francine: president trump, taylor, powell and yellen to lead the fed. the ruling elite, with one thing missing, a successor. force in the market to rethink boe uncertainty. that data drops in 30 minutes. this is "bloomberg surveillance" and i'm francine lacqua in london.

let's quickly check on your markets. let's see if there is a little bit of an impact on the index for the month of october, 116.7 instead of 115.1, as we were expecting. i am looking at stocks moving sideways in europe. they were falling off in asia as the earnings season continued to unfold. lar, putting pressure on industrial metals. bond yields, edging lower. i put the vix up there, because we had not seen that in a while, a little bit flat. we will get back to your markets shortly, but let's get straight to the bloomberg first word news. nejra: china's appointed five men to the standing committee.

they will be too old to rule for a decade after xi has his second term. >> we will build on the good momentum to continue modernizing china's system and capacity for government. china still wider to the world. francine: the u.s. senate has moved to overturn a rule aimed at making it easier for customers to sue banks, pending financial firms a big win in their battle against postcrisis regulations. they pushed for a reversal on mandatory arbitration in a 51-50 vote. mike pence was called in to cast the tie-breaking vote. the move follows a similar vote by the house in july. spain's plan is raising alarm

rajoy's allies. lking atts are ba shutting off options that would allow the catalan leadership a signified retreat. some of the world's richest people are braced for their financial details to be exposed after a major offshore company reportedly had its record hacked. firm,y, a bermuda-based is in the process of warning clients that could be implicated in a massively cold step the consortium isd a releasing the information in the coming days. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. am nejra cehic. this is bloomberg. francine: now, president trump asked senate republicans to raise their hands in support of

potential nominees to lead the fed. tim scott said trump as to specifically about taylor, powel l, and yellen. flake of arizona announced he will not seek reelection. critical, itbeen is because i believe it is my obligation to do so and as a matter and duty of conscience, the notion that one should stay silent, and as the alliances of thesure the stability entire world are routinely threatened by the level of thought that goes into 140 characters. francine: he was the second gop senator to rebuke the president on the day the party wanted to pass the proposed tax overhaul. if you look at what

happened in the last 48 hours, how significant are the developments? >> very significant. we are seeing the president doing something significant by going up to the hill and asking for a show of hands among republican senators, who they think should be the next fed chairman, that is an unusual situation. i am thinking back to when barack obama picked janet yellen. there certainly were democratic senators weighing in at the time, as there were concerns about larry summers, who was a candidate at that time. it seems whoever trump picks has to be confirmed by the senate, so it is not unreasonable to ask the senate to weigh in, but we do not usually see it in that manner. more broadly, what has been going on with jeff flake and bob corker speaking out so strongly against trump, that happening at the same time, that is a fairly

huge development, given that we don't usually see even opposing senators saying such strong worth against a sitting president. francine: mike, what do you make of this? it's not unusual to ask for the opinion of others. are we reading too much into it it? >> i think we are all focused on the fed chair. we are getting down to the final few days. so, any news tends to be relatively market sensitive. points fo rus, the key are, we think the fed is trying to lay a relatively hawkish short-term path. to give themselves flexibility in the event we don't necessarily get this transition of philosophy at the fed. if the fed is already

being guided to be more hawkish, it gives the fed chair more flexibility. francine: going back to the very strong criticisms from senator flake, and also bob corker, what is their end game? >> these are two republican senators -- jeff flake announced yesterday he would not be seeking reelection, like bob corker. so, i think, in both of their minds, this frees them up to say what they really think, or to use a trumpian term, to tell it like it is, in how they view the president. they are not able to speak out against their party. for them, it becomes a question of legacy. we are seeing that there are some republicans, like these two who think that this will help

build their legacy by indicting some of this behavior they have seen from trump that is problematic. it shows a new level of concern and discontent among republicans towards the president, for sure. francine: kathleen hunter, a congressional reporter. bearerse bond might be finally having their moment. this ceoves prompted to take to twitter, saying the moment of truth had arrived. mike amey fromto pimco. >> we have heard commentary before. i think for us, to get a serious selloff in yields, you need to get inflation up.

, youyou can see it have your charts there. bond yields are pushing up to the highest of the recent trading ranges in the last six months. that's fine and that's pretty consistent with several banks generally being more hawkish. so, i think it's generally pretty consistent that you are getting a push up in yields. to get a decisive break higher, however, i think you need to see some shift in the inflation dynamics globally. francine: globally? so, it is not enough to have it in the u.s.? >> globally inflation is below target. there's one or two recent areas, but realistically, the challenge is getting inflation up. if you can't get inflation up, it is tough to see a big bond market selloff. francine: how much do you need? iswe see 1.3%, the tagerget

2%. most places -- francine: is 1.6% enough? >> if you are a central banker. it is not enough to get a decisive shift. we would say the bond yields look relatively -- that is merely reflective of the fact that the central bank seems to be on the turn, rather than we have a shift in the background. francine: inflation is just lagging, janet yellen believes. it is not that it is not there, it's three months behind. any truth? >> well, we all hope so because we have been waiting for this for a while. it would be hard not to believe that some point in the next year or two that you would not get some gradual pickup in inflation. so, i think, you know, it would be reasonable to expect some

moderate pickup inflation. to get a serious shift in the bond market, we don't see that at this point in time. debt are still quite challenging and income inequality is not particularly conducive to higher inflation. so, for now, we would be cautious on calling a big move up in bond yields. francine: do the treasury's move on the back of john taylor becoming the fed chair? >> i think the immediate knee-jerk reaction would be to see hard bond yields. going back to what i said before, i think we've seen this with previous transitions in the fed chair. if you're going through a transition, the honorable thing to do would be to give your incoming fed chari ir a bit of what's ability. if the fed is going into that

transition being perceived as hawkish, it gives you more flexibly. i suspect the immediate response would be higher bond yields, but i don't think it is fundamental. francine: what happens to the dollar in this scenario? >> it creates a pick up a little bit. you expect the dollar to respond to that as well and move higher. francine: mike amey stays with us for the hour. we're live in beijing as president xi announces the men that will rule china for the next five years. later, we speak to one of the world's biggest chemical companies. this is bloomberg. ♪ francine: this is "bloomberg

surveillance" and i'm francine lacqua in london. here's nejra cehic. nejra: blackstone group's ceo has told bloomberg the company could double its assets under management to a hundred billion dollars in five -- management to $800 billion in the five years. >> for us, we have $400 billion roughly. without pif. there is expand,

certainly scope because we grow at least 10% a year. actually, sometimes a lot more. we are starting a variety of new businesses. there's real opportunity for many people to be investing with the firm. nejra: the french carmaker says sales rose to 12.2 billion euros, ahead of analyst estimates. outsideis extending europe with a slide in the u.k. amongst concerns over brexit. gucci, powering third-quarter sales growth. 25%. sales climbed revenue also beat estimates.

