growth, fasterr inflation, and more debt, that is the first forecast. trump -- the president-elect will look to fill two vacancies on the board of governors. yellen?utweigh european equities advanced after indices had in alltime record.

this is bloomberg "surveillance ." i'm francine lacqua in london. another busy day. five months on from the brexit . chancellor were outlined measures to help working-class families. the statement is the new governments first chance to shape fiscal policy since the decision to leave the e.u. we bring you the latest from westminster. how are the 19 economies of the euro area doing? we will bring in november's pmi numbers. in fact, we are just getting them now. november manufacturing pmi rising a touch above forecast of 53.7. and services also rising a little bit better than expected. plus, donald trump and the fed. sources saysam that the president-elect plans to reshape the central bank filling vacancies within three m onths. 100,000 people are

facing travel disruption with cancel flights after flailing to block a strike -- failing to block a strike on airlines. we'll make sure we keep you up-to-date with all the latest data. let's get straight to first word news. sebastian: opec talks didn't resolve whether iraq and iran will join any production cuts. meet next wednesday. containing questions around the two countries productions do not make a deal and possible next week, but the lack of agreement leaves open the possibility that the group will fail to implement the cuts outlined in september. 900 flights were canceled. after a bid to block a two day pilot strike over pay was dismissed. services such as beijing to

frankfurt and los angeles to munich are whitiped out. billionaire brothers charles and david koch are poised to keep $2 billion. u.s. bankruptcy judge ruled that the cash is out of reach of the trustee recovery money. the prophet was beyond u.s. jurisdiction because it had been transferred to foreign banks in the years before madoff's arrest. -- will seek to raise $6 billion from international bond sales. the first issue may be delayed due to market volatility after the election of donald trump. were planning to do it by end of november, but there has been volatility since the election in the united states,

because maybe of the change in the philosophy of how the economy would run and the plan of president-elect. so there has been volatility in the markets. we're really waiting until the markets stabilize. sebastian: global news 24 hours a day powered by journalists in 120 countries. francine: let's get on to the data check. we've seen quite a big rally in asia in global stocks. this is as there's more and more optimism that growth is strong enough to withstand higher interest rates. we don't look at them e malaysia ringit very often. interestal bank left rates unchanged but look out for any outflow for that economy as donald trump suggests that he will considerly reflate the u.s. economy. this is a picture for the yen.

remember, of course, it is labor thanksgiving in asia. britain voted to leave the european union. five my son, today's statement is the u.k. governments first opportunity to shape fiscal policy -- five months on. we'll introduce our guest, elizabeth martin, senior economist at hsbc. thank you both for joining us. let's start with you. how much can he actually do without changing? he does not necessarily need to take that opinion but they'll give them their opinion in a sense of how far is brexit going to impact on growth. we expect them to revise down growth forecast for next year significantly. that will have an automatic impact from borrowing that will come through in the form of higher unemployment benefit and so on and so forth. so, they will take that view on

his part. and it is up to him how far he wants to respond. he told us immediately after the vote that there would be a fiscal reset. we heard from various members of a surplusnment that -- was no longer a priority. now, you know, since then, he said five months have gone past and the economy has held up much better -- francine: we have had some great data. we will see how he navigates it. again, if he says we need to borrow more, how much of it will be down to brexit ? >> first of all, as we just heard on the automatic stabilize, that is a very important point. the bank of england's latest forecast is a good reference in terms of setting expectations on the forecast we can expect. so, probably something around the 1.5% mark for the coming years as what we would be looking for. that's one dimension. and that you can say is perhaps the direct brexit affect.

then there is some of the policy choices that will be made. as elizabeth was saying, the economy has held up reasonably well. in terms of a fiscal boost, it will be fairly modest. maybe some efforts on infrastructure, some efforts on lower income families but rarely modest. i think he will give us a strong signal that he will be keeping his ammunition dry and make room if necessary if the brexit impact does become more negative two step -- to step in for more stimulus. francine: under george osborne, it was very clear in terms of austerity and how you deal with it. are we going to find out more about the thinking of this new chancellor today? >> by telling us in advance that they are no longer going to be targeting a surplus they have told us that that monday is going to be replaced. -- that mandate is going to be replaced. there is an indication that perhaps the new mandate will be

on the primary budget, stripping out the effects of interest payments. up, it will not affect the underlying deficit consolidation. i think, yeah, uncertainty is much higher. and also, i think if you look back at the mandates over the years, they have a very mixed record of success. yourself down as george had, you are restraining what you can do. i-- as george osborne had. francine: it is a catch-22. it is uncertain times but you do not see it playing out in numbers. does the trump win change anything, will it spur this chancellor to increase government spending? >> i do not think the donald trump win has a direct effect on the fiscal spend, but i do think the brexit is the significant effect of a for example, one of the things the u.k. can think about is having a target in terms of a cyclically adjusted gives deficit, and that you a lot of flexibility for any

downside surprises to manage that. so, that is very much in line with what you are saying. and i think that is the sort of thing we should be looking for and expecting to see. francine: in 20 seconds, your killer question to chancellor hammond? is there one thing you want to get out of him if you had the opportunity? >> to me, the interesting thing is infrastructure. we've heard so much about additional infrastructure spending and global economic thinking and shifting towards this idea that monetary policy has run out of ammunition. t, so far what he have had from philip hammond seems to be a very limited policy. i question with be how much more is going to happen on it? francine: thank you so much. elizabeth martin. both stay with us. bloomberg will be live as the chancellor speech kicks off. later we speak to greg clark. and bloomberg customers can follow all of that on our top live page. tlivego.

stay with "surveillance." plenty coming up, including brexit and the u.k. economy. we are live in westminster with the scottish national party's spokesman. could the president-elect move to reshape the u.s. century bank? we will bring you analysis on trump's plans for his first 100 days. falling returns and pressure on pricing. i will bring you the interview with italy's biggest insurer. this is bloomberg. ♪

francine: this is bloomberg "surveillance."

let's get straight to the bloomberg business flash. sebastian: former credit suisse ceo is planning to start a merchant bank. gan has lined up $3 billion to start the venture in the first half of next year. the funding is said to come from partners backed by a network of ruling families from the middle east and asia and sovereign wealth funds. dougan didn't immediately respond to messages. lufthansa disrupted travel for 100,000 people after a bid to block a pilot strike over pay was dismissed. premium services such as beijing to frankfurt and los angeles to munich are among those being wiped out. monsanto is being sued on behalf of shareholders over claims its board members stand to profit from a planned acquisition by bayer. they suffer conflict of interest and have withheld information from investors.

a spokeswoman says the firm believes the claims are without merit. that's your bloomberg business flash. francine: in just over three hours, the u.k. chancellor is due to give his first statement. we are in westminster where we are joined by a guest. anna: thanks very much. i'm joined by stuart -- mp who speaks on economic and treasury related matters. what are you expecting, what you hoping for from the chancellor? what do you want to see? >> we expect the big numbers to be pretty awful. and we expect in truth that the numbers promised in20 2010 for 2015 barely to be reached in this parliament if at all. it is going to be a gloomy picture. what we would like to see is action on productivity finally on innovation, on exports, on investment, and, of course,

focus on the impact of brexit. the treasury have told us how bad it could be. it's got to put in place to mitigate against that. anna: let's talk about brexit. this will feature heavily in the numbers and in the planning. your party has been talking about a norway model for scotland. is it possible for scotland to have a different relationship with the e.u. than the relationship that england and wales has with the e.u.? >> it is possible. it might be complicated. it would require a lot more power to devolve to scotland and the u.k. government would be required to ask for that is part of the negotiations. certainly achievable. the reason it is necessary, not just achievable, is if we believe some of the numbers we are seeing, our loss of productivity driven by a loss of trade, amounting to a 9.5% of gdp, we have got to make sure that does not happen. however complicated, however muc

h hard work we have got to make it happen. anna: they cost money to stay in the european economic area. >> the majority of people in scotland voted to stay in the e.u. yes, it cost money but nothing comes without a price tag. if the u.k. post-brexit was to continue trading with the e.u. they are going to have to accept a huge number of the regulations on the rules and a cost associated with that. this is not a free lunch the way that some of the brexiteers suggested. if that is the deal to stay in and maximize our trade and jobs, that is what we need to do. anna: you joined the court case around trying to get houses of parliament to have more of a say in the triggering of article 50. if the government loses their appeal, if your side is successful in that case, what kind of process do you think needs to take place in the house behind his? >> the argument was made in the house of commons so far. there has to be a public and a parliamentary debate.

