continue. head winds continue. florida braces for hurricane rebuilds,e city another prepares for the most powerful storm to form in the open atlantic ocean. a hike, neel kashkari sounding the alarm about raising rates. mario draghi repairs for his own announcement. >> welcome to "bloomberg " i am david westin alongside alix steel, jonathan ferro is off. after thelm blockbuster day. triple digit selloff in the dow. a quick knee-jerk, safe haven trade a few minutes ago about half an hour ago based on headlines from north korea and now we are calmer. yields are up by 2 basis was by selling by almost 10 basis point yesterday. you're safe haven board, vix and

-- gold all muted but anything goes as abuse headlines crossbreed david: there are so many. the morning brief. -- but anything goes across of the headlines. -- david bank there are so many. at 2:00, the federal reserve will release its beige book looking at the u.s. economy. an update of headlines outside of the business world with taylor riggs. taylor: starting with a hurricane, the most powerful to form in the atlantic ocean is preparing to hit florida. passedricane of irma over the caribbean street it could hit south florida this weekend. a worst-case scenario have it destroyed so much property that damages would surpass hurricane katrina a that was the most expensive natural disaster in u.s. history.

the south korean president is seeking vladimir putin's help for north korea and they met and not stop,rth korea is the situation could turn uncontrollable. putin said there is no need to back a north korea in a corner. president trump has left a door open for little bit to end daca. last night come the president tweeted he will revert the dreamers act in six months -- he will revisit the dreamers act in six months if congress fails to act. in limbo about one million people who consider themselves americans. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries, i am taylor riggs. this is bloomberg. a drop indow seeing

one of the biggest movers in the treasury market. 10 year yields hit two point 05% and an overnight low and at the lowest level since the election. my question is, why? mounting tensions in north korea, hurricane irma or a looming debt ceiling? here with us is megan greene and brian belski and i feel like i'm in a game of clue. , how dide debt ceiling you understand the selloff yesterday? brian belski: everybody is back to work. if you look in august of volume on the new york stock exchange sinceetween 30 and 40% 2000. if you look since 2009, a little bit less. day, thed of the professionals are back from the shore and the island and from wherever beach is that are at and we are starting to think about what will happen for the fourth quarter and allocate accordingly. coming into the summer, every

body looking for correction and we would like to buy on a correction. everybody would like to buy lower. whenever we are looking for correction, it really comes a backer you have to be careful what you ask for. a lot of mixed messages. macro is pretty good in terms of earnings. everybody talks about high iep's. and now really about growth and not a recession coming. you are seeing "the risk of trade." we think it is healthy and necessary and we would be buying the depth as a long-term goal -- dip as a long-term goal and we best on au.s. is the fundamental basis and we would be looking to add or start a list to add. oris not a recession comment a bear market and everybody needs to calm down. think they'lli said speak had a big part to do

with an analysts came out with calls said they were not going to hike. many people saying they think they mail as long as the markets are aligned and we do not get a further fall. assaid they think they will long as the markets are aligned and we do not get a further fall. north korea could get a piece of but it is hard to price in geopolitical risk particularly the timing of it. i do not think that is the biggest driver but the round of said speak -- fed speak. david: brian said it is a temporary dip and at what point did do we really get what we expect? are people reacting to all of these stimuli because they have a deep uncertainty? megan greene: yeah, absolutely, more uncertainty since this election that we have seen in about a decade in terms of policy and risk.

a lot of uncertainty in everybody is expecting some kind of correction and this is not it. what will trigger that is really difficult and could be geopolitical, could be policy related, we have nothing any of that. david: are the downside risks more likely than upside? what are the of size? brian belski: that is me in the fetal position. no, no, no, everybody is a negative. the blackberry. ,o -- you scroll of the news nine out of 10 stories are negative, everybody thinks it is negative, you want to go the other way. if the analysis backs it up, even better. number three and really important and perspective, the majority of some of five analysts have less than 10 years

experience and over the last 10 years, death to america, dollar gold down and america does not matter. that is all they know in their philosophy. this is about the said. fromed has moved around crisis levels for the world of comics to an end and we moved up and starting to see growth -- from crisis levels and the world is coming to an end and we moved up and we started to see growth. if you have been an analyst for 10 years, you have never seen this and that's why they are befuddled and their negative first, never positive. alix: we saw the huge move and treasuries but not over in europe. i interpreted as that as we're having some kind of reaction to what is happening in d.c. and a lack of agenda. and followthrough do you not to buy that? : the trump started to unwind and of the first quarter

alix: is there more to get out? brian belski: we have a good fortune to visit cabinet -- clients around the world. , thelieve that consensus majority clients believe in nothing will happen. if something happens, there is a pretty big bid and nobody is positioned for it for people are so afraid to be wrong, they do not want to be right. people feel like they have to buy the market. the risk is to answer your question was distinctively, the risk as to the upside and not the downside because people are not positioned accordingly. when the rally columns, people will go, here is the rush. david: why does it cut the opposite way? why do we have an entire generation of analysts who have not seen a downturn in will not know how to handle it? brian belski: a lot of people

were smart enough to get out of wall street or going to be buy side. a grind side has been for experiments will be worth something going forward and not just listening to the company and the cfo but to do the work and start to do the work. the wind out some things and that's how you get paid in this business. alix: what is on your shopping list? brian belski: value is a place to be from a longer-term perspective and seems to outperform in five to seven year cycles. it isody believes when scarce, it over sales. you start to see a little checking in the armor from a longer-term perspective, tech is a great place to be. it has been leaning on some of the rallies and within financials, industrials, and we

are good on health care. health terms honorable will call into the year and we think from a yield perspective and from earnings consistency, health care is a great place to be. david: megan greene and brian belski will both stay with us. rokita: --e have rohit kumar and will talk much more capitol hill. this is bloomberg.

david: this is bloomberg. in the wake of the so-so job numbers last week, we heard from three members of the federal reserve and 2 struck a dovish tone. one urged caution.

>> because we have been falling of inflation objective but over a longer pew note, we should be cautious about tightening policy further until we are confident that inflation is on track to achieve our target. presidentneapolis fed went further saying fed rate increases may have already heard that the economy. >> maybe i will rate hikes are doing real harm to the economy. it is very possible that our rate hikes are leading to slower job growth, leaving more people the sidelines, lower wage growth and lower inflation. these premature hikes we have been embarking on are not free and we need to remind ourselves of that. joining us is politic correspondent michael mckee and still with us are megan greene and you call it be-mo.

alix: it is like a -- david: cheer on the sideline. it is not a big shock for lael or kashkari to be dovish for it is there anything to support what anil kashkari have said? michael: it is hard to back it by data. and the first time they started in december of the next went up for several quarters and a slump in 2016 into 2017. we have had to rate increases. -- two rate increases. we are probably going to do 3% see annd it is hard to impact in gdp and harder to see in a jobs because unemployment rate below what most people at of the fed continue the full employment level. the only place that is argument might hold up is in inflation

because inflation has remained low. the problem with that is we've always been taught the monetary policy works with a long invertible lags -- long and variables lacks. inflation has been low for 10 years and has not been a certainly responded to what we have seen from the fed. inflation expectation, i understand what kashkari is saying that the fed is signaling and an impression with inflation down the road? megan greene: it could go both way. you could save the fact that they want to hike is a good indication for the u.s. economy having recovered and smooth sailing without grouping of the system going further. and individuals can read that 2 different ways. david: what about from your call? how dependent is a that on the said keeping the -- fed keep in the rates low? toan belski: we would like

see the fed increase rates because it says the economy is proving a little bit more. then inflation has been decreasing for 40 years, right? you can't go back. oil prices have rebounded from last year's low and copper come back and gold because of the whole defensive move on a dollars lower. butctations are a big part, that is why we think that andyear treasury has fallen a combination of a lack of conviction with response to theomic growth and really whole notion of deflationary, deflationary. in allback to the cycle we know is deflationary and will will trade like that and think like that and investor like that. i want to take a look at the markets implied probability of a rate hike and shows what we have seen.

the yellow line is a historical implied curve as of june and green where we are now of december. it is still so flight because war under pricing any rate hikes. is it that justified? megan greene: i think it has gone too far. expectations way below the fed. i think we will be in between and the fed in particular doesn't have the best track record in the predicting their own rate past. from act your on, as they will have to revise downward's on what we have seen. is led by thed market and the short-term but medium to long, they will go to the actual target for david: what does a man for december? alix: 20%? >> data number bounces around and look at the fed future and they change a day-to-day. if we see in little bit of rebound in inflation and we

should because where sink higher gasoline and oil prices, the fed is supposed to look through it of the markets and will they raise the probability? forget a stronger jobs report, you could see the number go up and we will listen in november 2 the fed speeches and they will set the table because they are trying to get rid higher and they think they have a free pass. here there are making the case, that will drive expectations higher. alix: i was asking your of all -- call it what you needed to see a you said we cannot go lower. do you need the 10 year to stabilize? if we see the market have to rerate anyway, what is that going to do to the markets, short-term? brian belski: a couple things. you will probably see a bit of a shock because people do not understand yields and rates can go higher because they are not positioned for that and an unwind which we think from a

fundamental perspective areas like utilities, always going to be a couple stocks that are going to buck the trend. you as utilities is one of the most expensive in the world. telecom is less because that had problems with earnings. -- u.s. utilities is one of the most expensive and the world, a great sector, that is when rate has been going down. you have to unwind and still the distro and hatred for financials. people are discounting the greater dividend growth and so negative and so predisposed to be negative. and after be disjoint that, you will a return back into the trades. not of the trump trade but the growth trade, the value trade which and nobody believes. you have to unwind. alix: michael mckee and megan greene and brian belski. did i do it right? be-moe. i will work on that.

