe the best -- era of twitter is to come. they have more than 100 million users, so they can still get more users. you have described some of

your holdings, citigroup, 20th century fox, stocks you never anticipate selling. is twitter a forever holding, orkut something happen that could cause you to lose faith? prince al-waleed: if they are a -- weate for takeover, don't know the whole story. someer they tried or companies approached them, that is not known yet. and i am happy that twitter is still independent. 21st century fox? prince al-waleed: everything is on the table. lyft, foursted in season, tons of companies. interest in kingdom holdings requires diversity. nothing is forever. but for now, we are happy with our holdings. erik: your royal highness, you

have joined the giving pledge along with your friends bill gates and warren buffett, promising to donate your wealth to philanthropy ov the coming years to build a better world of tolerance, acceptance, equality for all. how will you do that, you will 95% of kingdom holdings, and you have a number of private holdings which are ill liquid. how do you make that happen? prince al-waleed: we have income coming in from personal investment, dividends from kingdom holdings, portfolio, etc. we have quite a bit of income to spend on ourselves and we have enough to spend on philanthropic and charitable causes. been a know you have very generous giver already and i encourage you in your philanthropic efforts. your royal highness, thank you for the time to speak to me and

bloomberg television here in riyadh, in the kingdom tower. that is his royal highness prince al-waleed bin talal. erik: thank you so much, a great interview. david: thank you so much, a great interview. interesting to hear that he had a great relationship with donald trump, even sold him a boat. jonathan: i thought it was he describedhe way it. we are talking about a fiscal policy plan going to the u.s. and how difficult it may be to get interaction. you talk about how difficult it will be to initiate that plan in saudi arabia. david: it puts pressure on the opec deal that they are talking about in the next two weeks. jonathan: we will bring you more of that interview later. i believe we can get to battle of the charts now. alix steel is reporting.

secret financial cell led the rally that we are seeing but i want to show you haveust how much can they outpaced fundamentals. we are looking at the s&p financial index. in the blue is the analyst target. typically, analysts are pretty bullish, more bullish than the stock price. their forecast for the next 12 to 18 months usually hovers around this line. it dips below in 2009. check out what is happening lately. this is the first time in the bull market that the price of whatcials has outpaced analysts predict what these companies will do. that is a really interesting development. doesn't happen too often. >> so essentially the analyst were wrong? >> and they were underestimating. >> shocker. thingnk the most important

since the election is the fang stocks. these stocks, own you underperform the market. money managers chasing these stocks. they gave up when tmp was elected, for some reason. facebook, amazon, netflix, google. take a look at the performance going back from a day before the election all the way up to today. a meaningful difference, about a 40 basis point difference. the orange line is the s&p 500 minus the fang. is the performance without. if you did not have them, you missed about 20% of the gains in the postelection bubble. david: some terrific charts. we just had betsy talking about

that, but i'm going to give it to cory. i cannot figure out what is going on with the fang stocks. jonathan: it is a winner. up, in new york, we are counting you down to the cash open. about 34 minutes away. futures are negative, down 56 on the dow jones. we are on a seven-day winning streak on the dow jones. will we break that? treasury yields up for basis points. ,he dollar hit a 2003 high gauged by the dollar index, giving up some of those gains now. from new york, this is bloomberg. ♪

jonathan: good morning from new

york city. this wednesday, november 16, i am alongside david westin and alix steel. it is a seven-day winning streak that follows a seven-day losing streak. futures down 57 points on the dow, and in the bond market, the routes of four basis points. the dollar strength earlier in the session keeping some of those gains. david: at this hour, donald trump's efforts to assemble his cabinet have been held up by power struggles inside the transition team. some say a putsch -- a push to rid the team of those loyal to chris christie is hobbling the decision process. the u.s. dollar hits a 13 year high and bonds are falling as the market now prices in at 94% chance for rate hikes. this morninging with rising u.s. crude