chipotle fell sharply in late attack after a hacker hampered earnings last quarter. the profit amounted to 69 cents a share last quarter. aboutts have estimated $1.623 a share. francine: china has unveiled its new leadership lineup with no clear potential heir to president xi jinping. only members of the standing committee will be too old to rule after xi finishes his second term. that opens the prospect the president could remain in office beyond 2022. tom mackenzie is in beijing. talk us through the new standing committee. reporter: essentially we are talking about president xi being

in an unassailable position. he has gathered around him people he has worked with sometimes for years and sometimes for decades. some are on more of the conservative side and some are closer to the reform side of the picture. you have the likes of wang been involved has in crucial talks with washington and a trade. he is being seen by some as a positive force. likeyou have got others ong huning, who is an expert theology. he is seen as a more conservative force, backing the centralization of power in china. so, there are shades of gray in standing committee, but we are looking at a group of men that are likely to walk in lock hep with president xi as

embarks on this ambitious policy agenda for the next five years and possibly, beyond. francine: what do we know about what he wants to do next? is it the same? tom: yeah, will they cannot escape the deleveraging dilemma. in terms of the economy, we get this important watershed moment, which was pointed out in the speech by president xi, and enshrined in the constitution. that sounds is a tarik, but it -- that sounds esoteric, but it focuses on the shift in equality. costs,t growth at all like we have seen over the last 30 years. that will have implications for the state and the private sector. we have already heard from the likes of alibaba, the big corporate types taking notice of what has been said by the president and they do take on board the added social

responsibility. pollution was another issue as well. that has pushed up some prices. bloomberg intelligence is saying we may get reforms around areas like banking and the auto services sector. we might see those leading up to president trump's visit. essentially, the focus is on the industrial sector and the space sector in china. the state will be key, with president xi at the forefront. francine: tom mackenzie, thank you. mike amey is still with us. when we look at deleveraging, the real warning came from the governor of the pboc. how much do we know about whether they are deleveraging a reducing the amount by which they are still leveraging by? >> our sense is the second derivative, which means there is

still an expansion of the balance sheet going on. that really, is why we see growth recovering over the last 12 to 18 months, the expansion of the balance sheet. president xi has a long-term challenge, which is, how do you transition to a growth model which is not reliant upon continued accreditation? we have seen that with a number of economies and that does come with risks. the interesting thing about what we have seen so far is that with the dollar having gone through a weaker period, taking the pressure off the cny, and giving ility to golexibl after some sort of slowdown, i think that would be our base expectation. that is what they want to do, have a gradual slowdown in the domestic economy. if you do that, you hope you can sequentially slow down over the

next few years. that is not without its risks. at the moment, it looks like it is going quite well. we were so cautious over the medium-term. there is still the challenge of getting that delevering done. francine: is the president consolidating power? >> i think politically it is fascinating. from the macroeconomics, you would argue it both ways. the chinese have done a very good job over the last 20 plus years of managing their economy. we should give them credit for that. of course, it puts a lot of responsibility on one individual during that potentially is a difficult five year time horizon. i would say short-term, things are going reasonably well. we don't have any major short-term concerns. however, we would caution that long-term, we have a high level of leverage.

francine: what does this tell us? >> this chart tells you that the chinese have been willing to allow their interest rates to gradually go higher as the u.s. has allowed interest rates to gradually move higher. you can see that over the last 12 to 18 months. that tells you that the chinese are doing the same things as a lot of different central bank governors. we appear to be in a relatively well think revised global upswing. if that is the case, then you are a trading nation, which the chinese are, you should be willing to allow your interest rates to rise modestly. so, this is a working quite well for them at the moment and is giving them the opportunity to raise interest rates moderately and tighten policy, which is generally pretty good news for them. francine: mike, let me show you my other chart, which is the holdings of china. we put belgium in there because a lot of the holdings are based

in belgium. there, if you look at that chart, the reduction of holdings there is the corolla y of money in the country. that shows the weakness in the cny. you get a period of better stability for the dollar weakness. cny stabilizes and then you get money flowing back into the country. francine: it is amazing they have managed this quite well. reserves, outflows and currency. what is the challenge for 1 2018? >> i think longer-term it is managing that shift to a more floating exchange rate. that does not really matter what your domestic audience thinks. they are going to want to diversify and the challenge of opening up to capital account remains the biggest

challenge. francine: how do you do it? slowly? >> over the last 20 years, they started to open up the capital account. started to leave the country, so they closed down the capital and out again. you look at the currency and the speed of credit creation. what they need to do is manage that gradually to prevent any of these sharp movements, because sharp movements destabilize markets. francine: the pboc governor is crucial to this. if he goes, does anybody else have the same credibility? >> we hope we will get a smooth transition. when you look at the chinese authorities as a whole, i mean, they have clearly done a good job of handling the economy so far. if we get a different head of the central bank, one's expectation would be they come in well groomed and ready for the challenge. so, there are always risks out there with the transition of power.

any central bank, as well as any government -- but i think we would give them the benefit of the doubt. francine: mike amey stays with u s for the hour. we are getting breaking news out of the brexit minister, mr. david davies. he's being grilled in parliament. he says there is the need to talk about the european justice jurisdiction transition. this goes back to eu nationals and europeans asking baby under the same tutelage. mr. davies saying they are seeking a quick agreement for the transition. we have gdp figures in three minutes. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg first word news. nejra: china's president has unveiled a new leadership lineup

that includes no clear potential heirs. joinive men appointed to the politburo standing committee will be too old to rule for a decade after xi finishes his second term. it raises the chances that he might seek to stay in office. the u.s. senate has moved to overturn a rule making it easier for customers to sue banks. pushedy republicans through a reversal of consumer financial protection bureau limits on mandatory arbitration. vice president mike pence was called to cast the tie-breaking vote. the move follows a similar vote by the house in july. plan to crush separatists is raising alarm bells among some of mariano rajoy's allies. the socialists are balking at the government's focus on taking

control of the administration in barcelona and shutting off options that would allow a dignified retreat. that comes ahead of what is set to be a decisive few days. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i nejra cehic. this is bloomberg. francine: thank you so much. forecast in the third quarter, which may fuel speculation that the bank of england is about to raise interest rates for the first time in a decade. beating theo 0.4%, 0.3% forecast a lot of economists expected. the report is the last major heart piece of data before officials will get that meeting next week. a lot of people are saying that if they do increase next week, it would be just a reversal of the emergency cut. pound, 1.3163. mike from pimco is still with

us. this is a very simple interest rate chart for boe versus ecb. we circled when the ecb raised reverse 2011 and had to it. is this the stuff of nightmares for mark carney? mike: it is the stuff of nightmares for any central banker, but hawkish would say. the bank of england got very close to hiking rates. there was a gdp break just before the crucial decision. there's some interesting parallels. the way the bank of england is phrasing this is that when they hike rates, they want to see this as the beginning of a slow path upwards in interest rates. they've seen the fed, and the fed started raising rates two years ago and has got up to 1%. if they can get themselves off rate risingery slow

cycle, that is what they are trying to do. , buthave a better chance they still have to make the decision. francine: would you, if you were in charge, hike? mike: today, i wouldn't. francine: because of brexit uncertainty? mike: yes. if you waited 10 years, in the data we look at, we can't see any upwards drift. we can't see any serious second round effects. me, i would rather get greater clarity on the brexit. untilne: that could be february of 2019. mike: to be fair to the bank, that is the argument they make. at some point, we need to do something. there are arguments both ways. the way they phrased it, the

data needs to be week to stop them doing it. that seems to be the rhetoric out of the bank. the first one is always going to be difficult. i think what they will try and do is emphasize, this is going to be gradual. francine: is the interest rate hike already priced in? mike: about 80% probability priced in for a november hike, and another 20 basis points for next year. argue if they do actually start, chances are they will do more than that. two to three would be our base case. francine: one now and two next year? mike: that would be our base case. there is a risk they don't pull the trigger next week. front looks a little expensive to us, but whichever way they play it, they are going

to play out the slow and gradual. that is the key message. francine: how do you look at pound? mike: pound versus the euro is interesting. we've gone down to just below 90. we are hovering around there. i think the pound is still sensitive to brexit news. if you get some clarity, i suspect the pound would rally. we say there's a better chance to pound rallies versus the euro on the back of a brexit deal. 4 francine: because the political system in the u.k. is more difficult to read than it was in the past, do you need to start modeling what a jeremy corbyn win could do, or is that far off? mike: the corbyn angle is interesting. if you look at how u.k. markets behaved during the party

conferences, then sterling came under pressure and the bond market did nothing. political uncertainty should send a currency down and rates rallying. if you get a very bad outcome, you risk a second election and the prospect of a different administration. markets have it in the back of their mind that a corbyn government would think differently. that would have implications for the bond market. i think the thing the market is looking at is a brexit deal, consistency on that. if the data holds up, that gives the bank of england scope to get rates higher. francine: what is consistency? does it have to be that you that says we have an agreement, or is this going to bounce with every negotiation tactic? clarityat we mean is

that there is a willingness on both sides to do a transitional deal. that, and businesses have enough confidence to believe the government -- businesses have to believe, otherwise things get more difficult again. you need the statement of intent. you need agreement from both sides. if you get that, you can get sterling up a little bit. francine: thank you so much. mike from pimco. up, we are live in riyadh. we will speak to the ceo of one of the biggest chemical companies. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's check in on your markets. mark barton has all the action. mark: gucci continues to glitter for kering, third-quarter sales growth up, underlying the revitalization. revenue increasing 28% on a comparable basis. shares are up 80% this year, record high today. luxury demand rebounds in china. creative revivals at several kering brands bear fruit. the 10-year on the u.s., jeffrey gundlach watching closely. he says it is pivotal.