it is not good enough for the government to say, we are keeping our cards close to the chest when they have no negotiating strategy and no plant. anna: they can put a three line, very brief statement to the house and get them to vote on that. >> i think a three line statement or something equivalent, even if three-page statement would be insulting beyond belief and it would give no confidence at all to our friends and neighbors into the markets. the u.k. government has a clue of the impact of brexit and what was required to mitigate its effects. does that leave us on independence, and the timing? would you consider another referendum? >> the first minister has a big team to work out how the u.k. maintains maximum access. and scotland maintains maximum access. only if this is completely refused by the u.k., as the

first minister said, it is likely there would be a second independence referendum. but it is far too soon. , to talk about timing, right now the sole focus is on maintaining access for the whole of the u.k. and for scotland to the single market. far too soon. anna: it sounds as if you would, a vote for independence would come after brexit negotiations. >> i would not read too much into that in terms of timing. let's maintain access to the single market and maintain a number of jobs and wealth. if we could do that, that is a great result. what comes after, if that fails or of the u.k. government says no, time will tell. anna: thank you for joining us. stuart hosie joining us on the green. we will hear from the chancellor. francine: anna edwards and westminster with the s&p mp. as europe's political parties intend to face down the challenge of the far right, we have more on the u.k. government's fiscal plants.

this is over. -- this is bloomberg. ♪

francine: this is bloomberg "surveillance." in london, let's talk about the uk's statement as europe's political parties try to face down the challenge of the far right. the u.k. government will set out measures to help what it calls working-class families. let's get more from our guests. elizabeth, it is clear they are trying to make this a more fairer society, right?

looking after the people that have less. maybe also changing the way we think about capitalism. talk to me about jam, a new ackerman the government is using, which is basically -- a new acronym. >> this is the new buzzword. there has been a big focus of the prime minister theresa may. she is keen to help families she addressed after becoming prime minister. from what we have heard so far dan terms of the leaked policy for today, we hear there will be more on child care, for working families. and it will be perhaps some help on universal credit, the national living wage will rise. this is a conservative chancellor and measures look relatively modest. we do not think he will go all out and launch a massive fiscal stimulus. the measures will be quite small. francine: are there fear surrounding the trump election, this brexit, which pushes

government to look at a fairer society or does it come from the prime minister? >> again, i think it is more linked to brexit vote than to trump. ishink it is about, there clearly concerned about inequality in our societies. and i think that is one of the things being addressed, but at the same time, it will be fairly modest. i think this is the key thing. what i also think is interesting is that there is clearly also some ideas about incentivizing people to get into work and not taking away benefits so quickly. that could be another idea. there are a number of ideas out there that are being discussed, but i think they will be fairly modest in terms of the impact in terms of the public finances. francine: how important is it to actually bridge the northern-75? southern divide? we have had people trying to focus on that. >> i think it is really important. i think the government will be

well aware of the geographical divisions of the brexit vote. so, i think there will be something there, perhaps not george osborne's favorites but more investment to support the regions outside of london. but i think the other concern that they are going to have as likely toe obr is forecast higher inflation. and we have already had five years of real wage declines. we have just come back and higher inflation -- threatens to send us back into that again. that will be a working for working families -- a worry for working families. francine: this is the productivity puzzle we've been talking about for quite some time. >> i think it is a global puzzle and it is a complex one that economies are trying to understand her to my mind, there are structural aspects, but there is also a cyclical aspect. if you come into a situation and

i'm speaking more globally, where labor markets are tightening up where you do get some wage inflation coming through, that -- i would expect companies to be more incentivized to invest in productivity saving measures. that is something i expect to see coming out of the u.s. in 2017. in the case of the u.k., i think it is very hard unless you go out and actually legislate real wage gains to do that. the only way to get gains is to drive economic growth. sadly, it is slowing. francine: thank you to our guests. coming up, we talk trump and the fed. this is bloomberg. ♪

. seeing is believing, and that's why

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not say iran or iraq would join in production cuts. they will meet next wednesday, continuing questions around the country's production do not make a deal in possible next week but a lack of agreement leaves open the possibility group will fail to limit because outlined first in september. lufthansa canceled almost 900 fights today after a two-day pilot strike over pay was dismissed by the frankfurt labor court. beijing to frankfurt and los angeles to munich are among those wiped out to charles and david coke and dozens of other bernie madoff customers are going to keep as much as $2 billion. u.s.is after eight bankruptcy judge ruled the caches out of reach of a trustee recovering money for victims, coke industry's and other defendants offers the prophet was beyond u.s. jurisdiction because it was transferred using

offshore to foreign banks in the years before bernie madoff's arrest. .lobal news this bloomberg. francine: what does the future hold for the fed? transition the sources say donald trump will move within his first three months to fill two vacancies in the central banks board of governor. he took shots at janet yellen and members during his presidential campaign. let's get more with stephanie baker. you, you have an following his every tweet and policy. and what we can expect. we understand this from sources within his transition team that filld trump may try to those two vacancies on the fed as soon as he comes into office. >> the more significant thing is

that during his term, he will also be able to replace janet yellen and stanley fischer so potentially he could change for seats on the fed board of governors which is a massive change for the fed. this comes at a time when central banks were under pressure that their independence is being challenged. particularly important because donald trump's economic plan will make the fed incredibly important. he is calling for a massive tax cut. infrastructure spending. that is expected to send inflation up. francine: what profiles are we looking at? people that are very anti-austerity or that would really bring back rates higher? how much sway can he have with those votes? >> once he has appointed for fed governors who are beholden --

four that governors who are beholden to him, there is a question whether they will be as independent as the previous governors. he has attacked janet yellen repeatedly. how will those governors respond to a spike in inflation and an increase in the deficit? francine: he gave this interview to the new york times. we followed it through his tweets. he had it been canceled it because -- then he went back on and gave them one hour and a half and seemed more tame. shocked. i found it extraordinary, he backtracked on so many campaign promises. hebig takeaways were that will not pursue hillary clinton on her you mail -- on her emails or the clinton foundation saying she suffered enough and he does not want to hurt the clintons.

the other shocker was climate change where he said that he thought there might be some conductivity between humans and backed awayge and from promises to pull out of the paris accord. a third was on waterboarded. saying he changed his mind and thought it did not work. there was the conflict of interest statement he made. that was probably the biggest take away of the whole interview which is basically saying that the president cannot have a conflict of interest which i think some people were interpreting as meaning i am above the law which i think -- while he seemed more moderate and had toned down some of his campaign promises, that one he seemed willing to defy the measured when it comes to the presidency. francine: he said that people knew of his business interest

when he was campaigning. you are an economist, how do you deal? we are trying to find out what kind of president he will be. he was more tempered in the interview and we wonder whether the fed can remain independent under him. what have we learned in the last two weeks? >>? 's about the economy, what type of u.s. fiscal policy we will see, how the fed will be shape moving forward, and a big question about what donald to the policies will be rest of the world, particularly the trade policy here as far as the fiscal policy is concerned -- i think we can look to some of the plants we have seen in the past from mr. ryan, the better way. we saw a lot of the elements came into donald trump's own elements during the campaign and

what we are expecting is a fiscal package coming out of the some tax cuts, infrastructure spending, but tax cuts is the big element. that will be lifting the economy and we think it gives a list of about a half a point in the second half of 2017, it will take time to feed through towards the second half of the year. you will get a lift to the economy. the economy -- we can argue about how close -- it has moved closer to full capacity and that means inflation will be heading higher. there are interesting things about that debate taking it to the fed, the question of what a new fed would look like moving forward, especially early 2018. francine: are you more word about independence or what kind of tax? >> the independence of the fed would be up to the people nominated. there is a concern, that is clear but this is where donald trump has been difficult to read

because he says one thing during the campaign and we see a much softer version coming through. if he stood up on the morning after the election and had spoken the way he did through the campaign, the markets would not have reacted this way. he has softened his tone on many positions. question of the independents is a concern but the other big question is during the campaign, he was pushing that the fed should have tightened more. it becomes ironic because too high rates is not what he wants to help the economy and here at janet yellen has been hinting that maybe the demand side run stronger and maybe can tolerate higher inflation, so she has been sounded dovish which may not be so bad. francine: we have not hear him talk about his concern about the dollar strength or going even further. in terms of trump news, to to secretary of state, treasury secretary, he does not seem in a rush, does it change order this is the

timeline previous presidents have taken? >> after a first chaotic week, partly because he was taken by surprise and slightly unprepared , there were a raft of that thents, i think treasury secretary position in particular is proving to be hard to fill, or difficult for him to settle on who he wants, we have had conflicting reports, offering it to jamie dimon who does not seem interested in the job. that is an important employment, particularly given what is in store for the economy and the fact that he is going to have this unprecedented influence on the makeup of the fed. going forward. but ihe is a bit behind think there is a challenge, given that he is alienated so many people in try to recruit people to those posts, secretary

of state and treasury secretary. francine: thank you very much. "surveillance" coming up, the productivity problem, will italy -- italy's business your grapples with low interest rates. the dollar rally cools ahead of thanksgiving as traders complement -- contemplate the fed rate hike. theook ahead to chesler -- chancellor's first statement. this is bloomberg. ♪