inventories and continued negotiations after a potential opec agreement. production will grow more than previously thought this decade and that is what you need to know. abigail, let's check in on movers. of the themes we are watching is the continuation of the selloff in global bonds. they lost $1.3 trillion in value last week. inare seeing a selloff again the u.s., japan, italy and portugal. prices despite higher in yields and represent that selloff. for the japanese 10 year yield, it is the second day higher positive territory since february 19. from a broader standpoint, just two or five years ago this sort of selloff would be a risk-lost signal but in negative rates, there is a smokescreen. movers, lots of

movers in the consumer discretionary. target shares are soaring with beat earnings by 25% helped by a strong back-to-school season while the full-year raise is on expectations for a solid holiday season. store of home improvement lows are down. concerns raised by home depot yesterday that americans are spending less on their homes. jonathan: let's keep it on stocks and another company, snapchat. their parent company has reportedly filed for an ipo and while no timeframe was given, it could come as early as march. running us now is bloomberg intelligence director of north american research, paul sweeney. 25 billion. how is it going to achieve that? >> they have to put up extraordinary growth numbers and have to hope that the market values, like a valued at

facebook and its ipo, this is a company that is a social media company. like facebook. they are focusing on video and photos and it is really popular with the younger demos, about 60% of their users are under 34. it is a sweet spot for advertisers so like a lot of the other social media platforms we are seen, their metrics grow your user base and try to sell them to madison avenue. at revenue growth -- jonathan: at revenue growth. facebook says that is set to slow down. marketplace, i think, is desperate for a another major advertising platform on the internet space. now, google and facebook take the vast majority of display, advertisingin -- for a another player --

advertising for another player to bring rates down and bring more competition. twitter may be platform but it has not become that platform. it has not become a viable option for advertisers. snapchat is the next batter up. >> you get 25 billion from snapchat. david: there is a demand for ipos. >> there are a lot of other big ones out there. of thoseno shortage that would like to go public. david: that is paul sweeney of bloomberg intelligence. the tech sector has missed out so far on the trump stock rally. tech stocks are done -- down 2% since election day. so what is going on with the tech sector? if you look at the different divergences, what happened since the election, the tech sector selloff came with the least

understandable or least explained reasons. you can understand by bank of .merica and its ilk shot up you can understand why u.s. deals shot up. -- is you step back, as trump going to follow through on beazosacks on becoats -- ? probably not. is he willing to reconfigure apples supply chain? building talked about more air in ohio, not talked about more manufacturers in california so there is a lot of visceral selloff but there is one important point that is understandable. sector rotation dynamics can be very powerful. years,ver the last few consumer discretion, it gets overblown after a few years and people want to rotate. people want to buy industrials

as exposure to the fiscal plan may have and more -- have a more obvious risk reward after so many years of performance. jonathan: are we seeing this narrative running through this new leadership story that is going to last couple of months? and then we wake up and say it is not really going to change? >> there is a risk of that. we can change past of the election. the sugar high is already starting to wear off in terms of the excitement and one of the realities is that here on in, the news flow people can trade-off of is going to be here and there, it is not going to be a lot you can develop a new goingoff of because it is to take a while for trump to get his cabinet together and then we have to see how congress coalesces around that. and what agendas are you going to prioritize?

campaignd a ton of rhetoric that was contradictory. we are not clear on that well until august -- in till -- into inauguration. but thehe a -- inauguration is 60 days from now. we will have a lot more clarity. you are looking at various equities. which ones are you more hesitant about? how do you parse through it? one thing that is extraordinarily important is the selloff in bonds. , evenas already underway if hillary had one you would see higher bond yields. that was sort of one of the themes, so i do think you have to be very careful with the yield sensitive equities such as utilities. i think banks are probably, particularly with the

deregulatory dynamics coming out of trumps are going to be much more obvious. you have to take each one of these pluses and minuses for these sectors and prioritize them and probability affect them. deregulation is to me the most easiest and palpable trump surplus. so stocks are exposed to to that which means pharma and banks and energy stocks, very obvious. the stocks that are exposed to fiscal stimulus, you would have affectrent probability because you've got mcconnell and paul ryan and the rest of the republicans. are they really going along with a $1 trillion fiscal plan? jonathan: we talk about this rotation out of bonds and into equities but we are talking about a 30 year ball mark. we are talking about exceptional stimulus from the federal reserve, the ecb and the boj.