rising above 2.4%. jerome powell could spark a five-basis point move, a drop in the 10-year yield. john taylor could cause a 10-basis point lead. the yield curve from two to 10-year may flatten by 20 basis points with a taylor nomination according to wells fargo. traders are on edge. the dollar could gain as much as 3%. taylor is the green option there, and powell is the red option. on the next fed chair, these are the odds according to predictor.org. line, powell, the blue clearly is well ahead. kevin warsh down at the bottom. yellen the yellow line. jerome powell is the clear

favorite as of now. the winning run for the nikkei comes to an end. the record 16-day run has ended. the gauge fell 0.45% today. technical indicators suggesting the gauge's advance was to rapid. above 50, where it has been since october. anding above 70 tells you asset is overboard. francine: thank you so much. saudi basic industries corporation is one of the biggest chemical companies in the world. it is part of the kingdom's plan to modernize its economy as the largest oil exporter tries to reduce its reliance on crude. the call to diversify calls for sabic to be owned by the public

investment fund. the ceo since 2015 is at the future investment initiative in riyadh with yousef gamal el-din. over to you. yousef: the story of sabic has been nothing short of incredible. the question is, how sustainable is it, and what happens with the regional and saudi economic transformation stories? joining us is the ceo. thank you for joining us. 2030, major vision changes for corporate in saudi arabia, how does this affect saboc? >> this is the best formula to achieve growth strategy. if you look at this year, we have been able to make major announcements about three

projects. the first one with saudi aramco. the second one is with our existing partner, exxon mobil, in the u.s., for leveraging the shale gas revolution, in addition to our major transformation going into chemical in china. these are projects that are going to fuel growth. vision brings this transformation, where we leverage. yousef: one relationship you've been strengthening is the relationship with saudi aramco. interesting for foreign investors. how does this intensify when it comes to oil, chemicals, how soon is it going to be developed? yousef: -- >> i think this is a

very strong strategy where sabic and aramco will leverage their currency. the oil company has a very strong refining background. is one of the leading companies in chemicals. we can complement each other. i'm confident that the project will be able to take it to the next level. yousef: is this a way that cooperation is a way to protect yourself from volatility? perspective, oil price always have an implication, but we have diversified footprints. sabic has assets in the u.s., europe, and china. sometimes when the crude oil price is down, therefore we get to a point where we want to make sure that sabic is managing its

risk portfolio globally to provide for our shareholders. that is not only the objective we drive. if you look at sabic portfolio, we strengthen our business on the specialty side. specialty has less implications on the crude oil price. in order for us to give our shareholders some stability. yousef: oil price volatility is a major risk for sabic. are you confident that oil prices are going to be more stable in 2018? >> if you know that, please tell me. the way we look at the long-term, the oil price will remain at least in the current level for 2018. let me highlight very important elements. we look at sustainable factors. we try to analyze them, but we cannot predict what the oil price will be.

we can control how we make our bring reliable, how we products and solutions to our customers. yousef: what about the pulse in terms of demand when it comes to petrochemicals, plastic products, steel? commodity, of plastic, there is a healthy demand for 2018. we are very bullish on the global gdp growth. ,f we look at north america there are so many positive sentiments. , after the at china national congress in china, it is going to give more confidence for china demand. these are all very positive signals for 2018 with healthy demand. yousef: in past conversations,

you said the u.s. was high on your list. has that gone down a little bit? >> north america remains one of our top priorities in terms of growth strategy. forave made an announcement our debut at exxon mobil. yousef: just to bring it closer to home as well, are you planning to tap that market in any way to raise capital in the next 12 to 18 months? >> nothing in the short-term, but 2018 is going to be very active for sabic in terms of growth. it could be organic or nonorganic. this is the time when we go into the market to raise capital. yousef: it sounds like you have a war chest that is ready to go. how many billions are you ready to spend in 2018 for m&a or inorganic growth? >> we have a very strong balance

sheet. sabic has no challenge to raise debt. that is what we're focused on now. in pricese rise domestically is another challenge. what are you doing to mitigate that? energy reforms policy positively. i think this will push the producer to become more efficient. this is the objective for our regulators. they would like to see our industry using the energy in an efficient way. we try to reorganize our organizations. we try to make sure there are no assets,synergize our improve energy efficiency, and reduce cost, and make sure we have the right portfolio moving forward.

performs been able to very well, and we were able to absorb additional costs. there are always opportunities to make better efficiency. also i have confidence with our regulators that they will look at the competitive of our industry. i'm confident that the chemical industry will remain competitive. yousef: thank you very much for joining us on bloomberg tv. the ceo of saudi basic industries. francine? francine: great work. yousef gamal el-din with the ceo of sabic. we are getting breaking news out of cnooc. we saw changes at the top. i'm trying to make a chart for you, looking at the golden

cross. a couple days ago, the 50-day moving average rose above its 200-day moving average. the european central bank followed the fed's path when it began buying bonds, but it is set to take a different route out of qe. the ecb will start withdrawing stimulus. all will become clear when it policy decision is announced tomorrow. mike is still with us. has adifferent because it different economy to the u.s., but there are parallels. mike: they have a challenge. inflation just below 2%. they have a bit of a problem on that side. they also have a problem with some self-imposed limits.

they are running out of bonds to buy at the current pace. our expectation will be that they will try and trend the middle ground, to indicate they will slow down, then they will keep buying bonds until september of next year. there's a question mark as to the phraseology. our expectation is they will say that we have flexibility to keep buying if we want to. there are some hawks on the committee who would rather they say, we are done. there's a bit of a balancing act on the committee. our expectation is they leave the door open if they feel the economy needs more stimulus. francine: i know the replacement of mario draghi is 18 months away. do they start trading right now? is the market going to start pricing in changes of ecb board

members, but also the top man? mike: things in europe tend to take a bit of time to come to fruition. we would expect that course trading to start. there's been some speculation already. we think that will be an issue for next year. just to get back to doing the honorable thing on the way out, our suspicion is mario draghi wants to end bond buying. he gives a much clearer set of opportunities for whoever takes the job. francine: how do they view political risk? we have catalunya. is there a danger -- do they worry about getting out to quickly? mike: they will be concerned about that. they will be concerned about volatility in markets. the market volatility has been very benign. -- there arecb

always political uncertainties out there. we think we've got pretty good momentum and we want to get out of the bond buying business. francine: let me show you my chart. tashis the spread between -- spanish 10-year and bunds. that if the ecb starts doing something, that risk comes back on? mike: there's another dynamic. the european economy in aggregate is doing well. our forecast is that european growth will match u.s. growth. i think there's two things going on here. cap on put some kind of riskier bond spreads. the underlying dynamic of the european economy coming out of a period of tough conditions, looking to be on a good path the

next year or two, is also behind that. francine: do you buy anything at the moment? mike: you look at that one there, and we are 15 basis points off the recent lows. that is the problem across a lot of risk assets in europe. markets are still trading at tight spreads. we would be a bit cautious at getting involved in this level. we don't expect a big blowout. francine: should they worry about euro strength? mike: i think they do. francine: but they can't do anything about it. mike: which is why they are going to tread a cautious path. they don't want the euro to spike up. francine: mike, thank you so much. managing director at pimco joining us this morning. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york.

