francine: the german chancellor wins a historic force term -- fourth term. america divided as president trump steps up his criticism of the nfl. controversy overshadow the rollout of the tax plan? abb will by ge's industrial unit. we speak to the firm's ceo. good morning. this is "bloomberg surveillance." i am pressing lacqua -- i am

francine lacqua. resurgence for the far right. belowdex is a little bit estimate for the month of september, 115.2. let's check on your data to see whether it has any impact on euro or not. you can see euro-dollar, 119. politics are dominating trading. -- the sliding a touch euro sliding a touch. gold falling, crude edging low as well. that is your data check. let's get to the bloomberg first word news. nejra: donald trump has stepped up his criticism of the nfl sing fans should not go to the games by saying that layers who

protest police brutality during the national anthem should be fired. said heand patriots ceo was deeply disappointed by the president's comments. meanwhile a trump has ordered you travel restrictions on a countries replacing the current ban on six majority muslim nations. it targets travelers from iran, libya, yemen and somalia. the move opens the president to what could be a new wave of legal challenges. iran has testfired a new ballistic missile in defiance of citingted states broadcasting, the missile which is capable of reaching much of the middle east including israel was unveiled during a military parade on friday. called a snap election within it -- is expected to call a snap election

. earlier this morning, he announced an $18 billion economic stimulus package. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am nejra cehic. francine. francine: angela merkel has won a fourth term as chancellor at her victory was marred by .upport >> a new challenge is in front of us, namely the fact that amd has entered the parliament. we should analyze this very closely and in depth because the one to gain back -- we want to gain back the voters of the amd tried to solve these problems by giving them solutions and certainly the politics. francine: let's get more on all this, chad thomas.

chad, what does it mean that angela merkel's clinical bloc that's political bloc needs -- political bloc needs. chad: germany's biggest newspaper is calling this a nightmare victory for merkel and her party. just merkelaving and her party are having a grim meeting on how they are going to move forward. one indication of the bloodbath that has happened here is that her bavarian sister party, one of her key people that were speaking last night representing , she failed to win a seat in parliament. what does it mean for the social democrats opting to go into opposition and not renew their coalition with angela merkel's bloc. what are her options? cha her options, she iseft

with one option, a jamaica coalition with the liberals and with the greens. that is untested at the national level which makes it much more difficult. yet these two parties you are negotiating with instant of one -- you have these two parties you are negotiating with instead of one. stick to likely to negotiations within the coming days and weeks at how quickly they can come to a solution remains to be seen. francine: chad, thank you so much. joining us live from zurich is burkhard varnholt. great to speak to you at what does this mean for your investment strategy? you.eat to speak what does this mean for your investment strategy? this is been a good

day for europe. yesterday's election is a mark of stability for germany were angela merkel has won the fourth term which is a very rare vindication. there is much that the media is writing into the decline of her numbers compared to the last election but more important is win of the the liberal democrats tightening the pro business field in the government is pro-euroan party. this is a mandate, not only for reforming germany, it also for institutional reform all across europe and the eurozone. that is what this opportunity really is about. francine: the you believe markets are too complacent? it seems after the win of

macron, they discounted political risk. now with a limited receipts just limited seats, you lookhange the way at it going forward? burkhard: the next political risk is the italian election. takinge contemplating italy out of the eurozone, something that has been toned down in their recent meetings. something that seems unlikely but it is a possibility that is keeping the european central tapering, or from spoiling the european financial stability at this point and time. if we move past that was a government that will commit stance,o a pro-europe then the opportunity for reforming the eurozone is a

historic and the opportunity to lend more credibility to stability and the way it's solidarity functions be something europe clearly needs and can take europe a much bigger step forward. yourine: where do you pile money into at the moment? european equities or bonds in certain cases? because it is a natural hedge? what we have seen, the continued in the political government in europe speaks for signs to be overweight. we continue to see good growth globally but also in the eurozone. the eurozone is late cyclical. expect that to continue throughout the fourth quarter of this year and into 2018.

that is good for equities, business, earnings. it is not as good for government bonds, clearly with the german government bond yields which has been unusually low in recent months and years. our stance on german bonds is a much more muted -- it is a neutral allocation, where is our equity allocation is more favorable and overweight. anything in there store for the european markets? .urkhard: i am sorry i couldn't hear the question well enough. francine: it was a simple question saying what is most distorted you go what is the wrong valuation on some things in europe? -- most distorted? what is the wrong valuation on

some things in europe? burkhard: the euro is cheap still. we know from history that such distortions can last long. it would be premature to call it for a normalization prior to the run-up in the italian election. the second distortion is clearly what i've mentioned in the governnt bond market wre the skeptic about the eurozone have packed their cash in the german bund market which is perceived to be the anchor of stability. it will not be for the right reason which is the eurozone will fall apart. that is not going to happen. everything we have seen throughout 2017 points toward the strengthening of the eurozone in the coming months and year, and that will be good for financial stability and financial markets across the eurozone. francine: burkart, thank you so much.

joining us from zurich, i hope -- hopes in the studio to see you in the studio very soon. investors prepare for a busy week of central bank talk. will get into speeches guess we will give it to speeches from draghi -- we will get into speeches from draghi. we speak to the swiss firm's ceo. this is bloomberg. ♪

francine: this is "bloomberg surveillance." here's nejra cehic. above $50i holding after opec says they are halfway declaring a global glut.

iran's oil minister says rising output from libya and nigeria needs to be addressed. crude is fine. as he was gulf coast refinery continues to resume operations after hurricane harvey. abb has agreed to buy general elections industrial fusions business in a deal by a that $2.6 billion. for $200e potential million and is expected to close in the first half of next year and we will be speaking to the ceo of abb shortly. unilever has agreed to buy a south korean cosmetic maker for 2.27 billion euros. last year carver korea had sales of 321 million euros and earnings of 300 million euros. that is the bloomberg business flash.

francine: we hear from some the biggest names in central bank this week. it starts with mario draghi who will address european union lawmakers in brussels is afternoon. investors will be watching for any clues about his plan for cutie ahead of next week's policy meeting. janet yellen speaks in cleveland after the fed less week announced the start date for the reduction of the balance sheet and on thursday, mark carney .ill talk at an event this get more from peter shaffer can. great to have you in the studio. there is a lot of talk about central banks. we seem to know where they are going. what would you be asking? peter: mario draghi, i would ask him a sneak preview of what he is what to do with the program? joking aside, i don't think we'll get anything out of him.

francine: does the german election change anything in the way you should see it. ?oes he ignore little risks peter: the way mario draghi is concerned, i will think they will take this into account because they look at this and they go on to the job anyway. i don't think this will be the main concentration for them. concerned, i will think they will take this into account because they look atfrancine: da clear win for angela merkel? peter: i don't think this was a clear win for angela merkel. , is importantly for markets there going to be stable government, is it possible? i think yes it is. we look at what the party had to

say yesterday, there was talk about the response ability of the party now has about courting coalitions. i am confident it will be a coalition -- there will be a coalition. francine: even if the democrats decide to stay out of it? peter: yes. it is going to be very difficult because the democrats and the greens have quite opposing views. if you listen to what the leaders had to say, they talked a lot about their responsibility, they talked the countryg governable. even think about the alternative option, new elections, neither of these guys will really look forward to that because it would only strengthen the protest vote . francine: peter, it if you look at janet lila -- peter, if you

look at janet yellen, we have had asked to bans on other countries, we have had the nfl and have the tax reform which some say could be overshadowed by the other scandals. peter: call me naive but the central banks will try to abstract from the political side as much as they can. francine: should they? peter: these type of things, yes , as long as it is not affecting business confidence. at thefrancine: should they? u.s., it is not affecting confidence. if the political row become so much that it drags the economy indications, the economy is doing just fine. francine: it is a distraction. a distracted demonstration, does it mean they can't focus on the economy as much? do you think the economy is doing fine on its own?

peter: if i can go back to a point i raised, if i look at how we forecast the economy in the u.s., we extract from potential tax reform. we do forecast on what we think is forecast double and then we say we together stuff as it comes along. there might be some positive impact but it doesn't affect our central forecast for the time being. the economy is dng just fine without any ofimpact the forecar the time being. francine: does it worry you that mark carney is looking through it? peter: apparently, he is not looking through it. strong indications we had on the bank are such that they might be inclined to raise rates, because most recently, the inflation figures were higher. francine: would that be a reversal of the cuts really hiking?