coming up tomorrow, i will speak to an energy chairman and ceo and the only exporter of lng in the u.s. and down on the west coast at how is he done with the impact of harvey a potential of irma -- of -- this is bloomberg. ♪

>> they come up with a number like $300 billion and the costliest is hurricane katrina and sandy was $70 billion and we are not sure were harvey will come in. andrew,ack to hurricane 1992, dave will remember this. alix: i was there. i was a there. michael: you were waving a running of the water. one of the three categories fives. 300,000 housing units destroyed and came in and $40 billion of the most third destructive of

all time. in 1969r two, camille and the great florida hurricane in 1935, none of us was there. whatchart shows you happens to national gdp. katrina, gdp went up. sandy, we were in a downtrend and went up because you get a lot of money going in to rebuild . the question this time, what does it do to consumer confidence and where do they get the money? we have not had to back to back huge destructive hurricanes like this annual throw a wrench into washington -- like this and it will arrange into washington. this will not adjust to be miami, you're talking about real not just bes will miami, you're talking about real money that does not want to be spent. alix: the fed said will designed the structure and winding down the balance sheet to minimize

the impact and was not as sure about rate hike and irma could be bigger? megan greene: shrinking the balance sheet and using rate hike or cut are totally separate now. i think that is right and the fed can shrink the balance sheet very, very slowly and gradually in a predictable way. major natural 2 disasters and i think he is right on that for. not only is it going to be difficult to find the money for the hurricanes in d.c. but to policy agenda more difficult because of the white house will try to pass tax cuts. in addition to having to cough up hundreds of billions, we might have tax cuts that will be difficult to finance, pay for themselves more likely, but that will be a harder sell as whips seen our deficit rise because of the natural disasters. david: it is already a tragedy

for houston and looks like for florida. will the u.s. have to borrow more money? then belski: translates to kids in washington will have to and lete in the sandbox tommy borrow the truck and susie borrowing that doll and played nicely and be adults. attitude toten this play together, let's get the bill together to get the hurricanes donna. alix: bloomberg's michael mckee, megan greene and brian belski, all of you will be sticking with us. coming up, rohit kumar. this is bloomberg. ♪

alix: this is "bloomberg daybreak," i am alix steel. after thehe calm storm. modestly positive territory. dow up after a triple digit selloff.

euro stoxx in the red and insurers getting hit in europe. , this is haven asset where we stack up. euro-dollar flat and a little bit of selling in the 10 year and yields higher by 2 basis points by the huge move yesterday. gold up. it feels like a calm and we will see more headlines will cross from the sea washington, from d.c. and an update from taylor riggs for taylor: a storm for the record books and on course to hit florida. hurricane irma has winds above 185 and the strongest atlantic storm. it could strike florida this weekend and that has led people to prepare to evacuate or hawker

down. one worst-case scenario said, could be the most expensive natural disaster in u.s. history. may'soblems for theresa brexit planet. the opposition will try to rerate her repeal bill -- rewrite her repeal bill after brexit. they eu's gevity brexit negotiator said she doubts officials will give to talk about a trade deal mets month after they had hoped. president trump takes his campaign to overhaul the tax code to north dakota and he will have an unusual guest on air force one, the democratic senator. the president will argue that is cuts are worthy of support from both parties and leaving details of any reforms of two republicans in congress. -- up to republicans in congress. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries, i am taylor for this is bloomberg. david: president trump left it up to congress to take care of

immigrant children. michael bloomberg who happens to run a company launched congress to step in where the president has failed to as part of what you said is -- isand part of what he said -- in that same keys, michael bloomberg gave estimates of the u.s. economy of it important all the people of daca saying -- still with us is megan greene and brian belski. let me start with you, megan. put together the policy question. deal with the economics. has said it've seen will hurt the u.s. economy as they are contributing members and they are paying taxes. what sense does it make? megan greene: he is more

ideological than economic and i agree with the statistics and will be a cost of economy. it is more ideological and a seems to be a proper tagging of american jobs for americans which is right down the -- it seems to be protecting american jobs for americans which is right down the middle of what trump said. it will be a drag. david: it does not seem to be the biggest problem. people goings without work. we are close to full employment it it would be different if was 8% or 9% and we need to get people out of the country. brian belski: it is a different kind of job. construction and industrial jobs are pretty good. and anytime time you see jobs above 100,000, that is pretty good. it it depends on perspective. if you go back several decades

and the annual average august was 79,000. that was a pretty good number and we are trying to be negative. job growth and america is pretty good. the american dream is pretty much alive, it is about ideologies and assessing the tone for what the policy is going to the. president trump has pushed it out for six months and giving it to congress, asking the congress to do the work and get something done. alix: we are seeing companies respond and a best buy said they are seeing the drop in hispanic shopper pull back a long the mexican border, whether a wall or deportation -- : best buy has been cutting employees, that is a headline they are trying to grab? they are in a secular decline. the only reason you buy best buy stocks is when they sell -- close stores. i say headlines like that are bunk.

david: let us go back to hurricane harvey. one of the problems we have is construction workers to rebuild homes. there is a very specific link to the immigration issue they are having trouble getting construction workers. brian belski: let us post the job for if you post the jobs and pay the people, they will come, period. the real unemployment rate, people are still underemployed. was it the other hurricanes, we want to react to the headlines and the noise out of washington. look att want it to history. the history of katrina and sandy, the gdp per covered in katrina. that is what we want to recover -- we want to focus on and we are focused on the motions of washington. david: tax reform that doesn't matter to investors. -- that it does matter to

investors. president trump tweeting about the next stop of his tax tour and will go to north dakota where the highest taxes nation in the world and that will change. there are conflicting reports of what that tax reform will look like an even if it will happen at all. joining us on the set is rohit heads washington tech services and the former deputy chief of staff and domestic policy director for senator mitch mcconnell, the senator majority leader. thank you for being here. as best as you can tell, realistically, what would tax reform look like? --it kumar: i think it makes i think it will be a mix of tax reform and tax relief. i think you will see some things done permanently annex some things because in the way it will happen because of budget reconciliation a using a simple majority so it is not subject to a filibuster.

setting up a process where they could do it. that means as it could increase of the deficit in the long run but in the short run, no. it is kind of like we did with 2001 in the bush tax cut and set up about fiscal cliff it. david: we hadn't larry summers who said the direction as they are heading will not do much good for the u.s. economy because it seems to be cut rather than true reform to redo you agree? not sure i: i am agree it will not do any inc. for the -- it will not do coming. for the there are examples in history, but the than what larry is given credit for because there will be some structural reforms. and some other things that will relief.e temporary

just because it is temporary on the first pass does not mean it will not ultimately be made permanent. the bush tax cut a perfect example. david: the bigger you make it, does it increase the difficulty to gain through? rohit kumar: it does and it is a sweet spot is something so small that is easy to do and not much bang for the buck. what is a big six is doing and they met with the president is tried to land the sweet spot to be big enough. alix: the perfect goldilocks. growth, what is your expectation in d.c.? brian belski -- megan greene: i 3%not expect us to sustain growth and a.l. more on the side of larry that we will get tax cuts for the corporate tax rate is 16%. it is unclear if we would be a huge boost to the economy or companies would use it to invest

or rather engage in more buybacks or diffident. i think we might get ridiculous. -- or buying more dividends. i think personnel changes will be enforced less strictly and that could help juice grows a little bit and somewhere down the road, maybe after midterm elections, we could get infrastructure spending in response to the hurricanes which can help boosted gdp. david: how big is a problem is taxes for you as companies? -- u.s. companies? you take effective tax we are in the middle of the pack. : part of the story i do not understand on this is it is going to get done. whether or not companies do something will be all about feeling better about growth again. ageur country, america, the

of equipment on the industrial side at all time highs and we have not bought economy and companies have been cutting, kartik and firing -- cutting, firing,'what about the marginal 80%? -- 18%?%, it will be going down and they will be investing again. alix: why do you think they will be investing? workers are so cheap and as long as wages are not going off, that the higher a load of workers. to.n belski: they have think about a beach ball in a swimming pool and pushed on and a relief of capital and they have to spend for investors to buy the stock because people bought the stock because it was cheap and margins were expanding a buying back stock in buying dividends. remember the job of the ceo and cfo is for the stock to go up and they will have to invest. this may be a two-year comesenon where cap x

back. the big trend everybody will be talking about is -- cap x. rohit kumar: and you do unprecedented expensive was a expensing or for some period of time is a big piece of what motivates especially amongst the big six. a lot of the conversation is if we allocate, how much in of the corporate tax rate and accelerated with the idea that new production and new equipment? david: larry summers said it could drive growth because you could get more cap x. a big thank you to rohit kumar and brian belski and megan greene will stay with us. we will her -- we will talk to ken solomon. this is bloomberg. ♪

alix: -- tyler ranked i am kevin briggs in the enterprise grade world. coming up, president and ceo. riggs in: i am taylor the enterprise green room. to your bloomberg business flash. airbus is close to getting in jets miners of 830 that could be valued at $14 billion before discounts. the order will likely be placed by united continental, the airline what a covert orders for a larger version of the a350 to a smaller one. the largest energy company in europe is investing in project to increase natural gas demand.