we have a couple of calls. stocks in europe overall, but stocks in asia seemed to the moving sideways. they are stalling as the early season continues to unfold. some of them are ok. some of them are not ok. seem to be failing the two inspire -- failing to inspire the kind of enthusiasm we saw yesterday. major currencies mostly in a holding pattern. metals declining. this is bloomberg and we leave you with a beautiful new york city. ♪

francine: put your hands up. picks for arump

chair to lead the fed. speculation the boe will raise rates. good morning. this is "bloomberg surveillance" and i'm francine lacqua in london. tom keene is in new york. tom, should we vote on what we do next? tom: breaking done the same fe haven movement. the future of global wall street. the financial times article on bank of america to become an investment advisor. there is a swirl of stuff on a wednesday morning. francine: now leftist or to the bloomberg first word news. hi, taylor. islor: president xi jinping leaving open the possibility he will remain in office after 2020.

he has unveiled potential successors. officials could be promoted at any time. jeff flake of arizona became the second republican senator to blast president trump. flake accuse the president of outrageous and undignified behavior. this came after senator bob corker denounced president trump on tv, which are too angry tweets from the president. in spain, rajoy's alliances are concerned he might go too far in trying to cross catalonia separatists. socialists are balking at rajoy's attempt to take control in barcelona. they don't want to shut off options that would give catalonia a dignified retreat. risks isold one of the

a collapse of the nafta talks. that could beven managed. >> we do need to have a continuing strong relationship. we have many things we trade with the united states. things at a fairly low tariff rate. we think that would continue. r: it is critically important for canada to get this right. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. i'm taylor riggs. this is bloomberg. tom: thank you. equities, bonds, currencies, commodities. interesting moves in the market with gold going down to a new low. futures off a littl ebe bit, but what a surge at the opening. 11.23,reen, the vix, that's an oddity of a vix.

23,442 on the dow. gold moments ago, breaking down. in retreatafe havens this morning. francine: stocks in europe and asia are moving sideways. we get some company results, but they are failing to inspire the investor enthusiasm we saw in the u.s. major currencies are in a holding pattern. tomorrow is ecb, and today the pound advancing on accelerating u.k. growth. the bond market might have hit the break or make moment. prompted the ceo to take to twitter and he said the moment of truth has arrived. we need to start rallying immediately, or obituaries need

to be written. we are joined by hans. hans, we don't want to write obituaries. [laughter] francine: it depends. guess i have seen what has happened to the central bank of new zealand. they got an increased mandate. 1987 and my career in in april of 1988, it was new zealand getting into to supply reform. introduced bank inflation targets in policies. now we see this modification taking place. with respect to inflation, it seems it is working. namely, when too many people are looking at the same target, you miss the target. that means we are in an

environment where modification is taking place in global policy. new zealand has taken the first step into that. the new zealand dollar has started to drop quickly. significant moves with the australian dollar over the last couple days. we have developed a framework. we are looking into the currencies in countries where we have significant debt levels, where we have weak asset quality. we call these the canaries in the coal mines. they belong to the same club. all those currencies are heading towards significant weakness. here we have seen a significant increase in nonsecure debt. tom: jpmorgan with a note off their desk this morning, trumpeting of the strong dollar. bring up the chart, folks. we have shown through the summer, the weak dollar.

this is the bloomberg dollar index. this is a beyond gorgeous bear market in the dollar. are you at morgan stanley willing to call the strong dollar trend? >> nol. we think we are in a dollar correction. i know many people are taking effort to talk about the tax reform, the impact it will have on the u.s. dollar. but i trust the dollar to take you back into history. look back into 1982. reagan did a tax cut. we saw a stronger u.s. dollar. but then there was another tax cut in 1986. what did we see? a weaker u.s. dollar. there is no relationship with this very strightaight. the u.s. dollar is the globe's main funding currency. you need to do dollar funding.

that is how an economy develops. that means if you come to the conclusion that you have strong dollar growth outside of the united states, the dollar is always going to be loose. francine: hans, let me bring you to my chart. this is a very simple 10 year yield in the u.s. what needs to happen for this to move significantly higher? it is currently at 2.44%. do we need global inflation to pick up, and will that happen? hans: people are talking about the importance of the 2.4% level. we said you need to belong dollar-yen, long dollar-swiss. but then, this is happening in an environment where we offer globally a tremendous amount of debt. what does this tell you? this tells you that you have a sensitivity of economies to rising funding. that means that some point this will be self-correcting.

if this is going to be like 2.60, one thing is very clear. at one point, you will see the economy reacting negatively. the question is, where do you need to look? if it in the united states where you see the initial negative reaction? no, it will be the canary in the coal mine countries. where asset quality is weak and debt is weak. look at the recent numbers coming out of canada. they were weak. in australia they were weak francine: let's also look to the middle east. hans redeker stays with us. alloway joins us. reporter: good morning. we are here at the future investment initiative. it has been described as davos in the desert. and the coming out party for saudi arabia and the economic

ambitions. am here with mohammed. we are talking about saudi arabia and its economic transformation, the ambitions to be a global player in the world. will they be able to pull it off? >> they are certainly trying very hard and they have made a lot of programs. one of the objectives of this come information failures, to get more people to understand what vision 2030 is, which is the long-term vision to make more people appreciate the extent to which we have already seen cost correction into this sequencing, followed by crowding in the private sector. reporter: and how do they balance fiscal consolidation with the need for social stability? somebody wants to push through change too quickly. >> the vision of this vision

2030 is very conclusive, to bring in more of the population. generatebjective is to directly income for a greater portion of the population. reporter: let's segue to some big macroeconomic news. the ecb has seen lots of talks about the upcoming strategy for tapering. why is that important? mohamed: first, it is critical for europe. b will announcec b a taper, but keep their options open. two, to underestimate the extent to which german yields influence currency markets. the ability of the ecb to follow the fed in delivering a beautiful mobilization is key to the stability of the global economy. reporter: one more central bank question. your topic for fed chair? >> i think my pick is the

relevant comparative to what the president picks. that picks has to be combined with the vice chair pick, which is critical because chair and vice chair have to be 18. -- have to be an economic team. you need market understanding and international standing. i think a lot of the candidates deliver that. francine: hi from london. is there a candidate that will deliver inflation more than the other? they are all looking at the same data once they are there. mohamed: i think this market of session with this person is more hawkish, this person is more dovish is wrong. will have to in internalize a ton of information. second, their hands will be tied for the first six to 12 months. the fed is almost on automatic

pilot when it comes to the interest rate policy and the balance sheet policy. i don't think there will be great variation in what they do in the first 12 months. after, it might matter. tom: good morning. tom keene in new york. in one of your books you spend an entire chapter on the game theory of coming to a point. it going to rename el-erian's qt decision. it will affect everybody, including the saudi's and the grand plans they have to deploy capital. where will we be in one or two or three years with quantitative tightening and what that will do to the real rate, which affects capital deployment? tom, that is a critical

question. especially if more than one systemically important central bank embarks on tightening. one can do it, we have seen that with the fed. it is an open question if several can do it. the answer is not with the economists, but with the politicians. if you don't get this critical policy handoff to other policymakers, tax reform, the deregulation, if you don't get that, it will be a much more challenging path. tom: as you know, there is a raging debate going on about t e corporate tax reform. we will feature that later on "surveillance." lawrence summers has written three essays going after the chairman of the president's council of economic relations. do you believe there could be enough growth to assist the