what is going to be this simple handoff from bonds to weather, without a route and without an upset and blood on the trading floor, there is a norm's as you go from the market and the economy dominated five monetary stimulus -- donated by monetary stimulus to one dominated by fiscal stimulus. we are not going to get a lot of clarity in terms of how much of this is going to be put into effect. the fresh highs we got in the s&p 500 occurred with the fresh lows in the 10 year bond yield. that has been enormously runrtant to find the bull since the financial crisis. to think that is going to be replaced by a no -- buy a whole new framework is very, i think, not likely to happen. >> how well do the markets really understand washington? notnt to talk about congress, we are all focused on

congress, when you talk about deregulation the president doesn't just wave a magic wand and all the regulations go away. you have to reset the agencies, there are rule makings, this could be a long time running. do the markets understand that? >> you go sector by sector. energy regulation, george w. bush certainly could implement a lot of field operative level stuff without any congressional interaction. i think that the energy sector sort of picked up on that. but it is throwing dodd-frank out. it is not a simple task. it has to be an extraordinarily complicated set of relations but i don't think -- it will be interesting to see what comes in place of that. if anything. it will be a slow deconstruction of that. jonathan: michael purvis, chief global strategist at wheaton and

company. we are counting you down to the market open. futures, midsession lows negative five points. over to emma chandra for headlines outside the business world. >> donald trump is considering whether to leave ted cruz. he was at trump tower but he didn't say he was under consideration for a job. he ran for the republican nomination for president when trump referred to him as "lying ted." too plan to bring an end to big to fail banks. it would increase the amount of taxable -- of capital banks must hold. debt forold a tax on non-bank lenders and reduce regulations on community banks. we will be speaking with mr. .escatore -- mr. peshkari a fleet of international

warships are heading to new zealand to evacuate people from the area. the u.s., australia, canada, japan and singapore are on their way. 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. up, oil slips from a two-week high as opec makes another push to finalize a deal on production. trump and mexico. his victory has roils mexico's financial markets. the peso has dropped 10% since he won. this is bloomberg.

david: this is bloomberg. we are waiting for industrial production numbers but let's take a look at the stocks in the premarket trading. the dow jumps down about 64 points. s&p futures are down 10 and this is after the european numbers were off. now we have those industrial numbers out. the estimate was going to be 4.2% growth and it is flat. on theelow estimates industrial production. the ppi numbers were also underestimates. jonathan? jonathan: let's get to today's futures in focus where we are looking at crude. i am looking at oil and a big rollover over the last month or

so. the enthusiasm build that we would get an output cut from opec. that enthusiast him drained out of the market and now we have a stronger dollar story to discuss. a stronger dollar rolling over. that is what we see over the last month. joining me from the cne is todd calvin. great to have you with us. forget yesterday's move. let's talk about the rollover. into thed by opec market, we have gone through that. what does opec have to do now? >> opec is doing what you expect them to do. we go back to those september levels, we are at those levels today. the market rallied on the excitement that they are going to get together and cut production and help elevate oil prices, which had been struggling. couple of wildcards, some non-opec members maybe

don't want to play and all of a sudden we get this? over the meeting which earlier in the year, we had a similar situation. we got a move from the mid 40's to the low 50's and a month ago everything changed. if you look at oil and break it down, there is a lot of static around the oil markets. the election is part of it and opec is talking about what they hope to do but ultimately, it is just supply and demand. if there is too much supply oil prices will decline. equilibrium is in the mid 40's and if they don't announce those cuts, and don't follow through with them, oil could slip at least down to 40 before the end of the year. jonathan: you are going to get a load of headline risk, not a happy thought coming from individual countries with the potential for a deal. i am thinking, let's say we get exactly what they put on the table. what is the upside?