peter cook it is probably going to be that but when you look at what the market is pricing, the market is going beyond that. past --ook at the inflation even after 25 basic rate hikes, the question really is whether the market will be of the price that out again? whether the price would be up to allowing theithout market to price in more? francine: peter, thank you. peter schaffrik stays with us. abb has agreed to buy the initial solution business of -- industrial solution business of e.g.. -- of ge. for more know this we are joined , ulrichhone spiesshofer. good morning to you.

this deal street fence your position in your main market, the united states. are you pleased with the performance in that region? can you give us an update on medium-term targets? u.s. is therich: largest market for abb. largest drop in the pool so altogether we're strengthening and a very attractive market environment. we expect this market to grow. there will be significant attractive growth for us in this market. the re-industrialization in the u.s., the re-shoring of activities for the mainland in the u.s. the investments and automation and infrastructure that are to come. abb will benefit.

we are in a better position. francine: in terms of the various things that you make, there is this deal. where do you see the biggest potential for the north american --ket question mark ulrich: american market? ulrich: we are a global market leader in number one in the u.s. here, we can help the infrastructure development. our team is doing a great job at the moment helping in florida to rebuild infrastructure there. we have a very strong position in this field strengthen further with the acquisition of ge. if you look at robots, we are the first to build a plant in the detroit area in auburn hills and we can help with automation

and industry in the u.s. and ,verall, on the leading edge the ability has been received by car dealers in the u.s. very strongly, because we bring together a solutions mindset which goes well with american customers. altogether, i think it is a great market. we will continue investing. do you worry about political risk in the u.s. impacting consumer demand or gdp? abb take investments and look at the market from a very long-term perspective p we're not getting nervous on short-term up and down's. i think long-term u.s. will stay largest economy of the world. the gdp on the growth is solid. solid.undergrowth is

if you look at some of the [indiscernible] it is the upgrade on industry, we have other positions. francine: you also but the company in april. you have an appetite for more appetite just for more acquisitions -- for more acquisitions? ulrich: we demonstrated implement in our next level strategy. we have the ambition to be number one or number two. with industrial automation, we have really strengthened our position. altogether, for us acquisitions will be one of the drivers, not the key driver of growth. the key driver would be organic growth. driver would be organic growth. we might consider others but it is not on the balance sheet, it

is integration capacity of management. they have their hands full integrating so don't expect major moves in the near future. francine: understood. did the deal with ge take longer than you were expecting? did you have to talk down the side? ulrich: from our we try get interested, to close in a very disciplined way. it falls to the seller to decide . i am excited by the commendation but it was also very clear that we will act on our basic principles of discipline. the deal we have now, the combination between acquiring the asset and developing the next phase of our strong supply relationship with ge, expanding ge. supplies with

we agreed to buy this asset in this set up. francine: thank you so much. next, angela merkel clinches a fourth term when but how would the rise on the right affect policy? we discuss that next. we look at euro. there is uncertainty, not only as of the victory of the alternative for germany party. we are seeing a little bit of a knees this -- a little bit uneasiness in the market. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua. here's nejra cehic. nejra: as the merkel has won a fourth term as chancellor but

her victory was marred by for thet support alternative for germany party. both as a merkel's bloc and martin schul's bloc plunged. -- over the weekend by saying that players who protested lease brutality by kneeling during the national anthem should be fired. in be a superstar lebron james called him a "bomb" on twitter. meanwhile trump has ordered a new travel restrictions on eight countries replacing the current ban on six majority muslim nations. it targets travelers from iran, libya, syria, yemen and somalia and also affects chad, north korea and venezuela. movie opens donald trump to

what could be a new wave of legal challenges. iran has testfired a new ballistic missile in defiance of the united states according to press tv setting islamic republic of iran's movie opens o what could be a new wave of legal broadcasting. the missile which is table of reaching much of the middle east was unveiled during a military parade on friday. shinzo abe has told his coalition partners that he is to call a snap election within the next hour. he is expected to confirm the vote take place on october 22. earlier this morning, he announced $18 billion economic stimulus package. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am nejra cehic. this is bloomberg. .rancine francine: we are getting some breaking news of the bank of england. this is a report on banks. do stress test going for come the bank of england saying that gains in consumer credit growth could cause it u.k. banks to suffer bigger losses if the economy weakens.

looking atat chart consumer defaults and the impacts this would have on the system. one of the things they're looking at if inflation goes off -- goes up because of some of the second-round effects of brexit. mean for some of the consumer debts that are out there? i am not seeing much impact on pound. let's get more on the german with local we lent -- -- wo ll go we lent volker wieland. -- which and stored -- which ensures growth.

.hat will allow them to prosper it is up to every country to establish the poet policies. what do we know about who will be german finance minister and that seems to be the key. the result of the election is pretty much the said,on as martin schulz let's provide eurobonds, let's provide greater transfers. that is not an election winner and likely the coalition forming is going to be much more skeptical on that. they're going to rely more on each country taking responsibility for its policies. to peter let's get schaffrik. what does it mean -- we were talking about implications. he said this is a good win for angela merkel.

how key is the volker wieland talk? peter: martin schauble is a very important key player, however when it comes to what germany be accepting european ministry? that is not a decision made by the finance minister. that is a decision for element pretty be like the competition for parliament in the composition of the jamaica coalition, the freedom but also --ved and more right ring right wing wing of the conservatives, they are very much against an -- against this. it is going to be tough to get anything agreed on more european fiscal integration in the near-term. francine: is it any appetite from the allies are german citizens? i don't think there's an

appetite for transfer union. ou put up aeven if big fiscal transfer budget, within the eurozone, tt doesn't enhance the stability of the zone because it comes with moral hazard. if you leave countries to establish policies that let spending run out of control. in essence, it helps nor can save the euro anyway and we have to focus much more on the kind of policies which macron doesn't nationally, labor market reform which will make france grow again. that is where the big success can be. francine: do you see other countries putting pressure on germany to spend more and save less? i think is an issue but if you look at that, it even if the german government would

increase government spending, all of the and houses we have on estimates on spill over into other countries, they are very small. francine: what do you think will unite the coalition? is it as a merkel and her willingness to bring people together? i always heard she is a great leader because she finds compromises where no one else can. is very thread that can make the make -- make the next chancellorship a success? it will take while to negotiate in a coalition. -- negotiate a coalition. think they have a bit more to do together then remake of the social democrat coalition.

that one has run its course. was a unique situation because in parliament, there was a left majority with social democrats and this is not a difference. i think it will be -- there is potential for a pretty good solution, but having the afd and the parliament means it is going to be much more debate and much more challenge to answer merkel from both sides. -- challenge to angela merkel from both sides. peter, what is the ideal situation for germany? peter: i don't think there is an ideal. done quite a bit of analysis on this and it is very clear that for germany, the euro level is less important than for other countries because of the tebow things of the germany is done quite a bit of analysis on this and it is very

doing -- because of the type of things germany is doing. quite a bit of analysis was done recently by the ecb. with to carefully analyze -- we have to carefully analyze. a good part of the most recent strength, the economy that is done well which doesn't mean that preciating euris a bad thing. more money comes into the economy, that maybe positive if that money goes into investment. francine: peter, thank you so much. trump up next, president puts of his argument about nfl players taking a knee. we'll discuss that next? this is bloomberg. ♪

francine: let's check in on your markets. mark: as we discussed the elections, arman portal of endless knowledge. a function of the bloomberg. there's the original results in the top right. final remaining hurdles for financial markets, this is being cleared off angela merkel. that is a bullish sign for money managers which is franklin templeton credit suisse, yes it will be in the conjunction of the rising popularity. there optimi in germ managersequities, valuations ofx are cheap relative to msci's global index.

the global average which is a strong foundation. the dax which is the white line which is trailing the other three. this is the german two-year /10-year spread. today. the euro-dollar investors are wondering about the permutations. the prospect of another round of elections should a jamaica coalition proved to be unattainable will certainly weigh on the euro in the medium-term. investors might look at two levels to assess the country's 118-term direction, 120 and . sterling fell for the first week in five last week. we had the theresa may speech and we had the ratings downgrade by moody's. data this week include to gdp and a gauge of consumer spending. , folks returns

on the boe. francine: thank you so much, mark barton. president trump embroiled in customer to this weekend stepping up the criticism of the end of the saying fans should consider not going to the games. ordered new travel restrictions on eight countries replace the current ban on six majority muslim nations. he said the move was to protect the security and interests of the united states and its people. the president saidyesterda he wants the corporate tax to be cut to 13% despite the fact that the public negotiators are turning a rate of 20% according to two people familiar. let's get more on all of this with stephanie baker. .eter schaffrik stephanie, thank you for joining us. is there a link between the three stories?