middle class, given the economics you learned at cambridge and oxford? mohamed: if implemented as part policy approach that also has infrastructure in there, has deregulation, and labor training, then yes. that is part of a reform effort. remember, we have not had a comprehensive tax reform since 1986 and since then, the tax system has been fragmented by invested interest. there is a lot of growth potential in tax reform, but it must be part of a comprehensive program. francine: all right, mohamed el-erian, thank you so much. now, let's get straight to the bloomberg business flash. taylor: bank of america said to be breaking with rival u.s. banks. according to the financial times, b of a has filed with the

fcc to become a registered investment advisor, solving the issue of how to keep providing research to asset managers working in europe once the new rules take effect. in italy, shares of the world's oldest bank fell on the first day of trading since the government bailout. monte paschi received a $6.4 billion lifeline from the italian government over the summer. trading has been suspended since last december. barclays might have to reassure investors after third-quarter results are released tomorrow. an slump in trading has had impact on the investment bank. that are questions about the bank's critical of business in the u.s. american, barclay's rival signaled they are preparing for more credit defaults. that's your bloomberg business flash. francine: thank you. the european central bank follow the fed's path when they began buying bonds, but is said to

take a different route out of qe. the ecb will begin withdrawing stimulus. all will become clear when it makes its policy announcement tomorrow. simon and hans, thank you for joining us. what do we know about what the ecb's end game is? they want to tighten a little bit, but without rocking the boat at this point. >> they'd have a problem. inflation are stuck arounds 1.6%. cpi inflation will be as far out as q. i expect those forecasts to be pared back further in december. i don't think they can afford to be particularly aggressive. i would call it quantitative moderation. we are likely to see a move from 60 billion euros per month to 30 billion to 40 billion euros.

i think draghi is likely to win the battle with the more german sympathetic elements of the council. tom: i look at where we are with the ecb, and i would suggest, simon, this is a very important meeting we are coming up to tomorrow. what will you actually listen for in the press conference? what's the nugget you want from mario draghi? >> it is a great question, tom. what i think we are looking for is an indication that this will be an open ended moderation levitate of easing throughout 2018, rather than limited. i think we will get a sign he has lost the battle with other members of the ecb governing council if he has to time this to six to 12 months, and will start to overweight the positive that against a core inflationary

picture. francine: for you, hans? >> this is concerning short-term rates on the euro -dollar. euro-dollar has decoupled from one year before. the euro-dollar is up to 1.20. what seems to be happening is the euro is much more driven by expectations concerning the future economic performance. it might be driven by expectations concerning the currency union becoming more optimal. there's a build up of institutions. there's another factor coming into play. we have seen over the last seven to eight years of the euro decline, we have a substantial euro. a solid ratio of 83%,

and the ratio in japan is 90%. when will you see the normalization of euro holdings? i believe in the case of switzerland, it's settling in. we saw yesterday a new cycle for the euro-swiss. dollar and been strong over the last two weeks. tom: we are going to come back. hans redeker with us. lots to talk about, just a loaded morning with markets on the move against safe havens, swiss franc, and gold. we will talk to mr. redeker about the swiss franc. are you part of the grind up, are you part of the melt up? stay with us. this is bloomberg. ♪ tom: "bloomberg surveillance,"

call it safe haven surveillance. hans redeker will not shut up about a weaker dollar. let's switch gears. this chart is awesome. the only reason we are doing this is because redeker darkened the door. that 30 years long-term swiss franc strength, even more swiss franc strength. right here is where jon ferro and i were at that beautiful

cafe in zurich, francine, and there is the swiss national bank with strength. what is the why here, hans? why do we see a retreat of gold, the retreat of the weaker swiss franc? >> there is low yield with weaker currencies. it looks like there is a reluctant increase in real rates to the upside. when you look into switzerland as the second-biggest global as a provider, that means the asset holdings need to be managed. there is capital management and then there is fx management. as a manager, you have made this fx management so much more. therefore, you try to get rid of it. n, you think the main destination of your assets, that

you have political problematics and support. tom: francine, here is a huge deal. here is the switzerland money market chart off a bloomberg. there is a lot of data, it is a little hard to see. look at the 10 year yield in switzerland. it just went positive. that is a big deal with this shift going on. francine: it is a huge deal. yet, switzerland is so different from anything else i don't know if we can read much into it. where do you go for havens overall? have they changed? >> i don't think they have changed. i think we are confusing a fixed glut in the economy, as having addressed the structural reasons as to why the safe havens have been very well bid. i reckon the fashion comes back for those. that onsee a break in the swiss. that remains an obvious save

haven when the structural and political into political challenges of fearful that we are failing to price correctly at the moment because we cannot price it. it is uncertainty masquerading as risk. when they manifest themselves in a real event, those will remain very well bid. tom: we will come back. we're going to come back to beijing. tom mackenzie is there. we will get an update on what is going on in china. daybreak" in your car, coast to coast, even in los angeles, home of the the tory as victorious dodgers. ♪ who knew that phones would start doing everything?

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choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. francine: "surveillance" with tom and francine. china's 19th party amassed more power than any leader in a

generation. with a break with the succession system, all new members of the standing committee will be too old to rule after xi finishes his second term and opens up the prospect the president stays in office in 2022. let's go to beijing joined by our correspondent, tom mckenzie, who has been covering the people's congress. first of all, great work. what do we know about the president's priorities from now on? how much is he focused on consolidating more power and how much on deleveraging the economy? tom m.: a key focus and footnote in chinese political history at the very least, yesterday and today, his name enshrined in the party charts and now unveiled the standing committee and no clear successor, this was set by ping in 1992. when president xi sets out with

the six men behind him, these are men he worked with in many cases for decades, these are people he can trust. the question is really will this concentration of power mean he can enact his policy, particularly around reforms in the economy more quickly and efficiently, or is there a danger around one man having so much power? because all of the china watchers say they look at a powerful president who will exert influence over the communist party and economy well beyond 2022 when he normally was meant to step down. francine: what do we know about his heir? is there a concern in china there's not someone to replace him or as you pointed out maybe he could stay beyond 2022? tom m.: well, it should be pointed out he still can nominate somebody from the bureau and they have the standing committee which is the

elite echelon of the politics, the seven-man team and the bullet bureau of 25. there are younger names, three in fact, who could be nominated any time between now and 2022 and president xi could step down as president and stay on as party secretary. there's not a huge amount of concern at this stage but what the focus now shifts to, of course, is the policy implementation. on the organization, there are some who are more conservative. and wang has been crucial in the u.s.-china relationship and been elevated and something of a reformer here. others like ning is a student of marxist theology. tom k.: if we have a mao-like

xi do we have elements of a mao-like china? i get the idea he'll be the all encompassing leader but are we going back to elements we knew n the 1970's and 1960's? tom m.: i think there is going to be potential for that to happen. you've seen the president stress the role of the party, he's elevated the role of the party like we haven't seen for years at this party congress. you're going to see a contradiction between the need for the party and the state to play a strong role and need for reforms, lowering foreign investment and think the two can work in tandem but when they talk about reform for the state enterprises it doesn't mean spinning off elements and privatizing them but bigger state-run companies. when they talk about lowering the barrel for foreign companies, you can come in but you might have to have a party committee sitting on your board. yesterday we sat down with a

member of kpmg's party secretary in beijing and hoping to get an interview but they refused to speak to us unless it was vetoed by their party bosses or checked by the party bosses and we refused to do that, kmpg has a party here in beijing. that's what the politicians think they can live with and these are the new characteristics in the new era, the catchy-catch phrase president xi came up with that he thinks is driving this new economic model. francine: thanks so much. let's get back to our chief economist of morgan stanley and hans, let me bring you to my chart. this is a spread of china and u.s. 10-year-year-old and this is a story of central bank, a story of currencies, what does this chart tell you? hans: this chart tells me that we have a tightening for