>> i think you already know. and youto $50 a barrel start bringing online more producers because it becomes more profitable. you will struggle to see increases exponentially go higher. you always have to remember oil is a very volatile commodity. you have a hot spot or a hot zone in the middle east and oil can jump significantly overnight. a lot of the positioning we have seen has been long -- has been since september. it is going to wait until the november meeting. jonathan: coming up, sport versus trump. for forrump criticized the plan to move production to mexico. mark fields has some advice for the president-elect. cache openwn to the in new york city and we are

about 12 minutes away and equity the dow, -10own 64 points on the s&p 500. will we snap that? we will discuss.

jonathan: here is a programming note for later today. the david rubenstein show sits down with eric smith, alphabet executive chairman. >> do you think the united states government is better at cyber terrorism -- if that is the right word -- than other governments are? >> the why worry about is russia. actions in at their the last few months they have done number of publicized invasions and alterations which can only be understood as cyber activity and they are not shy about it.

this must be part of their strategy to keep in our face. >> you can watch david rubenstein's full conversation ath eric schmidt tonight 8:00 p.m. eastern on bloomberg television. david: yesterday i got to speak with mark fields, ceo of ford after remarks at the auto mobility conference. advocatel continue to for currency manipulation rules, for free and fair trade. we will continue to support copperheads of tax reform, and we want to make -- comprehensive tax reform, and we want to make sure they are aligned with market realities. always had very positive discussions on what that means not only for our business that what it means in for -- in terms of providing economic growth.

david: there is a review in 2018 of fuel economy standards. to align the fuel standards with the reality in the world, what would they look like? i think when we agreed to the one national standard in two thousand 11, 1 of the things we agreed to was the checkpoint in 2019, what they called a midterm review. we want to make sure our vehicles are as easy on the planet as possible. want great fuel economy for our customers and we want to make sure those regulations are arened with how consumers reacting to the new technologies and the new economic realities. that is a discussion we want to have because we want to provide great satisfaction but customers can afford it and it can encourage economic growth. david: you ship a lot of parts and vehicles across borders. didn't make much of

the secret of the fact that he had some questions about trade. about ford, as you look forward to a trump administration, what do you anticipate and what changes does it make for ford motor company? >> we will have to see when president-elect trump gets into office and the policies that he advocates. we are a global manufacturer with our home in the united states. the majority of our investments in north america are right here. as we are leveraging our manufacturing footprint in other parts of the world it goes both ways. isexport our explorer that made in chicago to 100 different cities around the world. we have always been for free and fair trade so we can compete on a level playing field and we will engage positively with the administration, talk about policies that will help provide growth in the u.s. and do our part but at the same time make

sure that as a global multinational company that we are building what we are selling. david: if donald trump called you up this afternoon and said " give me your best view about what we should be doing with advicewhat would your be? " was veryvice consistent that we have given of the last couple of years. freea trade standpoint, and fair trade and very importantly with currency manipulation rules so we let the markets determine currencies and not governments to tip the playing field. fair playinga field because when we can have a fair playing field, we can compete with anybody at -- out of the united states. david: that was mark fields and the thing that struck me about this, because i asked him about the trade problems because trump specifically targeted for, he

would always come back to currency manipulation. he wasted that he raised it more than once. jonathan: the rhetoric around the trunk campaign has actually driven the mexican peso a lot lower. it makes exports even more attractive and we haven't even had to change the nafta. we haven't gotten to the discussion about material tariffs and yet the incentives to export out of mexico have built up. precisely. the opening bell coming up next on bloomberg daybreak. futures negative, down 56 on the dow. negative nine on the s&p 500. yields up on treasuries from new york, this is bloomberg.

jonathan: this is bloomberg daybreak. moments away from the opening bell, let's get you up to speed.