francine: this is bloomberg "surveillance." italy's top and sure rescue was

productivity and exit businesses as it pushes to increase efficiency. european insurers are struggling to sustain earnings growth as investment returns fall and competition is pressure on prices. i spoke to the ceo. i asked him about the biggest driver of short-term change for business. >> the insurance industry is mostly because of the interest rate. ago, i haveyears been turning around life insurance company in japan 15 years ago. in the same at low interest rate scenario, it is difficult to understand how and when you get out of this kind of scenario. you have to live with it. we have to live with it. this is why we accelerate on the transformation to reduce our

costs to adapt the company to leave in this test live in this new low rate environment because it may last long. i do not know. is will itassumption last -- it will last. the markets believe donald trump will reflate the economy, inflation will go up and the bonds have already started changing a little bit. >> maybe. i do not know yet. because we do not know what will hisis policy because program was not that clear and we have to still understand what will happen. thingited states is one and europe is another thing, he is not president of europe, he is the president of the united states and the growth is quite slow in europe. fact on ourin

business, especially the property division of the business. competition is strong and the growth of the premiums are very small. francine: do you expect the more fiscal spending in europe as well? not -- i dodon't not really know. francine: the situation in italy, are you discounted in terms of your share price because you are an italian company or seen as a nighttime company and there is a referendum coming up december 4. philippe: yes we are, if you look at the stock price it is very connected to the insurance industry index which is discounted. then to the italic index which is also discounted. we have double discount, one for the sector and the second for the country. italy, everybody

is expecting the result of the referendum of the december 4, nobody knows what will be the result. that, you know, i am quite optimistic. if you want to be in the insurance business, you have to be optimistic and cautious at the same time. i am both. we do not know what will happen. italy and fort in the rest of europe, the reforms have to continue. politics is something that can accelerate or slow down the reform but at the end, reforms will be achieved because they have to. francine: why is there a discount for the industry? too tough or misunderstood regulations? philippe: mostly because of low interest rates. they have an fx on earning -- they have the facts of the

earnings of the company. then the regulation, especially in europe, is a hazy regulation and to comply with the regulation creates lots of new constraints. recognition should be more flexible. -- regulation should be more flexible. we need regulation. we had issues earlier in the banking industry and insurance industry because there was not enough regulation, we need good regulation but the regulation should not prevent the companies to the -- the more entrepreneurial. we are a company and we need to do business. sometimes, because of the regulation, we cannot be entrepreneurs anymore. maybe it should change a little

bit. francine: do you think it will change? and what would be the catalyst? more lobbying? what needs to happen? some regulation in the u.s. could be a catalyst. we have constructive dialogue with regulators. we listen to them. we would like them to listen a bit more to us. but it is a constructive dialogue. that was ahead of today's investor day in london, his first tv interview coming got the job in march. conversation, the a full year global outlook for 2017, the banks chief global economist joins us here for the biggest risk in the year ahead. when you listen to him, there is

a clear asked that things are not -- angst that things are not getting better. what will it turn for us to get this economy out of its stupor, the world economy? >> he said important things during the interview and talked about structural reform which is one of the very important things moving forward. is the reforms be it in terms of trade, in terms of national reform, labor market, education system, product and service market, this is true at the global level that reforms are needed and i want to emphasize that when we look around the world today, the underlying economy is not doing that badly. we tend to forget that admits the gloom on the political scene that that has created a lot of uncertainty but if we look at the underlying economy, the euro area is growing at 50% above potential. 1% --the digital is only

trend potential is only 1% and that is the key moving forward. francine: i often have this debate, i understand we are still growing and not doom and gloom that given the amount of things you see be has put in place, the amount of support and where inflation is and the price of oil, we should be in a better place? michala: when i watch the press meeting,ter the ecb president draghi tells us the same thing every time, for literally years. we need more reform, better hasdinated fiscal, and he been telling european policymakers this for years. unfortunately, the politics, the pace of reform continues to be simply too slow. i would not turn around and blame the central banks. in a world where we have very

high debt stock and we should not forget this, it is much harder for monetary policy to be as effective in the transmission mechanism. the multiplier is slowed down by the high debt stocks. francine: the biggest risk to 2017, how can we mitigate those? michala: clearly there are risks on the political front. these are not just risks for europe but globally in terms of the political situation, this is one risk. turning to china, there are risks on china. we think that of capital controls in china mitigate some of this risks in the short-term but the slow pace of reform accentuates the risk for the medium-term and i think this is an important point. we talked about the interest rate environment, clearly there are risks if we get a disorderly move in the bond market and those are some of the risks we

are looking for -- how do we mitigate them, i will come back to giving good visibility on the reforms, having well courtney did fiscal policies, and also -- coordinated fiscal policies, and also, having stability in the regulatory environment. regulation butre we also need clarity on what that regulatory environment will be. francine: thank you for joining us. the global head of -- in the, the record rally u.s. equities will look to continue, we will have your market update and any kind of forecast that mark barton has been fighting in analyst notes. this is bloomberg. ♪

francine: this is bloomberg "surveillance." let's get to the bloomberg business flash. >> former credit suisse ceo is trying to start a merchant bank according to a person with knowledge of the effort. he has lined up $3 billion to start the venture in the first cap of next year. if funding is set to come from partners backed by a network of ruling families from the middle east and asia.

and us and sovereign funds. he did not respond to messages seeking comment. please talk has canceled almost 900 flights a day. -- lufthansa has canceled almost 905 today. flights today. that is the bloomberg business flash. francine: u.s. futures pointed to a higher open come a continuation of the record-setting run. mark: yesterday, record highs for the dow, s&p, nasdaq, a chart showing how many times we have had a simultaneous record highs for all three major indexes. the blue lines, vertical lines showing which quarter they fell in going back to 1971. oversold, goe most , the rsi for the

bloomberg treasury index, the barclays u.s. treasury index at 17. the most oversold since 1973 following on from this big treasury selloff. equity volatility has been declining as political risk has been gaining. boston is one of the brokers funding. francine: thank you. surveillance continues in a sour, tom keene enjoys the from new york. we look at the u.k. statement. this is bloomberg. ♪

francine: the brexit bill slows -- canand more debt to

fiscal policies deliver for the u.k. working-class. the president-elect will move to fill two vacancies on the board of governors within his first few weeks in office according to transition team sources. can he outweigh yellen? european equities advanced after ux indexes -- u.s. indices hit records. this is bloomberg surveillance. tom keene is in new york. and most interesting day, we need to look at the markets. general anderity in look at what donald trump said in the latest interview with the new york times. tom: donald trump on twitter and youtube, i do not think mr. hammond will be out on youtube with a financial statement, is he? francine: we will have to find out but i do know the previous chancellor, luck would have it it was all planning, we have the former chief of staff started and made a tweeting

push to go more on social media. let's get to the bloomberg first word news. >> we will get the hammond and donald trump all right here, the british chancellor philip hammond will outline a series of measures aimed at helping working-class families, he makes this often statement to parliament today, pledging $1.8 billion to help build 40,000 homes and raise the minimum wage to a little more than nine dollars per hour. donald trump has shifted his tone on climate change. he told the new york times that perhaps humans are to blame for rising temperatures link to extreme weather in he called climate change a hoax during the climate and plan to pull out of the paris court appeared opec has not decided the issue of whether iran and iraq will make production cuts. the oil cartel has deferred the matter to ministers who will tot next week, opec's right

agree on cutbacks in an effort to stabilize oil prices. global news 24 hours a day howard by more than 2600 journalists and analysts in more than 120 countries. i am taylor riggs, this is bloomberg. tom: there it was on radio yesterday, the print of dow at 19,000, one indicator of the ship -- shift. here is the data check, futures continue green on the screen, a little bit, it is wednesday, come on, thanksgiving eve. oil at $40.21 per barrel. -- 48 -- there is the history made yesterday, the dollar resilient today. francine: happy thanksgiving, an early present, we do not look at this often but i thought today was telling because it is slumping for an 11th day after the central bank decided to leave interest rates unchanged.

there are concerned about capital outflows because donald trump, and outflows from the emerging markets. 111.04, japan is having a labor thanksgiving. for next have to wait week to decide if opec decides anything. tom: i look at turkish lira, emerging markets still challenged to say the least. let's go to the bloomberg. this is the most optimistic chart i have. the extraordinary decline in people walking in to state run employment, unemployment offices in filing -- and filing a claim for unemployment. they are not. they are less. he read, the fears of the 1970's and 1980's and the 2008 crisis. down we go to a nirvana.