monetary conditions here. i've seen the spread widening out. and foreseen with the spread running out as well as r.m.b. strengths and china needs to rebalance and what you need to consider is china occupies 40% of the g.d.p. still for investment. statement its productivity growth rates have been declining and that means you have a lot of nonperforming investment activity taking place and you have to reduce it and it means you have to grow the household sector because of the potential decline of investment. how do you support the household sector? the one thing is the household sector is a huge saver. so you increase saving rates to make more money. you increase the exchange rate. by doing that it means you have more real disposable income. you're increasing beiges. that's part of the restructuring process and means china is moving away from the supply-driven economy to the

demand-driven economy. tom: are we seeing a dampened g.d.p. in china or get back to a 7% g.d.p. or is there a new egime? simon: i think there's a return to 7% growth given the prevailing demographics but back to a question you posed a few minutes ago around what risks to markets does the wider economy have from having so much control in one man and you look at how he manages the next five years, the challenges of protectionism, domestic protectionism against investments but protectionism to china and we look notably to the u.s. to set the tone regarding that but how it manages the 310% of g.d.p. debt burden it. that's huge. in terms of reading the transition, it is whether he can handle those economic challenges the next five years

and if he doesn't, is he prepared to have a different school of thought, challenges or authority? therein lies the question mark. tom: we'll come back and switch gears to the politics of beijing to washington. right now with our first news this morning in new york, here's taylor rigs. taylor: it's a big win for financial firms on capitol hill. senate voted to overturn the consumer protection bureau rule which makes is easier to sue banks. republicans fought against the agency since it was created after the financial crisis. meanwhile, president trump is urging republican senators to push ahead with their tax cut plans. the president went to capitol hill for lunch with the lawmakers. some republicans have complained about the lack of direction from the white house. details of the tax plan haven't come out yet. global news 24 hours a day powered by 2,700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is

bloomberg. tom: there's a scene in the movie "lincoln" with daniel day-lewis where all hell breaks loose with the house of representatives in congress, that of course over the emancipation proclamation. yesterday maybe wasn't like that but it was shockingly close. here is the senator from arizona but before that, the senator from tennessee. >> look, i've seen no evolution in an upward way. matter of fact, i would say it -- ars to me that >> when a leader goes to hurt and instead of addresses it looks for someone to blame there's perhaps nothing more devastating to a pluralistic society. if i've been critical, it's because i believe it's my obligation to do so. and as a matter and duty of conscience, the notion that one should stay silent as the norms and values that keep america

strong or undermined and as the alliances and agreements and ensure the stability of the entire world are routinely threatened by the level of thought that goes into 140 haracters. tom: extraordinary, two retire from congress. corker yesterday and flake yesterday. is there a middle ground in the republican party, stephanie? i think the basic question is after olympia know in maine, is there a moderate republican oice left in washington. stephanie: i think we saw trump trying to remake the republican party in his own image and this sort of g.o.p. traditionalist like corker and flake, mccain are no longer -- they're not seeking re-election and unclear who will replace them and we have a shrinking kind of

traditional republican conservative faction, you know, and they're going to be replaced by supporters of trump, at least that's his hope. many people think he scored a victory yesterday by making sure that plake, with flake's announcement that he is not going to seek re-election. the real question is what happens during the midterms and who replaces him. tom: exactly. i want to mention to the global from ce, greg value yea horizon said it's a tossup where the democrats could take the house. what should be the response from the white house to the words of senator corker and the word of senator flake? stephanie: what is surprising is he keeps upping the ante on this at a time he wants to get his legislative agenda through

with such a film majority in the senate, he needs every vote he can get and has now alienated two prominent senators he needs on his side if he wants to get tax reform through. i think there's a question mark hanging over that now whether or not he's got the votes given the fact the democrats are unlikely to reach across the aisle and help him get that through, you know, ahead of the midterms. tom: do you believe, and this is the arch financial question, folks, do you believe the tax reform will dovetail with fiscal issues three and six and nine months down the road? is tax reform going to run into scoring which leads to a bigger budget deficit? stephanie: i think that is the concern. and you know, senator corker, that was his main -- he's already come out against -- tom: and senator paul as well. stephanie: the deficit hawks within the republican party are against the plan. what came out of this lunch

that trump went to the senate to meet with senate republicans on the tax reform and, you know, they were all complaining there weren't enough details still. we don't know actually if this plan will add to the deficit or not. we don't know if it will be a tax cut for middle class, lower class americans or not. the details we have make it look like it is a massive tax cut for companies and wealthy individuals by the elimination of the estate tax. francine: why is it so difficult, is it because there's no clear plan of what the tax plan was to achieve or is it because they're trying to find the financing for it and again making sure it has the backing of the senate? stephanie: i don't think he has outlined, you have prominent republicans including his supporters in the house and senate saying they don't know what trump wants. so as they're trying to draw up this plan, they need guidance from the white house as to what is top of their agenda, you know, this plan to create new

income tax brackets, you know, what are the parameters of those? they still don't have guidance from the white house. i think that's the problem. to get something like this through which is incredibly difficult, they need to be focused like a laser on getting this through instead of this endless distractions that trump has made with attacking members of his own party. tom: who knows what this morning will bring. stephanie baker with an important sum from london. hans redeker from morgan stanley and simon french. talk about the right interview at the right time. the governor of the third tunnel under the hudson river, governor chris christie of new jersey, do they play golf? i think maybe they beach. chris christie at the 11:00 hour on bloomberg. stay with us. this is bloomberg.

trey: this is "bloomberg surveillance." don't we have fun, tom? london to new york, anything from financial repression to negative rates to central banks. the u.k. economy growing more than forecast in the third quarter. g.d.p. rising 0.4% leading the 0.3%. this may lead to speculation the bank of england will raise rates for the first time in a decade. our experts are here and join us. thank you. i want a chart up looking at what the e.c.b. and b.o.e. have done over the last couple years. there's a very clear moment in the e.c.b. in 2011 where they hiked and then had to reverse it and posed a credibility

issue. are we at an inflection point with b.o.e. now? simon: not insofar as the bank of england is not ready to start on a rate hiking path. what you're alluding to is the break in 2011. and with the bit of hindsight given what credit conditions were doing across arizona and the world at that time was a mistake but we don't have anything like the same financing conditions or indeed strengths on credit and i think that is crucial. the bank of england has pointed to an increase in rates next week. i think they'll do it to keep their credibility intact. francine: at the time when the e.c.b. increased interest rates and had to reverse it the b.o.e. was thinking the same and shied away because of a worse than expected g.d.p. if you were in charge of the b.o.e., do you hike or not? hans: i wouldn't. i don't think they will. they've now guided the market four times as many britains

this month think the banking will hike this quarter than last month. they've clearly taken both market participants and the wider public with them and therefore i think is a question of credibility rather than the maco economy demands it. francine: would you do it? hans: i wouldn't. they have four times now indicated and in the past they tried and four times failed to do so. this time i guess there's a credibility issue and therefore they have to deliver. from a market perspective, you have to think what is priced in and as well think about when you have higher interest rates and in an environment where the united states, obviously bond yields are rising and you have a lot of nonsecured debt in the u.k. so you would expect the economy is going to slow. what we're seeing is an economy which has moved from being a gross leader to gross legerd and the gross on the credit book and the central may be hiking because of financial stability concerns because they thought they can't continue this unsecured debt of unload