diverting the attention to nfl players? stephanie: this nfl controversy has drawn that any talk of tax reform. abc, heuchin was on wanted to about tax reform and instead he said that she spent most of the time trying to explain what trump is trying to do by singling out these nfl players. what happened is by highlighting this issue, he has united and put a whole spotlight on the issue of race in the nfl. he saw nfl players come out in support and this has become a far bigger controversy than it was previously. divide weatherto was unity. francine: what does it mean for global audience. how important is the nfl? is john kelly the only man who can talk to us president to

scale it back? stephanie: you would assume behind the scenes he is trying to rain trump and and try to get him to dial down his rhetoric. it remains to be seen how this plays out. you've got more than 70% of the nfl and nba who are african-american. a lot of these players have twitter accounts, massive twitter followings. they are popular figures. i think this is not your average -- this is going to play out in a different way than his attacks on other figures who don't have such popular support. francine: what happens to tax reform now? stephanie: he is going to unveil more details this week. it is a hugely ambitious plan. everyone wants some sort of tax cut. facing what weis

think in their looks like a massive tax cut for the wealthy. how does he spend that -- how does he spin facing that? how does the pay for that? he wants to put the corporate tax rate down to 15%. people in the gop thinks it is more realistic to be 20%. how does he sell that? what does that, mean for your gdp forecast? talk a this political change it? peter: i don't want to repeat myself endlessly. if i don't get the traditional indicators for the u.s. economy, the growth is there, investment is there, and that is all good. the two things we have to watch out for is the current administration will be up to lift growth or are they not going to be up to do that and

are they able to through some of these controversies dent economic activity maybe through the sentiment? neither of the two i currently see. for the time being, the best option we have is putting it to one side, looking at the economic in decatur and how it is going and making our forecast out of those. if anything changes between the political situation, then i think it is time to put them into account. for the time being, i think it is observed them -- it is time to observe them. francine: how the travel ban play out? stephanie: you'll get new litigation. the supreme court was supposed to roll on the legal case in mid sept -- mid-october. it is unclear whether or not they will do so since he came out with a new one. he tried to diluted i making it

not look like a muslim ban. at some level how it plays out, there will be new litigation to it. francine: stephanie baker, thank you very much. peter schaffrik stays with us. butit negotiations later can the intent to break the deadlock finally be broken. we also look at crude extending gains above $57 a barrel. that is the highest since march 1. this is bloomberg. ♪

francine: this is "bloomberg surveillance." this is what we are looking at, $57.22rude at 57.0 2 -- $57.22 -- $57.07. we're meeting in vienna and we spoke to newsmakers there. before the round of brexit talks research today. the real fight is about to begin. it willssions resume, be the first opportunity for the delegation to respond to the british prime minister's speech in florence on friday. theresa may moved to restore

momentum to the stalled talks by offering to pay into coffers after britain leaves in 2019. --dmore with peter schaffrik t's get more with peter schaffrik. at did you arn more on friday about how negotiations go? peter: not a great deal. if i want to be senate, one of the things you can say -- if i , one of the cynic things you can say, my first reaction was if that is the case, why should the europeans look at this any differently than before? the payment that would go into this, as long as you stay a member, would be expected anyway. the first few reactions we have germanythe talks in were sort of a little bit lukewarm. there was some praise from the

eu officials about what would be very doubtful. francine: i imagine the real trouble is that there is no precedent. there is no real starting point. for market participants, how do .ou do that tech spec peter: if you take a step back and look at what do there is participants want in this negotiation, it seems clear to me that they want very different things. the u.k. once a deal that is very beneficial. i don't think that is what the europeans want. cynic, the you a side is delaying this process becausethey no longer it takes, the less time there is to get at cy bits, looif you

it from the negotiation point of view, it is not in the use interest -- it is not in the eu's interest to speed things up. francine: this is a physical issue, this is a more divisive issue. do you think that brexit negotiations will go much faster? peter: not necessarily. that is a very broad term because if you look at what they abouto do, the estimates not only the money flows but how you calculate it, there is a lot of gray area. agreed, the only thing we needed the stage is a common framework. it is not easy to achieve. let's say we take that box, going forward, the trouble is tryingre because without to anticipate all the details, me thatry clear to

including the u.k. in a very comprehensive trade agreement without crossing some of the eu's redline's, particularly in the migration thing is me that including difficult. if you look at some of the things in place and i know the u.k. doesn't want to talk about it, but when you look at the swiss agreement, it is difficult on financial matters. francine: this is my favorite chart of the day. what does pound do from here? peter: from the time being, a long as the bank is indicating a might be raising interest rates, there might be a bed in the pound. i think it is going to be difficult for the pound to strengthen significantly. i would reckon if we strengthen .t into the next bank meeting francine: peter, thank you for joining us. bloomberg surveillance will continue in the next hour. tom keene joins me out of new york. the president of fifa is coming to.

we talked to the head of goleman sex germany. there will be a desk goldman sachs germany. in the meantime, these are your markets. we are looking at your level -- euro dropping after that vote. i looking at some of the other asset classes. oil did gain, oil falling. investors are looking at politics possibly. we are not seeing any huge swings. shinzo abe will be giving his speech very shortly. these are live pictures. this is bloomberg. ♪shinzo who knew that phones would start doing everything?

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no one else lets you do that. see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. ♪ francine: a mixed bag for angela merkel. winning a historic fourth term

but her victory is marked by a surge of support for the far right. what is that mean for the future of europe? president trump criticizes the nfl, more players of neil during the national anthem, overshadowing the rollout of a tax plan. shinzo abe tells coalition official we await announcements imminently. this is bloomberg surveillance. good morning everyone. i'm in london and tom keene is in new york. there,litical risk out as investors try to take stock. before a lot of fed speeches. that is the backstory on economics. i agree, it is a political monday, no question about that. francine: i would say a lot of central banks speeches. ando draghi is speaking

janet yellen as well. let's get right to the news. here is taylor riggs. taylor: as you are mentioning it was history in germany. angela merkel won a fourth term as chancellor but her victory was marred. a new challenges in front of us. afd hashe fact that the entered the federal parliament. we shall analyze this closely and in depth because we want to gain back those voters of the afd by solving these problems, giving them solutions and certainly by good politics. taylor: merkel and her main plunged to historic went to afd. millions of,

iraqi kurds cast ballots in a historic but nonbinding vote. the united states has warned the vote will destabilize the region amid the fight with the islamic state. travelers from eight countries will face restrictions on entry to the u.s. under a new policy unveiled by the trump administration. will impact chad, iran, libya, somalia, syria, venezuela, and yemen. it will go into effect october 18. president donald trump's criticism of players who protest during the national anthem sparked an increase in activism with 200 nfl players sitting or kneeling, others raising their fists or locking arms to display unity. it also drew objections from owners, including the patriots owner. global news 24 hours a day, powered by more than 2700 journalists and analysts in more i am taylorntries. riggs, this is bloomberg. once green today, francine

will pick up on oil moving ever so slightly. a little bit flatter yield curve from friday, the euro unchanged. the german election, not much move there, unless francine wants to disagree with me. aerican oil rounded up to $51 barrel, a higher vector. tom, i never disagree with you. politics are dominating trade in sliding a touch with the election results foreshadowing lyrical collisions , -- foreshadowing political collisions. our guests,ened to we were thrilled to have stephen roach and four years he has talked about declining savings in america and the need to bring money. foreign let's bring in the chart mr. roach talked about when he visited last week. this goes back to the depression. here is the depression here and

the collapse of net savings. willand pearl haor, i put this on social media for our radio viewers. decline inlong-term american savings, the drop to a negative net savings rate, to gdp, in the financial crisis, critically we roll over once. chinad that money from and other venues including the united kingdom. francine: there is a strong parallel between your chart and mine. mine is looking at shorts on the pound. this is very simple, taking a back, you see and read, the zero line, but the pound off of it post-brexit vote losses, forecasts are way behind. we will put that on social media wastom, i would say it partly because of the rapid gaining consumer credit that could impact u.k. banks. tom: bring that chart up again.