shell is helping smaller and less creditworthy customers. a factory orders unexpectedly fell in germany, europe's largest economy. the july figures released less than three weeks before chancellor merkel faces an election. a stronger euro can hurt exports. that is your bloomberg business flash. emma: -- alix: thank you. according to a recent a survey by bloomberg, 67% think mario draghi will address the your role no big changes to qe but will wait after the top or -- will wait after october is still with us is megan greene. megan greene: i think we'll have to wait longer to see how they will taper qe but i think it will happen on the name timeframe.

i think they will start next year and will taper their qe program through the course of next year and maybe start hedging. we will fall -- find out the details later because we do not know. the ecb has been clear as will discuss all of this in the fall and now just of the fall and we do not have the answers. the marketems like is totally not seeing what the ecb is doing correctly and their oh-fer -- overemphasizing. bloomberg intelligence wrote there is nothing that short-term oriented investors like more than what they firmly believe are malleable central banks that are committed to boosting asset prices. is it that fundamental misunderstanding? sure iteene: i am not is a misunderstanding fundamentally. we know things go haywire and central banks will probably step in. the question is, how candidates

step in a given central banks are starting to unwind asset purchases? that's partly why they wanted to get the rates up so when they need to step in, that a way to do it. david: there was a bloomberg report that we may not find out until december what they will do in december. the last time they telegraphed well in advance several months or years down the road. megan greene: they have been sign posting they are starting to think about tapering and we know you have to do the math in terms of germany they will run out of things to buy. forave known it is common while only the details we do not know and much more complicated than and the u.s. there is an election coming up in italy by may of next year that could complicate things because italy has profited off of qe. we will find out the details. and the short-term, the effect on the currency little bit and has not really been sustained,

but part of it is -- the euro little bit. i think the start tapering qe in ,anuary part alix: megan greene really nice to see you. coming up tomorrow at 7:45 a.m. ecb policyey decision for mario draghi and the man himself in a live as conference for i enjoy -- in a live press conference. i enjoy them more than janet yellen's. this is that wrong? -- is that wrong? go to bloomberg tv goal. this is bloomberg. ♪

david: this is bloomberg. in sports, venus williams advanced. it is a big victory for her and a loten which is missing

of star power this year on both men's and women's aside sprint joining us is ken solomon, tennis channel president and knows all things tennis. -- on the men's and women's side. -- joining us is ken solomon. ken solomon: it is going great from others. we have went from 10 million to 30 million homes. on the women's side, incredible homogeneous. the american women are dominating. david: what about sloane stephens? is solomon: they say it attributing to her having broadcast. she is an amazing talent for you one of the things we have seen is people have been forced to that you're often because of an injury or something else and coming back with a stronger body clear ahead. david: talk about sports

television. we had a big announcement on earnings from disney. bob iger said we will take easy and in us -- espn in a direct subscription service sprint ken solomon: it is giving fans a choice and i remember being here with you in the early days and sort of looking like the crazy professor as you can watch it on tennis channel right now which you can. david: you had it early on a you could subscribe. ken solomon: it has grown as an integral part and when we were at that the networks, you kind of having to wait and see what the networks would choose you, baseball or tennis match intent now the -- and now the choices in your hand. involving.s but when disney's sneezes, a lot of of the world feels like it gets a cold because it has been -- it is a big business. they are certainly not first, turner announced this, we have been in this.

the fans demand it and the natural evolution at the choice is what matters and how you present it to people. david: take it out three or five years, is it the dominant way that we look at sports? espn ormon: if you are the tennis channel on a single sport, it is integrated. we do not look at it as a replacement what a compliment. certain tournaments will be up to -- will be all the courts in the near quito -- period and how quickly we can build of infrastructure. i do not think the linear goes away and for espn, in many ways the primary network becomes the channel for yes, i love cricket and i love this and premier league soccer so i will go over and watch it on perhaps a paid service to get all of it and

watch it the way i am general entertainment. david: one of the big changes is you workforce and clear that i suspect it has something to do with the number of homes and tens channel and things like that. tell us what it is like. what we know about the sinclair is they are a large local broadcaster that has a particular political point of view and it is rumored they are vying for the fox news. how does tennis put together with their? ken solomon: sinclair is a large company and diversified and i know them and have known them all many different size and we identified each other as particular partners. it really is, it is something new, but this not nothing to do. sinclair has followed was we have done and we are going into year 13 of tell us -- tennis channel. it has been the perfect marriage.

sinclair is a local broadcaster and local broadcasters having a resurgence because if you look at what we have, tennis is a perfect category. on the one hand, national and international with the biggest stars. and at the same time, hyper local, tennis in high school, college, kid centers and of those centers. -- and adult centers. oneking one sport through company nationwide or even international basis, we have an internationally number one url and typing tennis and get tens channel -- tennis.com. it has been a hand in glove kind of relationship and a great emancipator for us as an independent network to level the playing field and say we are not espn or one of the big conglomerates a part of a local company that people care about. david: what is next for tennis? ken solomon: new and bigger.

tennis is hot. paidave a lot of attention on it. economically, $800 million worth of revenue coming to the city. sam is still in it. ken solomon: he has had quite a run for we lost him last night. i hope you were not asleep. david: ken solomon, thank you for being here. alix: thank you for totally of watching tennis. american airlines canceling 51 flights out of miami today and thursday because of the hurricane. more coming up. this is bloomberg. ♪

♪ alix: the selloff in equities continues across the globe.

the s&p had its worst day in three weeks. florida braces for hurricane irma. american airlines canceling 51 flights today and thursday from miami as it preps for the most powerful storm in the atlantic ocean. don't take a hike. neel kashkari sounded the alarm about raising rates ahead of the announcement on thursday. david: welcome to bloomberg daybreak i'm david westin alongside alix steel. jonathan ferro is off today. alix: it is the calm after the storm. david: interesting choice of words. alix: take a look at what's happening in the act -- equity market. s&p futures up by three points after that selloff yesterday. euro-dollar starting to inch higher. we have regained a little bit of a risk on mentality when it comes to the fx market.

market in the treasury as yields moving higher by one basis point. to tell five is what we had yesterday on the 10 year. ,'m taking a look at the vix dollar-yen, all relatively flat on the day. industrial metals holding off strong despite the selloff. david: it is time for the morning brief. 10:00 we will get august nonmanufacturing isn data. federalp.m., the reserve releases its -- work. taylor riggs is here with first word news. : the most powerful storm ever to form in the atlantic ocean is aiming towards florida. earlier today a pass over the island of barbuda in the caribbean. it could hit south florida this weekend. the worst-case scenario has arm destroying so much it

could become worse than katrina. american airlines announcing 51 flight cancellations today and tomorrow due to irma. south korea's president is seeking vladimir putin's help with north korea. warned that the situation could turn uncontrollable. putin said there is no point in backing north korea into a corner. theident trump is leaving door open slightly after ending a program preventing the deportation of immigrants illegally brought the uss children. u.s. asht to the children. putpresident's action has in limbo about one million people who consider themselves americans. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. alix: you have a little bit of

risk off yesterday, now a calm in the markets. the dow reporting a 200 point drop so far this year. one of the biggest movers was in the treasury market. 10 year treasury yields getting 2.05%. now the lowest level since the u.s. election. my question is why? a looming debt ceiling? a potential showdown? asset allocation marketist and the bnp economist joins us. riskr us, i think the combined with the dovish fed speak caught us. is kind of a golden age for global investing here.

measures 45 countries. of 45alize that 45 countries are growing this year for the first time since 2007. we have seen this trend before. we've seen the one day downgrade and in the fundamentals more important. by the way, we are still 1.5% percentage points away from a high. alix: if you take a look at what happened at the 10 year, 2.05 percent, what is the treasury market telling us? paul: it is saying the fed is out of the game. hide when core inflation is as low as it is.

they don't understand why it has happened in the need more growth to push inflation up. what they don't need to do is dampen expectations. they are out of the game until next month. david: let me question you about that. why would raising rates dampen inflation? i think it would say they are more hawkish than they need to be. it would give a message about the future sense of miller -- monetary policy. if you raise rates when you it says youo, then are shifting towards a much more hawkish stand. that would push the dollar up and reduce prices. it would make people want the next step. be a mistake to hike at the moment and i don't think they will make that mistake. david: why don't you respond to

that. every hike in the past has met with loosening financial conditions. there is a thought we are at a pretty low level in absolute historical terms. willp: remember, they announce a pretty important balance sheet in a couple of weeks. they had that as well -- they have that as well. i think it would like to see them closer to 70% ago. the -- they have the inflation cover to move. comingot talk about this totally off their normalization process. even if they don't go in december, we think they will announce in september and this is a normalization process. they have already moved twice. they are almost looking for a reason to hike versus prior years when they were looking for reasons not to. david: paul, talk to us about the balance sheet issue. we think we will

be just fine with rolling up. why are the central bankers so sanguine about the consequences? paul: because they try to reassure us. if they were completely relaxed about it -- remember what happened with the temper tantrum. they don't want to do that, they are going to see what has happened and if there is a big reaction, then they will recalibrate. they say they won't, but if there was a big market reaction, they would. , it is have to remember not just the fed balance sheet, there is also the bank of japan and ecb. together they are buying billions of bonds every months. that has important spillover to the u.s. market and it is