futures -51 points, s&p 500 negative eight and on the dow we have a seven-day winning streak. futures indicating a lower open. switch up the board. bonds down, yields up. the dollar was much stronger earlier in the session. the dollar index printed a 2003 high. that is how the set crosses asset. we are 15 seconds in the open. a weaker looking at open for u.s. stocks. we have the dow and nasdaq all trading lower and fact, the dow has been higher for seven days in a row. to put this into context we had some nice strengths yesterday and the powerful rally last week when the dow had its best rally since 2011. aocks taking a little bit of breather, as for one sector on the move in a air -- in a

way, we have wells fargo trading lower on the day. these stocks really led that rally last week. minneapolisve the fed head saying he would like to raise capital requirements for the big banks but investors might not like that. we have downgrades from piper jaffray's, baird and sparks. had ae banks last week huge rally, the xls or the financial etf sector had a big rally last week, up 11%, it's best week since 2009. a bit of a breather or consolidation here for u.s. stocks and the financials. >> according to build gross's jenna capital, no bull growth would see donald trump making america great again. the quote from his outlook for the month of november.

higher deficits resulting from lower taxes raise interest rates and has the potential to produce lower earnings. joining us to discuss the latest on monetary policy linked to president trumps administration is bloomberg's michael mckee. that quote is kind of differing from the tone of the market the last week. >> he is right about inflation and deficits because trump baked that into his plan. how much inflation do you get? part of that will be determined by how much they spend and how much of a deficit you get. , which will make janet yellen's testimony interesting. david: bill gross is a very important investor and a very smart man so i don't want to dismiss him but wouldn't you expect the bond king to say we don't like inflation? >> absolutely. rayget an equity guy like

dalia was saying this is great and we will see a lot of growth and uity markets go higher what it all depends on your look. nobody really knows at this point. >> i suggest everybody goes out and read this on linkedin. he talks about whether the risk rally will short-circuit off the back of high yields and a stronger dollar. caught up with a former chairman of goldman sachs who commented on the potential for a stronger dollar. and what it would mean for a trump administration. >> if you look at the strategy of what trumps advisers seem to be saying and linking it to what we are touching on before, a very strong rising dollar for a long time does not make any sense to me whatsoever. i think that is very unlikely to persist. the dollar index printed the highest since 2003 and the story

of bias that the dollar to be , the fiscaler policy, but to jim's point the stronger dollar kind of contradicts the goals of the trump administration on things like trade. >> if you get a stronger dollar it will be harder for us to sell exports overseas and it is going to bring inflation lower. all of this has to be worked out. presidents propose, congress disposes. you've got republicans who won't like inflation or higher interest rates so it is hard to say exactly where we end up on this. we are all going to be floating space for about six or eight months. >> part of the responses monetary. while we have been on the air kashkari has come up with his plan on too big to fail, which includes increasing the reserve requirements for the

biggest tanks and putting a tax on shadow banks. >> it is interesting because it parallels what a lot of work that people who have been credible -- critical of the two big to fail banks have said. have dramatically higher equity capital because debt is not a good loss absorbing mechanism. the banks hate this idea but andkari would go to 23 percent to reduce the chance of a bank oil out of less than 10%. to 2.2% tax. 1.2 as an offset, he says we reduce regulation on community banks. jonathan: i will be loose with my tongue. reasonable presidents are looser than -- looser with their own tongues. janet yellen has testify on the commodity -- on the economy

tomorrow and i imagine if she could delay that by months she would but she has got to do it anyway. >> i think she is going to have to say, "we don't know what is going to happen so we don't know where monetary policy is going." but we do know that under currt conditions the economy is ready for a rate increase. she won't promise it for december but she will leave everybody believing that the fed is going to go in december because that is the universe they are working in. on a longer-term basis, the fed has been calling for fiscal action. you could get into the weeds about whether it will work or what kind, she doesn't usually like to give advice to congress but she will probably try to sidestep that. david: normally, the fed is independent but there are some openings on the fed that president elect donald trump will fill. you also had questions about the regulatory authority. to what extent will the president-elect embraced the approach?