this is the most optimistic chart across the american landscape. francine: i like that chart. labor thanksgiving. this is my chart, a construction chart. i want to talk about the u.s., for what the u.s. will or has looked like under president obama but i wanted to put it next to the u.k.. ,his is construction spending u.k. versus u.s. construction infrastructure year on year, the blue is the u.k. and you can see it going down and kind of leveling off at minus 48. this is the u.s., you see it leveling off but less volatile than what we had seen in the u.k. and you wonder what the white light will look like in a couple of quarters or maybe we give donaldme trump to replay the economy. let's bring in rupert harrison

from a blackrock. he was chief of staff to the former chancellor george osborne. i want to ask you a million things about this construction that autumn statements, or the stressful desk were they stressful? after the weekend, the few days beforehand it is about preparing the speech and the presentation and the story you will present but the big decisions had been made. difficult is this often statement because you have a chance to that needs to navigate brexit and give possibly new forecasts but can he take offense whether this is good or bad for the economy? will behis decision framed by wanting to keep his powder dry, we will not see fireworks. he has a company that is perhaps flowing a little bit but much less than people expected with a huge amount of uncertainty and

what the future is for business investment, hiring, the labor market. that was not the time to throw money at the problem. he probably will take the hit and spend a little bit more on infrastructure but a pretty small amounts in the big picture. the key strategic decision is keep the powder draw because you might need it. francine: how much of the extra borrowing is because of brexit directly? rupert: the numbers we have seen from some third-party forecasters ahead of this event have been a look to numbers -- around during the referendum campaign, the independent institute of fiscal studies indicating a cyclical and maybe structural deterioration stores the end of the forast of 20 pounds -- 20 billion pounds, 30 billion pounds. that is a serious deterioration which is mainly a slow growth story. on top of that, any additional loosening will be maybe 5 billion pounds or 6 billion pounds. francine: -- tom: help me with

the market adjustment, obviously a global adjustment to donald trump economics which has to change the dialogue in london and has to change the dialogue for the chancellor. will the autumn statement at that and adjust to higher interest rates to possibly a greater marginal inflation? rupert: yes, i think they will have had to make that adjustment because the big change in guild inls happen -- yields happen time for the forecast, months ago they thought they would be looking at quite a big windfall from a lower debt interest payment, a lot of that will have disappeared over the last few weeks. maybe there was some nice political giveaways they were planning a few weeks ago that are now not possible because they lost the fiscal dividend. that is true across most of the world. a lot of this fiscal loosening people may have been looking forward to outside of the u.s. will be more difficult, not just for the u.k. but many european

countries -- bobbles is much more exotic than your marks. earmarks.rks -- give us an update on the current deficit and the capital accounts, what are flows telling you now? rupert: sterling has stabilized of late. currentt about the account, we have had a strange situation where the trade balance has been improving over the last several years. a strange situation on the income side were overseas income has collapsed, that has been complicated by a reevaluation of overseas assets. that is a sideshow, the story is about growth prospects in sterling, people's expectations is it a hard brexit? that is what is driving

sterling, that is the reason we have seen a little bit of stabilization recently. we have not had much brexit news for some time which is why it has been stable for a few weeks. francine: a new ackerman -- aboutm j.a.m, just managing, this makes it a more fair society, anything in the budget statement? why does she feel the need to do this, just because of brexit or are there economic indicators to support the fact that people are much worse off than in the past? how can they help? j.a.ma, is the latest in labels, it equates to what you have in the u.s. as the middle class and a basically means almost everybody because everybody feels like they are just about managing whatever their income level. the reason is the propositions are under pressure from people

in middle incomes who took a big hit after the financial crisis have seen their incomes growing in the last few years but it is not registering relative to the big falls they had. politicians feel under pressure, particularly under brexit and the donald trump election. theresa may does not want that to happen to her. they are constrained, they do not have a lot of money to throw around but small measures, a tax on gas, maybe air passenger duties, some visible -- francine: childcare. rupert: the numbers will be small, it is about the signal. tom: you are the captain of austerity, is a dead -- is it good -- is it dead. rupert: no, the u.k. will carry on doing what it has been doing for the last few years, despite the rhetoric which was strong, the u.k. was in the middle of

the pack, similar to the u.s. in the pace we reduced the deficit and we will have to carry on hammond hammond isip not a different kind of politician as george osborne, he is a balanced budget fiscal conservative and despite the change in tone, the sick -- the substance will be continuity. maybe that is a story for another time and place and we , we continue -- coming up will look at the sky five markets, 19,000 on the dow, no one better than howard word come he has been the ultimate resilient bowl, not buy and hold but pretty close. smart. ♪

francine: this is bloomberg "surveillance." we have a very busy day at week, corporate news with the bloomberg business flash. >> lufthansa canceling 40% of its flights today because of a strike from pilots. they say the strike will last through tomorrow. the dispute has to do with pay and a move to turn their lavrov -- euro wings unit into a discount carrier. egypt is hoping to raise $6 billion from international bond sales through next year, the country's finance minister tells bloomberg that the first sale may be delayed for a while. >> we were planning to do it at the end of november but there has been volatility since the election. the changes inf the philosophy of how the economy will run.

there has been some volatility in the market and we are waiting markethe > -- egypt is trying to reduce borrowing costs after deciding this month to let its currency float. that is your bloomberg business flash. francine: thank you, taylor riggs. what does the future hold for the fed? transition team sources have said within three months donald trump will fill two vacancies on the central banks board of governors. let's get more with stephanie baker. stephanie, we have one million questions on donald trump, his tone in the new york times but what is more significant is the influence he can have on the fed. are we concerned that the fed may be less independent on donald trump? stephanie: he has the ability to twoint four new governors, are vacant and he will move within the first few months to fill the slots. fischerllen and stanley

, their terms expire in 2018 and he could fill those slots. there are big questions over whether -- this is a remaking of the fed essentially. colors at ag four time when central banks worldwide are under assault for their independence. tom: from where you sit and with your experience in journalism which is tangible, can he sustain his distribution of message? our executive producer, we believe he has not treated this morning, -- tweeted this morning, we did not see that with george washington or george bush. prepared toto be bypass traditional media channels which we saw through his youtube video and he has not given a press conference since he was elected just unprecedented. we had a new york times

interview which was very revealing and showed him dialing back from a number of his campaign positions. he seems to be playing by his own rules. tom: the people around him, do you understand who is his message machine at this time? i cannot figure it out -- who are the people helping him learn the message process? stephanie: he seems to be relying on kellyanne conway. i do not think that has changed. steve bannon is an essential part of this messaging operation -- you sawhim, to him come to steve bannon's defense. francine: if you were chief of staff under president-elect, what would your advice to him be?-- advice to him howard: i do not think he takes advice. him, i ample around

not sure if he listens to them. on monetary policy, in my experience, politicians complain in public about low interest rates, when you are in office, he does notthink -- want higher interest rates. it is true that there will be a different type of individual on the long list appointed to the federal reserve, no more janet yellen but i do not believe that a donald trump government will want tighter monetary policy, he may say that but i do not think that is what he wants. francine: could he appoint loyalists? who do you will point that who do you appoint? rupert: if you look at his appointments already, fairly mainstream people, but it is a orferent cast list,

republican leaning, more hawkish types. that is probably worth 25 basis points to 50 basis points but i do not think this is a deliberate attempt to engineer a tighter monetary policy. nobody wants that even if you think it is the right thing. tom: stephanie baker, my deepest sympathies, good luck trying to figure out what the message is and how the message moves forward. i do not know where we will be next monday after the holiday. stephanie baker, thank you so much in london. the dean of columbia business school, he is a republican, glenn hubbard on donald trump economics and the donald trump team. from london and new york, this is bloomberg. ♪

>> i am optimistic, if you want to be in the interest business, you have to -- in church business, you have to be optimistic and cautious and i have both. -- i am both. in italy, and this is true also for the rest of europe, the reforms have to continue. is something that can accelerate or slow down the reform but in the end, reforms will be achieved because they have to. that is earlier about

the italian referendum, his first interview since he took charge of generali in march, the italians biggest insurance. rupert harrison of blackrock still with us. if you look at political risk, french elections which may see marking the pen coming to a second tour, are the markets pricing and more political upheaval in europe? rupert: following brexit and donald trump, there is a higher political risk premium. with the italian referendum specifically, everyone is positioning for a no vote so a yes vote would be a short-term positive surprise. there is a question about whether political risk in europe is being perhaps overestimated. it is very easy to draw a parallel from brexit and donald trump to say therefore we can make no forecast about political events, pulling is junk.