helping to hold yields down. year, the fedrd a is running up its balance sheet more quickly. it may be that the annual rate of qe will be one point trillion dollars a year. i think it will start to matter. at the moment we have the thin end of a long way. alix: what is interesting about what phil was saying is that he is not buying because of a goldilocks scenario, he is buying because we are in a killer global economy. do you agree with that kind of statement? it would be more interesting if i disagree, but i do agree. if you look at the trending growth, everywhere is growing more quickly and it is dependent in many economies on domestic demand where some economies in

the past were taking growth from other people because their experts worst -- exports were stronger. it's a bit like a human pyramid when everybody helps to push each other up. that is what we have at the moment. everybody is strong and it is mutually reinforcing. with inflation being low, central banks being cautious, a great time for risk assets including emerging markets. alix: copper did not participate in that, industrial metals and been holding up. is that a materials or industrial cyclical call? philip: it is an almost ideal environment. they are dancing through the streets of beijing with rates remaining low and the dollar is weak or. this is an ideal environment for that. the trump trade, that is what people were fearing was higher

interest rates, stronger dollar, small-cap over large-cap, emerging markets underperforming. that is not happening and stock markets are still posting really good gains led by the emerging markets. david: this is what puzzles me. at the peak of quantitative easing we heard from central banker after central banker, fed governors, what we really need's fiscal reform. we need the government to step up and do something. we now have a situation where we don't see any of that reform. central bankers will be backing off to some extent. why are we still so comfortable with how the economy is going? .aul: because it is widespread it is not like there has been a massive acceleration. everybody has got the feeling that it's much more solid. back when they were talking about fiscal people, monetary policy was impotent.

now that feeling is gone. the economy looks very solid and it looks solid across the map. central bankers are thinking we don't need fiscal action. we can think about recharging our ammo by backing off a bit. phil cap rally and paul mortimer-lee will both be staying with us. we will be talking with david beyond go -- bianco. ♪

♪ david: i'm david westin. as if congress did not have

enough on its plate, president trump assigned it the responsibility of the issue of deporting people brought to this country when they were children and gave them only six months to deal with the problem. joining us from capitol hill is kevin cirilli. why did he do this? is it just to get it off his desk and onto there's? kevin: the president making the case that the former president's executive order was illegal. executiverescinded an order that was popular amongst democrats and key conservatives. he kickstarter the debate in congress where lawmakers will have six months to get to some alternative solution. already we are hearing some of those alternative solutions come to the forefront, including a proposal put forth by senator lindsey graham and dick

durbin. what they would do is allow for the dreamers, the 800,000 people brought to america when they were children and have grown up here. it would allow them to become citizens should they pass criminal background checks and volunteer in the military or other volunteer programs. there is a host of questions surrounding this morning whether or not there is a viable moderate can senses that is to be formed. congressional leaders will meet at the white house with president trump later today. david: there is another constituency that weighed in immediately after this happened and it was the ceos in the country. we had ceo after ceo issuing statements. the tree mers impacted by this cruel and misguided decision make significant contributions to our country. i urge congress to make immediate action. tim cook, i am deeply dismayed

that americans may find themselves cast out of their home. lloyd blankfein as well weighed in. really condemning what was going on. does the president pay any attention to the ceos and he really counted on so heavily? kevin: it doesn't look like it. microsoft is pushing for lawmakers to pass on capitol two -- for lawmakers to act on daca. this is all going to come to the forefront justice hurricane irma is about to make landfall because the senate wants to tie hard the aid and the debt limit together -- hard the aid -- harvey aid and the debt limit

together. alix: thank you so much. philip camporeale he and paul mortimer-lee, the debt ceiling comes first and you can see that stress reflected in certain areas of the market on the margins. for me it was you had yields versus thell two-year yield and they are now in conjunction. the last time this happened was 2013. how'd you start to protect yourself against the short-term d.c.? the laste saw this time. it was short-lived but you expect it with the debt ceiling looming. for us, this is not something we expect to really derail markets. i think what kevin said was important. anything you say before tax reform in terms of the congress agenda, that will catch our

attention because the tax reform argument and the tax reform potential for earnings in 2018 is what we're paying attention to. a little bitoks better than what we did in the u.s.. the tax reform would be nice to have, but not a linchpin. we saw in the second quarter gdp was a 3% growth. what kind of signal anywhere from this do we need to see that kind of -- to sustain that kind of growth? paul: i think it would be difficult because the underlying thread is about 2%. to get up to 3% you would need to see a massive tax cut. to be honest i'm not sure the economy has the spare currency to add to that. there is not the capacity to deliver 3% growth on an ongoing

basis. i think we can get with tax reform 2.5% the next year, but that would be pushing it i think. david: what is left at this point in the president's progrowth agenda? we hear about tax reform, but then we hear we have to deal daca. , itrding to a piece out will be about $20 billion year in lost income. are we moving forward or backwards? paul: in terms of the debt ceiling, we will get through the debt ceiling and get an agreement. in terms of the shutdown, if you look at history, we've had 18 of them. if they were important to the economy, we would not have 18. what we will see is the economy take forward until december on a potential government shutdown. on tax reform, we have to see what they come up with.

real reform is difficult because real reform creates losers and winners. i think ultimately it may be easier to have tax cuts. that is unlikely to calm until the end of the year or even early next year. so at the moment, we are not making a lot of progress. we are not moving quickly. alix: it is all happening at once. phil cap rally -- phil camporeale and paul mortimer-lee, you are sticking with us. tomorrow we are bringing you mario draghi's news conference. it is going to be an interesting couple of hours. this is bloomberg. ♪

♪ david: this is bloomberg, i'm david westin. greg's the negotiations continue their bumpy ride with news on the european side they doubt they will get to the question of trade regulations this fall and

the news the labor party may .ake on prime minister may joining us now is our brexit editor simon kennedy. we still have phil camporeale and paul mortimer-lee. simon, give us an update on where these negotiations are standing at this point. simon: it will be a bumpy autumn for prime minister theresa may. telling german lawmakers the october milestone that many in the eu and u.k. hoped to reach is now going to slip. that milestone was the declaration by european leaders of it -- of sufficient program on the terms of the divorce. if that was met the u.k. could discuss the long-term trade deal. they are not very happy with

progress. david: how sophisticated is this or is it simple in the end? is it you agree to pay up and we move on? simon: there is a huge amount of money. there might be a fundamental disagreement going on about the .oney the eu wants a financial settlement paid but he wants money paid for that obligation. that will span beyond brexit. the u.k. see the money as a payment for the future benefits, the future access to the market. neither side talked about the terms of the amounts. on the moment, no progress the key issue. alix: obviously at home internally u.k. politics is

rough for theresa may. the labour party basically wants parliament to be able to have say in any kind of amendments that wind up turning eu law into u.k. law. theresa may wants to streamline the process. is her own party revolting against her? plan tohis is the import the whole eu law book on to the british statute and then after brexit they can whittle out what it doesn't like and that is about 12,000 laws. to make things easier, with the government would like to do is have ministers be able to unilaterally tweak parts of the law they don't like. the labour party says that much and up forab parliamentary scrutiny. unless that changes, they will have questions and maybe oppose it.

the opposition will want to -- anti-brexit tory members of parliament to sit with theresa may and try to bring them to their side or least diluting the government's plans. alix: thank you so much a simon kennedy. camporeale and paul mortimer-lee you are both sticking with us. coming up, the bundesbank board member will be joining us. he has an inside look at the potential companies moving to germany from london. this is bloomberg. ♪

♪ it is the call after yesterday's big selloff. s&p futures down by three points. a flat over in europe.

take a look at other asset classes. the 10 year yield pretty much goes nowhere after moving lower by at least 10 yesterday. the euro dollar inching higher as the dollar is mixed on the day. crude up by 1%. we do have the trade balance coming out for july and it is -$43.7 billion. will be exporting more than we are importing. the weaker dollar will help those exports as we move forward. the trade balance down $43.7 billion. byid: we are joined now bloomberg fed reporter matt basel are -- by fed reporter matt. yesterday we heard from the fed president hu warns they are

doing some damage to the economy because of rate hikes. hikes areur rate actually doing real harm to the economy. it is very possible our rate harks -- rate hikes are leading to slower job growth, more people on the sidelines, lower wage growth and lower inflation expectations. these premature hikes we've been embarking on are not free and i think we need to remind ourselves of that. david: pretty ominous talk. is there any evidence in the data that would suggest he is right? matt: it was surprising to hear to -- a fed president to say the actions may have an effect on the economy. i think you could make the case that he does have a point in the sense that if you look at what happened in 2015 for example right before liftoff, you had a big trading and financial conditions. , theil and gas industry

manufacturing industry got hammered with a stronger dollar. that was due to central-bank divergence. you can kind of connect the dots to get there. it is an interesting debate now because the question is are we coming off the tail end of that shock. should we see a pickup in the economy? heightevery time they of so far, the conditions have loosened. matt: you have this tightening of financial conditions before they start raising rates. that was the case for a good 13 months where you had tighter financial conditions. for the last 15 months or so you have had easier financial conditions so it might be getting to the point where we are balancing out those two. alix: does anyone care about what he has to say? i feel like he is always the outsider now. relevant orat all prevalent in the fed?