the white line coming up, there is fewer people betting for a week pound sterling. francine: correct. the number of contracts looking at sterling-dollar positions. we are all see -- we are also looking at live pictures of shinzo abe, there he is. he is just started talking, holding a press conference in tokyo. he says he will dissolve the lower house of parliament on september 28 and this will have huge implications. if you go to elections, it depends what it means for the cabinet. we will get plenty more on japan. angela merkel has won a fourth term as chancellor. her victory that was marred by a surge in support for the populist alternative for germany a threat to her open doors policy. let's go to matt in berlin. afd is 13% and one of the main

partners decides now they want to be part of the opposition. who will she build a coalition with? to build agot coalition with the liberals and greens. that is the only choice after the social democrats say they will no longer participating government but go to opposition. afd is a sideshow, it has been a while since we had a right wing in germany. they don't wield much power even with those seats. it looks like a party could break up and split into two. even though it is interesting, the more important focus here is, who rules germany when they finally negotiate a coalition within the next three months? tom: i've seen the focus of the alt-right, the afd, in the southern corner of east germany, dresden, what is there impact across western germany? frankfurt, hamburg, of area,

what is there impact away from their core? party, a troubling. the sister drubbing. you're right to point out that they are most active in the eastern states. with the exception of the north,ial center of the that is historically and spd .tronghold their reach does not extend as far as frankfurt. francine: matt, thank you so much. scott, us on set is chief investment officer of global fundamental fixed incomes. great to have you on the program. how does this mean, what does

this mean for pricing risk? think the german situation is rather complex as it unfolds. having to put a coalition together and to lead that will be a complex process. at the margin, german politics will have to turn inward for some. ,f time which i would suggest and i'm not sure the exact implications at the moment but conceptually it means the agenda , the far right party is very much against, one of the platforms they ran against, i would suggest it is not a nontrivial amount of votes. the further work on european integration will be slowed at the margin because france and germany have to lead that integration process. you see the euro down 4/10 of a percent. initial market reaction, because this is not the outcome that most market participants

were expecting, and would suggest harder integration. francine: what does that mean for euro bonds. how should markets view this? --y are in a tricky scott: they are in a tricky spot. yields are low and we are about to get information on the ecb on how they begin tapering. election is less impactful on the near-term direction of the european bond market more generally. , if anything you could say this is marginally negative for peripheral bonds in the sense that further integration makes them more attractive. tom: i thought you were done, i'm sorry. ,ou have the luxury of philippe in your meetings at blackrock. off of his work at the swiss national bank, what euro level does chancellor merkel want?

she has a balance where she wants to make german exports competitive. for the currency to represent the fundamentals. i would suggest that what has happened in the euro appreciation of late, the market is focused on the relative outperformance of the european economy and in respects, that is driven in a large part by the german economic engine which is benefiting from on balance a weaker euro, and stronger global economic man for its high quality, high barrier to margin exports. i would suggest she wants a euro that is relatively steady or nonvolatile. i know she has a particular level but clearly the level of the euro currently is supporting german exports and the economy. something important, the economy is very important. the german economy is ing well almost at full employment and

trefore the political impact of this will be much less so than if it were to be of the economy were in worse shape. i'm not sure she has a particular level in mind but she is obviously encouraged by the economic growth of europe and of germany. francine: scott, thank you so much. head of global cio. he will stay with us. we will talk about germany and the prime minister of japan, shinzo abe. he is giving a press conference in tokyo. he will dissolve the lower house of parliament on september 20. this is bloomberg. ♪

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this is the prime minister of japan speaking at a conference in tokyo. abe told his coalition partner he will dissolve the lower house of parliament on september 28. that means that will be early general elections. we heard from the head of the other party telling reporters of his conversation with shinzo abe. tom: fascinating. my limitedack to in knowledge is robert feldman of morgan stanley, really quite clear of his support of rural japan, away from tokyo. away from the big cities. he is beloved. in london this morning to talk about a historic weekend in the united states, stephanie baker. speak for all americans, whatever their believe for politics, we just wanted to see the opening kickoff and a little bit of

football. i guess we got that but around it we migrate into a changed america. what changed in america this weekend? we just saw donald trump attack virtually everyone from kim jong-un to nfl players. shocking. he put a spotlight on this issue that have been rumbling in the nfl for months now and he suddenly made it part of the national conversation. for our global audience, without question, and we all agreed with this on our team of bloomberg surveillance this morning, the single moment was on abc when the secretary of treasury, steven mnuchin made a comment. >> what the president is saying is that the owners should have a rule that players should have to

national respect the anthem. this is not about democrats and republicans, race. it is not about free speech. they can do free speech on their own time. tom: fascinating. i put this out on twitter to a huge response. i had sharp criticism from supporters of the president. explain why the secretary's comments on free speech in football had such a visceral reaction? the listened to that over weekend and his comments that they can have their free speech on their own time, is what i found most shocking and what other people found shocking. as if there is a time for free speech and a time to just shut up. i think that is why people reacted this really to the comments. go on and talko tax reform and all he was doing was justifying the president's language, calling nfl players, sob's.

instead of talking about the issues like tax reform. francine: from an outsider point of view it feels so insane. who does the president listen to? what is he being advised today to scale back controversy? >> i don't think steve mnuchin is telling him to tone down his rhetoric. it is unclear if john kelly is telling him to pull back. jared kushner, what is he telling him? you can only imagine them saying, this is counterproductive. you need to get back on message if you have any hopes of passing tax reform, you need to stay relentlessly on message to get that through. francine: what does it mean scott, for your investment? is this a distraction that can hurt focusing on fundamentals? lessmeans that he will get

for other things? >> the national anthem aside for a moment, the point is correct. there is a lot of stuff that needs to get done in a short amount of time. including tax reform and other legislative agendas. to the extent the president wants to get those things done he needs to focus on them. the failure of the repeal of the health care plan, again, for the third time. froof that is a detractor effectively putting in place the tax reform that he wants to do. the market is going to key on that. what is really going to move treasury rates materially higher over the next year? it is not the federal reserve. that is clear. the market is going to key on that. it is not the economic data because we won't see a surge in inflation over the next three to six months. the implementation of tax reform. and what that means for government firing and the economy.

tom: well said, scott. stephanie, this goes to the weekend where some things on tax reform leaked. are eight or nine items on tax reform, that means a president who is willing to advance that debate toward a compromise, am i right? you cannot do that when you are worried about who is kneeling for the baltimore ravens. >> exactly. he needs to reach across the aisle if he wants to get something passed. is an ambitious tax reform plan. cutting the corporate tax rate to what he wanted, 50%, most people think 20% is more realistic. 39% to tax rates from 35%, individually. that is an ambitious reform plan because they have to figure out how to pay for it. that is where the real tussle will begin. which tax breaks do they get rid of in order to pay for that

massive tax cut for the top end? tom: thank you so much, i am sure you will be watching monday night football tonight. we will continue with scott. a good way to sum up the week. a huge buzz to the reinvigoration of bloomberg businessweek, thanks to megan murphy with her team. this week they just focused on facebook. the many topics giving them focus to mark zuckerberg right now. bloomberg businessweek on facebook. ♪

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from london and new york, let's talk about the fed. the biggest names in central banking this week, ecb president mario draghi who will dress european lawmakers in brussels -- who will a dress european lawmakers in brussels tomorrow. let's get back to scott from blackrock. all of this, at what surpasses any interest is who replaces janet yellen? will be a person who was dovish, even more than the current fed chair? scott: this is an important transition. the direction of the u.s. capital markets and the global capital markets. the timeframe is sometime in october for nominations. then for the appointment shortly thereafter.

can takedent, if we what he said at stake value wants a lower interest rate environment to help with the economy. , this ist is important a critical part of all central banks in my mind, for investors there is a certain autonomy in the central bank community. you have that set up specifically in many countries whereby the central bank governor, and janet yellen is a good example, and her predecessors, the appointment made by the president is then, the governor is left to their own devices. as this process goes there it is clear that the president wants lower rates that it is also important for the market that the person who is appointed is willing to implement their agenda as they see fit whether someone from academia or banking. that is important. francine: when you look at treasuries, we know the timeline of this fed governor. does it depend on who comes next question mark or is it steady as

she goes? scott: it is a continuity of effective process. the number of rate hikes pricing and mediocre over the next several years, u.s. treasuries at that range would dip down slightly over geopolitical conflicts or concerns. the market is assuming that whoever steps into janet yellen's shoes will continue her dovish approach. francine: scott, thank you so much. stay with us. coming up later today we will be joined by former reserve bank of india governor, at 10:30 a.m. in new york. this is bloomberg. ♪

