♪ francine: inflation insights. some officials are unsure about another hike. when we see another move by the of the year? braces for the worst as brexit talks come to a close and the government look second into plants. cities report earnings today. will the recent trends of declining trading and slow growth continue? i'm francine lacqua in london. all be live at a conference today will be speaking to the

heads of organizations. this hour, we will also be speaking to one of the biggest names in private equity, jon moulton, and then later nicolas dufourcq. overall, stocks in asia seem to be dropping a touch. european stocks were mixed and bonds rising as investors focused switching back to central banks. several policymakers were cautious about raising interest rates again this year. the dollar weakening a touch, you can see. that's your business flash. let's get straight on to the bloomberg first world news. nejra: donald trump has said he will announce whether or not he will decertify the iran nuclear deal, quote, shortly. that's ahead of the deadline this sunday.

trump has called the agreement a badly negotiated deal. has denied ever calling for a bigger u.s. nuclear arsenal. his comments came response to an nbc report that he had asked for a tenfold increase in u.s. nuclear capabilities. he also questioned whether the broadcast license should be taken away from nbc television. ofbrussels, a session negotiations between britain and the eu has come to a close today. the commission is refusing to britaintrade before assures will pay status. the focus in london is not trying to contingency planning. the catholic administration has been given five days to clarify whether or not they have 11 dependents. regional president has until 10 a.m. monday local time to state his position. if he is found to have violated the law, the prime and nasser

may try to force him from office. shinzo abe looks set to maintain his position during the election in today's time. the ruling liberal democratic party is likely to win 289 seats. abe's coalition partner would win 30 seats. coalition plan to win about three and seats overall. five --ornia, the wildfires have claimed at least 29 -- 21 lives. states of mercy has been called in several counties. hundreds of people are still went missing. flames have damaged at least five wineries. global news 24 hours a day. powered by more than 2700 journalists and analysts in over 120 countries. i'm nejra cehic. this is bloomberg. feds revealed little

to surprise markets and the u.s. lowerl bank said inflation may not be transitory. powell may have been privately recommend that the next fed chair. donald trump has scheduled a meeting with john taylor. the president has promised to's up the american tech system. could the fed be next? to shake up the american tech system. could be that the next? us, paul quinsee and jon moulton. to the fed and when it comes to central-bank policy, what do markets want to know? markets want to know how quickly central banks are going to withdraw this extraordinary level of stimulus that we have

been enjoyed and markets the last seven or eight years. we have seen the first signs of that in the u.s. have begun to creep up. we've been talking about beginning of the end of qe. but really, very little has happened so far. we haven't commented he monetary policy in the u.s.. the markets want to know how quickly cisco to change. francine: how quickly can a change? jon: the underlying economic fundamentals are much better, which helps. we have recently strong growth around the world. the best leasing since the credit crisis. that really helps. foundations are more fragile than they were 10 or 20 years ago, but i think there are enough going on to justify a gradual move to more normal interest rate policy instead of qe. it really does matter in

terms of financing. in medicine terms of economics two. one thing that is very clear is the central banks are frightened at releasing things back to what we used to call normal. now we have had 10 years of totally abnormal. they are really very stressed about the idea of releasing because it just might be the economies to collapse. they don't know. they just don't know, they don't understand how it works. there's no coherent list. the low interest rates are doing some damage, that's clear. they persist in allowing bad business structures, bad businesses to continue. that's part of the productivity puzzle. francine: what does it mean for you? when we normalize monetary policy to be more bargains? jon: more companies will fail interest rates rise. that's clear. how quickly that would have is anybody's guess. francine: what type of companies? jon: at the moment, if you have

a company that can pay interest 7%, whichrates go to is hardly historically unprecedented, they are clearly under massive cash stressed. low performing a poor performing companies, those businesses would cease to exist and we would have evolution happen in the market. there are a lot of companies out there that are very low or bad return. their only trading because the long, protracted low interest rates. does that also go back to the record highs with equities? how much are they propped up by this monetary policy? paul: low interest rates help the stock market. the s&p 500's 70% above the levels it reached in the previous cycle. valuations on equity type measures looking pretty full bypassed standards. versus bonds, stocks look like a bargain. the stock market hasn't fully priced in interest-rate environment we are in.

we equity investors are quite believe it. but it's deftly been a hell. we look at credit quality, and we look at large american corporations, we look in pretty good shape. there are too many that we feel will fall over at the first sign of higher interest rates. borrowing in the u.s. has gone up. it's been a broad increase as companies have tried arbitrage the capital structures. selling debt and attractive prices to them and using that money to buy back. yielding, which is quite odd. you see the things that are started looking bit silly. high yield is very cheap. aree is a that the rates looking suspiciously low. marketveloping in the versus the low interest rates encouraging it. cut him back as for change. francine: what higher interest rates?

if we have two or three rates, is that a game changer? when you 3% would be a: game changer. 5-wood deftly began changer. five would definitely be a game changer. is a tax cuts in u.s. one of those ship had sailed question mark something else? large american copies are investing. capitalist ventures have rise at a modest late. we have success in the energy send -- energy sector. a lot of them pain is taken already. most companies are generated mark cason they feel they can invest back in the business. the investment opportunities are reasonable. there are a few exceptions to that. amazon is investing very heavily and the market is very happy for

jeff bezos to spend money aggressively. but most companies don't have investment opportunity that amazon has. they're getting a money back to shareholders. stock markets love that. bitcoin strictly about 5000 for the first time. you believe in the coin? yes. it's a horribly, good subject. francine: you think it will take off? jon: the idea of a currency that is not last to a central bank is quite attractive but it is full of problems. the opportunity is very real. the opportunity is to not understand what the hell they are doing is very apparent. no one can give you a coherent account of how bitcoin operates. francine: are you a player? the technology behind bitcoin, i am certainly involved in using elsewhere. but the court itself, the rising of done is at the international stock exchange we've listed one

bitcoin father. its quite stock. --hasn't really made its way paul: it hasn't made its way into the mainstream equity world. a leave to him. there was a helicopter copper is it because jpmorgan was out with earnings here and was pricing it. let's go back, i cut you off, because this breaking news. you are trying to tell us what would take for ceos to increase. increase capex. jon: a lot of the companies don't have good opportunity investment opportunity internally. how to get people to invest more? change the business models in some cases.

you can't just harvested harbison harvest. francine: is it legacy? jon: some of it is. that stage, a dangerous capital structure was an existential threat to companies. francine: let's is into president trump talking about tax reform. >> we are going to fight and we are going to get as republicans and maybe a few of those democrats to raise their hand and you are going to have so much money to spend in this wonderful country and this great economy. cutsis why we propose tax that are progrowth, pro-jobs, pro-worker, profamily, and from america. -- and pro-america. do you believe there will be some momentum and something will be done and it will translate into the world equity? we are very focused on the level of the corporate tax rate

in the u.s.. we are optimistic about my change. but i'll think we are any other investors are really expressing too many strong views on this topic. the political environment is very uncertain. it's difficult to have to much confidence on what actually can get done. the case for lower corporate taxes is straightforward. the decrease would be a generally good thing. market, having initially got excited about this back after the election in november, has taken a more cautious you. that's probably appropriate. need to wait and see what can be done. jon: stocks have done terribly well. it's likely that a lot of people think this is going to happen it will be a big benefit. they may well be wrong. it seems incredibly unpredictable. some going out against the u.s. dropping rates. that should make an interesting confrontation between the imf chief and mr. trump.

and paul jon moulton quinsee. stay with us. very for the worse. another round of brexit talks wrap up with scant progress made. we will talk about how to organize your portfolio. later, invest in france. in france to speak with the head of france's investment agency at a gallery of operators. this is bloomberg. ♪

francine: for the first time ever, bitcoin advancing as much as 4.9%. that means it is a record high of just above $5,000 for the first time ever. that's according to bloomberg data.

we will be trying to figure out a little bit more and whether there is something in there. it seems bitcoin is so close to breaking a new record that it could the taking market share from its smaller cousins. there are markets at play at play and how the markets position. that's something we need to look at or not. jon: it's a very speculative market. is a few a hunch having a punt of the coin. francine: could go either way? jon: it's going to be a volatile acids were long time. francine: are you expecting it to be better question mark? -- better? jon: bitcoin will have to evolve. the way they manufacture bitcoins cannot sustain 10 years. it's very interesting to have something on attached to governments and central banks. that's the bit that is rather appealing.