-- holding is junk. -- polling is junk. these were just close elections. most people in europe look at marine le pen and france, that does not feel similar to donald trump and brexit, the kinds of margin in these polls are 20 points, 25% differences in the head-to-head which is very different. if you are looking for a place to take risks, perhaps there is a premium you will pay on european assets. francine: how do you plan, through yields, italian or french versus german or do you play it through equities? rupert: yields or european banks still provide upside if you think the fiscal risk is overpriced. that would be the case in a yes outcome in the a tight referendum. -- ical you and referendum. it has become less of an event because it does not lead me to

political turmoil in italy even if renzi is not prime minister, you have a technocratic government, the main focus of a time politician -- italian politician -- francine: thank you. coming up, plenty more from philip hammond, he is the chancellor, the first time we will hear him deliver his autumn statement. then we will be talking to stephen hammond, a ukip member of parliament -- a u.k. member of parliament. ♪

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he is in florida, thank you for that information. it is a beautiful new york as begin ready for thanksgiving. hopefully you travel safely, leave early and often. i look forward to tomorrow. the detroit lions at minnesota vikings, 12:30 tomorrow. a data check, a quiet wednesday, the vix 12.33 and the jaw-dropping story on the dow. nextd ward joins us in the hour. let's go to the first word news and speak with taylor riggs. taylor: president-elect donald trump is leaning towards mitt romney to be his secretary of state according to a report, the wall street journal says its decision is delayed by a a disagreement on whether to pick him or former new york mayor rudy giuliani. the donald trump team could also keep searching. whowhite house democrat wants to replace nancy pelosi as

minority leader wants the party to focus on economic issues. tim ryan says that is the way to win back midwestern and southern voters. they backed donald trump for president. message drowned out everything else he was talking about or that other people were talking about. we need to that as democrats because we are better on those issues that he will be. taylor: he says the democrats problem is they are no longer a national party, they are a coastal party. withdrawalcoming from the tdp is focusing on another set of trading negotiation's emma next week talks are set in indonesia or a agreement unlike the transpacific deal this one includes china and not the u.s. if a deal can be reached, it would further boost china's role as a geopolitical leader. global news 24 hour stay powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs and this is bloomberg. francine: thank you, taylor

riggs. later today, the chancellor in the u.k. philip hammond will deliver his first annual autumn statement. we are outside the house of parliament. we have a great guest. hammond you, philip his deliver his budget, first response to the brexit vote in terms of taxes and spending, that is 12:30 u.k. time and we are joined by stephen hammond, military parliament, no relation, from the conservative party. great to speak to you. we have a budget situation which the chancellor has described as eye watering levels of debt. and election -- no election on the horizon so why give anything away, why the burning platform for change? sayingchancellor will be

-- laying out what the economy looks uncertain over the next year, as steady as she goes, make sure we understand how the economy will perform before we make big statements in terms of giveaways and i will come with next year's budget. ensure some of these --ple, theresa may is right some of those people will be helped by what he is likely to say today, something on the national living wage, likely about tapering of welfare benefits which will help people in work and finding it tough any moment. >> they are just about managing. families may be tempted to vote for brexit and that is something theresa may may wants to go for but in terms of the business environment, infrastructure spending one of the highlights which we have seen in the, you capture the imagination of some investors. int kind of announcement

every structure will we see today? stephen hammond: quite a big announcement on affordable housing, something over one billion, 1.2 5 billion on building more affordable houses which is something we need to do, we need 50,000 new homes per year in this country to keep going. i think this will give 40,000 across 10 year ranges from straight social housing through two rent to buy. what hislk about infrastructure plans are going forward, reaffirming his commitment and accepting there is a lot of money out there from pension funds that one -- want infrastructure schemes and ways to bring the private sector funding through infrastructure in the u.k. heard talk about infrastructure banks and bonds, will there be innovation around how that infrastructure is funded and the involvement of the private sector? borrowingmmond: all

is touted in the same weight in the u.k., i think he will say that borrowing is going at a pretty -- pretty heavy rate because of the uncertainty in the economy and he wants to find ways to dust that do not add to public sector borrowing. -- that do not add to public sector borrowing. >> theresa may earlier this week was saying it does not mean picking winners come what does industrial mean? stephen hammond: a modern industrial strategy, not a time where we pick winners but looking at industries of comparative evidence a greeting an environment of success. looking at the british economy, we have done nothing about in the last years and were constrained about the deficit. a skills agenda, science agenda, the areas where britain has a great advantage, high-tech skills from university through to commercial production. have seen the enthusiasm for infrastructure in the united

states, compare and contrast that for us, how enthusiastic is this government about infrastructure spending? how much room to maneuver does it have? stephen hammond: unless appreciate the balance sheet, it --maneuvering is relative relatively constrained, if we do that, this is capital expenditure, we would look at what it would do to the asset base of the country which opens up possibilities. these are highly technical things and i would not expect that to come out in this first autumn statement. >> thank you for joining us, stephen hammond joining us in westminster. francine: thank you. rupert harrison, a former chief of staff of george osborne, not inspecting fireworks, we just have to wait and see what the economy becomes in the next six months to eight months, will he addressed the pound in any way? rupert: i do not think he will comment on currency.

i think what you heard there is very much the message that the government is laying, as steady as she goes, do not expect fireworks. there probably will be tidy -- tiny surprises for the headlines in the newspapers but from an investment point of view, this is all in the price. a small change. keeping the powder dry. 123.74, sterling is where does the prime minister want sterling to be? rupert: she probably does not have a number but i think where they are pretty clear is they do not want another big slide in the pound in they are starting to get nervous about inflation, they do not want consumers to feel to pinch, -- feel too pinched. messaging we have from the bank of england and the latest inflation report. they are concerned about

underlying weakening in the economy but they do not want to give permission for another big slide in the pound. tom: what is black rocks call on sterling? as a general statement, what is the blackrock call on sterling? rupert: my view is we exceeded the correction, sterling at the moment is likely to be more range bound. really, the driver will be if we get news about brexit. a court case, the supreme court appeal in september, probably a judgment in january, the next big sterling moving event, beyond that, we have had the big moves and trading in a range for now. francine: how do you see it playing out? people who say this may mean that brexit does not happen. quite unlikely, if you put in parliament saying, do you respect the will of the people, they will have to go through with it. rupert: that the judgment goes

with the government, sterling will fall and against the government, sterling will maybe pick up. in the medium-term, what it means for brexit very little, parliament will not go against the will of the people. francine: does the donald trump when change anything, does it give anything negotiations play to -- theresa may because she is suddenly much more valuable to the u.k., because of the spending and she is an anglo-saxon model? rupert: the security card the u.k. has is more viable, particularly mediterranean securities, the migrant crisis, russia, the borders. centristide is that political leaders in europe are now more worried than before that populist movements in their own countries. particularly after the polling errors. they do not want to get trumped. therefore, if you listen to these populist leaders, marine le pen, they all say we want our

own brexit and that means that the centrist leaders in europe cannot afford brexit to be seen as a success. that creates vulnerabilities back home and for me that is the main effect. much to talk about on this wednesday before thanksgiving. we need to recalibrate on the american economy and with near 100% certitude of a december fed hike. armando's in our next hour -- from london and new york, this is bloomberg. ♪

tom: home alone, you remember the movie, moving through

o'hare, the famous white pillars .themovie made famous family left the offspring at home . francine: i remember. tom: no question this thanksgiving, selected children that need to be left home in the nation. francine: i was thinking, you are off tomorrow. i will be home alone many dust from london. -- manning the desk from london. tom: using my final vacation days, friday and monday. francine: you can take the week off. turkey pardoning. tom: an interesting time as we have a president-elect in transition and looking for any news on the secretary of state. pardoning of a turkey is an ancient tradition that goes back to 1620, no it doesn't. a great tradition that has been

amended over the years. ot ande tater and t everybody gets a blue ribbon, like little league in baseball for six-year-olds. nobody dies. francine: do they goes to -- do they go to turkey hotels? when the department best when they are pardoned -- when they are part of -- pardoned? tom: it is a new america were no turkey's shall die. rupert harrison with us to give perspective with his public service to the united kingdom with mr. also warned in previous -- osborne and previous administrations. what will be different in this budget on austerity? if it continues with the deficits you see within the united kingdom, what will be the flavor of the austerity?

rupert: the issue is around timing, the previous government had a target of a talents budget in 2020, that target got junk after the brexit referendum because of the uncertainty. i think philip hammond will want to achieve a balanced budget because that is who he is, a balanced-budget conservative. will he put a date on that? will it be a big aspiration or some fixed date? how it is delivered will be similar because in the u.k., the government already has departmental spending totals for the next four years. it has tax and welfare changes that are legislated for. they have no incentive to re-visit those decisions. they will spend a little bit extra on infrastructure but pretty small numbers from a macro point of view. tois a touch of the teller change the course and timetable

but the composition is not that different. vigilantes are different, in the united states the congressional budget office has two key plug-ins coming economic growth and the interest rates, those have changed in the last eight weeks or so. how do they plug-in that's how do the plug-ins change in england? rupert: it has taken away a windfall but perhaps the treasury was thinking about spending and the growth outlook is weaker. a downgrade to the borrowing forecast but i think the government will take the hit and not try to adjust to that. they will ignore knowledge borrowing will be -- acknowledge borrowing will be higher and pushed back the date. tom: we have retail articles in america to kick off the holiday season, what is the retail spirit of london and the united kingdom post-brexit? francine: strong. rupert: very strong, retail

sales data in the past few months has been what buster numbers. -- blockbuster numbers. better placein a through brexit than we realize, a couple of years of strong income growth and strong employment growth, low inflation , people are in a mood to spend. been the surprise post-brexit, uncertainty for businesses that consumers are carrying on is out nothing happened. francine: you came with an empty suitcase. tom: and they were filled. with the burberry and other british fashion houses, papers are loaded with a battle for the houses and the department stores over the pricing of products. are they having the same battle over there? not happening for some designers, is it? francine: we tried to get as many interviews with burberry as we can, we have understood with them is that three years ago,