♪ good morning everyone. bloomberg surveillance from london and new york, today, the focus on germany. let's get to our bloomberg news. here is taylor riggs. taylor: angela merkel won a

fourth term as german chancellor buher victy was marred by the alternative for germany party as a clear rebuke to her open-door policy. the social democrats support plunges to historic lows. donald trump and republican leaders plan to release a tax framework that would dramatically cut taxes for corporations and the wealthy. to cutcludes a proposal the corporate tax rate to 20%. they also include cutting the to 35%.vidual tax rate republican senators circulated a new version of their obama care repeal measure. the changes in the new draft which comes as the gop plan appears to be heading for defeat , were aimed at some of the

holdouts including susan collins. 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. francine: thank you so much, taylor. europe has biggest economy faces the most divided parliament in modern history. the attention now turns to the future of the european project which will be impacted by the composition of the coalition of government. the negotiations are likely to be tough. saysemocratic party leader he will need to see a change of direction for germany before joining a coalition. joining us now, the goldman sachs germany ceo. for joining us. you had a long night yesterday looking at the elections and the possible tetris component of all this. who will angela merkel choose as

partners? for the immediate reaction of the social democratic party, her current partner, not to join a government or be open for discussions on the formation of the new government, she basically only has one realistic choice. theorm a coalition with democrats and green party. at least for the first agent is clear she will attempt to form a government with those two parties. francine: what does it mean that the official democrats are in opposition? what does it mean for euro bonds? >> at first glance, the fact that very likely the free democrats will join the government instead of the pro-european social democrats, something that will make deeper fiscal and bank system integration more challenging.

on the other side, the greens will define their position. if you look at their platform, they are not very outspoken on all the fiscal unity, bank union topics yet. they will form an opinion. the outcome is highly uncertain. tom: wonderful to speak to you today with you being at goldman sachs that many decades. as was alex before she went to allianz. did you work with her at goldman sachs ages ago? >> no. she was briefly out of university. tom: that is what i thought that i find fascinating, the economics of this right-left debate who was part of the afd in germany? how do you perceive the income distribution of their support? >> the first demographics show they won 1.2 million of their

voters from the non-voting base. they gained voters from merkel's party. and from the social democrats and the left party. they were much more successful on the former east german parts of the country. in there also successful traditional industrial they had, north, strong boats. they were also quite strong in bavaria. the old west germany. equate the afd as a one off moment or is at the beginning of a new institutional right party? maybe something like conservatives in america or is it a one-off as madame le pen would be proceeding france --

perceived in france? isthe reaction from the cdu that they will attempt to make it a one-off. the quote was not to allow any party to the right of the christian democratic union. hopefully that will be chu. it is hard -- hopefully that will be true. it is hard to evaluate. they are a non-uniform party which has a right wing extreme component it. it is unclear how that evolves is i would say the consensus , there is hope in germany that will only be a one-off event. francine: when we spoke in frankfurt last time we talked about brexit. what does the resurgence mean for brexit negotiations? .> that is a signal of hope both christian lintner, has

strong ties to the u.k. and has aen outspoken that he wants moderate outcome of the brexit negotiations/ quite a constructive role. the green party is generally in favor of deeper eu integration. i would say it is too early to tell what the details will be but that is an element that gives me more hope that the german position will stay constructive during the negotiations. francine: is this just at the margins? somee u.k. is looking for sympathy from the european union to the extent that this gives that, that is more positive. the markets immediate reaction was that it was positive for brexit. the reaction to theresa may's a speech over the weekend, the first reaction was stronger and the euro, weaker. marginal euro but that was the initial reaction.

that speaks to the idea that it would be positive to negotiations. i would suggest it is too early to tell. francine: are you attracting a lot of talent? to frankfurt, because of brexit? >> at the moment we have an interesting dynamic. a lot of our employees are saying, maybe this is my last chance to spend time covering european climates. to spendeing interest time in london. tom: i'm sure. oute will have to build capacity in frankfurt and we are working on that. we have to plan ahead. our clients requested that and regulators requested that. tom: that is a very delicate, politically stated answer. let me ask you the question we are getting every day on bloomberg surveillance. the school shift from london to frankfurt.

does frankfurt have this cools that labor needs if they are going to make the move? schools to put their kids in? >> my daughter is going to an english-only speaking school very near frankfurt. that school is trying to increase capacity. , there will be an increasing capacity and the schooling is very strong. frankfurtwho went to as an employee of the european central bank can confirm, there are a lot of bilingual schools in the frankfurt area and those are growing. tom: francine, let's make the distinction. do you want an english school that teaches united kingdom english or american english? francine: this is when it gets tricky. tom and i always see i to iv this is a trick question.

will move on. i know better than to answer that question. tom: what is the euro going to do? francine: what do people want, what are they worried about t? >> the political uncertainty is the biggest ncern. it is a challenging situation at the moment to form a government with emerging views that a lot of the proponents voice and the various rounds, even on topics like immigration, deepening of the eu, where it is the economic and fiscal policy in germany go? that will be a big challenge ahead of us, to form a government with all the elections coming up regionally? francine: one of the things we talked about, how do you deal with mifid ii? how much of your time is being challenged by figuring out

exactly what needs to be reported by january 3? changes,gulatory anyone in the financial industry is challenged by regulatory changes and mifid is a big component of that. our discussions with the asset management industry on how, for example, research will be paid for and priced? in execution changes equities and classes are opening a lot of discussions. thatare going on a path makes me optimistic that we will be ready come january. tom: thank you so much. greatly appreciate your attendance this morning. a great perspective on germany. thiel ofnue with mr. blackrock. you can migrate over to coast-to-coast, bloomberg daybreak, -- this is

bloomberg. ♪

♪ on a monday, bloomberg surveillance worldwide. tom keene in new york. we are focused on germany in the stunning elections. we will do much more on the upper over the weekend in the united states of america on football and politics. the speech, it was something to see prime minister may give an important speech, some would argue the most important since june 23, 2016. to do that in florence last week. scott is with us from blackrock. scott, let me go to you first. what is the follow-on to the

, the tories, will they coalesce around the prime minister? scott: the speech lacked critical details and direction as to where we are going. in many respects it was a rehash of things we already knew. the leak that was put in the press the day before. i don't know that we learn anything new in terms of the progress. we are running up against time constraints. as politicians do, they push it as far as they can to give themselves more time. -- itgests,aps there is the emergence within the tory party as to how to deal with this. she is going with, we need more time to sort this that is true. complex thing. there is no way it gets negotiated in one year. tom: with the coalition in all of the united

kingdom, will they speak to brussels or the individual nations including a changed germany? position of the eu beenssion in germany has synced up so i do not think there will be a big difference there and given angela merkel's strong leadership position i doubt that will open up divergence between berlin and brussels. i think the interest of everyone will be to have a position on that. francine: what does this mean for asset classes in the u.k.? is that going to fluctuate? >> we have been favorable on the pound for some time and if you look at the progression, we are now, right exactly in midpoint. i thinkhappening and rightly so is the market is focusing on the economic fundamentals in the u.k..

the further that brexit gets pushed from a hard brexit or a cliff decision into a transition. , the more the market and banks can focus, the bank of england can focus on the fundamentals. the pound appreciates. .50,us to get back to 1 means we have to think about a positive outcome. i could still see the pound appreciate based on the economic fundamentals, full employment, inflation above target suggests that rate structure should move higher. francine: i am looking at a euro-pound level. going toward parity, do you care? when we look at brexit negotiations should we assume, angela merkel, we need to find a solution, or is it muddled because we want to save time?

the u.k. is one of the largest destinations for jarman -- german cars and industry. carefully at these things. in the context of brexit, everyone talks about the financial industry first but for germany the producing economy is much more effected and the exchange rate is a big issue in that context. the separation of west germany from east germany, is it wider? i know it was terribly wide before unification. there are a lot of improvements which angela merkel lived. what is the dynamic now? if you look at the economic statistics, there is convergence in a lot of factors. that is certainly going in the

right direction in terms of the facts. if you look at the divergence of electoral results and the much longer support for the right-wing populist party in the former east germany than the foer west germany, you can clearly see we are not there yet and we e noclose to being very yet. tom: can there be a domestic fiscal policy that buys off the votes and the anger or is that not part of the german calculus? at the moment already every income taxpayer in germany pays a 5.5% supplement solidarity surplus to fund economic expansion and fiscal transfer to the former states of the east. that is already taking place. it is part of the coalition formation discussion, how that continues and whether it gets more or less. votesd say the stronger

are to reducing these transfers rather than increasing them. tom: this has been wonderful. stay with us. together off the london desk. trading on wall street gets ready. go, put it on, they around the morning, what they are doing with the research department, looking at our conversation.pert bonus round, they can come over and go back to a previous segment, click on it and you can onal the stephen roach chart american net national savings back to 1929. ♪