but we haven't think paul goldschmidt is roughly the same. francine: if you look at the market share, bitcoins market cap as a percentage of volcker co currencies -- percentage of volcker to currencies -- percentage of all cryptocurrencies, say hi. nejra: bmw is working on a deal that will bring manufacturing of the brand to china for the first time. all --e discussing outsourcing the manufacturer to china's biggest automaker. chinahing is for bmw's unit in the merely respond to any melting comment. morgan stanley is said to be ready to charge two and a half thousand dollars an hour for private analysis when new eu

financial sticking next year. people with knowledge of the plan say that would be on top of the annual rate. the charge is almost twice the rate of top commercial lawyers. kobe steel fake data scandal has iconicd as japan's bullet trains were found was substandard parts supply the company. aluminum parts were found to have failed city centers although they don't pose any risks. that's the bloomberg business flash. the fifth round of brexit negotiations are to close today and sides are the goodwill generated by theresa may speech last month did not translate into progress in the talks so far. the chancellor warns the governments need to be ready for a bad tempered breakdown. release more money for

a new deal in progress if there are not clear signs of august. has bolton --jon moulton navigated such situations in his career. we are back with jon moulton and paul quinsee. note clear, john, you are believing that crashing of the eu is not the worst-case scenario. jon: if this becomes acrimonious, punitive, somebody decides that the way spain treated catalonia is a good way to treat the disobedient child, that the catalog on. ,hat would be protectionism borders, high terrace. that's the worst you can imagine. with that being of brexit deal? if it's acrimonious, you just sever.

a non-acrimonious, just all the rules through, pop off into the wto, that's not a terrible. it's not great. there would be appearing a. of pain. but not a long. . what are we now is absolutely certain. we are getting a protracted. of uncertainty. have transition periods, that. of uncertainty will extend an extent. uncertainty induces economic growth and investment decisions. the worse outcome is to sack of this on and come to conclusion. i'm sure that's right. i draw that they reversed the brexit vote or get the hell out. if the government is planning -- the governments planning on to be that we will agree next to nothing and then deal with the things that have to be agreed like traffic control. francine: does the occasion

does the u.k. pay the divorce bill first? jon: they don't have to. francine: that's of the eu says. jon: nobody set this up properly. there's no rule in how the hell to deal with assets or it is like if you're a member of a club. you leave and don't get a share of the clubhouse. francine: let's say the u.k. does not get a deal and is under debbie to your rules. what happens? economics and stock markets are not the same thing. is british stock market dominated by international companies. a pound dropped increases in pounds the value of overseas businesses. assuming they're not disrupted. i'm not saying it's a good thing

, but i do think there is a fundamental difference between economics and politics and the u.k. market is one of the places you have to understand that. francine: one of the consequences of the uk's falling under do with your rules? -- falling under wto rules? paul: if you're taking a cautious you, which is performing lead -- performing .ifferently than most economies we see accelerating growth and low inflation. the uk's less stable because of currency weakness. in fact it's worse, it will make it tougher for companies exposed to that. -- 18 months ago this was a complete surprise. it's not so much of a surprise now. everyone is talking about it. the currency stock market has reflected some of this already.

mini coming onset brexit would happen. what are the chances there is a second referendum? one and three. -- cine: jon: we do best when we stay focused on economics and profit.

cabinet together. it's very hard. damaging.y to be more an acrimonious of larger would hurt the financial services and u.k. a lot. non-acrimonious the vizio, probably ok. francine: thanks so much. a non-acrimonious wto, probably ok. francine: thanks. has catalonia devoted to finish in spain. we will have the latest. this is bloomberg.

♪ francine: you are watching bloomberg surveillance. i am dancing lacqua and london -- francine lacqua in

london. donald trump denies he asked for a 10 fold increase in america's nuclear abilities. the broadcasting license should be taken away from nbc. in brussels, a round of brexit talks have come to a close. the european side is stepping back from concessions it was considering last month. toh the commission refusing discuss trade, and with 18 months to go until u.k. tumbles out of the block, the focus to london is turning to contingency. administration has been given five days to clarify if they have declared independence. they have until 10 a.m. local time on monday to state their position. if he is found to have violated the law, the prime minister may try to remove him from office. abe looks to maintain his

position after the general election. -- ldp is likely likely to win to an 89 seats. the coalition partner is likely to win 30 seats. together, they're are likely to win three headed seats. in california, the wildfires have claimed at least 21 lives. governor jerry brown has declared states of emergency in several counties as the tall of death is expected to rise. hundreds of people have been declared missing. five wineries have been this -- damaged. global news 24 hours a day. powered by more than 2700 journalists and analysts in over 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much. >> officials are wrestling with why officials are remaining so low.

that was taken away from the minutes. investors pricing in a 77% chance of a rise in rates and biting of the year. a bond bull since 1990's sees the fed playing a dangerous game as it starts to unwind its $4.5 trillion balance sheet. he says it's a move that will check on credit growth and curb excess reserve and suppress inflation which he says is already stubbornly low. wonderful chart. it often portends recession. germany off 1.19 basis points. the spread has widened by 10 basis points since wednesday. and in down in catalonia

spain, this is a great chart. jpmorgan earnings a little later. past year, eurozone banks have lacked their u.s. peers by half. 14.514 u.s. banks. .here's a gap in price 2.2 times european banks. jobs drop by 300,000 in u.k.. it helped boost salaries including those of young people. this is according to the resolution foundation. overall, pay growth in the u.k. remains tepid. a situation brought into sharp focus by the acceleration in inflation since the brexit vote. this is real wages versus average pay.

francine: thanks so much. spanish prime minister mariano rajoy has given the catalan administration five days to declare whether they have declared independence or not. the catalan leader has until 10 a.m. local time on monday. if he is found to have violated the law, he could be forced from office. we welcome back once again paul quinsee and jon moulton. there was a move yesterday on catalan bonds. does it go back to political risk? is there a discount in european stocks because of that? paul: a little bit. we have a moment of tension. investors have to think about scenarios. we always try to bear in mind advice that if it's never as good as you hope, it's really as bad as you fear when it comes to

european politics and the impact on markets. a lot of investors have missed this tremendous rise in europe because they were worried about the elections, in particularly in france. so far, markets have taken this in stride more or less. we haven't seen much trouble in the credit markets for the equity markets area -- markets. european profitability is finally growing. europe can participate in this bull market. match the returns from u.s. equities after underperforming by so much in the last 10 years. does a gethen overcrowded? to me before piling then? is there linkage with euro? paul: i think there's a long way to go before that happens. money has started to go back into europe this year. but we still haven't seen the money going and replace the money coming out in 2015 and 2016. hearing that europe was uninvestable. people have given up. i think there's a long way to go

before it's crowded. i know along -- the a lot of people talk about it, but there's not too much sign yet that people are overoptimistic. francine: do you invest in europe? jon: sure. francine: countries are? individual on deals. i have investments in greece which is more specialized. francine: in the banking sector? jon: internet. deeply specialized. thing hase catalan had remarkably little impact, actually. a tiny handful of stocks that are basically canceling companies that have been hit, but it hasn't had much impact at all. what's good to happen next, don't know. francine: are you worried about that, paul? is potentially a big geopolitical threat. i don't know if that's the way the market functions if you have algorithms or too much acid --

passive investment? dear ignore it, is that dangerous? it, is thatnore dangerous? are risks that investors have put a fairly small probability on and they are right. if those from ability to change in the market impact could be quite different. when it comes to this one, we haven't seen yet enough of a reaction for us to want to get involved in the stocks that are closest to it. it hasn't really changed that broader european story that we've seen for years. it was a long. of not much going on. the picture looks very different. francine: what's the biggest distortion? is a regulatory? jon: there is certainly a repertory impact on some parts of it. the growth of regulation in europe is something that switches off a few u.s.

investors. they are much happier investing at home. there are much more at the mercy of regulation and government. there's not much else that i could take care of. paul: european companies have been much less aggressive about returning the cash they are generating to shareholders that we have seen in the u.s. or even in asia. that may be beginning to change. quitends in europe are generous but share buybacks are not a feature of the landscape in any meaningful way. we have seen pressure on company managements that has been a feature on u.s. markets and so-called activism investments. there are less things to get activist in the u.s. these days. there are plenty of things in europe. if we see an invest -- increase in as best in activism, it may change. francine: what industries? s&m this morning, we seem

quite fully priced. you got german companies under stress. one-timing trace. the americans are common across to try and exploit it. i'm not really sure they're finding good targets. francine: are you anesthetists and investor? -- are you and activist investor? deal with but i the public markets in many ways. i haven't done a hostile takeover in many years. francine: widget? jon: -- francine: would you? jon: sure but you have to find a company that is doing poorly and run by crooked people. francine: we will be talking more about monarch airlines next. a host of top french ceos are gathering in paris for a

conference, an event hosted by the government investment bank. it's the first since the election of macron. the future of france is top of the agenda. witheporter is standing by nicolas dufourcq, the ceo of bpifrance. i'm very happy to be joined francelas dufourcq, bpi chairman and ceo. since the election of macron, perceptionthink the of foreign investors to chance has changed? >> it has changed a lot. they're coming to france and they think france is back. the reality is that the track of the country is there. ande is loss of been passed

the opportunities and the way we do business in the country. the corresponding to be revealed. we are welcome to investors now. when it comes to u.s. investors, even though more investors are happening in france now, in the u.k. for example, how are you hoping to attract u.s. investors? nicolas: i want to convince that it is the time to invest in france. all the ventures in paris today is 7 billion euros. how much u.s. money? practically none. it's only european money. it has to change. u.s. money goes to israel, china, india. do you think brexit is

creating a shift in europe? nicolas: it is. undoubtedly. we are starting to we attract a lot of those funds to paris. all of them recognize the quality that we have now in the country. how is this fundraising different in paris that in london? you talk to them. what do you say about why they want to move to paris over london today? you should talk to the man who will talk afterwards. atomic oh has incited to invest in france. there is a move from paris -- to

paris from under which is real. bvi france also hold some share holds in various companies. are you planning to change any of these investments? nicolas: we sold some of our shares. made a beautiful profit. we are stable. cited, wempanies you don't change. . -- >> what's your reaction? nicolas: it's bizarre. the biggest investor in france. we have 13 billion euros under management. sometimes reinvesting competitors.