matt: he is definitely at one end of the spectrum on the committee. we heard from the fed governor who has been noticeably dovish. she had a dovish message as well. the extent the committee is in all these different aspects of reasons why it might make more sense to go slower now, it could potentially be relevant. alix: what is going to be the keeper bill dudley? been: he -- matt: he has adamant on how easy conditions have been. he has been adamant the curveball made a visit a great relationship, but it will show up eventually so it makes sense to continue hiking as long as the unemployment rate is below the estimate of full employment. given the circumstances, we might actually becoming -- he might actually become part of the more hawkish wing. paul, i want to bring you

in here. what does it mean when you have dudley one side and the other. where does yellen stand? paul: historically she stands closer to bill dudley. i don't think -- i don't see how neel can make the claim. the year on year growth rate was more than a quarter. it is now two point -- two and a quarter. where is the slowdown he is talking about? unemployment is below the equilibrium rate. i don't have much sympathy for that. , i she is talking about inflation is low and if that is low we don't fully understand why it is so low. i think a lot of things are going on. technology, competition and so forth. that is holding inflation down. while inflation is low you can hold back and let the economy

grow quicker. that will raise inflation and i think that seems a respectable argument and probably the one janet yellin will listen to. you said earlier the fed is off the playing board right now because they are not going to raise rates this year. let's talk about what's happening tomorrow, the ecb. what do you expect out of them? paul: he has got a tough job because the fact is the economy is growing twice as fast as the potential. it's about -- there is about 1% of an output gap left. qeing whenwant to be that happens. the problem for them is the talk of tapering is putting upward pressure on the euro and he is worried about the effect it will have on inflation. it will have an effect on growth.

it is not such a bad deal, but he wants to see consistent progress on inflation. you have got a very fine balancing act because in a way you've got to kind of prepare the market for tapering to calm. come. at the same time he doesn't want to launch the euro into hyperspace. from your world, you the by european equities or do you want to trade out now? philip: especially for u.s. investors in the world of a lower dollar. for the ecb, it's a must like tapering in tightening is the new stimulus for them because it's based on fundamental growth. were arguablyings the best earnings seasons we have seen since the financial crisis.

europe story is really the improved margins story. they have been very depressed since 2011. the weaker dollar makes european equities a buying up -- buying opportunity. they peaked because the euro started to strengthen. alix: what is the level of the euro you have to be careful of? philip: i think around these levels. we don't see it going back to 1.40. a large part of that was priced in. even though it is a near-term headwind, and we were trading because marine le pen won the next -- french election, this would be different. the whole reason -- this is a good story. this is a good story in europe we are buying. alix: thank you so much.

now let's get an update on what's making headlines outside the business world. taylor riggs is here with first word news. taylor: a storm for the record books on track to hit florida. hurricane irma has winds of 185 miles per hour. earlier today it passed over the island of barbuda. it could hit florida this weekend. there led to people either evacuating or to hunker down. president trump takes his campaign to overhaul the tax code to north dakota today and he will have an unusual guest on air force one. the state's democratic senator. the president will argue his tax cuts are worthy of support from both parties. he believed new details of reform up to congress. does go problems for theresa may's brexit planning.

the opposition labor prior -- bill will try to rewrite a for a new legal system after brexit. the deputy brexit negotiator told german lawmakers he doubts officials will be able to start talking about a trade deal next month as they had on. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. biancooming up, david will be joining us. buyeard for the last week the dip is still the theme. this is bloomberg. ♪

♪ alix: this is bloomberg tape --

taylor: coming up later on bloomberg markets, pioneer resources president and ceo. hurricane irma made landfall last night. it is a category five hurricane. it is currently around here in the caribbean moving towards cuba and potentially to miami next tuesday. if the storm were to make a direct hit, estimates could be in the $200 billion range. a couple of areas that could get hit. you have the citrus industry in florida is the largest producer of orange juice after brazil. two thirds of the state citrus

crop is located in the lower two thirds of the peninsula. cotton prices, interesting story. george is the second-biggest producing cotton state after taxes. both could be impacted by the last two hurricanes. us is jacob. good to see you. can you give us some perspective on what kind of storm we are looking at. jacob: it is on pace for being the strongest storm overtime in the atlantic basin. sustained winds of 185 miles per hour and what we are watching for the potential for the storm to maintain this type of --ensity over the next hours. alix: these pictures are unbelievable. you brought a chart of the sea surface. explain to us what that is and what the chart indications tell you. it shows just south of florida and around the caribbean , sea surface temperatures are

around to slightly above average. it slightlylow warmer, if it is blue it is slightly cooler. that is adding fuel to the storm. you're seeing perfect conditions for the storm to maintain this intensity. all the way to landfall we are seeing temperatures above average. we note across the pacific ocean by the equator, temperatures have dropped below average. what that typically indicates is around the atlantic basin there is last windshear. the storms are able to strengthen quicker and remain strong longer. it is a perfect storm. david: so to speak. a meteorology joke there. when you look at those temperatures on the sea surface, does that mean you get more storms or stronger storms? jacob: it depends on the upper levels of the atmosphere. it means the storms the do form will have more fuel. the this particular storm,

path it is taking is over some of the warmest waters. alix: i know you are watching natural gas futures. impact?the potential florida makes up 7% natural gas, walk me through that. the storm will stay east of all producing regions for natural gas in the gulf coast and on shore. the real question is how much into demand can knock off florida and georgia. it's unclear where the storm is going. landfall further to the north, you won't see quite as many populations hit. demand doesn't fall off quite as much. it's a question for how bearish it is for natural gas. david: we see in houston they are getting a lot of electricity back online.

jacob: we are talking a week or two weeks. this is not a true structural shift in the economy. where youort-term have supply coming up and demand falling off. eisel, thank you so much. ,ven as we brace for irma houston is breaking out of hurricane harvey. i'm standing here, you can see downtown houston in the background and i'm along buffalo bayou which is still quite --. this is one of the main byways that connect a lot of houston. the main areas that are still really flooded and affecting a lot of people and their daily lives really move west from the city. we were driving around last

night and he as you get further out you move into affluent areas , some names that might be familiar to some viewers. the kincaid school which is one of the top private schools in the area is out that way. there is a lot of water still sitting there. that is a part of the city where there is still a curfew. the rest of the city, that has been lifted. the rest of the city in many ways as you alluded to is getting back to work. it is a slow recovery. david: you referred to the affluence in the houston area and there is an interesting story from bloomberg. some of the wealthy people of houston stepping up to help. jason: this is a boom town as you know. so you have a group of business leaders, a group of people who have been very successful over their career to really say stepping up.

one of the interesting overlaps is your a lot of sports teams owners. this is a big sports town. you have the owners of the biggest teams stepping up, bob mcnair who owns the texans pledged a million dollars. interesting news on the houston rockets, leslie alexander is selling the team reportedly. one of the most interesting things that has come out of here in the sports world is jj watt. about 200 to raise thousand dollars, he has raised $20 million largely through small donations. jimmy fallon's show pledged a million dollars last night. finally you have michael dell who has made his fortune mostly in austin, he has pledged $36 million to a fund to help taxes. we are talking simply -- pretty

serious money. alix: to move from sports to the area we connect most on, private equity for you and energy for me. there is so much private equity money on the sidelines. what will be the role of private equity in helping to clear the energy debris and get everything up and running? jason: private equity will play a role. it has been an area of great interest over the last five to 10 years, especially as we have moved towards fracking and natural gas and energy independence in the u.s. we are starting certainly to hear rumblings. carlisle has a big presence here. riverstone as well. it is not completely clear exactly what the plan will be. infrastructure is a key element of the rebuild, whether it is upstream or

downstream. however you're looking at the indus -- energy business. there is a lot of rebuilding that has to happen. when you look at the broader national plans. the private capital clearly has a role to play. alix: bloomberg tv executive editor, jason kelly, good to see you. also with us is phil camporeale and paul mortimer-lee. we just laid out the harvey efforts for recovery. we are talking about the potential impact of irma. you get a small decline from natural disasters, but then you get paid back. paul: i think we could see 1.2% of gdp knocked off the q3, but we will get some knockback on q4. the real hit will be the high frequency monthly data. initial unemployment claims

following hurricane katrina left by 70,000. up to 100,000 a think we could see that. and industrial production will take a hit. gasoline prices of gone up. so those high frequency monthly data will show volatility longer-term. the u.s. economy is a huge economy and it will be a blip on the face of the u.s. economy even though it is massively and -- for the poor people in texas. palladium got a big boost last week. of seeing more auto building because of it. how do you look at it from a sector point of view? philip: how many cars were destroyed in hurricane harvey? these folks are still rebuilding year. .s far as the sectors go

all the homes the need to get rebuilt. in terms of the broader story here, the sectors don't change by much for us because it is not uncommon in economies for these episodes to be transitory. gas prices are the real issue for us. gas prices going up. if they stay elevated, that is really what we worry about. and paull camporeale mortimer-lee, thank you for sticking with us. if you have a bloomberg terminal, check out tv . interact with us directly. rewatch any of the interviews you may have missed. this is bloomberg. ♪

♪ alix: s&p futures inching into

positive territory. here are some of the movers. hp enterprise is one of them. the stock rallied on earnings, then it fell. it is back up. meg whitman says she is staying after reports she interviewed over at uber. opening up some amazon dedicated zones with stores that have amazon fire, tablets. this is potentially a pirate -- pilot program. that is still the question if they moved to more stores. options. the strategic it is going to sell itself. david: there has supposedly been an initial approach from one of the chinese outfits. daimler getting an upgrade at goldman sachs for creating value in emerging markets. david: as i read that it sounds

like it what happened with ferrari being spun off. maybe they should separate out trucks and buses from cars and that may unlock value. that is where you make your money. alix: you're a neat -- he is a nissan guy. david: is the chairman of nissan america's and they are bring out a new leaf. it is an all electric vehicle. it is all good. .oming up next, david bianco this is bloomberg. ♪

.