♪ francine:-- taylor: let's get the bloomberg business flash. industrial solutions business from general electric. the deal is valued at $2.6 million. ranging from engineering to delivering power supplies and next year's olympic games in china. unilever has agreed to buy a south korean cosmetics maker for $2.7 billion from shareholders.

including goldman sachs private equity, the deal will bolster the position. that is the bloomberg business flash. francine: thank you so much taylor. let's go to china where property stocks plunged in hong kong. after investors betting that the government's next step would be to ease restrictions. let's get back to scott. are sayingople treasury levels will normalize on central banks move. how do you deal of china? -- how do you deal with china? scott: we are looking closely at the u.s. trade relations with china. central-bank policy and economic were unlikely to see deviations from where we are currently at 6.5% current economic growth. i don't think there will be anything that changes but what

may be interesting is, how the u.s. and the trump admistrationeals with the relationship with china. from a trade perspective. outside of what is happening with korea. it is not the economy in china we are worried about, it is more the relationship that the u.s. has with china. francine: who would suffer most in a trade war? where china also retaliates? a complicated issue. china is a big owner and buyer of u.s. treasury securities which is an important part of the economy. the economies are entwined with each other. part of the concern we have is that there is a complex relationship between the two countries and it is important to take into consideration all those components. investment thesis, we continue to like the emerging markets story. particular, emerging markets that have high yield rates and central banks that can afford to cut rates, countries like turkey

or russia. concerns about china in terms of disrupting that emerging-market situation are not front and center. tom: brilliantly said. it goes to the heart of the matter. is the inflation-adjusted rate, is the real rate in china a real rate? scott: in many respects the government has a policy in terms of economic development and monetary policy. it is what it is. the reality is, so long as that rate continues to foster economic growth that the market expects and as we saw from these other measures that they might employ to slow down the housing market, so long as that doesn't disrupt the overall state of the economy, it is a government controlled economy. that is not lost on anyone. a wide ranget has of resources to deal with that.

one could expect status quo. tom: this has been a terrific briefing. scott, thank you so much. blackro, head of global bonds, chief investment officer of fundamental fixed income. we tried the conversation forward. washington, the tumultuous weekend we saw in the united states of america. a greater tumult lyrically, maybe on populism. joins us, we will talk to him, of u.s. trust as well and also focus on germany. the germany that wakes up this morning to a changed the lyrical landscape. -- to a changed political landscape. this is bloomberg. ♪

♪ tom: this morning, quiet markets after a stunning german

election. the far right returns for the first time since world war ii. they almost bested merkel. consider ag, we plethora of fed speakers. they talk of things transitory, they say is, where is wage growth? are you ready for football. here is rocking donald trump. a national uproar this weekend. good morning everyone. this is bloomberg surveillance. live from world headquarters in new york, i'm tom keene with francine looking at the sanity of a german election. shinzo abe in japan. none of that mattered to the united states, or the disunited states this weekend. renewed: we have

political turmoil in the u.s. but the german election is interesting. angela merkel now has to find a coalition with an easy partners and it could change the way in which she focuses. is who is this finance minister? tom: i agree. it should get more weight than the certitude of merkel returning as chancellor. with your monday update, on first word news. here is taylor riggs. we are starting in germany. history was made. angela merkel won a fourth term as chancellor but the victory was tainted as she received fewer votes then needed to govern without a coalition. >> a major new challenge is in front of us. the fact that the afd has entered the federal parliament. we shall certainly analyze this closely and in-depth because we want to gn back tho voters by solving problems,

giving them solutions and certainly by good politics. [applause] taylor: merkel and her main challengers, plunging to historic lows alongside the afd. will dissolves he the lower house of parliament on thursday. heightened tensions with north korea have boosted his approval rating and may help them retain the coalition majority in the lower house of parliament. open, and the provinces and disputed territories as millions of iraqi historic but a nonbinding vote. the united states has warned that this would destabilize the region in the wake of the islamic state. in a new policy by the trump

administration, the new rules would impact the citizens of chad, libya, north korea, syria, iran, yemen, and will go into effect october 18. president donald trump's criticism of players who protest during the national anthem sparked an increase in activism with 200 nfl players sitting or kneeling and others raising their fist or locking arms to display unity. it true objections from owners including the owner of the patriots. global news 24 hours a day, powered by more than 2700 journalists and analysts in more i am taylorntries. riggs. this is bloomberg. tom: how about a data check? just one board today, not much going on. equity markets, off the dow jones industrial average highs of wednesday and thursday last week. haseuro under 1.19, it weakened substantially in the last hour. oil with a lift.

$51 a barrel, american. britt crude rising. a good move. francine: looking at similar data boards, politics seem to be dominating trading on monday. euro sliding a touch. looking at the german election and whether that becomes complex in terms of political coalition building, and wti retreating. back to germany. angela merkel has won a fourth term but the victory was marred by a surge in support for the populist alternative for germany party. a clear rebuke to the open door refugee policy. this comes as the business conference this morning, unexpectedly weakening, a sign that europe's largest economy is struggling. clemens joins us now, great to have you on the program. what did you make of how hard it will be for angela merkel to get

a working coalition together? --mens fuest it will be now, andis stronger the spd has weakened so that is the end of a grand coalition so get two have to different parties to her coalition. angela merkel has been the person spearheading movements in europe. will that change her convictions or her policies? for europe, the challenges that president macron of -- president expects her to win. this will be more difficult to aboutrong resistance common eurozone budget.

i don't think the obstacles are insurmountable but it will be harder for merkel to bring this new coalition behind her. tom: when i look at the incentives that will be required here, you can go back to the professorship at oxford in business taxation, you know it is about incentives. what are the incentives to bring west germany and east germany closer together? there is currently a lot of money flowing from west germany to east germany and we need to understand that and to see that, eastern germany is very different than north. huge economic problems. a decline in population where is the south regions like saxony are much better off and building their own industrial base. it is not so much anymore east versus west but the flourishing others that are

having a difficult time. see, as francine mentioned, a new finance minister that will change the domestic budgeting of germany around these election results? clemens: i don't expect any change in fiscal policy. the question is, who will be the new finance minister? with three parties in the new coalition, maybe the liberals will want to have the ministry of finance, we will have to see. to ring be able together these forces, and would be an important element of stability. francine: how much of a forceful be? isd what can they actually do? clemens: i think what they will

do is try to provoke the other fories and set the agenda the debate. theerday evening after results came in, it is time for the other parties to focus on policy issues and not on the afd. it is just 13% of the vote. of thecant but 87% population have voted for other parties. i think a lot depends on how the other parties deal with the afd. francine: are you worried that a second decline among the numbers mean that growth is on a weaker trend? clemens: no i don't think so. i think the german economy is taking a breather but i don't think it is a turnaround. not a change for the worse. we still have very positive signs, the level of reading is high.

this is not a turnaround. tom: thank you so much, from munich this morning. right now with us in new york to recalibrate on monday is joseph of merrill lynch, the head of market, i love this. strategy, which ride to find a thematic strategy right now. -- we tried to find a thematic strategy right now. a terrific one-page writeup on active passive management. have they moved so far and so fast, thematically i want to go back to the united states? >> we still like the multinationals. robotics. despite the german election we are in the midst of a obal expansion. don't give up on the u.s.. adding the active passive

summary was interesting. is it still the land of passive? >> if you can get it done, look forward. that is where the value is and there is enough churning out there with the central banks doing what they are doing, you have fluctuation of monetary policy, this is the time for active management. francine: we have been talking about this inflection point for central bankers for years. how can you be certain that this time is the inflection point? >> given what the fed said about rolling off the balance sheet, this will be a slow process, like watching paint dry. >>i do think globally are seeing growth pickup, inflation will follow, unemployment is falling around the world, so it will be a long drawn out process. it might happen over three months or three years. francine: joe, thank you so much. staying with us. coming up tomorrow, live in talking to thebe

ceo of mediobanca. that all begins at 6 a.m. in new york. 11 a.m. in london. this is bloomberg. ♪