sometimes they might think that because we have invested in a competitor, we should not be on the board. it's ludicrous. there is not going to be any change of the orange stake holdings in the future? we have a merger. we have shipyards. how do you think weekend promotes tech? -- we can promote tech? companies must be enhanced. france and germany are linked together, it's in the believable -- unbelievable, and so forth.

we should be more independent. not between big groups only. between small groups. they should merge also. >> can you be more precise? nicolas: basically in the industry. there is a big industry in france, a big industry in germany. there are some big companies. they're not making enough. enhancehere we need to the quality of the relationships. >> france is one of the countries proposing to tax technology companies based on the revenue generated in the country. we think about google, apple, amazon. their revenues and taxes paid some routes.

how will this impact everything theave been talking about? investment, the attraction of france. nicolas: i don't because it into do with that. it's just recognition of the reality. you have huge companies which are platforms, they are holding market shares between 60 and 95%, and they don't pay taxes and europe. you have to fund expenses. rhodes, so security, things that make this confident reasonable. we need tax money. those companies need to understand that they will have to pay a little bit for the sake of europe. the giants will have to pay a little bit for the sake of europe because bpi france ceo nicolas default is live in paris

--nicolas dufourcq is live in paris. francine: still with us, john bolton. --jon moulton. what's a look-alike of u.k.? -- what's it looking like in the u.k.? a lot of we have action. we have tremendous amount of support for early-stage startups. sadly, they are not very successful. francine: that's normal, correct? jon: it's optimistic. a large failure rate is expected that you need your winners to be big ones. we don't have enough big winners to catch up. over a long. , investing in startups has given poor return to the u.k.. is it a financing problem or scale problem?

jon: it's a bizarre financing problem. if you are putting money into something and not getting a good return, it's in excess of money or shortage of deals. it doesn't matter, you have a neck as of money in the retards. there -- there is quite a lot of money pumped into the start of market from wales, scotland, global enterprise funds, european investment fund. they put money in which is typically not economic. they are driving the prices of good deals down. private investors don't make much money. they also take away the pressure for efficiency that you otherwise get if you're in the more naked startup environment of the united states or it you fight for it. there's a bit of a defensive culture. it's quite difficult to solve. we need to improve the supply of companies to invest in. francine: how do you do that? jon: education. regulation.

culture. investment into technologies that could go forward into full stage companies. generating things that companies can take forward. it's hard. it's difficult. the government ought to pump a lot more many dust money into the service rio micrograph for it. economy, we need efficient startups. given a decent rate of return on money. francine: thank you so much. we will talk a little bit later. you coming in at the beginning of the year. later we are at the conference in washington dc. tom keene will be doing an interview at 3:00 p.m. u.k. time. this is bloomberg.

♪ francine: let's talk regulation. chargestanley is set to $2500 an hour for analysis.

that's on top of the annual rate for basic access to equity research. this is once the mifid ii regulations come into place. this is twice the rate of commercial lawyers. -- i'm'm excited surprised we are to have months away from the new rules and no one knows how this will function in the markets and how will be priced area that price. when the european commission puts rule senate supposed to delay value for money. that'sknows -- francine: regulators fault. nobody knows if disruption is a cost-effective instruction at all. u.k. did a cost-benefit analysis and 10 to the conclusion it was massively negative. francine: negative, why?

negative because it was a cost with no benefit. francine: it was assumed to be a benefit for the consumer. the institutions are not a bunch of months in public doesn't read research. think you can relatively rely on the soles of places like blackrock to look after themselves. francine: do you think the industry will be worse off? jon: just the cost of it and the complexity of it. francine: what people go bankrupt? probably know. it's going to be a next her cost of the investment industry which will soon or later find its way back to the customer. it parses the things out into dark pools are a chance. as dangerous. jon: perhaps. dark pools sounds so terrible. they're not that bad

but they're less transparent. few people understand what's going on in full and there will be a lot more costs. it's just cost for us. we don't the it's going to benefit our customers. it makes research difficult to do for small countries. francine: we are getting some breaking news. stakeholders are set to back chairman james murdoch. what's your take? i would love to see media in my hands -- in the hands of more people rather than fewer. it's really quite frightening to see what happened with the phone hacking and things like that. i'm sure it's not happening today. but if you got very powerful press barons, it's a concern. other than that, not much of an opinion. wascine: this is as sky

facing new pressure over murdoch's election as chairman. these results are based on proxies received ahead of the vote. john, thank you so much. , we hope to get you on very soon. we return to our and tom keene joins me. we will be seeking to the world bank president. up next, we speak about u.s. banks. this is bloomberg. ♪

♪ someine: fed minutes show

officials are unsure about a hike. how uncertain is it we will see another move by the end of the year. will the recent trend of declined trading and slowing continue? the u.k. government turns to contingency planning. this is "bloomberg surveillance." tom keene is in d.c. with our own contingency plan. i am excited about your imf interview with madame lagarde. and and the bloomberg news the financial times, sharp trumpes about administration of the international monetary fund. sudden, that is front and center. i will bring that up with madame lagarde this moment. francine: here is taylor riggs.

in spain, time is running out for the president of catalonia. the prime minister has given him until monday morning to clarify if he has declared independence. if he is found to be in violation of the law, he will be given three days to back down. then he can start the process of removing the catalan government from office. round of brexit negotiations in brussels. progress has been so limited the european side is stepping back from concessions it was considering last month. the financial settlement is a stumbling block. some brexit supporters say that walking out of the talks should be an option. the death toll is rising from the wildfires in northern california's wine country. 23 people are dead, 100 80

injured, hundreds reported missing. the fires destroyed 3500 homes and businesses. 8500 firefighters are on the job . president trump promising his money forould save american families. the president spoke to truck drivers in harrisburg. it is part of his campaign against criticism that their proposal is a giveaway to the rich. he argues that if corporations keep more profits they will use some money to boost wages. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thank you. equities, bonds, currencies, commodities. we had a number of risk on days, now a little risk off. i want to come back to equities, curve flattening down to 82. the euro on a carry.

you can see that across the cross rates. let's go to the second screen. if we can. what is fascinating the equity market, let's call it 9.99. 22,872, remarkably non-correlated with the risk off feel. a little in the other asset classes. euro-yen shows a strong euro. to 1300. up it is a weird take. weird i think is the proper financial word. given theit is financial sector. i would probably go along on it.

european bonds rising stocks. in mr. focuses back on central banks after the release of month's fed last minutes. treasury yields declining. i am looking at pound because of brexit talks. we are a news conference in 90 minutes. gadfly's marcus ashworth. we will talk about the market movements. tom is in washington dc for the preview. when you look at market dynamics and correlations tom is talking about, what can we be certain of , that all will be change depending on what the fed does next? markets: the markets are more focused on who the next fed chair will be. as far as december, everyone expects a rate hike is coming. teetering onet is

the edge. a lot of people are worried we are about to blow out yield significantly. we're looking at the cliff and edging out -- edging back little bit. francine: if janet yellen is not kept on what about regulation? what is more significant to the markets? you can argue when you are in the chair you will the pretty dovish. whole pointink the about regulations as they are trying to roll back. the fed was saying absolutely no way. let's look at what happened in years ago, how can we consider it? it is an easy windfall for donald trump, and he needs one, he is up slightly in the banks. the u.s. banks are better capitalized than their peers internationally. the economy is in strong shape.

there are always problems him credit conditions, but in that sense there will be probably a replacement to janet yellen. whoever that be will probably be less dovish nine she is. that is why bond yields have been rising. francine: not that much. when do bond yields start believing the fed? marcus: janet yellen had a bad start. recently she started to get the 's confidence. ironically she probably does deserve another term. i think the market is confident we know what the fed once and will deliver. that is quite a significant change from this time last year. when everyone was like, what is the fed up to? tom: greatly appreciate your attendance this morning.

dulles, fromfrom abroad, from new york, that would be the bankers. the bankers to send on washington for the international monetary fund. he has been at ubs, morgan stanley, in the trenches of bank s and now holds court at algebris investments. why do you come to washington for the imf meetings? is the worldmf economic forum for bankers and banks. within three to four days all the key bankers, senior policy makers, ceos, the best way to get a real pulse of what is going on. the imf addresses some of the issues. script that the imf and world bank wants to be

on. the trump administration is not playing by that script. we saw overnight the article talking about trump how dare the imf three blocks away metal lid tax reform. should the imf do work on tax reform, not only in the united states, but in developed countries? , think aboutmf infrastructure in the u.s.. last night we had a high dinner with lots of long-term capital mentioned it is hard to invest private capital in u.s. infrastructure. participants said when you talk about infrastructure in the u.s., the u.s. becomes socialist . it is public money, they don't want private capital. infrastructure abroad, it has to be private and they want to deploy their own capital. hi from london.