>> we don't know but it is an interesting time for him to release this because the president-elect has said that he wants to get rid of dodd-frank, which is the regulatory mechanism so if you have another plan in place maybe he likes that, particularly one that would make it harder for banks .o make profits it would be interesting to see what he does with personnel because jan tarullo -- dan tarullo may not want to stick around when dodd-frank is taken away. yellen's chair, he probably won't put anyone on their to influence the path of policy. but her term is up in a year. david: michael mckee, thank you for being here. fullrow, we will have coverage of janet yellen's testimony in front of congress beginning at 10:00 a.m. eastern times. coming up, the peso under pressure. this month has been the worst

for the mexican peso against the u.s. dollar since 2012. how much more a trump administration could weigh on the mexico economy. ♪

>> this is bloomberg daybreak. i am amazon drop. 4 p.m. eastern. jonathan: from new york city this is bloomberg and we are about 10 minutes into the session.

open lower, down by one third of 1% on the dow. a marginal decline over the nasdaq by about 0.0. -- 0.08%. abigail doolittle, good morning. are looking at movers in the fitness space. trading higherre and brad erickson is saying more skepticism has priced in but this is not a ringing endorsement at a stock down 67% here to date. , on ag lower on the open downgrade over a credit shift saying sales momentum seems to be accelerating. what does this mean for the stock over the longer term? #btb, we see the

but investors don't really know too much of what is going on here. we know the stock has put in two death crosses. sellers arehat the becoming stronger to take the stock down. recently, a death cross was put in the shares of lululemon. david: we have some breaking news. presidentreports that obama is going to block the sale of new drilling rights in the u.s. are which reminds us that he is the president. he can do what he wants through executive order until he is out of office. contrary strike me as to the thrust of where donald trump said he would like to take energy policies. jonathan: he is just wondering if he is going to reverse that. we have a conversation with the oil investors saying "we were headed in one direction, and it

will be accelerated. it will be the pace of change on the red trump administration that will dominate the headlines. jonathan: the report is that president obama is going to block drilling rights in the arctic. now to mexico. 2016 does not look like the year of the peso. in january, most forecasters saw it as undervalued. joining us now from mexico city is jpmorgan mexico economist, thank you for joining us. we have seen this dramatic shift since last tuesday night. give us a sense in mexico of what the practical effects have been on the mexican economy. we see that the peso has depreciated in the past few years and we continue to see that it will remain under pressure. most of the sect was in the back of the oil price shop which was reduction.

the fact that the economy has the feeling and the heat on the back of the new measures and even the macro framework was affected by the economics, however, now with the peso continuing to be effective, there are factors, more the political values taking a toll on these economics and we want to keep in mind that the fed has been suffering on the back of the risk, on risk for the past two years. we continue to accept that the peso will deteriorate. orare projecting 27 to five 2180. jonathan: now facing a classic dilemma, and upside risks to inflation and announced -- and the marketable -- and a marginal downside risk on everything else. >> the central bank has increased 102 basis points.

and september, we are thinking it has done enough even that the peso had depreciated since 1990. passing that level, they are soing to bring expectations at this point, they need to do something in addition to that is the peso has depreciated beyond the 20 and now we place expectations starting to get -- reaching a higher level. we see that from analysts or think tanks. we see risk-free inflation for this year next. 3.5%.rently expect another 50sk for basis points, not as much because they have done some in the past but they are doing some tomorrow. david: president-elect trump made no secret about his views on mexico during the campaign.

in england we talk about hard , as your soft brexit look at the trade situation what is the hard trump and what is the soft trump? what is the under and over? >> the hard trump will be something that increases tariffs dramatically, something that extends from uncertainty and volatility. of the point, most damage has been felt on the back of additional uncertainty and extended volatility. growth from 2.2 to 1.8%, the main concern is we have these lingering concerns on volatility and a tape. first leg down but obviously, the hard trump is something that would increase tariffs by 10%, in terms of style in latin america. .ut that increases the tariffs

we're thinking that is what we need to keep in mind but the soft trump is something that moderates the rhetoric in which you could see some increments in tariffs or renegotiations in some chapters but nothing that manufacturing between mexico and the u.s.. jonathan: great to have you with us on the program. coming up at the top of the hour, david westin and i step away and vonnie quinn and mark barton step up. >> we are seeking all sorts of market related events and hopefully we will get some clarification on who some cabinet picks might be and potentially a treasury secretary or commerce secretary. mexico is going to our own eric martin. we'll be hearing from prince alwaleed in saudi arabia and of course, we will also go to the

l.a. auto show. the ceo of jaguar landover is going to join us. jonathan: on this program, globalization and trust policies. we will discuss. from new york city, this is bloomberg.