four years ago they tried to deal with this problem by getting franchises back so they are in control. is actually the company, this was usually important, especially in japan for burberry were the prices, we talk about this a lot, when it goes to retail sales, we have also seen, actually rupert, a lot of these companies have to pass on their increases, their price increases, we have seen it with apple here. it feels like you could see a retail sales going stronger until you squeeze families because inflation is so high that this gets passed on aggressively. rupert: the big unknown about the outlook in u.k. inflation is how much can those companies, or will they take the hit on margin, particularly food retailing and everyday purchases. there are so much competition from the low-cost entrance into those markets that the main players will resist to the full

extent possible in passing on. i think the bank of england, toward the lower end of the rage with the inflation forecast is probably right because the scope for price increases in may be an iphone is different than day-to-day items. back on the shelves, i am sending one to tom keene so he can try it because he probably does not know what it is. today on surveillance, david rubenstein sits down with the pepsico chairman and ceo, you can watch the discussion tonight on the david rubenstein show at 8:00 p.m. in new york. this is bloomberg. ♪

tom: "bloomberg surveillance." she is in london, francine lacqua. it is a different day in america. taylor riggs prepared to cook a 26 pound turkey. [laughter] report that facebook is so i just to return to china it has built a tool that will geographically sensor

information. that is according to the new york times, they say the tool would prevent content from appearing in the newsfeed, china blocks facebook in 2009. one measure of economic growth in germany stayed close to a 10 month high in november, purchasing managers index list slightly desolate -- lifted slightly this month. feed supplies in the u.s. are now at the highest on record they have ever been, the records go back to 1915, the amount of be in cold storage up almost 5% from one year ago, expected to keep down the price of hamburgers and steaks. that is your bloomberg business flash. francine: thank you so much. let's go back to the fed for three reasons, first of all, we trump lookingmr. to put his stamp on the fit in

his first months of the presidency. we bring you to the implied, the probability of a rate hike. this is the chart we did for the one year in price policy rate change. it is close to 50, it means the market is expecting to interest-rate-2017, closer to 25 basis points, implying one. rupert harrison has been with us and we talked about donald trump and whether the fed can stay independent. what are the markets looking at? seems like there are more fairly price than three months ago. rupert: it is now more of a fair price. ats is a big cult looking markets, has this big repricing in court rates and expectations desperate expectations, has that -- fed expectations, do we have a new range with gradual changes or a bigger change which affects how you do asset allocations and

emerging markets. it looks now like it was a big move and it is now more fairly priced. tom: it gets us out to the early everybodyre meetings, focused on december, i want to get to january, later january meeting. what are your thoughts on a bed that gets measured in sequential -- on a fed that is measured in sequential? rupert: the donald trump has brought in such a to what was to us an emergency, gradual reflation in the u.s. and a fed that wants to be gradually normalizing. that will continue. toe of the concerns that led that stop-start messaging from the fed are still there. they still face and a symmetric risk profile were getting it wrong, the downside is much more risky than getting it wrong on the upside because they are running out of tools. they face this feedback loop

from the dollar. we have seen the dollar breaking out of the range on the xy and if that continued, we would see this feedback loop through china and emerging markets causing to develop and they will be conscious of that. they are still facing the same trade-offs and donald trump does not lose the risk. tom: you wonder if measured will be the operative word into next year. rupert harrison, thank you for a good briefing. as we look to next year at tomorrow, he will be watching most of minutes of the vikings and lyons, howard ward on your dow at 19,000. this is bloomberg. ♪ a

it is quiet this morning. thanksgiving eve, stocks at record highs.

the u.s. dollar ever resilient. the gloom and doom crowd are desolate in this hour. the 2017 use of cash. adapted to higher interest rates? we consider the desolate fed meeting. april 27 of next year. esther trump considers the desolate wilderness of turning campaign rhetoric into presidential policy. good morning, everyone. "bloomberg surveillance." of thethe nicest days year, wednesday before thanksgiving. , i am tomk city keene. francine lacqua is in london. people stopped by the netherlands, then came across in 1620 two america. nothing has changed at all. christopher columbus is from my hometown. let's pay oh my gosh -- let's pay homage to him.

we look at the pound. first, a statement since he became chancellor following the note -- the brexit note -- thee -- volatility in the pound has been huge. imf in washington, we had a flash crash. traders are bracing themselves for some kind of surprised. -- for some kind of surprise. tom: i like the idea of bracing. here is taylor riggs. taylor: we are going to stick with that. british chancellor of the exchequer philip hammond makes his autumn statement to parliament today. he will pledge $1.8 billion to help build 40,000 homes. he will also raise the minimum wage to a little more than nine dollars an hour. president-elect donald trump has shifted his tone on climate change. he told "the new york times" that perhaps humans are to blame for rising temperatures linked

to extreme weather. during the campaign, he called it a hoax. angela merkel says she is not happy about the possible collapse of the transpacific trade deal. donald trump has vowed to withdraw the u.s. from the agreement. merkel warned germans against turning to economic isolationism. she acknowledged voters are apprehensive about globalization. opec has pushed off the issue of whether iran and iraq will join in any production cuts. -- the oil in vienna cartel has deferred the matter to ministers who will meet next week. opec is trying to agree on cutbacks in an effort to stabilize oil prices. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: i want to get to the most optimistic chart in america. futures flat, euro flat, oil flat.

on to the next screen, really showing that wednesday -- not lethargy, but just the way it is. there it is for the gloom and doom crowd. the dollar index still resilient, above 1.01. francine: we are seeing big moves. the german three-year yield jumping four basis points. -0.70. see it there at they are suggesting that the ecb lend out more of its government debt because they would be concerned about a freeze through the freeze would be in the short-term funding market but underpin the financial system. they are trying to do more. stocks are pretty much flat, on the downside. i wanted to show you this -- concerns on outflows following the election of donald trump. 118 the yen getting up to

on euro-yen. let's go to the bloomberg terminal. this is the most optimistic chart in america. job claims adjusted for the number of unemployed in america, back 40 years. on the left, the crisis of 2008. and the red circle -- boy, have we come in with a vengeance on jobless claims. that is my most optimistic chart on america. this wednesday before thanksgiving, we demand the attendance of howard ward. he has been one of the great on thent bowls capitalistic system. what will mr. trump due to your world? howard: mr. trump is a bit of a game changer. he has excited the stock market, raised expectations for growth, and it is going to be interesting to see how quickly he can deliver on his promises.

tax cuts at the corporate level -- those are progrowth. deregulation -- progrowth. the big worry that the business community has is with trade. protectionist measures would not be viewed that well. belly --and mario to and mario, decades of experience -- is this new infusing as him cfo's tor ceos and invest? howard: surveys show that ceo confidence went through the reverse -- went through the roof, and actually stunning reversal. isis important because there a significant correlation between the ceo confidence surveys and gdp. so we are going to be looking at better gdp growth next year, provided we can get some of these changes made early enough in the year. you will be talking about a two-plus level of growth for

2017. previously that would have been one something. beenat would have one-point something. francine: talk to me about optimism. is the optimism just that the market and ceo's were waiting for some kind of catalyst? donald trump comes along and they are hoping for something to spur a little bit more of the economy, so they are optimistic. that they believe he will be able to spend half of what he has promised -- he promised $1 trillion in spending, right? howard: that is a great point because we first of all had to back and think that donald trump is not going to get everything that he wants. part of that has to do with congress not being able -- with congress not letting him spend as much as he wants. there are concerns about deficit spending, which are appropriate. he will probably not get to

spend $1 trillion on infrastructure. but he might get $300 -- you might get $300 billion or $400 llion. you are talking about a year before any money is put to work. this stuff is going to take longer to be enacted and have an impact on the economy, which is why 2018 will be a better beneficiary of these policies than 2017. the increase in confidence seems very real. this is an unexpected development. no one was expecting trump to be president. let me just go back -- the s&p are different indexes, but the s&p 500 is probably the one we use most on wall street. it is up about 5% starting with the friday before the election, and three percentage points to place in the three days going into the election when the market is up and hillary clinton was going to be president. on had a 3% move in the s&p

friday, monday, tuesday, and another 2% since then. other indices have done better. trump is a more dramatic change than hillary would have been. francine: what kind of change are the markets hoping? apart from deflating the economy with spending on infrastructure, the markets are excited about deregulation and different taxation's. which would also mean that a lot of your corporates could reap hatchery eight a lot of the money -- could repatriate a lot of the money they have offshore. therd: if you can reduce corporate tax rate from 35% to talking about,s that is going to unleash greater profits. profits are the source of jobs and capital spending and consumer spending as well. two years,reset for

three years out. let's bring up this chart. up we go from the depression. the yellow circle is the first time "the wall street journal" desolate wilderness. we stay right on trend, or do you have to have ample cash available? howard: you could make the argument that the market's exuberance of november carried too far. i say that because we are entering 2017 in a tighter world financially. interest rates have gone up. as the stock market has gone up 5% this month, you had the biggest, fastest move in the 10 year treasury that you have had in history. rates are higher. the fed -- tom, we are going to have a record number of turkeys eaten on thanksgiving, the fed tightening in december.