do you think markets are too complacent about some of the risk? davide: yes. inrecently published a piece which bloomberg elaborated upon. we are very worried about the centralt half of the banks think that $20 trillion of monday, about $100 billion every month, has volatility in the base of finance. that is treasury, guilt, b unds, and volatility is being sucked out of every asset lasts. in our view, this is wrong because the world keeps being volatile. 7 billion people keep making decisions. some get them right, some get , life is not a straight line. central banks are keeping the on the gas and

where sucking out volatility in a way that i think is conducive to long-term growth. francine: when will that change? if you look at the policy rates from the fed and the timing from other central banks, does it mean it needs to be a 2% for interest rates, 3%, 4% to get that is shifting and for volatility to come back? davide: i think within our framework is as follows. if you think a normal cycle is moves, ist rates and think the next cycle will probably be half as much. at around 2% in hiking. it will take longer than seven, probably 10 years. 20 to 25 business points in 30 years in terms of long-term moves to adjustment. what is key is not is what happened in 2007 and 2008, a currency war, the dollar

depreciated. a coordinated effort where banks start hiking and the fed has to go first, because they were the first to engage in quantitative easing in 2009. tom: this is what we will do. financial banking, all of the bankers attending. willl turn to our -- we turn to economics later with madame lagarde and other imf officials. we continue on financial with davide serra with us. we will take a real look at the state of the financial system as the elite meet to great in washington. -- meet to greet in washington. this is bloomberg. ♪

♪ taylor: this is "bloomberg surveillance." . am taylor riggs to talking about outsourcing china. people with knowledge of the , the german manufacturer has been in talks with great wall motor. 230,000 bmw sold cars worldwide. bullet trains have been found with substandard parts. central japan railway says the parts don't cause safety risks but failed to meet industry standards. the international energy agency forecast oil stockpiles will

fall for the first time since 2013 because of stronger demand and production curves by opec and russia. the resurgent supply from the u.s. and elsewhere will prevent inventory from dropping elsewhere, preventing price hikes. getting: earning season underway with the u.s. banks. jp morgan and citigroup reporting third-quarter results before the u.s. open. some analysts say trading revenue may drop by as much as 20%. let's get back to davide serra. we are talking about volatility. what are you looking for in terms of success for jp morgan? is it only when volatility is back that you can see who best in class is? davide: for jp morgan, i think we're looking at the quarter volatility in summer everyone is

aware of. particularly july and august we are seasonal. they key is this consumer banks deliver its margins and if we see access growth that is consistent with the growth pattern in its earnings power. jpmorgan is a company we think can see results in the stress test and contains earnings and dividends. we find it very attractive. it can keep returning cash flow to the shareholder. enhancing our corporate position for 11 years, and it remains to be self. bencine: no u.s. banks stronger than european ones, because we don't know if the rules and regulations apply to them? thede: first, look at numbers. jp morgan market capitalization is higher than the number one the 27 european countries.

adding the market capital of 27 european banks, it is not as big as jpmorgan. size does matter. in the u.s., you are three to four years ahead of the healing, jp morgan is in a position to attack. innovation is more than all of the european banking systems put together. as a result, u.s. banks are ahead of the curve, they deserved a the premium, they are in growth mode. unless you see a sharp recession in the u.s., you will keep having a premium. tom: what is the panic mode for the european banks? i remember years ago, deutsche bank wandering in, everyone greets the four seasons, there is a bustling georgetown. they're going after barclays and jes staley. -- jes staley. the panice urgency,

mode, as european thinkers come to washington? davide: i don't think it is panic mode. thinking of barclays, they are earning 6% to 7% return. tom: they have to do better. davide: i agree. tom: 500 basis points. spread, buts a big a question of time. their own economy is under exit was asian in europe. tom: they have to pick up the pace. they have to be more american-like in the next two quarters named in the next eight quarters? davide: the problems of our clay they haven't had -- the problems barclay has inherited is to be a niche. europe needs to have a goldman sachs and morgan stanley inside europe. because not cutting it

the locals are stronger. now they are stuck between a rock and a hard place. to attack the is core of the issue. it is not going to take two quarters to fix the system. davide should remember, had the quote, deutsche bank has not made a dime since time began. francine: paraphrasing loosely. probablyavide is kicking you under the desk. we have a viewer question on greek bank stocks. i think the viewers asking specifically the national bank of greece. davide: they are an option. first of all, they are not equity.

50% provision. the value of the old greek banking system is 5 billion euro. tocomes down to they want keep the system private or send it to the stress test and make it 100% public? there is some value in the banking system keeping it private. it has to be considered an option and not an equity investment. it is a risky bet. it can be up or down to zero. francine: davide serra stays with us. coming up, a conversation with the formerdes citibank chairman. less then 10 minutes. this is bloomberg. ♪

♪ tom and francine from london and d.c. you're learning italian talking about the government there. three ballots in the lower house vote on legislation. the bill could facilitate the creation of coalitions before next year, which could hurt the populist five-star party. do you worry a lot less about italian politics now than two months ago? davide: the answer is yes. of new electoral -- first

all it has been discussing it like torah law for 20 or 30 years. the last electoral law has been considered unconstitutional. last three or four elections were unconstitutional, which is kind of funny. it has the support of more than two thirds of the upper and lower house and forces people to look at the problem of the country and forming coalition to and forming -- coalition. to drive reform, that is what the country needs. you need reform. the government has given -- clearly, something good is coming out of it. i think the new electoral will the meant it. francine: how do you view the ecb plan to rein in bad loans?

davide: i think it is a good plan as long as it is applied to new stock. the existing stock has to be dealt with within the already ecb guidelines. we can't have an acceleration beyond what is rationally reasonable. tom: let's continue. davide serra with us. conversation of the day, i will speak with christine of the international monetary fund. the trump administration goes 's economist. and we will speak with dr. kim from world bank. ♪

♪ tom: good morning. tom keene in london, francine lacqua in london. conversationmy

with adam lagarde, more timely today after sharp criticism by the trump administration over economist, and tax reform. keep your nose out of -- with christina lagarde -- christine lagarde. the world bank's efforts, particularly on infrastructure, the idea of moving forward with a development of the emerging markets. right now in new york city, first word news, here's taylor riggs. francine, those wildfires in the california, have spread to an area bigger than the city of chicago. at least 23 people are dead, hundreds are missing. the fires have destroyed at least 30 500 homes and businesses. highways are keeping firefighters from containing the fires. california state fire chief says the situation will get worse before it gets better. president trump couldn't get congress to repeal obamacare, so now, he's going after it

himself. the president will sign an executive order that the white house says will promote health care choice and competition. he's likely to allow people to have unsubsidized coverage outside of the affordable care act. critics say the plan would raise costs. in new jersey, the bribery case against robert -- senator robert menendez may be in trouble. a federal judge suggest he could dismiss the heart of the case. there's a supreme court ruling that narrow the definition of a book corruption. menendez is on trial for allegedly taking bribes from a codefendant, one of his biggest donors. japanese prime minister shinzo abe will maintain his coalition with majority parliament, after the october 22 election. kill tunas projects the coalition could win two thirds of the seat up for grabs. this could pave the way for abe to become japan's longest-serving prime minister ever.

global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. out of brown university, bill gross went to city break and said, oh joy, you would love people think eisenhower -- from there, he became anchor to the world. his book, still highly readable, is banker of the world. banking our imf coverage on china with bill gross. bill, thank you for joining us today. somewhat short notice here. there's turmoil. what i love about europe survey shouldn't, you say forget trump, forgets the meetings, what matters is china. why is china, and where these meetings coming up? where they so important? coming up on the 19th party congress, which begins october

18, is probably the most important political event this year. more important than the of elections and -- than the elections in europe. it's the meeting that will decide where china goes for the next five years, maybe even more . this president of china, xi jinping and party leader, is the most powerful head of state in and, since deng xiaoping some say, since mao zedong. >> you look at ken burns is treatment on vietnam -- you look at ken burns'treatment on vietnam, you go back to the generational, -- the generational shift, cultural revolution. explain to our audience, what is the why the gets this new leader to be an equivalent to them of decades ago? and assumed power five years ago -- quite he assumed power five years ago, we've seen this in more areas, much's -- much more so than his immediate

predecessors. he has a strong hand in the economy, usually a role of the premier, like it was wenzhou and jean was the premier. under this president, he has assumed almost total control of everything. one of the things you've also in the is an expense power of china worldwide, particularly in asia. economy continues to move ahead, but it's got a lot of problems. basically, with their tremendous amount of debt, which now some -- total something like 280% of -- 300%oing on to 290-3 of gdp, compared to 150% when the great recession started. he's got a lot of problems that he has to face. the important thing to look for out of this meeting is what he does with the standing committee of the politburo, seven people now. he may reduce it to five. and, who he appoints on their.