♪ alix: september swoon. markets on average.

the wall of worry grows. florida prepares for hurricane irma. and do not take hike. the fed raising the alarm about raising rates as mario draghi prepares for his announcement tomorrow. i am david westin with alix steel and jonathan ferro is off today. 30 minutes until the opening bell in a new york. alix:: we are taking -- we are taking a break from yesterday. the day.ar flat on a little bit of selling in the margin after the huge move higher and yields moving up by one basis point and crude on its own by 1%. in other asset classes, the safe haven a trade, dollar-yen flat, vix flat, did industrial metals last. with all of the headlines the

triple outcome a continued risk. over to abigail doolittle standing by with individual stocks. abigail: we have lots of numbers in the premarket related to hurricanes. branch a shares are down in the premarket on hurricane harvey, a consumer products giant and own sharpie to elmer's glue and cut their full-year earnings forecast by 5% blaming hurricane harvey and of the fact that storm caused manufacturing plant to shut in the texas-louisiana area. you have to wonder if it is a precursor and we have hurricane, and that is taking a toll on the travel related to stocks. american airlines a united continental -- and united continental down pretty united continental down 3%. flights cut through

september 7, tomorrow to the caribbean and not including florida. united continental cut revenue view in the industry and that is not helping. look at the cruisers, royal caribbean and carnival down for a third day, these companies are canceling boats and the caribbean's. lots of potentially devastating effects on irma. yesterday was a dark day for the insurance companies. the s&p 500 insurance index down. travelers it down yesterday, worst day of the year swiping through the 200 day moving area. double whammy of hurricane harvey and irma and according to jonathan adams of bloomberg intelligence, until investors know what to the capital losses are from the company's, they are cautious selling. should jewsside, or of for a second today and moments ago, the best to your street -- on the bright side,

orange juice up for a second today and moments ago, the best in years. alix: a longer-term issue. it can have a real damage to the trees. david: i love orange juice. davidi literally bored westin. rallies on the yield on a 10 year bond on site of a 1% handle and all sorts of reasons for investors to reach for the safety, north korean tension, rising cost of harvey and fears about,. nervousness about a u.s. debt default all weighing on sentiment and risk. stocks reported their biggest decline in three weeks. we are seeing a bit of calm re- enter. investors have been following the big selloffs with one piece of advice. whatam a believer of

warren buffett believes, you want to invest in equities in the long run and you have to have some exposure to volatility when you do that. in the long run, equity values of growth with a value of the world economy and there is nothing else out there that it does that consistently. >> a little bit aggressively that we can buy it like other geopolitical dip in the past. dip is dyingby the a slow but steady death. >> you had a this kind of trump reflation and that has come off and then some. the risks are to the upside and a mainly around tax policy and what impact it can have. the story thisn year which people are underestimating we are having an earnings recovery. spend a lot of time focused on politics but more about the earnings recovery than the politics.

>> if we tried to make decisions based on geopolitical risks, more than ever, investors will never be in the market. we need to pay attention as human beings but investors look at the long run. >> industrials are interesting. i think we level fall surprise and tax reform will be done in some fashion. there are opportunities. >> the risk combined with a dovish fed speak caught a lot of people's attention. the fundamentals are rocksolid and that's what we tell our investors. it is a global age for global investing. into the summer, everybody looking for correction and we would like to buy on a correction. alix: joining us now is david bianco, chief investment strategist for the americas rate you know the question, do you want to buy? david bianco: not yet. we do not think the dip is over.

what you saw yesterday was kind of a get back to work, get back to school, make your decisions and not a lot of upside from here and the market needs to be lower to entice more investors. not quite yet. david: you will by the dip at some point? david bianco: we have said we would likely see a 5% plus dip and likely buy it. where we think it is worth staying the course and fully invested in growth stocks, technology in health care. the point most of honorable and playing cap -- vulnerable and energy.out is cyclical, a big disappointment in the oil price recovery against the dollar's softness. now we have the doubt if in the fed will hike in a december? you see the 10 year yield for alix: about people back to work. this will measure volume as we have seen and is white wine is

what you want to pay attention to, the current -- a white line is what you want to pay attention to, the current and the red is a below. we were right around the low. was it that it? people coming back and saying i will sell? is that what you are attributing it to? david bianco: people think about how they want to be positioned year in and made the decision as they get back to work and everybody did their training appositional yesterday and that will play out as people focus on all the known risks from debt ceiling to what is going to happen with the geopolitical concerns. most importantly kind of a risk that we can kind of get our arms around is a risk that we cannot ignore because it is the case of affecting earnings with what is going to happen with interest rates. not so much about bank earnings and that will be what puts pressure on the stoxx. i do not know why energy stocks

are trading at the value they are. most of the company surprised for $60. david: how fully bought is at this stock market? maybe waiting for the dip to bottom out? david bianco: a lot of people waiting for a dip. about 18.4 -- about 18.5 times of the earnings and the equity market is still optimistic on a corporate tax cut, which i think if you had a five dollar to $10 benefit, below earnings which is where the investors want on near-term earnings to see the valuation and not overly demanding and recognize the interest rates and we made the argument. for me, not so much about the flows, never has been. the flows have been weak for a very long time, it is about the earnings in interest rates and the earnings were good. the earnings were the best after the growth story, tech and health care, especially the

dollar head went turning into a headwind turning into a bit of a tailwind. they are diminishing the upside. alix: you brought on the 10 year and if we see a one handle, when is that no longer goldilocks scenario and you have the fed keeping rates low? when it does it start to become a material risk? 435 years,o: long-term yields have been falling and the stock market has been going on. all bond market and the bond market does not get , something is happening in it has to do more with the underlined economy and earnings power. banks, comes to the interest rates are important for earnings and the big banks were we see upside valuation, it is the short-term rate of that matters. we argue there's a lot of upside on a big banks if the fed could get to 2% this cycle. getting there will probably take longer.

david: you said it's all about earnings. how much of earnings are we seeing the because of cheaper money? monetary accommodation but a lot of borrowing? what happens if the fed continues on the path of work, at what point does it affect the ratio? david bianco: i think you have more power earnings to come for the s&p principally because of what is happening at financials, higher interest rates and higher credit costs which i do nothing will be a problem. higher interest rates, higher earnings and the rest of the s&p , really has nothing to do with leverage. the earnings of these large growth companies and nothing about the balance sheets that is concerning. i think most of corporate america is under levered, the exceptions are energy and retail. most of corporate america, most large companies would have more earnings upside if they have buying power pretty

david: -- buying power. -- david: david bianco will stay with us and we will speak with andrewas dombret. this is bloomberg. ♪

david: i am david westin and bank regulation over in europe and when somebody who is at the center and he is andreas dombret , a board member. thank you for joining us. andreas dombret: thank you. david: we are not going to ask

you about that the ecb what is going to happen. that's a quite cute oh. -- quite period. various people have close want to armor program at think there may be over banking in germany, how close are you to a consolidation? -- various people have come to the program and think there may be over banking and germany. andreas dombret: we have 20 plus banks that are seen over by the central bank and we have about 1600 banks below that. we have quite a number of banks. we have seen consolidation and but inman banking market the 1990's, we had 4500 and now we are down to 1700. there has been consolidation and it is going on. the level of competition not only from banks and we surveyed the market and they are expecting a lot of competition. it goes beyond here -- pure

banking and the banking market. as somebody responsible for some of the regulation, do you think the banking sector in germany would be more effective if there were half as many banks? andreas dombret: it depends on the size of the banks. the level of the banks need a that regulation and we need to learn the lessons of the crisis. if you get to very, very small banks, i still believe that the capital rules, liquidity rules are correct. what we may do a little less with is the amount and the frequency of supervisors. for example, if you were to cut off banks below a balance sheet of 3 billion euros, in germany, you would reach 83% of the banks with only 14% of the aggregate assets. rather small risk with a large number of banks.