the fed will tighten into the teeth of these higher rates. these are headwinds to growth. profit margins are being hurt by rising labor costs. you showed those very low unemployment claims earlier. these are all headwinds to growth. bank lending statement -- bank lending standards have tightened. tom: can you be in the market with that assessment? howard: you can, but be prepared for a plaque, a reality check -- a pullback,red for a reality check. tom: we will speak with harm bandholz. maybe he can put into place the american economy that president trump will see next year. this a beautiful new york is bloomberg. . ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. tom keene is in new york. is pride -- there is quite a lot going on in corporate news. here's taylor riggs. anzar: lift anza -- lift -- canceling several flights today. it has to do with a strike that has to do with a. with pay. monsanto is being sued on behalf of shareholders over the planned acquisition by bayer. there is a conflict of interest.

the ceo of monsanto stands to collect $18 million in cash and benefits from the merger, and directors would also benefit. monsanto says the claims are without merit. it appeared twitter had suspended the account of its ceo and cofounder. it did not last long. jack dorsey said the suspension was an internal mistake. he tweeted that he is setting up his twitter again. that is your bloomberg business flash. tom: thanks so much. with gabelliith us funds. also joining us now, martin schenckerhat's marty -- joining us now, marty schencker. marty: the action is in florida for the next few days. ,om: will we see action today something on the secretary of state announcement?

marty: there is continued speculation whether it will be romney or giuliani. there are reports that donald trump prefers romney and that other advisors want giuliani. it is too early to tell and he is full of surprises. we got a report that nikki haley will be u.n. ambassador. tom: i did not hear that. so he number of announcements coming out in different forms. i have to get to this well constructed story on the fed. it is 90 days out, supposedly. a there any indication of beauty list of governors that mr. trump would fill? marty: all these economists that have been through speculation, potential candidates for the fed -- what is interesting to me is that this transition team is focusing on that granularity of the fed. i would imagine that would be something they would put off, but they are obviously concerned

about what is going on inside the federal reserve, and that could be of some concern to investors. francine: how much do we believe them? rupert harrison at black rock -- at black rock said in no uncertain terms that when you're in politics and you are in charge you realize that there is no way that negative rates -- the higher rates are good for you. you may say you want higher rates, but when you are in charge, helps having them lower. marty: no question about it. aven donald trump's plans for large amount of interest section are spending, lower rates certainly help them get there. -- for a large amount of infrastructure spending, lower rates are certainly helping them get there. what was the take away from donald trump's interview with "the new york times? he came away with differences on

climate change, waterboarding, and foreign policy? marty: he enjoys his meetings with president obama, and he has talked to him at least once if not more. his backing away from prosecution of hillary clinton and the foundation, which was one of the highlights of his campaign -- he is definitely moderating his rhetoric. you remember clearly the battles that we had at bloomberg about what we are going to do with twitter, facebook. you remember clearly the battles that wei dealt with thi. you were associated with "the wall street journal," now with bloomberg. withoes mr. trump adapt twitter, youtube, but also the new journalism of various houses? marty: there was an interesting poll the other day that some 80% of the population said he should

stop tweeting, which is interesting. i do not think he is going to do that. i think he recognizes twitter is a direct line to the american population, and he is going to use it. howard, you and i grew up with traditional media, and it is adapting before our eyes. how will the investment tones and decisions change? i could see jeff immelt tweeting out general electric news. howard: that is not even really on my radar screen, worrying about who is tweeting and who is not. i think trump, what is important is what he says. i understand. i think a lot of people feel the same. but do you not feel that you may miss out on key policy because he decided to put it on twitter instead of putting it through the normal channels? sleep: i do not lose any

worrying about that. francine: in terms of policies -- and this goes back to how he is going to use twitter -- he will have to, i guess, rated in once he is in charge -- he will have to, i guess, reign it in once he is in charge? it does get a little tricky when you are actually dictating policy that could have market implications. tweetingimagine him after if the decision. that would be very disruptive. and i think he will actually moderate is tweeting. record turkey is 86 pounds, and you are trying to top that. marty schenker. and we will continue with howard. hubbard -- dean

hubbard about america and trump economics. this is bloomberg. ♪

tom: good morning, everyone. francine lacqua in london, tom keene in new york, this wednesday before thanksgiving. howard ward of gabelli is with us, and martin schenker. marty, it is your fault. howard ward and i has -- howard

ward and i as kids have this pounded into us. marty schenker's "wall street journal." shut up and read this. tom: how did this come about at "the journal," to ruin my wednesday? in 1961, i think i was in fifth grade, tom. tom: you inherited this tradition. marty: it does conjure up images of the death of equity. suggest we. bartley had to have this? marty: it could be mr. bartley

or mr. kilgore. not isolationism, but those oceans are there for america, aren't they? howard: they are there for our taking. tom: if you have new trump economics, new trump investment, if you are down 19,000, is it still ask americana -- is it still pax americana? howard: it can be, but it may not be. there is a lot of policy uncertainty heading into this administration. i am all for reading more portray -- more poetry. howard, are the markets fluttering? are they in the breeze, or have they -- tom: you are being cautious here. howard: i think a little dose of caution is warranted. let's deconstruct gdp growth,

because ultimately that is what we are going to be talking about with respect to stock returns. your gdp growth -- one way you could come at that is by looking at the growth in your labor force and the output per worker. it is output per worker times number of workers. that is one way to get there. tom: so you do not believe in the trump 3% or 4%? howard: it is going to be a stretch. that is not to say you could not get to 3% over a short toe of time -- over a short toe of time. tom: this is bloomberg. ♪

tom: it is philadelphia, or it could be any other airport in this united states of america. without question, a busy travel day. it has been a great year for the airlines.

their cash flows are more persistent -- are more consistent. thanks to brian kelly for being with us on "bloomberg yesterday.e" travel safely across this nation. francine lacqua is in london and taylor riggs is in new york. thatr: there is a report president-elect donald trump is leaning toward mitt romney to be his secretary of state. "the wall street journal" says the decision is being delayed over a disagreement of whether to pick a former presidential candidate or rudy giuliani. and there is focused attention on another set of trade negotiations. next week talk is set in indonesia for a regional trade agreement. unlike the transpacific deal, this one includes china and not the u.s. if a deal can be reached, it would boost china as a geopolitical leader.

a presidential purse that -- it to eventual -- since 1947, the chairman of the national turkey federation has prevented a turkey -- has presented a turkey to the commander in chief. these turkeys will go to their new home at virginia tech. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries,global news , powered by more than 2600 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. tom: francine, help me. howard ward, this is getting way too pc. two birds, and they both live? howard: what can i say? francine: i am a very big fan of voting. i did not get a chance this year to vote because i am not american and i am not british. but i voted for a turkey.

i did not want to be an executioner. tom: i have never shot one, but in the woods these things are ginormous. it is stunning when you see one from a distance. they are a lot bigger than what you see at the butterball factory. let's continue with economics and investment. howard ward is still with us. holding court in the u.s. our theme with howard ward is can we get to trump economics? can we frame to gdp? >> i think i agree. it is always possible to lift gdp growth to 3% over one or two quarters. but we have to acknowledge that potential growth is 1.5% or at most 2%. tom: we are doing this for the first time.

i have to go with this. march 16, and april 20 7 -- those are the three dates. do you see a measured fed that gets it going, or is it one and done? harm: if things go roughly right, i am confident we are seeing a couple of rate hikes next year. we have one in december and then two next year. tom: howard, this is critical. measured is what got us into trouble before. howard: 12 months ago the 10-year treasury is exactly where it is today. going into this year, the fed telegraphed four rate hikes. they have not done it yet. we will get one most likely next month. how we feel about what the fed is going to do is maybe a little bit early to be speculating too much about how that will play out, especially with the trump administration coming in and

creating lots of policy changes. tom: help me with the makeup of our almost 3% gdp. will it be all consumption? francine is talking about the retail boom in london brexit. do we get a retail boom in america? howard: i think we have one already. if you look at the stimulus basel, most of that -- if you look at the stimulus proposal, most of that looks at what the short term would be. that would mean more consumer spending. 100% of gdp was constituted by the consumer. do we want more of that? i am not sure. there was the overdependence on consumption spending, maybe. francine: at the same time, you need wage growth to increase. this is a similar problem that we are having in the u.k. it is all fine for donald trump to be focusing on re-flailing, building roads and infrastructure -- henri flaking