particularly, the position of our shushan, the anticorruption power, who a lot of people think will stay on. it's good to be with you, as always. francine: thank you so much for joining us, bill. i want to go back, this is critical. we understand that one of the key china critical things to rein in is basically to translate that into equities sake. isthe initiative starts -- it supposed to, that that's really isn't going away. do you worry about this kind of mishap? they're trying to dealing with it in a matter, perhaps, that will come back to bite them? that's a good point you raise. we will see more of a clampdown after the party congress finishes, particularly starting the end of this year on to next year. that can have an effect on growth. the real estate sector is basically someone out of

control. there needs to be a further clampdown on death, on the state on the -- enterprises, and minutes of palate is. upot of this has been held because xi jinping does not want to have a slowdown in growth before he brings off this party congress. this is one of the reasons why he is not very happy with kim jong-un and north korea. that has sort of given this , toe movement to anoint him be the strongest, as they said, head of state in china since done jumping or mental -- or mao. they will see more chinese cooperation with the united states and others on north korea going forward. , yesterday in the world report, the imf said they were meaning to stop focusing on short-term growth targets, and to really start raining and start growth, and also focusing on reforms. will that happen after the congress? >> that is what i think probably

will happen. the question is the speed of it. centralhink of china's bank, they felt strongly about this for some time. joe shaw schwalm, who is a schwalm,-- joe xiao he's close with important figures. tom: are the chinese banks real banks? you're the guy who does the international thing, you have decades of experience of saying, deutsche bank and jake -- jpmorgan. banks?y real >> yes, i spent 45 days and morgan stanley -- what is clear there, in a system -- in morgan stanley -- what is clear there, and a system like that, the large banks are lending to many for no prices -- for the prices. it is a nobel it to you business. you can see that with capital over the last 10 years, very

stable. the question we need to ask ourselves -- remember, this is a closed end system. in the economy, foreign capital and china -- it's less than 60 billion. be clear. last 10is over the years, with capital being more bullish in china vanke the average -- if they think they have foreign capital in china -- which they do not, they have the right to do pretty much whatever they want. i don't think china will see a big crisis anytime soon. >> to they a walt kristen? kristen?ave a walt a jamie dimon? >> put it this way. you've got experienced bankers on the state-owned banks, and private banks. what you basically need is the beginning of -- which christina

and i were just discussing a cleanup of the financial system. in addition to the lending problems that i mentioned, one of the concerns is that you have the past two obligations on the books of the banks, and this has to be cleared up, and not just renewed. i think you need a cleanup there. last time that was done was under two rushing, who did a tremendous job. he increased capitals -- capital of the banks. he went over the stock -- zombie state owned enterprises. the truth is, that the type of program that runs china. >> when you look at china, is , for example,y banks that have joint ventures

in china? if you're a european company, u.s. company, does it make you 100% more investable? >> not in financing. but the hbc you, the largest operator in china for more than 150 years. you are talking about the negligible exposure, a balance sheet of about 1.5 trillion, about 5% of the underlying her. for industrial, if you can have a manufacturing base in china, that's a game changer for financials. it's all regulated. there's no real axis. different for hong kong. there is where, you think about spotharter, they have a for markets. in china, they can make a lot of money. it's hard to access it. >> bill, is there something that actually the u.s. can do from an some point of view, or europe from an economic point of the

you, to get china to play ball geopolitically with north korea? >> i think this is a real challenge. there's no doubt that xi jinping is not a very happy camper with the disruptions kim jong-un is actually providing him, and they would like to do something. the real question, are they willing to go fully, to bring him to the table? i think the only reason kim jong-un will go to the table is that the chinese cut off all of the oil and gas exports they're giving him. they provide somewhere between 85 and 90%. if stop it in its tracks, the isth korean military -- china's connected to do that, -- >> i want to give this up front for the rate -- raging debate in washington.

over the study of tax reform, helping with attention -- for the imf of the trump administration. >> i think it's not just the trump administration. i can think of a number of cases where the city administration wasn't happy. that's what the imf was predicting if it wasn't the same as the administration. a think that nothing new, i don't inc. that will stop christine lagarde -- christine lagarde or the imf from making their comments. they have discussions covering every country, to break what they think is going on. i don't see that changing. the main thing this administration has got to do is get down to business. they've lost a lot of time over health care. they haven't started on the infrastructure side, and they need to get on tax reform. if this administration is going to get to 3% growth, they've got to move out of this area as quickly as possible.

>> that was mentioned by mick mulvaney yesterday. we are certain we are going to it could -- continue to accommodate. we will continue here from washington and london. your morning brief on radio, bloomberg daybreak trade look for that coast-to-coast. on bloomberg radio. ♪

francine: we need to talk about technology and startups across europe. since being elected, macron has been on a drive to boost france.

he had a commitment to commit 10 billion euros to finance innovation. some people are in paris for this year's dpi generation conference. joining us from the event for an exclusive interview is nicolas gorsuch from, he's the ceo -- he is the cofounder of skype. think of for coming on. thet of people want to be next start up a base -- a lot of european capital want to be the next startup based. it's not that easy. infrastructure, venture capital, funding. how is paris doing it question mark how can they improve? be at paris ag to few days this week through just to see the ambition of the founders for getting bigger and bigger -- are getting bigger and bigger. paris is a big place for technology. great innovation, great

engineers. so encouraging is that the ambition levels of the founders are so much bigger. it's very encouraging. look at the if you big companies, google, facebook, amazon, does that make it harder for smaller startups to get into that space? i don't know if that's a problem of funding or market share. no:, it's atrom matter of time. you have to think about value traded over 50 years ago. the system was done 10 years ago -- it's a much younger ecosystem. i think there will be companies in the next 5-10 years that could become big global capital winners. it's not a problem, i think it's an opportunity. francine: even in europe -- it seems the u.s., silicon valley, it's so much better at putting

money behind something and scaling it up straight away. so, the difference in this in the europe is, while we have now a lot of great talent and great companies, there has been a funding gap in europe. we could raise a larger fund with atomic up. year, you ares having some international growth investors really looking at europe, and pouring money into things. european companies are able to raise capital at normal rates. whether those are u.s. investors are asian investors. believe there is a backlash towards a lot of tech companies? what's the problem? where does it come from? >> we haven't seen any backlash against in the european tech

companies. a think there's been backlash against some of the big u.s. tech companies. as --ope, we see that even politicians here in france, the u.k., germany, they are helping european tech companies. >> nicolas, talking about celebration, it seems like the party is getting started behind you. you probably want to go and take advantage of that. that was the ceo and skype cofounder. >> if you are a bloomberg user and we sincerely hope you are, log on to tv . you can look about what we asked him from -- but you can also ask ask our -- you can guests -- we will ask our guests questions. this is bloomberg. ♪

♪ we welcome all of you worldwide to washington dc, the meeting of the imf and world

bank. francine lacqua in london as well. later, my conversation with medical card. am theela card -- mad lacquard. -- we have, i don't know what we have. it harkens back almost romantically, to hemingway in the 30's. but there's no romance about this. this is an independent movement in catalonia. mr. royce spoke about this yesterday. what do you perceive is the strategy? >> first of all, this is something that probably has been thinking about for five years -- this is something he has been thinking about for five years at least. i spend time with him, during the worst part of the recession in spain. i asked him what his biggest problem was. he said obviously, the economy at the moment, but we will move

ahead. if got a plan etc., and i've got the team. he was right. he said my biggest problem going forward is going to be catalonian, because if you take a look at what happened before the spanish civil war, in 1934, they try to break away. this was all part of the excuse that franco gave. >> right. >> among others, for starting the spanish civil war coming up from a wreck. >> right. >> because, he said the independence movement in catalonia was going to tear the place apart. he felt he had to -- >> what are the banks going to do? francine this up the other day. -- it's a seems to be most like the canadian quebec why movement years ago. they leave montreal.