jonathan: some key events coming today. philadelphia president patrick harker set to speak at 5:30 p.m. eastern. tomorrow, we look ahead to fed chair janet yellen. today, we will be speaking to cisco ceo chuck robbins. that is that 9:30 eastern time. joining me now is our dennings. -- our dennings. -- art dennings. i want to talk about the term

premiums on presidencies. walk us through the term premium and the significance of that term. >> the shape of the yield curve is an indicator of where investors think the economy is heading and i guess trump's election has raised expectations . there will be more stimulus then our policies are worth for the economy. loweringher hand, taxes on the others, those bond yields have gone up. >> i wouldn't call it a real market just yet. since october 2 years ago, the fed stopped buying treasuries. ecb have backed off but the and the bank of japan is still buying government securities and their interest rates are still in the negative. david: you just said the yield

curves are indicators of where the economy is headed. how confident is that that is where we think it is heading instead of where we think laois and -- think inflation is headed? >> maybe normal is trying to make a comeback and the business cycle at this point is pretty mature. you start to get wage inflation. i think that is what the bond market is. we may not need stimulus because we are at full employment. >> something that interests me, in the summer where we had a flat yield curve, that means there is trouble ahead. the yield curve doesn't tell you anything anymore. i have been told it is an expression of where the economy is going. how do you make money? you went long and made a trip affect decimated terrific amount of money. >> in the stock market all the interest rates and utilities, the consumer staples, did great

until a couple of years after brexit. that kind of made below great opportunities. when you look at the entire year it actually looks like a pretty normal year but within that you have this extraordinary volatility. jonathan: at the start of the year and through the first six months you have this big push for capital gains from the bond market. now we see the correction of the longer. is it more about that than an expression of where we are going? >> in july we got 1.38% on the 10 year and now we are at 2.4%. in july we were discounting a depression and inflation. david: i want to bring politics back. maybe we don't need to stimulate because we have close to full employment, but donald trump got -- by making certain promises and his voters are expecting tax cuts and stimulus spending and more jobs.

is there a danger of overshooting? >> i am hopeful that it all adds and not a lotwth more inflation but we are getting somewhat more inflation in wages. but maybe we won't see it in prices. as long as the world remains from the competitive i don't have a problem with fairer trade as long as it stays free. >> let's talk about the offset, the self-limiting correction in the bond market. how significant is it for you? >> it worries me. we got ourselves into a real conundrum, and the word that greenspan used a while ago, the conundrum might be that we have been reaching for yields for so long that everyone is up to here in bonds and if this market continues to move higher it could start to squelch the stimulus.

it is something to watch out for. i don't believe that inflation is going to be a serious problem and i think bonds are going to be two or 3%. david: inflation is not going to be a serious problem, we need productivity to increase? we have more dollars chasing the number of same goods and services. >> that is my assumption. we have been puzzled by the weakness of productivity but you can have the most productive widgets plant in the world but if nobody wants widgets productivity is zip. if demand really starts to pick up i think a lot of that to be met through productivity. jonathan: that wraps of our program, nearly 26 minutes into the session. cross asset equities opening a little bit lower, a seven-day

winning streak on the dow following a seven-day losing streak that may end with 0.3%. the s&p 500 down by one quarter of 1%. and treasuryet yields up by two basis points. dollar strength is the dominant theme in the fx market. the x y printed a 2016 high and more and we have to go all the way back to 2003. the cable right up as well at 1.2 447. it to the end of daybreak. tomorrow, full coverage of fed chair janet yellen speech. ♪ vonnie: 11:00 in hong kong.

from new york, i am vonnie quinn.

mark: i am mark barton. welcome to bloomberg "markets." vonnie: from washington, d.c., coverdi arabia and stories from mexico and the next hour. global bonds resume me their slides. stories from mexico and the next hour. his election has made action and his election has made action and near certainty in december. >> speaking to bloomberg