♪ taylor: this is bloomberg surveillance. let's get the business flash. the bank of england said rapid gains in consumer credit could cause u.k. banks to suffer losses. obthe economy weakens, the b financial policy committee, losses from consumer loans would reach 30 billion pounds within three years. confidence,siness unexpectedly weakening for a second month in september. a sign that the largest economy

in europe may struggle to improve on its current risk pace of expansion. the amazon effect. shares of india retail he -- , itiler, shopper stop agreed with amazon's local unit to set up experience centers which let's customers test out products available online. that is your bloomberg business flash. tom: very good. to our global audience particularly for all of america, there was one moment where time froze in this debate in america over football, the national anthem. greatestd, over our challenge, which is race. the secretary of the treasury on abc. isi think what the president saying is that the owners should have a rule that players should have to stand and respect the national anthem.

this is not about democrats, republicans, race. this is not about free speech. they can do free speech on their own time. tom: whatever you think and let me tell you,i ard fr a cross-section of people on social, this was a defining moment yesterday. martin has seen this before, the chief content officer at bloomberg news with his years of duty on the government and economic watch. mnuchin comment, does it carry forward for the president and does it carry into other debates in washington? >> it might. i have never heard something like that before. has been a rich tradition in american history that dissenters are able to express worst amendment rights in any venue. for the treasury secretary to suggest that at work, you cannot exercise first amendment rights is rather disturbing to many people. tom: buried in the new york post

today, the pittsburgh penguins say they will greet the president at the white house put in a very carefully worded note, they provide full support for the other athletes of professional society. tell me the racial debate of moment into the politics that mr. trump must face with the legislative branch and with the judicial branch as well? >> moment into the it is a veryd controversial an uneasy relationship. say this hasmay nothing to do with race but he does not get to determine that. it is people of color that get to determine that. at a time when he is seeking business support for tax reform, for companies and ceos to align with the president on tax, they have to have pause.

it may symbolically say, they agree with him on issues like standing. we saw that earlier in the way. here is someone who stood by the president often, mr. kraft of the dreaded new england patriots. including mr. brady. "i am deeply disappointed by the tone of the comments made by the president." marty, this was widely quoted. also widely noted, a 1968 olympics. how do you take what we witnessed this weekend back to i believe it was tokyo or mexico in those olympics of 1968? outrage was a sense of

over that display in the 68 olympics. the feelings have evolved somewhat. athletes are seen as having andy right to have a voice i do think this kind of rhetoric from the president is divisive especially when we emotionally connect ourselves with sports and sports teams. tom: i am sorry francine. we just showed the new york jets on television. i didn't want to do that. dr., if you are watching, i am sorry. the jets won yesterday. francine? francine: i don't know if anyone can figure out, does this impact tax reform and the rest? if president trump wants loyalty amongst his cabinet, are people going to say, that was too close to home? our story this morning suggests it may

complicate the effort to get tax reform through congress. donald trump is going on the stump wednesday to proselytize for tax cuts. as i mentioned earlier he will who the backing of ceos will be reluctant to get out front with him on tax reform when it may be construed as support for his views on sports and race. after the, medicated new york giants loss yesterday. have been talking but germany and japan, and a set of reasons to stay in cash for the many people that have enjoyed double-digit, they do not have the courage to be in the double-digit bull market we are in. are these distractions legitimate or do you push aside marty's world? --y are legitimate joe: in terms of beating back protectionism. she is seen, angela merkel as

the worldo is keeping together. shinzo abe is doing a good job. the political risk of china and korea. tom: a lot of distractions this morning. we will get to, what to do with your money, and some point. -- at some point. for more, pick up a bloomberg businessweek, the focus on mr. ckerberg this week. he has a few challenges which megan murphy lists on the cover. smart reading. this is a good magazine. i love bloomberg pursue this week. this is bloomberg. ♪

♪ this is bloomberg surveillance. let's talk about central banks. mario draghi speaks today and tomorrow. joe, we were talking about the fact that this is an inflection point for central bankers. how do central bankers react to inflation? can you explain why inflation has been so low despiteful employment? we have a similar situation in europe and the u.s.? joe: the china effect. automation technology, companies are doing a great job managing cost. part of that is the labor cost. inflation is parking up

in 2018 and 2019. the markets are starting to sniff that out. as demand rises we need more supply and we will have to pay more for labor. francine: i was going to ask you that. why are markets taking such a long time to see it? joe: there is so much excess liquidity out there. whether it is the federal and off the balance sheet, the bank of japan, the bank of england, there is copious amounts of liquidity. from the corporations themselves . we are in this large full of capital and the liquidity is out there. we are beating back deflation and moving toward inflation. of speakersthe set this week, which is in oppressive -- which is impressive. after, the half of the yellen press conference.

joe: i think they are looking for information. i don't think the fed will move as aggressively with the balance sheet as they talk about. inwe get a rate hike december it will not kill off the rally. it is steady as you go. tom: i go to this timidity that may be out there. maybe that is what is in store for december. francine: whatever happens there may be a quick shift in the markets. joe stays with us. in the meantime, this is coming up later today. the former reserve bank of india governor. that is at 10:30 a.m. in new york. 3:30 p.m. u.k. time. we will talk about inflation, some of the troubles we are seeing in india as the reforms are lagging. this is bloomberg. ♪ what did we do before phones?

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no one else lets you do that. see how much you can save when you pay by the gig. xfinity mobile. it's a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. francine: this is "bloomberg surveillance." these are live pictures from germany.

this is the ader of the free democratic party. people say it's thanks to him that his party did so well. young, dynamic, this is what people are telling us. huge turning a point for angela merkel as she tries to regroup after her victory scioscia needs to find some kind of alliance. we know mr. lindner wants to talk about what happens with greece from -- from now on. these talks may be difficult not everyone sees eye to eye. may hold the key to who the next finance minister is and he says the greek bailout was contingent on imf participation. he talked first thing about after the election and wants to implement is greece. he says there might be a change of direction also needed on the

greek policy. with more on germany, let's get to first word news. taylor: angela merkel won a wasth term but her victory challenged. her political party plunged to historic lows. republican leaders and donald trump plan to release a tax proposal that would dramatically cut taxes for corporations and the wealthy by 20% from 35%. tax lobbyists say they also include cutting the top individual tax rate to 35% from the -- from the top rate of 39.6%. republican senators are circulated a new version of their obamacare repeal measure. new drafts in the which come as the gop plan appeared headed for defeat were

aimed at winning over some of the holdouts including senator susan collins. news, 24 hours a day, powered by more than 20 700 journalists and analts in more than 120 countries. i am taylor riggs. this is bloomberg. the petersonre at institute, you know you can speak to adam pozen about germany. if that doesn't work out, you can go to james kierkegaard. what you need to know is they listen to every word written by their senior fellow jeremin zetelmeyer. it's our interview today on the future of europe in the future for chancellor angela merkel. how important is it that the conservatives, the altar right, some associate with near nazis -- with neo-nazis, are down -- are back to a bundestag. how much is that a motion for

germany? >> it's politically huge. even though it was widely shaken,ted and somewhat the more traditional parties. in terms of economic impact, it's not that important except possibly in one sense which it takes a little bit of the political space from angela merkel to compromise on positions that would be, shall we say, left of center of the german consensus. so she has to be a little more careful. i have a long conversation last year about mr. kissinger about migrants in europe and he was deeply emotional about it, the importance of this issue going back 500 years. does this election change the migrant immigration debate in germany? i think the debate has already changed. lag we are seeing now is a

reaction at the polls which was palpable even a year ago. basically, the consensus in germany is this was a one-time touation where maybe one had let in one million refugees and maybe not. the government did not and let particularly well. there will be problems with integration going forward. is some amount of regret. on the whole come i think the majority of the population still merkel's decision to let them in but going forward, it's a different name and it's not something the population wants repeated. ifdcine: how will the change the policies of the merkel coalition? there are basically two dimensions.