>> the current generation, the thisr -- they came from chaves idea. i grew up in italy, where back then, being part of the rational .art would be good people just want more money -- saying an independent catalonia will be a disaster. they said spain will veto it. this go back to people being unhappy and not being sure why? that's either an independent or secessionist, or populism. >> it had to do with 30 years of funding of independence -- independent ranging tv's. they do believe their own fake news. in a way, you can look at any .usiness, the numbers

it's recycled. ultimately, i think the king and prime minister have been trying to cut a deal with these guys. then, what i was told us the last 10 days, they relegated -- renegaded. if you want to change the constitution so bad, they have to go and change the constitution. it's too easy to say, i have the right, that's the voice of the people. tom: we could go another two hours. this has been wonderful. you. you so much, both of we continue from london, washington. this is bloomberg. ♪

♪ morning, risk off

slightly stronger euro. did you notice another record high in the dow yesterday? in the fed derby, kevin warsh leaves of the second post. governor powell is sharing karen yellen, they are gaining. john taylor, glen arbor, erin judge, richard taylor not under consideration. suddenly, a bouldering imf bank leading -- trumpcare -- trump acolytes, could go after madame lagarde. the imf should but out of the u.s.. debate. we will speak with our guest in a bit. this is bloomberg -- this is "bloomberg: surveillance." we will speak with dr. lagarde and our other guest later. francine, a lot in this hour. the real question, francine, seems to be over tax policy, not just in the united states. taxcine: yes, over all policy has a lot of the equities, and of course, what it

has anything else -- undistracted. we have a big hsbc -- im distracted. we are waiting for cbo to be announced. it is the head of retail of hsbc. this is what we found out. don't know if we can get a share price up for hsbc. they have named johnson governor -- from february of 2018 time. tom: the hsbc -- a few years ago, a great discussion over where their geography should be. we have a guest that could actually qualify to talk about hsbc. we will do that here in a moment. studyl continue with the of hsbc, and of course, the meetings here and washing them. in new york city, with her first word news, here's taylor riggs. ♪ taylor: tom, francine, time is running out for the president of catalonia. prime minister arianna lloyd has given him -- mary on the low holy has given him -- the prime minister says if he is in

violation of the law, he has three days to back down. after that, he can start the process of trying to force the government from office. the u.k. is preparing for the worst in brexit negotiations. the next round of negotiation ends today in brussels. this has been so limited on the european side, stepping back -- they said they would considering other things last month that they are now stepping back from. a big stumbling block, the uk's considering contingency plans great some brexit supporters say walking out of talks should be an option. is rising from well fires northern california's one country. injured,ad, 180 hundreds were missing -- hundreds reported missing. three 500 vote -- homes and businesses destroyed. president trump is promising his tax plan would save money for millions of american aimless. the president spoke to a group

of truck drivers in harrisburg, pennsylvania. it's part of his campaign against criticism. the proposal is a -- president trump argues corporations get to keep more of their profits. they will use some of that money to boost wages. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. rigs, this is bloomberg. francine? tom questio ? francine: just to bring you up-to-date with the news we had slimmed now naming john -- john slimmed to secede the -- to succeed the most recent ceo. we know who john flint is. he joined the bank in 1989. , chiefuty head of market of strategy at the bank. he seems to know the bank like no one else. it was pretty quick, the chairman mark tucker, came in

last week, said the appointment would be soon. this is great timing. tom: are going to blow up the show here. jason furman is the former chairman of the president's council of economic advisers. he has been watching carefully in the trump are being very's fiscal and monetary efforts. we are honored to have with a somewhat -- as well to the and wonderful time, arguably our best guest, looking at banking in europe, particularly with in the united kingdom, with schroders global -- the global head of strategy. hsbc is the most interesting bank. hong kong and shanghai inking, dutch corporation, the romance of hong kong and condon. - >> john is a great thinker, great choice. the complexity of running this business -- tom: are they spread too thin? >> they have been pruning the

network back. focus is critical in thinking these days. they need to make sure they have high market shares, and also adopt technology. john's -- one of john's biggest challenges going forward is harvesting technology to get the efficiency down. tom: this was after joe staley 2-3 years ago -- three days ago. the bloomberg article on the challenges john has on this board -- what dhs cc distinction against howard davis rbs come against him -- and his other banks scrambling for the diamond? >> hsbc has one huge advantage over domestic u.k. banks. it's enjoying the growth in asia. it's enjoying u.s. business at a time when the u.k. sounds like rbs parking/much more prone to the weakness in the u.k.. as we saw with the latest imf reports, the u.k. is near the g7 in terms of rough. the mobile platform helps them. they need to be focused.

hugh, help me out here. good morning. -- huw, help me out here. good morning. they have many challenges. one into asia, the said they have 100 billion in the pearl river delta region. them, they have to -- then, they have technology. this probably means being in a fitted -- innovative and cutting jobs. then you have to increase asset management. out of those, with the biggest challenge for hsbc? >> in terms of the 10 year growth, it's around technology. many of the banks that i know, thinking about trimming 10-30% of that stock, harvesting technology. more productivity, getting closer to customers. being compared to threats coming from other companies. on a long-term basis, technology is critical. in the near term, they need to be focused on growth in asia. people that own -- hsbc for group -- global growth.

tom: thank you so much. much more to talk about in the hour. jason furman is the most interesting economists. for years at an institute, someone who is not played in the wall street game. then, he growth to prominence -- he grows to prominence as chairman of economic advisers for president obama. he has been a student of trump economics, we are thrilled he has joined us this morning. there was an etf article last night from sam fleming and company comics turner situation, where mick mulvaney goes off -- goes after madame lagarde on tax for from. there's any right to study tax reform on any country, correct? >> united states would play a leading role in setting up the imf, and once the imf to engage with economies around the world on their issues. they came in, dated an article for the united dates. he supported some of what we

did, criticized other things. i didn't follow every bit of their device, but i took at all seriously. >> the text dynamics can there is not evidence that constructive tax reform can go to directly into this. of,n thing and certain that's a preposterous notion. the most interesting question, if you look at a badly designed tax plan like this, with the sign on growth? is going to be a small positive or negative? i think small negative is more likely. but with the modelers at the penn were budget center, one of the best models other said. the congressional budget office has found similar things for plans like this in the past. even if it's a positive, it would be enough to offset,

according to goldman sachs, 20% of the costs. deficit,f 1.5 on the $1.2 trillion. both numbers are too high given where we are. francine: does it impact inflation in the u.s.? ,r, does it just focus on gdp and in your eyes, have a small impact question mark -- >> the fed would offset any short runs impact of these tax cuts. so, you get higher just rates, but she wouldn't get a lot higher gdp or inflation. maybe they can do that a hundred percent. in the short run, you get a little bit extra inflation, a little bit extra gdp before the fed another dynamic. today, jasonh us furman, hugh vesting us with us the conversation through the morning, culminating in a conversation with dr. kim of the world bank, and christine lagarde of the international monetary fund.

any number of topics to address. front and center, trump administration criticism of international monetary funds. stay with us. from london and washington, this is bloomberg. ♪

bloomberg:is is " surveillance." a mini bring to china, according to people with knowledge of the plan. a german automaker has been in discussions with china's biggest bmw has beenrer, working with them. they sold more than 230,000 many cars worldwide. datapan, the kobe steel scandal gets bigger.

bullet trains have been found with substandard cars. japan railway says the price don't cause any safety risks, but fail to meet industry standards. the international energy agency forecast oil stockpiles will fall this year for the first time since 2013. the reason, stronger demand and production curbs by opec and russia. the iea says supplies from the u.s. and elsewhere will prevent inventories from dropping further, and that could limit price hikes. that's your bloomberg business flash. tom, francine? tom: taylor, thanks so much. one thing we try to do it "bloomberg: at surveillance" is avoid speculation. here's gave sherman yesterday of vanity fair, in a short article laced with just that, rumor and speculation. the president's longtime

confidence, along with character of leaks emerging from the white house has shifted. as a new level of concern. the white house denies these counts. presidents mood is good, and an outlook on the agenda is very positive, an official said. we need to bring in our chief rumor and speculation correspondent, kevin cirilli. [laughter] kevin, my head is spinning, and answer bloomberg -- bloomberg wide audiences heads are spinning. tell me first about general kelly, and his place in advising the president of the united states. in terms of controlling who is going inside and outside peopleoval office -- tell me that essentially, before general kelly had taken over as chief of staff, it was a free-four-all in terms of talking to the -- free-for-all in terms of talking to the president. on capitol hill, we got a story an hour ago that says the president was increasingly

frustrated about the reports and estimates regarding his tax plan. especially, local tax reduction. that's driving controversy but -- between republicans on controversy. -- between republicans on capitol hill. tom: that's the question, is it dead on arrival in november? kevin: they get a small window to get this done. right now, republicans are not on board together as a party, together, to congress any type of meaningful tax reform. i could couple of months ago, we were talking about the republican party on the border adjustment tax. it seems the border adjustment tax is dead, that's been replaced by a divide amongst republicans. even if they remove state and local deduction, that's only $1.3 trillion worth of revenue for a $6 trillion plan. the republican side on capitol hill, with prominent lawmakers, are all still trying to crunch the numbers of how they're going

to pay for this plan. they want to have some type of tax reform by the end of the year, the right now, they don't have a way to pay for it. you know kevin, do whether the trump administration is reaching ceos on the back channel of quarters? we have things in the bloomberg tournament -- terminal, don't know how american tax law will be changed in the coming months. they are already putting things in place because of it. kevin: francine, it's not just ceos, it's significant members of congress who are still trying to put together the details of his plan. president trump campaigning so to speak, in harrisburg, pennsylvania, touting this plan read ceos are trying to get more answers, so were lawmakers. look. we all remember the drip, drip, drip of ceos who left the business council several weeks ago now. that was, to be honest -- that left frustration among many in the administration, who found

that was it way to get everybody on board and talk these things out. tom: kevin cirilli, thank you so much. our chief washington correspondent in charge of her speculation. jason furman was a fact based economist for president obama, and understand that some point, you have to be fiscally responsible. in the upper between the imf and the trump administration, one of the themes after tax reform is, int -- put your fiscal house order. is the united states fiscal house anywhere near in order right now? >> look: think the deficit rainout is a 3% of gdp. the debt is stable of gdp. we need to worry about where the data -- debt and deficit will be a decade from now. my fiscal plan is do no harm; do not add to the deficit rainout, then seek for opportunity to bring down the medium and long-term deficit. don't think a deal is the top economic very for the united

states, but it don't think we should be digging a hole three >> one of the distinctions here of obama versus trump is a call to have conservatism of a midwest fiscal responsibility. are we being too calvinistic in our analysis right now? >> i don't think we are. we have a deficit with the rise of 5-6% of gdp after a decade. the debt set to be on a number course. absolutely, part of our -- how we need to deal with that is more economic growth, you are not going to get more economic growth by adding to the medium and long-term deficit. he will get more if you are bringing that down. >> -- tom: we will continue the discussion. brian moynihan, working on his french. migrants into paris is one of the themes. with schroders, jason furman continuing with us as well. coming up, a conversation with jim young kim, world -- jim young ken, world bank president,

who focused him what the world bank can do to jumpstart investment in infrastructure within the emerging markets. from the meetings of the imf and world bank in washington and her washington studios, this is bloomberg. ♪