-- on reflating, building roads and infrastructure. howard: -- not in troubleis right now from an insider prosper specter of. right now from an insider's perspective. ,ver the past several months quarters, maybe years, nominal wage grave -- nominal wage growth -- francine: i want to move away from looking at the u.s. for just one second, moving to my terminal. we are seeing big news when it comes to the german two-year and the u.s. two-year, this on the back of a report that the ecb may be doing something. we see the spread between these two bond yields. do we see a reflating in the

bond market? this may force the ecb to do more. harm: i think it is almost a done deal that the ecb will extend qe. think they are forced to do anything more, but their desire is to -- chart,is is an important the difference in yield between the united states and germany, higher u.s. yield compared to the stunningly negative yield. you go back -- that is back 12 years or so, down below on the x-axis. harm bandholz, the divergence that we see in the united states , and that globally represented -- the u.s. is alone. harm: but from an economic perspective you want to look at real rates. the real rate differential is a

little bit smaller, but then you are right. we had this diverging monetary policy, and the ecb and the fed was about to tighten. tom: help us with multinationals in the u.s. versus buying large caps. one thing that we have seen since the election is an outperformance of the more domestically oriented smaller is likely and that going to continue because the strong dollar, with the double appreciation that we have all to, it is potentially going be a very cold winter for a lot of these emerging markets as well, because slowdown in trade is going to pinch them more than anyone. and china is withdrawing stimulus. as china withdraws stimulus, china slows. that will be felt first and foremost in the emerging market. tom: i did not mention this in

the 5:00 hour. china steps in as u.s. retreats on trade. francine: and that was the story yesterday, a "surveillance" exclusive yesterday, trying to figure out whether donald trump from the tpp, giving china a gift. let's go back to what you are saying about the differential spirit overall it seems to me that the dollar strength would be the main problem. if you see the u.s. going in one direction and the rest of the world going in the other, it points to a very strong dollar strength. howard: it does. again, there is a tendency among the media and most of the public to not appreciate the full impact of global trade. it is 60% of jewel -- it is 60% of global gdp. it is united states

faster. if we start to slow down -- and i think we are looking at slower growth in the first half of next year -- that will be felt in global trade. the strong dollar is going to exacerbate that. a slowing china will exacerbate that. i think we are in for a stronger dollar, weaker trade, and caution in the first half of 2017. tom: harm bandholz, i want to bring up this chart. on the left side of the chart we are already up to this level. this is the condition howard ward was talking about. is the great moderation over, this massive move from the paul -- from the joe paul volcker 1980 period? i think the market went a little bit too far. time, i am a bit

more on the hawkish side because i have been pointing to inflation being higher. i am a little bit torrent. it should have been higher for some time, but over the past those two weeks -- tom: have we lost the language lower for longer? howard: i think it is all relative. relative to two months ago, rates are not going to be as low as long. but rates are not going very high very fast. tom: lower for longer is thanksgiving at about 3:00 p.m. when you lay down on the floor and sleep. francine: the german two-year, the yields are going down. this is probably the story of the hour. the ecb is looking for ways to lend out more government bonds. we will talk about that next. tom: on "bloomberg daybreak,"

edward morse of citigroup. forward to that. from london, from new york, stay with us. this is bloomberg. ♪

francine: this is the first time we will hear from the new chancellor, philip hammond, of the exchequer. how he views brexit. westminster,n anticipating crowds that were protesting pre-brexit. and there is the supreme court hearing on whether the vote on brexit needs to go through parliament. coming up shortly, it is "bloomberg daybreak: americas." in are looking at bonds

europe. jon: the fiscal reset, the one that chancellor hammond promised, is not needed. 2017 looks uncertain for the bond market. much extra how borrowing will come from the u.k. government, a remarkable session. returns are deeply negative to the old time lows. -- to the all-time lows. may lends ago, the ecb out more bonds to avoid a market freeze. the ecb may have to lend out more bonds to avert that. pricing inn a read the bond market on the back of that news. the periphery is very much on offer, and the core as well. intraday tom has an move for the german two-year

yield, now jumping four basis -- twoto minus 069% -0.69%. we are not expecting fireworks, i guess we're just expecting steady as she goes. >> yes, the chancellor -- we will see what he delivers. he speaks in about 45 minutes. new sort ofent the official forecast for the u.k. it will bed interesting given that there are so many unknowns about the where -- about where the u.k. economy goes from here. inhave seen simple testers support of brexit just behind me seenmorning that we have some testers in support of brexit just behind me this

morning. they are spreading the wealth of little bit further, but at the same time the big emphasis on productivity, infrastructure, and getting the economy to what hammond says should be brexit ready. new growthill we get forecasts, or do we have to wait a bit for them? get new forecasts on the opr. analysts are saying it is difficult for them to forecast given they don't not know the relationship that exists between the e.u. and the u.k. that is one of the key questions, something that the obr has to factor into the forecast. remember, george osborne, the previous chancellor, promised a balanced budget, a surplus by 2019-2020. that is a commitment that the

new government walked away from a long time ago, but we are looking for an update. could there be this 100 billion pound black hold the government has to find a way of funding for the next five years? that is one of the numbers we will be looking out for. francine: thank you very much. anna edwards there in westminster. get back to harm bandholz of unicredit. i want to get back to some of the spreads we are seeing, some of the repricing we are seeing in european yields. this is on the back of what we heard, that the ecb is seeking to lend out more bonds to avert a market freeze. is a market freeze a real possibility? should we be thinking about this danger more? harm: the fact that the ecb said they want to mitigate these threats -- honestly, they are probably more involved and have more information than i have. these market freezes sometimes happen depending on specifics in the market.

it has not been popping up until recently, that threat. but the big moves in the market suggest no more. francine: it is difficult to say -- is this a repricing on the back of donald trump's win, or is this more internal ecb politics? or do we not know yet? it is going completely the other way as u.s. yield. howard: if i could interject here, francine? is some real concern about some of the banks in europe. this has more to do with the banks in europe than it does with donald trump. tom: we have important u.s. news. john deere is such a bellwether for america, for international sales. howard ward, in a million years,

this is one of the oddest press releases i have seen. deere,fic beat by john all due to cost cutting. the estimate was $.39, and they came in with $.90. directly above it, fiscal year sales growth, -1%. it is almost like the model of your world on steroids. cutting costs works. howard: it works, but the market does not pay up for that. you have to have the top line. that is a short-term thing they can do to help earnings. but without top line, the stock will go nowhere. tom: agriculture and turf sales, down 5%. that does not even include the john deere zamboni that i bought for the backyard rink. are you more optimistic about those kind of companies, given the trumpet economics? howard: not necessarily.

if you start talking about things tariffs on items in the country, they will start wha cking u.s. farm exports. i would be cost us on that. because john deere is commodity ag driven, it is a different cycle than the rest of the economy. tom: we use apple as a metaphor. harm bandholz is with us as well, with unicredit. lots to talk about. we are watching a carter market, this wednesday before thanksgiving. good morning. ♪

tom: "bloomberg surveillance." how about foreign-exchange? dollar-renminbi -- this is about the controlled, weakening depreciation of the yuan. 6.90 is how i round that up. frombandholz is with us unicredit, and howard ward with gabelli. did you pick down 19,000? howard: i did not.

i am always long-term bullish. tom: howard ward has been bullish on equities. apple computer is a metaphor for engineering. i would suggest nothing is going to change. corporations are going to have a massive mandate to supply cash. howard: right. apple is going to be a company you will read a lot about in terms of repatriation of foreign cash because most of their money is offshore. they have 230 billion dollars, $240 billion of cash, and a lot of that is offshore. if we lower the repatriation tax from 35% to 10%, a lot of that money will come back. tom: where will it go? you, somecan assure of that will be used for buybacks, some of it for growing the dividend, and some of it will be to work. they are talking about moving some iphone production back here

to the united states. it is all good. francine: howard, is or anything the president elect can do so can investrations rather than giving back to shareholders? -- i justey can try want to be very clear that it is important that the government not insert itself into the capital allocation process. this is capitalism. these private companies need to have the authority to direct their capital where they want. if they want to buy back stock, raise dividends, buy other companies, they have to have -- tom: can government make a policy to steer investment to create jobs? harm: yes, but nobody talks about what they should do, to improve the qualification of the labor force. cash has never been an issue. you can tell -- you can cut taxes and reduce regulation, but i really think the big policy

that we have to see is to improve the skills of the labor force. if you talk to small, medium companies in europe, one of the main criticisms they have is they cannot find skilled labor. that should be the number one policy to make the u.s. more attractive to investment. that speaks to the peace earlier about pilots that are overworked and striking. there is a skilled labor shortage across many industries. tom: howard ward and harm bandholz. eli lilly, with crushing news. the stock down double-digit. their outsider drug sales in a final -- their alzheimer's drug fails. ♪

jonathan: for our viewers world wide, a transatlantic bloomberg

daybreak. i am jonathan ferro in new york alongside guy johnson in london. david westin and alix steel away. equities in the united states, all-time highs. benchmarks pretty stable as we count down to the opening in new york. a very witty session for the british government bonds. thiswhat we need to know hour, let's talk about trump in transition. he is said to be looking at reshaping the fed fast. who is in line to fill the vacant seats on the fomc? crude trading their $40 a barrel as opec fails to agree on iran and iraq hospira tip-in takes -- precipitation. well