what i am thinking about is some relief in the administrative issues and the administrative costs of the banks rather than changing the regulation per se. you do not need to notify the supervisor about every single data in a high-frequency as large international banks needed to do. david: i am not going to ask to buy interest rate setting from the ecb because it is, got tomorrow. our some of the smaller banks under pressure -- are some of those smaller banks under pressure because of this low interest rate? : actually, they are. around 75% of all earnings are interest rate sensitive coming from the interest rate market. only up to 25% from provision in,. if you have that business model, you can imagine is very low interest rate environment is causing a lot of pressure on

interest rate margin. i'm a this didt not start with the ecb policies. we have had80's, compression and we have had that interest rates going down. -- having said that, this did not start with the ecb policies. our models are given to interest rate and, which means of course, you are more heavily affected by a low interest rate and environment than others. it depends on how long this very low interest rate level will maintain. we are expecting that each and every bank whether germany and europe or elsewhere is an adjusting to which ever interest level they are in. we talk about consolidation, not only within germany but fairmount foreign investment interest. hna from china investing in deutsche bank. i know you cannot comment on

individual banks, but in general, is there a concern as a regulator of foreign investment into the german banking system? andreas dombret: nope. in principle, no worry. we are in open economy and would look to each and every investor. the that german or international and into a proper check -- be that german or international and do a proper check. the same criteria apply for national or international investors and they need to be proper want those investors, the origin, do not matter. david: earlier, john cryan spoke out in germany and said that frankfurt was an attractive alternative for banks coming to the economy from london because of brexit. how do you see, as i can call it, the competition among

frankfurt and the dublin and paris for some of the banking business? andreas dombret: let me say that germany has always had a very, very good relationship which we will maintain. they are partners of us and i strongly believe london will stay, by far, the most important financial center in this area. in case of the brexit and we are assuming it will happen, there will be movement and of the need for banks on the continent. we are in no condition with other european financial centers and clearly as an alternative all the german center bank i should not to be and will not be competing with others. we are working under a single rulebook and the same rules. for me, much more important than the german, the german corporate have access to the investment banking products they have right now, the same way in a legally

sound manner they are able to buy those products. and they are able to support their financing needs. that is more portent than the fact whether or not the next bank which is going to move part of its business will go to dublin, amsterdam, paris or frankfurt. i have had a lot of discussion with bankers comic to frankfurt and want to see what the advisors could potentially look like and they have been calling on us. we will not refuse speaking with them, but we will not compete. the impression i am getting from all the financial centers in and friend for it is listening to my bankers and a seemed to me that dublin efrin for it seems to be the 2 attractive centers to them, we have seen a number of applications. -- and it seems to me that

dublin and frankfurt seems to be the two attractive centers. if anybody is interested in for a for, we will not accept empty we will-- in frankfurt, not accept empty shelves and under the same rules we have done in the name away as in the past. we will talk to anybody interested to come but we will not give out any goodies or assess and no bankers have asked for any goods or discounts. david: clearly efrin misstated and that is andreas dombret -- clearly and firmly stated and that is andreas dombret. will be joining us to talk about rebuilding homes in the houston area. this is bloomberg. ♪

alix: talking about where you the to put your money with

fad or the ecb is still with us is david bianco, this is a chart we love to explain. normalize s&p versus the euro stoxx and we talk about how the money is moving to europe but really the outperformance of the s&p in terms of pe at record low versus the u.s. where do stand on by europe? david bianco: we are constructive on europe and ever since the current victory. we most prefer you ask, tech and health care, -- u.s. tech and health care. we encourage people to buy europe value stocks over a u.s. stock values. we see good upside but not a lot of risk, u.s. big banks. with the way the fed may getting to the end of the hikes, maybe time to move over to european banks and we are tracking to european banks. the is important that ecb data

back to positive rates before this cycle ends. with the doubts about further said about hikes and ecb getting above zero in the next couple of years, that is pressure on european banks. the interest rates are weighing on a bank earnings and that should be important to regulators because the first line of defense of this credit losses for a bank is profitability. i would like to see stronger profitability. alix: is that a call based on ecb normalizing or a better growth momentum? david bianco: normalizing -- alix: not fully. david bianco: you have to believe that the fed will get to close to 2% by the end of 2018 or 2019 to lift and on from a for the ecb to get -- and of roma for the ecb -- an umbrella to get back to 10% for the ecb. some of that interest margin,

the existing loans, and marches under pressure. david: how patient are you as an investor? emma slater they will handle their balance sheets problem. they are not even thinking about raising heights works. david bianco: we are tactically cautious on the banks and the europe for october. six months ago, we got structurally bullish on european banks and we lived with that kind of tough call, how to grit your teeth on eu as banks 2012 through -- on european banks 2012 through 2016. over the next few years and i think the u.s. and europe will avoid a recession and i think european banks will go well. david: is that a call on u.s. bank doing domestic work and stepping out of the big money trading facility? some of the:

largest banks in the u.s., substantial capital markets and advisory businesses and we think it is an area where the earnings, there's a lot competition. we think the earnings will be good cushions and sources of profits for the rest of the cycle and what will cause u.s. and european banks -- stocks to move. alix: wasn't you are totally avoiding? -- what are you totally avoided? david bianco: energy. it is overvalued. energy equities outlook spain most people say they are the value trade. why? -- energy equities. -- most people say they are the value trade. david bianco: they are wrong. now, with oil really failing above $50 as the dollar has softened and more than we

expected, it's basically tells me oil price recovery is a not of this cycle story. david: what about the u.k.? david bianco: u.k. stocks, you are better off with european small-cap stocks. as and then i would move on to emerging markets for -- emerging markets and we like them out of asia. not about state owned enterprises or a weak dollar, it is about true innovation and a true leadership in their categories out of tech stocks out of china. alix: to be clear, how many said about hikes are you looking for? hike inanco: i expect a december which is part of my constructive, longer bullish view on you as banks. no hike and december and i would not want to on big banks. alix: what about 2018? david bianco: 2 more exacting that is it. alix: you think emerging markets

can handle it? david bianco: yes. a stable dollar. alix: because of the ecb will be more impactful for the markets or just 2%, no big deal? david bianco: all developed markets are wrestling with what is normal inflation and normal real interest rates? and they you asked me europe will be closer than -- and that u.s. and europe will be closer than people think. how far does the fed want to push it this cycle? way.nk they will lead the alix: 2% is better than 1.4%. there you go. david bianco. deutsche bank you will be sticking with us for about a sex away from the opening bell in new york. futures on the high and the dow points despite

the big selloff yesterday. other assetat classes, an interesting story, and mixed dollars story. it was a weak dollar and you still have buying in safe haven like the swiss and the yen. treasuries are relatively flat a yields up by one basis point as that they were down yesterday on the huge rally we saw on treasuries. crude oil beating to his own .rum, a russia, saudi story $50 a barrel level. , abigailr trading doolittle standing by for relief rally? abigail: it is a sigh of relief. gainse relatively small for the major averages but nonetheless after yesterday's pullback, the worst in about three weeks, we have a sigh of relief. small, modest gains. analyst said

despite the pullback yesterday, the bicycle is in place and she s in place the buy i and she expects it to grow. we will be watching. one pause or source of caution is hurricane harvey and hurricane irma. hurricane harvey having a positive effect on the energy, the best for the s&p 500 yesterday. we see oil higher up for a for the day in a row. a strategist is saying hurricane harvey is bullish. -- we see oil higher up for a fourth day in a row. gas is down for a 30 day in a row. rising oil helping -- gases down for a third day in a row. largely on analysts expectation that oil is likely to recover. a mixed picture but energy is

trading higher. another concern for analysts are the banks. 9093, an analyst said that they respect the up trend but they are concerned by the performance of the banks. a charge out of the election and the banks had been the best sector for some time as missing the story. -- as we see the strength. we see that they were basically trading in a lockstep and at a blue, the regional banks relative to the s&p 500. the regional banks are really starting to underperform hitting a low last week in the last year in june. that is concerned that if we leave the leadership of the bank, it could take a toll on the markets. time will tell the something to keep in mind. alix: what would happen with that?

and the best day for the dow in two weeks. tech is leaving. joining us is bloomberg intelligence u.s. strategist and andreas dombret. david, we got your cost -- and david bianco. david, we got your call. been a tells have spot to be, a vicious cycle of attachment to whatever is happening -- a tough spot to be. theink that is part of reason why the stock market in general has been in a malaise. tech stocks are breaking out to new highs and these sectors, number one and three and health care became number two a few weeks ago. threember one and continue to battle out. the markets have the struggle. alix: is it growth versus value with the banks and tax? -- tech? gina martin adams: it is part of

it. the weaker dollar helps a multinational and more domestically focused segments of the u.s. market, consumers stocks start to break down, which is part of the same story. growth, international growth, in particular, do best within the u.s. equity market and a tear down structure to the energy and telecom which is doing worst. alix: we know how you feel about banks but what about tech? bigd bianco: we do prefer banks over small banks because of the flattening curve. we like to find violations reasonable and nowhere as outrageous as in 1999. i am seeing a scenario where we could have somewhat outrageous valuations and technology because of the low interest rate and a softer dollar and post some of the best earnings. i do not think it gets quite as

extreme as 1999 because emerging stop markets are a way for people to go and that was not around in the late 1990's. i think attack will leave it up in the next three years. david: what is the sensitivity on tech? what will drive it up or down? david bianco: there is room for pe expansion and there could be a lot of upside under a late 1990's at adjustment. what keeps us bullish is the best cells for the rest of the cycle. some of people take concern for the size of the sector relative to s&p. i think the tech sector will get a split into tech services and goods more forget that. the tech sector is very diverse and a different models and focused on the earnings a valuation were david: is it him him, nothing -- is it immune, nothing cannot get? gina martin adams: certainly knowledg -- certainly not.

it happens to be in a sweet a spot right now and as mentioned, interesting link what is happening -- interestingly, growth and growth sectors. ech and health care and that is what is leaving the market. we find that tech is expensive lateot as expensive as the 1990's but relative to its history and other sectors. it is the relative growth. when you have relatives sales growth and earnings growth, much higher and revisions importantly moving higher and that's going to drive us down. alix: the conversation has been the breadth of the market. stocks hitting the new 50 week highs and much more highs than a lows. is it better than we give it credit for? gina martin adams: for the s&p 500, yes. and other parts not as good.