♪ francine: this is " bloomberg: surveillance." -- the chief of

executive. a earning season gets underway with u.s. banks, with jpmorgan and citigroup -- having results. jumpinges have them down expectations. some analysts say trading revenue may drop by 20%. here's the global head of strategy, one of the biggest experts in banks overall, and we are also back with jason furman, former counsel of dax economic advisor. thank you both -- both for sticking around. if i go to you one banks, is there any chance there will be a big investment bank coming from europe left and 4-5 years? >> i think five u.s. banks -- they've got a much stronger and healthier economy. think that's really supportive. the europeans clearly have a reasonable chance, but they are now being much more focused beyond wealth management, asian and emerging markets, and fewer and fewer -- fewer of them are

truly global players. it will be interesting, the trump picked their spots, where they have an edge, and not try to do other things. maybe it's not such a bad thing after all. francine: if you look at things going from these banks, how much will they be held, depending on what they go after? whether they are asset managers or other wealth managers, how much will they just -- be held by stronger economics and monetary policy? >> what you've got with european banks -- an environment where interest rates are really low, it's incredibly helpful, whether bwest credit suisse, or some of the banks. they have an extraordinary amount of money coming from asset management. second, europe is turning. we've now got loan growth in europe catching up with the states. of -- the recovery in europe is starting to help out. i actually think we're coming the end of communique here with

banks. >> i was less have full here in 2006. this is the first year of wondered into washington in october and it feels like 2006. are we about to repeat our ills of 2007-2009? >> for my money, not. i think the challenges -- i would bet how the challenges -- have a central banks get out of the meeting with our courting this, its use should -- hugely problematic. the bank as much better capitalized, that funding regime is much stronger. feet solid at the moment. i don't think it will come from banks. obviously, there's a risky system. constructs, you suits the short-short list on the fed, there be right now. what is the stability linking the fed into the financial system right now russian mark >> i agree. our banks are in much better shape. we have a lot more tools to deal with it. exiting qe is an unprecedented

task. so far, it's been handled marvelously. here don't see any of the instability you have seen before. isimately, the feds mandate maximum employment and price stability. we are 4.2% unemployment, prices are going less -- it's hard to fault them for this. >> we can stop the show right now, because everything is fine according to dr. fuhrman. our twocontinue with guests. this is a joy. you see imf meetings of reform weeks, that would work out. [laughter] conversationmy with madame lagarde. we will begin that conversation on the tax reform for imf, stay out of trump administration legislation. ♪ retail.

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holding first in london. first word news, here's taylor riggs. taylor: the wildfires of northern california's one country have sped to an area bigger than chicago. , 1 -- hundreds are missing. the fire has destroyed at least 3500 homes in business is. i winds are keeping firefighters from containing the fire. windste fire chief -- hi are keeping firefighters -- president could not get congress to repeal obamacare, so he's going after it. he will sign an executive order that will promote health care choice and competition. he is likely to allow people to cheaper,ether and buy on coverage outside of the affordable care act. -- could ask say the plan would raise costs for the sake. robert menendez -- senator robert menendez may be in trouble. federal just couldn't dismiss a could- a federal judge

dismiss a case involving him. it involves corruption. menendez is on trial for allegedly taking bribes from a codefendant. shinzo abe in japan will retain his coalition folks -- of a large majority in parliament after the election on october 22. the coalition would win more than two thirds of the seats up for grabs, a victory that -- by that margin would pave the way for abe to become japan's longest-serving prime minister ever. 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. francine, tom? tom: taylor, thanks so much. it's a quite business, jason furman in the white house, and he on his -- any offices near

there. chairman of economic advisers. as a quite business, if you are director of fiscal affairs for the international monetary fund, that would be victors goes far -- victor gaspar, quiet and important work on fiscal responsibility for the imf. the trump administration goes after you come and you are flipped on year. did you get a sleep last night -- any sleep last night? >> absolutely, i sleep wonderfully. that's one of my strong points. [laughter] what is going on, in terms of u.s. tax reform, is extremely important. it's important to underline the decisions of the imf on u.s. tax reform have been made public in ourly year after year article force, less time -- last time, it was this july. we had advocated strongly for is needed form, simplification. in particular when it comes to corporate -- corporate income tax rate is too high.

there are too many exemptions manyon it -- too exemptions, too many loopholes. the complexity is tremendous. complexity is particularly relevant on the international dimensions. the uproar of the last 24 hours of the bloomberg news article -- here's sam flemming in the financial times. ,his is a quote from dr. gaspar the idea here of a response to -- by mick mulvaney of the trump administration. the idea that one would produce additional revenue -- revenue by lowering tax rates for something beginning a conceptual possibility is rarely documented empirically. we do not find systematic evidence of increasing tax progressivity hurts growth. -- key thing in your work is is tax reform over fiscal debt dynamics. do you assume a larger u.s. debt

the tax reform, as proposed by the trump administration? what -- no. at this point in time, we don't have sufficient details for u.s. tax reform. itsannot really estimate economic impacts, its economic impacts, it's economic impact or employment and growth. tom cole and what you did jason, critical, is what you did for president obama, which is gdp.imate -- guesstimate is 3% achievable? as we've heard from -- many. 3%i would love to see growth, i just wouldn't build an economic plan with the assumption that we are going to get there. going tor do, we are be pleasantly surprised. our deficit will be lower than we thought.

to make them and were the other direction is a big problem. the biggest source of our slow growth is our democracy. is goingn the tax plan to change the fact that the population aged 25-54 is not growing right now. it needs to be growing at 2%, now it is growing at about 0%. that's like the laws of gravity, they can't be repealed. by the way,table, but a lot of what the imf, a lot of what the administration has objected to is the -- in the imf, it -- are things the administration stated they agree with. even counting the dynamic of -- what mick mulvaney said. both houses of congress discussed revenue neutrality. with the imf is saying -- i don't want to speak for them but i guess i am -- do what you said you are going -- you were going to. francine: we will get back to victor on that and the second. i want to bring you up-to-date with some brexit negotiations.

sure about any, the commissioner for brexit -- is disgracing reporters. reporters.ing he has said, we are of -- have not made great progress. in thisinternationals country would still be under the jurisdiction. he said the u.k. needs to introduce a simplified procedure , and he's actually just said that brexit talks have reached deadlock. what that means for the markets, what that means for the future brexit talks, i don't know. a lot of times, this can be seen as posturing or negotiation skills. however, you see a headline such as this, saying they have reached a deadlock, you wonder what the next step is, and each position has to get -- has to regroup and readjust. tom: mr. bernier speaking this morning. we are waiting for jpmorgan earnings with an exceptionally

busy morning. if the tour, have you spoken with the trump administration and the last 12-18 hours? is there a dialogue between your offices and that of the administration? >> the, the dialogue between the imf and its membership is constant. i have not contacted with anybody from the trump administration in the last 12-18 hours. if you allow me, the two things which are extremely important. first of all, when focusing on u.s. tax reform, the main focus should be on growth, labor market participation. the avoidance of polarization -- it's very important that people in the middle class and people with low incomes benefit from the tax reform, and in general, it's very important from the viewpoint of the imf to take into account international spillovers.

articles, weh the have specific recommendations. we do speak about going to corporate tax rate, broadening the tax base, signifying the international simplifying the international provisions. moving into a territorial scheme as well, and void descriptor -- avoid discrimination in favor of debt, avoid the debt by us, creating a set up for investment. tom: get a territorial scheme -- francine: guitar -- tom: francine? francine: this is significant. what you have seen -- higher taxes for the ritual will cut inequality without hitting growth. we just had that explicit deadline from -- headline saying "brexit talks have been deadlocked." u.k. or if, let's say, the gets out of the eu and a messy

way, what kinds of things do think the u.k. could become and should become, especially when it comes to taxes for brexit and the u.k.? >> so, if you allow me, francine, i will not speculate concerning the impacts of brexit on the future of britain. i do think that would be a simple speculation, but it think it should call your attention to something which i believe is key central in the fiscal monitor. we document that if you compare 1981 with 2015, you see that the mean top marginal tax rate in oecd countries has come down from 62% in 1981. can you imagine that -- can you imagine? 61%, to 35% now.