because that is a big problem in the future. francine: simon, you look at credibility, who on the m.p.c. is worried about the credibility, you need five members to vote for a hike, is it not just the top governor carney that thinks of credibility? simon: i think they expected the data from the guided markets to where we are today to be more rebust than we have. hans alluded to the fact the cyclical data we've seen in recent weeks is not necessarily supported the speeches that were made three or four weeks ago and therefore having a disconnect. what is really problematic or what provides the cover to the accusation that is it is a credibility issue is they say hang on, inflation at 3% and not our central forecast expected to come back for a couple years and therefore we need to do it on an inflationary standpoint and i personally don't buy the argument but gives enough cover for the inflation report next week. francine: stay with us. hans redeker and simon french. in you want to ask them a

question through tom and i, load up tvgo and you look at the gpped and we'll ask those questions next. this is bloomberg. ♪ dd

tom: bloomberg surveillance from new york. is it lawyer sfot if you're not a part of global wall street, the financial times, the bank of america will take a different and separate path if the securities exchange commission of the united states doesn't act to staunch mifd and keep it in london. kneel callahan knows about this and is out of dub lan and provides important reporting for our financial team in london. thank you for being with us on short notice. what brian moynihan is saying at bank of america is we're not doing mifd and either the f.c.c. blocked mifd in new york or we're going to set up our own rules to deal with our

important european clients. how will the f.c.c. react to the idea of bank of america going its own way? neil: it will be interesting to see how the f.c.c. deals with it. we reported last week they plan no action letters saying you can't charge for research in the u.s. unless you're registered as a investment advisor. it's now been reported the bank of america has taken steps to register as investment advisor which gives them work around in order to charge for research. what we don't know is whether this happened before the decision made by the f.c.c. to take no action in these letters. that's a decision we expect to be made public towards the end f the month. here's the question and if you don't know the answer, i respect it, but if i'm hugh of

sloweders of london can i do my research through new york or do i have to stay with london and play with london rules? why can't everybody in the racket move over to new york if hey don't want to do mifd? neil: they come do that but mifd is likely to become a global standard because a lot ofs asset owners because like pension funds like the idea of m action ifd and research and getting to choose which research they get to choose and ideally lower fees thereafter. at the moment lower fees equals alpha, or at least beating market returns because a lot of managers are underperforming because of the fees they charge. you bring down the fees you get better returns. tom: i've heard it 40 years i'll make alpha off of fees. john vogel of vanguard would go mental. are you kidding me? research is why a given fund is underperforming?

neil: it's not actually the research but the fees they charge, actually rates them underperforming against passive and vanguard would of course have that argument. but if you look at the fees in europe, they're significantly higher than the u.s. there is nothing like black rock has most of the market share for e.t.s. in europe, for example, and fees here are higher. and you'd expect them to be somewhat higher but not as high as they are. tom: i'm in the francine lacroix chair for bankrupting. thanks for briefingous on this ornt article as we drive the story forward. this is bloomberg. ♪

tom: is it a grindup rather than a meltup, global safe

havens, will they ever recede. tag team g.o.p. criticism, scathing criticism at that. corker and flake go at their president, who is next? daniel clifton gauging the likelihood of tax reform. and on the value trap that's blue chip america as compared to emerging markets, we look at that with brian leavitt of oppenheimer funds. good morning, everyone. this is "bloomberg surveillance." live from our headquarters in new york, i'm tom kean along with francine laqua in london. this e.c.b. meeting in london is a big deal. why is it for you? francine: you'll see the convergence of the what the e.c.b. and fed does, tweaking things without messing around with this very difficult ecosystem. i think it has the nuance and they're treading on water is how i would put it. tom: we have good charts for you as well and wonderful conversation to get you ready for your american morning.

now with our first word news, here's taylor riggs it. taylor: starting in china, xi ping is leaving open he may stay in office until 2022 and unveils a lineup not unveiling otential successors. jeff flake of arizona became the second republican senator in a day to block president trump. flake announced he won't run for re-election and acusde of president of racist and undig any find behavior after bob corker demounced president trump on tv and led to angry tweets from the president. in spain, the prime minister allies are concerned he may go too far in trying to cross catalonia separatists. according to people knowledgeable, they bach at taking control of the administration in barcelona and don't want to shut off options

for the catalan retreat. big morneau said the economy is resilient to shocks. he told bloomberg one of the risk is the collapse of nafta talks and said even that can be managed. >> we have the u.s. as the largest trading partner and we do need to have a continuing strong relationship. many things that we trade with the united states are, you know, things that are at a fairly low tariff rate. we think that would continue under any scenario. taylor: morneau says nafta is important for canada to get right. global news 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries, i'm taylor riggs, this is bloomberg. tom and francine? tom: commodities and annuities, a check with them is a bit odd. green, green, green yesterday

with new highs with the euro churning now with dollar strength across the board. thanks to hans redeker from morgan stanley won't get on the strong dollar bandwagon. v.i.x., up 11.18 with the dow at 23,442. we're watching two safe havens, swiss weaker and euro swiss weaker and gold at 12.73 and down a big $5. the recent support is 1269. we're not quite there yet. francine: very strange i put it in my data check like the vix and the stars are aligned. seems to be in a holding pattern until the e.c.b. meeting. metals are declining because of the recent dollar strength and pound advancing better than expected u.k. growth, tom. tom: let me do a safe haven.

this is euro swiss and we showed it last hour but it's important to drive forward in the 6:00 new york hour. long term swiss frank strength. the momentous day in 2015 where the swiss national bank threw in the towel and drove swiss franks stronger and now we've backed up and are getting back to where we were on that january day in 2015 and gives you the level of swiss franc backup, weaker swiss frank in perspective of 40 years. francine? francine: i have a simple chart just looking at euro pound but actually it's significant because a week and one day before the b.o.e. decision and the u.k. with more than forecast in the third quarter. this new orleans that there probably will be more speculation the b.o.e. is about to raise interest rates for the first time in a decade. again, a lot of people are saying it's a credibility issue so they've promised a rate hike and if you have strong g.d.p. then they have to go ahead and do it, tom. tom: let us begin a discussion,

you need to reallocate your equity portfolio because you're in this bull market and sort of in this bull market or you've totally missed this bull market. brian leavitt is in charge of dispensing aspirin at oppenheimer fund as a senior investment strategist. how are your portfolio managers, are you taking them off the window ledge? brian: no. tom: are they participating? brian: absolutely. it's been a period of low volatility and modest growth which has been fine for corporate earnings and kept market volatility low and when you think of where we were coming into this year, you show a chart that has the s&p outperforming international markets for a prolonged period of time. what happened as we got into this year where expectations in the united states were quite high, significantly lower outside the united states, weaker currencies outside the united states, providing a nice tailwind and we've seen some niceout performance. tom: did he get my descript before we did this?

brian: i did not. tom: bring up the chart leavitt previewed for you back to 2007. i did pink for tom la year and for the extend and poors and levitt totally ununder performing, a nightmare for emerging markets. what's critical in the space, slope matters. here's the s&p going up and you mentioned emerging markets go up at a higher rate of slope. is this a value trap where emerging markets will come up and do better or a value trap where emerging markets underperform, which is it? brian: we think emerging markets will continue to perform. you have a nice backdrop, the weaker currencies at the start of the year and oil prices which stabilized and gone up and more or less stabilized. you have the u.s. dollar which likely is strengthening over the last days but likely in a more stable environment and you have emerging market growth improving at a time sentiment

had been weak and valuations were quite low. all of that combined provides a noise tailwind for the emerging markets. francine: would you worry about the most in the emerging market? brian: what i worry about the most in the emerging markets is a conversation i would have about the united states. i worry a that policy in the u.s. and other parts of the developed world might get too tight at an inopportune time and wouldn't be my base case scenario but if we got in an environment the u.s. fed raised rates too rapidly with the dollar strength and doesn't seem like it's going to happen today but you could perhaps see the yield curve start to flatten again, that wouldn't be a good environment for risk assets globally. short of that, the u.s. probably remains in this modest growth environment and emerging markets continue to be or will be the drivers of growth around the world. francine: when you look at inflation expectations around the world and we heard overnight from mr. goodlatte