you are looking at about 65% of markets above their 200 day moving average and pretty decent breadth. small caps not as good and we are about 50% and an improvement but pretty weak. nondomestic stocks relatively weak. europe has been a struggle the past few month and breadth indicators are weak. for the large-cap u.s., breadth is strong. david bianco: small caps the disappointment on u.s. growth and loss of financials in small caps especially regional banks and people forget that. there is retelling, which has been nothing but pain. david: are they as reliable as what they want have to been? we tended to look at it is individual stock picker saying i want to buy the stock. success success breeds and a bigger factor in the index has the buy more of you. thing hasco: one

never been that absolute indicator and you have to look at the collective. i tended to be fundamentally driven and focus on the earnings and longevity and justifying the valuation and interest rates are part of it. the debate about passive investing, i read an active equities, and intense debate and i would have to admit i do not see clear signs of all of this growth impassive to date as having cause inefficiency. as an aggregate, i think the market is reasonably valued and i see it acting in a discerning fashion identifying what is going on with retailers and energy for valid reasons versus large-cap growth markets know what they are doing. alix: i want to pivot to hurricane harvey in hurricane irma. bunch of mliv, continental and

delta, southwest, american airlines, priceline because of disruption of hurricane fred -- hurricanes. how do you understand these instances? gina martin adams: they are very short-term in nature. the first caveat around -- relatively short and there will be a bounceback. you are seeing quite a bit of energy andin insurance as hurricane irma is potentially threatening florida. but, i do not think it is theme.rily a disrupting we bounceback after the hurricane. i think these are shorter-term trades and some of them are attached to longer term, the consumer is a good example of that. we have a terrible second-quarter earnings in the second quarter. we have seen it develop all year

and breaking down further. i do not messily suggest a hurricane is at investable theme. : tw hurricanes and the dollar as weak as it iso, i am looking for other -- as it is, what has been knocked down has a good chance of rebounding, airlines and other travel hotels and entertainment typo stocks sensitive to this. i think they come back. alix: david bianco and gina martin adams. about 10 minutes into the open on trading and a relief rally underway. you are seeing the s&p up by about five points and the dow jones of 67. how long will it last as the rally from europe follows over to the u.s.? this is bloomberg. ♪

taylor: this is "bloomberg daybreak" and i am taylor riggs. of ag up, david bride virginia joins us. alix: fema is almost out of money at hurricane irma is heading toward florida and starting to recover from floodede harvey that homes houston. to the homebuilding sector and going around houston, what is the real impact? how long does it take to build back? >> it takes the years, as you know. and that is starting to hit home here in houston. one of the interesting things we

have seen on the ground is of the storm was really indiscriminate, very different, hurricane katrina where it really laid bare and some of that city and some of the poorer areas, the lower ninth ward that was eradicated. harvey hit both poor areas of but very affluent areas as well. some of those affluent areas are the ones still underwater today. alix: fairpoint. we are looking at staggering pictures. most of the homes were damaged by floods and not messerli win -- and not necessarily winds, have you seen efforts to rebuild? it is mostly clean up but we see crews go in. on thea lot of trucks scene, private contractors going into homes and a lot is still assessing the damage and at this point. one of the big questions where the displaced people will go even temporarily?

fema has been providing assistance will financial it that will become more challenging as you alluded to it a if more money needs to go to irma depending on how that plays out. there are a couple of bright spots in houston. there was some overcapacity in the apartment sector here. there was a vacancy rate upwards of 8% to 10% so there's inventory on the market for people to move in. it is not an easy thing to do. the other thing playing to advantage to planners, they think ahead is and we heard a lot about in the wake of hurricane harvey, the lack of zoning law and regulations here in houston. things can get built up pretty quickly when they get going. i am going to talk later today with the ceo of the largest don't -- apartment developer in houston.

more on that front but clearly housing on the minds of people here in houston for david: thank you so much for that is jason kelly. he was a housing co and will be speaking to harris county judge wright and the center of the recovery efforts at 3:45 p.m. on bloomberg tv. is among theon homebuilders with the most exposure in houston with 14% of the closings and the region last year and as they deal the damages from harvey and have to keep a close eye on florida operations were irma could potentially hit. joining us is sheryl palmer, taylor morrison's chairman and ceo. good to have you. give us a sense from your company because you are so involved in houston and maybe in florida. when you assess what it is storm for your company, how do you get the numbers around it? sheryl palmer let me start by saying: by over the last week, communication

protocol with all team members and we have been in daily contact. all of our team is good and everyone is safe. we were fully operational and back to business yesterday. we have been able to begin the assessment, each of our communities across the city. david: you had ongoing facilities, building new houses, how long will this delay some of the finishing of the houses? sheryl palmer: we are in really wonderful shape and as of yesterday, we have a meeting every evening to check in with the team. all of our communities across the city are open and 1200s of homes under construction. all of our models are back open and we had construction workers on the site at the end of last week. when i look of reduction, homes

under construction for future less than 1%e have of those homes impacted by water. alix: are you seemed issues with your crew, can they get there and can they work? sheryl palmer: that is the most salient point, the transportation corridor's are affected. commute times are much longer. we had many construction workers on all of our sites yesterday, but certainly, depending on which part of the city you are commuting to, your commute times could be as much as double. know you have extensive operations in the houston area, but what about florida? as we look at irma, it looks frightening. it is too early to know. we have entered into the prepared mode and we have a protocol days before storm would be expected to hit. in naples,rations sarasota and tampa and the largest in orlando. after this point, we will be

prepared and we started the protocol around the material delivery and certain things can't it be built before the weekend, then we won't. hopefully, the worst case is that we have a few days of not building a because we are making sure the business is ready. it is too early to know and we will certainly no more through the weekend. alix: thank you very much. sheryl palmer at taylor morrison, the ceo, all the rebuilding efforts in houston and potentially in florida. interact with us, go to tv on your terminal. if you miss anything, you can go back and rewatch. this is bloomberg. ♪

david: i am david westin. congress is the focus of attention as they dealt with the debt ceiling to keep the federal government going and tax reform and provide relief to hurricane

harvey. joining us now is dave brat. representative bright is a well-known fiscal conservative was a phd economist and chaired the economic director. great to have you here. representative bright: great to be on. david: let's talk about harvey relief because that is front and center. where are you and where is congress? both -- we we will will vote on it today. we are all fine with it. we are praying for texans and for speed recovery. the white house and mnuchin is said less a doable we have to do, a clean debt ceiling with no reform on the deck when you are less than 20 trillion in debt and unfunded liability and i went around back home and the class of 2030 is the kindergartners, they will be

graduating college in 2034. medicare and social security go upside down and become insolvent in 2034. we have got to death of fiscal house in order. those kids that do not have a great future unless we get our act together. no-brainer is tax reform it seems to be from a complicated bring we had a larry summers on yesterday who said what they're looking on is not tax reform, it is tax cuts that will not do much good for the economy, what do you say? rep. brat: we want adult bid package and that is the big unknown. people say we will do tax reform and the big prize. -- we want a big package and that's a big unknown. we do not know what it looks like. after the health care debacle where the senate cannot get it together, it is like a madison avenue tagline. i have concerns let us not make the same mistake again. what does it look like?

hopefully it brings down corporate rate from 35% to 20% and have to lower the tax rate for the small business person and give the forgotten man some relief, putting money back in their pockets and tell us what the rates are in some range of relevancy. you do those things and we are reasonable, we will compromise, we cannot mess it up. we need so bad but we do not have any information on taxes and the world is what you were getting at with a what will you loss from the obamacare failure and $1 trillion loss from a border adjustable tax -- which we dollar loss from the obamacare failure and increase -- $1 trillion loss from the obamacare failure and there are four $1 trillion problems i mentioned. the problem is we do not bring down tax rates enough. we need to get the tax rates way down to that huge economic pop.

usually, i am a fiscal hawk but on this one, to get economic growth for the next generation, i will cut us some slack in the short run because i know we will ask reagan-esque and jfk- growth. david: you are a fiscal conservative a you are willing, you're fair up of a fairly big deficit, i am not sure how long the short run is. how quickly do you have to get that growth cutting in to satisfy you? rep. brat:: the growth is cutting in already on the expectation of tropical winning the stock market is up and the reflection -- and it reflects future earnings. capital investment, real capital that everybody works with on a daily basis was -1% and expected to be 4%. key to tax cuts is it will keep the momentum going and if

we do not match expectations, the small business person back home and everybody says will i make a $10 million bet on that senior when they cannot perform? i doubt it. ford: thank you very much congressman dave brat of virginia. alix: nearly 26 minutes into the session, by the dip mentality. dow is up, as if he up five. -- s&p is up five. crude, euro-dollar flat for you steady on it is wednesday. for myself and david westin, this is bloomberg. ♪

alix: it is 10:00 a.m. in new and 10:00 in london, p.m. in hong kong. julie: i am julie hyman. mark: i am mark barton.

welcome to bloomberg markets. ♪ julie: we will cover hurricane irma and president trump's meeting with congressional leaders that we start with breaking economic data. here's abigail doolittle with the isn report. abigail: that ism nonmanufacturing composite came in at 55.3 and the survey called july's6, this after reading of 53.9. economists were calling for a rebound but just a small miss on this service is part of the economy. anything above 50 indicates expansion. not much of a reaction for major averages. we were looking at small to modest gains for major averages going into the non-ism