securitygration and inside germany. i actually don't think they will change very much because the big change in terms of prioritizing internal security come in terms of making sure no additional would have already occurred in the last color should -- last coalition. i think it matters somewhat. ofs is the result where both the traditional parties, the social democrats and the christian democrats, came out a bit weaker than expected. reflects also impaence of the german electorate, certainly the afd supporters, with what is viewed as an overly generous set of german policies towards the rest of the euro area. time, we have a political window of opportunity for real euro area reform with

president macron in france. this would make it harder for mrs. merkel to see that -- to seize that opportunity. francine: talk to me a little about who will choose the next finance minister? can angela merkel keep the finance minister in place? that the foreign -- the finance minister will remain in place. she has a huge interest in keeping him in place. he is very popular in the broader public. he can keep the right wing of the party offer back. his -- off her back. not thaties are different from the relatively senior coalition partners. the real question is whether the a high-stakes bargain for that job. they view it as imperative not

that on euro. policies they are different but to have a biblical -- to have a bigger political tax platform to push tax cuts. we don't know that yet. show after the chairman of the free democrats that one over 10% of the vote was asked whether he would make a play at the ministry of finance and he said well, it's not as important who is the minister of violence but the policies. -- who is the minister of finance but the policies. in either case from my perspective, it's not great. he will either make a hard play or he will really try to nail down the chancellor uncompromising policies with france. charthere is a great toy showing how broken up the parliamentary system is in germany.

it's unlike the united kingdom where there are two bigger parties and a couple of smaller ones. where is the generational shift? where is the youth fit in? where is the use of germany after this vote? >> i don't think the youth is with the altar right, the afd. my understanding is that the is inupport in the afd the 30-45-year-old democracy. the youth is everywhere else. the youth was not strong enough in spite of relatively high participation to sway or prevent this result. had is quite a few crossover votes, about one million or so crossover votes aom mrs. merkel's party, have

million from the social democrats and, importantly, 1.5 million nonvoters. these are traditional nonvoters and they came out in droves last night. when you look at the change of direction in certain places, what does the election yesterday mean for countries like greece? a change of direction is needed on greek policy. >> again, it's probably not good news. it's not fantasticallyad news and it's not catastrophic in the sense tt mrs. merkel will still be the chancellor and provide over a coalition which consists of two additional parties. whoe are the free democrats are anti-bailout and opposed debt relief for greece and then the green party that are arguably the most friendly party toward greece of that gives her a little bit of room to maintain her own stance which is not

particularly friendly toward greek debt relief but one where end,ny will, in the collaborate with other members of the euro group. i would except -- i would expect the same stance but with the ftp in this government, the propensity for germany to agree to a significant debt relief package has gone down. if you think that in greece is unsustainable as i do and by the end of next year we will need a serious debt relief package, then this is not great news. tom: thank you so much. we look forward to your writings on the german election. we will continue with joe quinlan from merrill lynch. we will link all the political manye into last week, how record highs in the dow, two or three or four? we thank you for watching us on bloomberg television.

don't forget, when you get to the automobile, consider bloomberg daybreak on radio.

francine: coming up shortly, it's a daybreak america. i know you are focusing a lot on the elections with great guests. jonathan: we are challenged fundamentally with politics. the basic question off the back of the german election is what does the coalition look like. it depends where you are from. it means different things for the french and italian.

do and thel president's busy weekend and have a discussion with the former u.k. ambassador to the united states. him and more coming up. you are greek, you're probably feeling a little hot under the collar. jonathan: little bit, gece might be celebrating a little bit. francine: thank you, let's turn to china were property stocks plunged in hong kong after a raft of mainland cities added housing curbs betting the government would ease restrictions. economicthe chief asia reporter from bloomberg. make us smarter in the tory today. -- make us smarter on the story today. >> is another example of how determined china wants to rein

in housing prices across the country. over the weekend, we sought new curbs in eight cities. we are talking about a city by city policy. eight curbs a new citizen of measures like banning home resales within two years. onsaw a knock on effect share prices in hong kong taking a nasty fall. are though house prices showing the signs, they have a long way to go before they are confident with the overall level of house prices and the campaign of curbing those prices have some way to go. francine: when does policy risk get back on? could there be more policy mistakes? that's the market view and the view of a lot of analysts. we have to get through this massive political meeting last month, the 19 party congress.

after that, we will see whether the government in beijing is serious about pushing through far-reaching and deep economic performance that could cause great change in the economy but also pose a risk of making a policy misstep. that's wherestep, we will see the volatility around the china story. we have to get through the congress first. is the iphone going to sell in hong kong? will it sell in shanghai? sell inphone going to chengdu? >> it's an interesting question. all we can point to are the early indications which are a mixed review for the iphone. in china itself, there are plenty of homegrown options made by chinese smartphone makers. by all accounts, the consumer base is growing.

we know the demand for smartphones has risen in recent years. whether they take to the iphone upgrade, we just don't know yet. the end of the year will tell us a lot. tom: thank you so much. prices occurreless in china. joe quinlan is with us. that goes back to the conundrum of four or five stocks being the market. how do you respond to the fact that apple has been dominant in this great bull market question mar? to thee is a lot more markets than technology whether it's health care, the industrials or some of the commodities. you have to roll together. tom: you have been doing this for decades. do you ride your winners or do you sell part or all of them off

to buy the dogs? that's the motion late into a bullarket. i dump apple to buy ge? >> ge looks very interesting on a valuation basis and what the new ceo is doing so i would take money off the table with apple if you have done well. that's the same with any stock. if you've done well in the last few years, we are near the top and take some money off and look at the laggards so that trade makes sense. tom: there is your buy/sell for today. you will sell apple and buy ge. it's not our fault. francine: what is the most distorted market out there aside from treasuries? is there a trade that is overcrowded? >> other than bit cohn, let's set that aside. maybe perhaps technology. likewe are missing -- we

robotics in particular. we like some of the health care stocks. defense, cybersecurity, which is a huge growth area. you have to connect it where the money will flow and driver earnings where you can sleep at night owning these stocks despite the geopolitical backdrop. that's a good question on where to go. it means where to not go. utilities is something we never talk about. are you capturing dividend growth is within utilities? >> it's not gone. it should always be part of the portfolio in terms of looking at total return. whether it's staples or utilities, in: are you buying stocks 2017 with the same 4 p.m. -- same formula as 2016? >> we are starting to be defenses -- defensive.

we still think we are in the middle innings of the emerging market rally and many folks have missed that so it's not too late to put things into e-commerce in china, the banks in india or the energy sector of say mexico. francine: thank you so much. if you want to ask more there in of what's out the markets, you could ask your question using the tv . you can click on any the video screen and you can ask us questions. this is bloomberg. ♪

tom: the single best chart. whatever your politics, let's look at the unambiguous trend is your friend. good morning to the late martin is why --zweig. , right here isii the last time the jets won since yesterday. joel quenneville and, i'm sorry, the trend is there.

you have to be in the market so who do you say to people want to go to cash or who are all in cash question mark >> be in th? >> be in the market. utilities, industrials, by value. hung up on get too valuations and don't realize you have to be in the market to get that return. did i do ok? the concern is that there is something ugly out there in terms of correction. what will that look like? >> that's always an overriding issue. you have to on emotionally put that aside and look at the long-term. policying to be a

misstep or mistake whether it's the fed being too tight or aggressive, i don't think geopolitically it's a real risk. when you look at the liquidity, the cash flow of corporations, the top line earnings growth, synchronize global expansion, we are good into 2018 but the further we go with this rally, the more risk is out there. fullback presents a buying opportunity. francine: what kind of pull back? is something big geopolitically happening with north korea and there's a pullback, do you stay investing? 10% welutely, five or stay invested. we are long on defense, robotics, technology, and health care. dow we are up 22% on the and have made three years of single digit negativity. what do you say to people who want to go to cash? that makes sense but don't go

all into cash. you can take off and wait for the opportunity, that's fine but don't go all into cash. cfa this is a lot of mumbo-jumbo. some assets are sweating out what to do right now. joe quinlan, thank you so much. tomorrow across all of our platforms, the speech of the chair of the federal reserve system, janet yellen. look for that after the noon hour new york time. stay with us through the day on bloomberg television and radio.

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nightmare victory, a fourth term of chancellor comes with provisos. she closes out -- president closes at a busy weekend. japanese prime minister is calling a snap election come announcing plans to dissolve parliament as he unveils an $18 billion package. good morning, a warm welcome to bloomberg daybreak. off, a market shake -- a slight risk aversion and futures a little bit softer. catch up a bit with yields up by two basis points. in the fx market, capturing the german story, the euro dollar lower. french and german vereigns are really outperforminan