but we emphasize in the fiscal monitor -- countries where progressivity has declined the most amongst economies, and were top marginal rates arm -- our lowest. and want to have -- we want them to have the option of increasing top -- soft marginal rates. francine: i'm just getting a little bit more breaking news. david davis on the u.k. side, , the last minister speaker saying "decisive progress is possible in two months." speculatent you to politically what will happen to the u.k., but if they become a tax haven, is that good or bad for the people of its country -- of this country? it'sain, with the imf, very important to approach international tax issues from a cooperative viewpoint.

that's, of course, applies to the u.k.. but, it applies to the u.s., the , ifest economy in the world you take sides in terms of a nominal gdp. and so, the u.s. is a leader when it comes to international tax, and the exercise of that leadership role -- it's important for global taxation. tom: think you so much for your comments on tax reform -- thank you so much for your comments on the tax reform. >> thank you so much. tom: now, director of fiscal affairs for the imf. , ofontinue with dr. fuhrman course, from the chairman of president's council of economic advisers. we hope you are enjoying your morning briefing on television worldwide. on radio, bob moon churn moscow, bloomberg data break -- bloomberg daybreak, a wonderful way to catch up on the news,

including the trump administration and i must. this is bloomberg. ♪

♪ francine: -- taylor: this is "bloomberg: surveillance". a dollar figure on the shooting block by the u.s. men's soccer team, because the americans didn't qualify for something -- fox estimates they will lose $20 million in ad sales. according to people familiar with the matter, fox news our results on the 5% of their ad inventory. 25% ofnews already sold their ad inventory.

sarah global or will be replaced for hsbc.y as the ceo john flint is the new ceo. francine: thank you so much. we are winning -- awaiting jpmorgan figures. we know $19.5 billion of debt this year. huw, when you look at some of the big players, i think a lot of people want to know from .amie dimon where he stands he says he doesn't believe in their pricing. he got quite angry when they came out with earnings, jpmorgan, because he said he -- who cares about fixed income trading in the last two weeks of june?40 looking out for for the big themes on bitcoin, but trade revenues in general? >> on bitcoin, the question everyone is asking is, is bitcoin currency? is it security, or commodity like gold? or, is it fraud?

currency, andot a it's not a great way to pay for stuff. i was with a friend of her here, whose canteen accepts -- over here, whose canteen accepts that coin. he couldn't take it back. it's not currency. it's a commodity or security, therefore it's available to trade, but i think it's going to get regulated, but i'm not in the accounts that it's a fraud. in terms of today, training will be in focus. trading might be down 15-20%. it's also about loan growth rate loan growth is clearly slowed in the states. a been looking closely at jpmorgan, how loan growth has depressed in the quarter. francine: if you look at tax cuts and regulation -- there was so much hopes from a lot of these banks, bankers -- when donald trump got elected. what's the price of the moment for bankshares in the u.s.? >> think there's probably a a 50% chance of something,

depending on what it is. the piece that is impressed in his store financial deregulation. i think the reports have some quite smart small tweets -- tweaks to make the system flow better. these are net-positive. investors have stayed in the likelihood that this agenda is moving slightly in favor of banks. tom: i want to take 12 seconds ise and just sell that this the real world here, folks, when you are on the road. i got my iphone. i have bloomberg live. you have to login, pay for the terminal service and that, but it is an extraordinary conduit of what francine is waiting for ourondon, jpmorgan, with team of people that give us analysis right away. i don't have a clue what i'm talking about with jpmorgan, so i turned to this -- so i turn to huw. this is important, this idea of

technology and banking. when i go to a fancy meeting, that's all bankers talk about. how are they doing with technology? >> i think it depends. u.s. firms are spending a huge amount of technology -- money and technology. in many ways, some of the largest banks of the most advance. -- advanced. the cyber risk is their number one risk at the moment. they look at the chinese bank, they lost 60 million. another bank was hacked. tom: equifax alone, every account, yahoo!. are there enough bodies out there to help them with their technology and cyber-this, cyber this? a wonderful book before talked about amazon and hiring retired generals from the military. our their bodies there? >> clearly, there's lots of talented people. e bodies there?

>> clearly, there's lots of talented people. it's fascinating how people encourage you to wear flip-flops, t-shirts, not ties. tom: i can see -- jason furman, allowed them to wear flip-flops at the white house when he was running the show there. francine: think the results are just now in. tom: ok. francine: jpmorgan third-quarter earnings per share at one dollar 76. 1.76. third-quarter earnings per share seems to be pretty much in line with estimates, some having a look at estimates. if you look at the adjusted revenue, beating highest estimates. it's fruit -- for the third quarter, tom. they kind of delve into the various -- investment banking revenue, which is unexpected, $1.7 billion.

you look at sales and trading revenue. -- as good as expected here these are pretty much expected, tom. it's better than what i expected overall. this looks at ficc. the fixed income arm also pretty solid. >> ficc is the romance of the business. they are the guys that drive the red ferraris. they have a maserati as a backup car. great. it's a famous 2006 -- >> far, far from it. am not sure they are driving maseratis these days. the challenges he talked about early on, pulses are much lower. the opportunity there. forechnology is there businesses, computers can do what humans were doing before. jpmorgan is one of the leaders in terms of using technology to make it more efficient, but the lack of goal is a challenge. tom: his a key line -- here's a

heat -- key headline. flat 3.2 billion. that's an immediate surprise, my guess. francine: that seems to be pretty much in line with expectations. let's get more from our global director of -- ken, what do you make of this? >> good morning. to the point of trading, one of the conferences, jpmorgan, stated that -- fixed income would be down. anything better than that would be a positive. the key though it is, we'll is talk about earnings between training sectors from banking. the underwriting for debt issuances still very strong, so that's one business combined with fixed income training. i think i kind of area is neutralized. the area i am looking at today is cost control, or what key factors call efficiency ratio, what kind of concern do they get

on every dollar invested are spent. those ratios come down -- that's the near story, the conversation earlier this morning about the 2018 isiate period into improving a rising rate environment, with wider spread, and tax reform. federal reserve, again, having a more pragmatic view of regulating banks than they have had since the financial crisis. francine: ok, ken. looking at ratios for us -- i can't find a ratio straight away. i can find the extent come trading revenue down, but in line with estimates. is that good enough? >> again>>, i think it's fine. the business is run -- the debt under runnings would be very strong. there is low volatility, client activity as well, if risk taking is not there. we have been on this conversation for about six-eight quarters. at -- 10ok, ken lyons,

leon, at when the headline was goldman sachs jury not a trading error, but an awful trading quarter. this affects trading revenue, the revenue is very different think-to-inc.. it's not -- hank-to-bank. it's not a homogenous -- it?cise, is >> a presentation last month, speaking to the fed -- there's two components here. profile,ur customer that you have more corporate versus hedge funds, you're going to have a better level of activity. the other factor is where you focus on it. that's is related not just in fixed income, but what areas from the treasuries -- payout to derivatives, goldman is also very historically involved with commodities in a big way. goldman's got special issues here. morgan stanley's done a great job in this area.

jpmorgan, i think there's other stories to tell. tom: i mean, do they get there tier 1 ratios up to where they want to be, and were regulators and central bankers want to be? this jpmorgan so healthy , it's all clear of the financial crisis? >> on an operating level, the efficiency levels -- ratios are key. they're moving down to 53% in the next year. tom: yeah. >> those metrics you mentioned, it's not like drinking water but it takes 1-3 years of steady improvement just to make sure they get a blessing from the fed to raise their capital plan, and increase the business. francine: thank you so much, ken leon there. you can see the flow, i'm tom's -- as tom says, i'm sounding more like tom every day. [laughter] you kind of say record job

openings, hiring. tom: it's called the firm in charge, that's the firm in chart. francine: it's always if i planned this. rman chart. fuh francine: are you creating quality jobs? >> i think we are.i like to see more which growth, but real growth have been growing -- as is our productivity, 1% a year. tom: right. >> for the same wage growth, if we don't get productivity growth, it's harder. tom: should drag vanke you -- greg van q should be the next fed of the chair? >> i'm a great fan of greg, huge fan, but chair yellen has done a fantastic job. very well served by chair yellen. tom: chair yellen would score points with a lot of different people. >> absolutely. she is done exactly what the fed

was asked to do. tom: this has been wonderful. huw, thank you so much. jason furman, thank you as always. should mention, mr. fencing is with struthers as well. later today, this was an important conversation, as we come more so in the trump administration -- goes after her imf. you know she will be briefed and very defensive, even offensive brady christine lagarde on tax reform in germany -- and the dora, and yes, the u.s. -- united states of america. this is bloomberg. ♪ who knew that phones would start doing everything?

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wall street. a plunge in revenue for jpmorgan. our latest survey shows gary cohn falling behind the pack. europe is growing again. political skies continue to darken. good morning. i am jonathan ferro alongside david westin and alix steel. at ane in to the session all-time high. futures a little softer. markets, muted price action. a bit of a bit on treasury. your yield on a 10 year. alix: brexit talks have reached a deadlock.