about this is the moment for treasuries, do you believe inflation expectations worldwide will rise significantly the next six months? brian: no, i don't believe inflation will rise. we have a lot of structural forces keeping inflationary pressures down with an aging population in the west and high savings rates in asia, and so you don't see the money circulate throughout the financial system rapidly. and even as we talk about tight labor markets particularly in the u.s., you're starting to see the labor force participation rate trend high are and people are coming back in the markets and don't see wage growth picking up. tom: in thailand 19% tyler based if you're thai bot based you're 13%. bring up the chart. i have no idea what he did with his chart. weak dollar -- it's a gorgeous chart and we showed it last hour as well. this is a beautiful, trendier

weak dollar and we get a little bit of a move here. do your portfolio managers believe in a strong dollar trend or do they have to stay weak dollar? brian: in our international bond fund we don't hedge in our equity exposure in the long term that adds cost to the portfolio and it doesn't over the long term is in essence a wash. what we believe right now for the dollar is the recent strength in the dollar is on expectations of fiscal stimulus in the united states and a growth rate above that of a lot of the rest of the world. you know, you said you'll bring on a friend of mine, dan clifton. tom: you're friends? neil: to discuss the probability of brian: to discuss the probability of tax cuts and fiscal stimulus. i still think it will get done. this recent move in the dollar and 10-year treasury rate is on expectations of greater growth in the united states and i'm not necessarily sure that's coming. francine: right.

so what happens if it doesn't come like you're expecting it to, a huge correction? brian: i don't think there's a huge correction in the markets. i think the dollar will go back, you know, along the trajectory it had been on prior to the last few weeks. i believe 10-year treasury rates will come down. i don't believe there's a big correction coming in the markets. remember, when president trump first won -- or president-elect trump first won the election in november, the rally was all about value stocks, small cap stocks, and what you've seen this year has been more about large cap, more about growth and things like the industrial sector are still trading at a discount of long-term averages. this move higher in the u.s. equity market has not been in my opinion about tax cuts but synchronized global growth for the first time since the financial crisis. it's been about accommodative policy globally and an environment where stocks still rade cheap to bonds.

francine: thanks so much. later on bloomberg markets we speak with former e.c.b. member and central bank governor of cyprus at 10:30 a.m. in new york. that's 3:30 p.m. in london. looking forward to that conversation on euro. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." i'm taylor riggs. let's get to bloomberg flash. the earnings forecast has been boosted for the fourth straight year and posted third quarter profits that beat expectations. visa reporting earnings in the last few minutes. earnings per share came in higher than expected 90 cents versus estimates of 85 cents

per share. the company with net revenue growth in the single digits on a nominal basis, chairses up 1%. in italy, shares of the world's oldest bank fell on the first day of trading since the government bailout. a $6 billion lifeline was provided and trading in the bank shares of monte paschi had been suspended since dest. tom: that's not a typo and we'll have more coverage on that through the day on bloomberg. tax reform away from politics. let's do the mechanics of the new legislation, dan clifton is with us but first we're joined by our white house correspondent, wonderful to have you with us. i believe the count for tax reform for three senator is not a good thing for the president, is not a good thing for the senate leadership. i believe i count three as corker, flake and maybe rand

paul. greg valle says tax reform is at risk. is that the belief at the white house this morning? >> the white house has known this would be an uphill fight and they saw what happened with health care and they can only lose two votes and the fact the president is fighting members of his republican caucus in the senate doesn't make it easier. there's fundamental issues that haven't been addressed and how will they pay for these tax cuts? the president is taking things off the table, the state and local tax deduction and 401-k's and while senators are wondering how to pay for this there's no answer from the white house. tom: the so-called democrats of do they house, eagerly anticipate scoring or the measurement of tax reform or is that their worst

nightmare? toluse: they've been trying to put out their own numbers and we saw the council of economic advisors put out a report saying the average american will save as much as $4,000. they're not looking forward to the independent analysis from the c.b.o. or other scorers who are going to find what we've basically been expecting that this is largely going to be a very major tax cut for the wealthy and benefits for the middle class will be more ambiguous and the deficit numbers won't be favorable for folks that said they were campaigning on fiscal conservatism and wanting to reduce the debt and deficit. those numbers won't look good for the white house no matter how they sort of tweak this plan because there aren't those pay-fors because they don't find a way to pay for the tax cuts they want to give to the middle class or wealthy. francine: when will we have details of the plan? toluse: we've not seen the actual legislation but hearing it could happen as soon as next

week, the beginning of november is what we're looking at. the time line is incredibly short as they try to pass it before the end of the year. they only have three weeks' worth of legislative days, about 21-25 days where the house and senate will be in session to actually have this plan, score it, have hearings, have a vote in the committee and have a vote on the floor. not a lot of time and we actually have not seen legislation yet and hoping to see it next week. tom: and toluse has a three-day workweek as well. he's our white house correspondent. thanks so much this morning. daniel clifton is a strategy researcher and write as pithy research report on the minutia of our legislative branch and joins us this morning. after what you witnessed yesterday, is tax reform grievously threatened into next year? dan: let's cut through the nonsense this morning, tom.

what is jeff flake's problem with the president? his behavior or immigration? jeff flake probably was going to lose his primary so why not get out now when you're down 20 points in the polling and primary, right? bob corker is trying to keep the president honest on deduction closings so this doesn't become a big $2 trillion deficit bill. so angles are being played here that we need to look through the noise of the president fighting with his own party. and you have to say to yourself, what is the one thing that binds all republicans, bob corker, jeff flake, rand paul, donald trump? tom: getting re-elected. dan: tax cuts. at the end of the day, they know they have to do a tax bill and why we'll see a tax bill by first quarter 2018. tom: dan clifton, jason called me last night and said we have to do microeconomics. here's a morning must read with a chart. you'll love this, folks. the blue box and the orange box. what will you bring up first,

riley, give me the morning must read or the chart as you can. this is paul crugeman continuing to debate dan clifton is living, more or less respectable conservative economists made a basic math error, wage gains to revenue losses depends how much capital comes in which dependsen the sensivity of m.p.k. to the quantity of capital. forget it. bring up the chart now and this is the reality. the blue box is smaller than the orange box. nobody in your world is looking at this. no one is looking at the economics what the tax reform will mean for the middle class, are they? dan: i would disagree with that. by the way, first, i think we're having one of the most fascinating debates in economics, larry summers versus some of the more conserve pitch economists and krugman and is a healthy debate for the economics profession but at the

end of the day they're measuring a corporate tax rate cut and the impact it has on the middle class. this bill will have significant middle class tax cuts. we can talk about the distribution and proportion that goes to it but in 2003, paul krugman made a very big claim that tax cut would not create economic growth. the c.b.o. and blue chip forecast was for 2% growth, tom. in the next 12 months we produced 4% growth. in hindsight they say other things were leading to that, we were able to deliver a very large tax cut to the middle class and it produced higher levels of economic growth and i think this tax cut is that on steroids, not only are we doing income tax cuts, 100% expensing of capital equipment which creates investment and job creation, then you're getting the corporate tax rate cut and their ok that argument to the corporate tax rate cut is too narrow for what congress is trying to do. tom: coming up on bloomberg

radio, a conversation with the senator from virginia. looking forward to that. from london and new york, this is bloomberg. ♪

francine: bloomberg surveillance with tom and francine from london and new york. et's talk to dan clifton, from strategas, and the openen-er funds strategist with brian levitt. we were talking about the

possible rebellion in the republican party but talk to me about the democrats. have they chosen a leader to go against a republican candidate at the next elections? dan: that's a great question. when a party goes out of power they don't have a singular leader and there's a fight for time. you're seeing a fight in the democratic party and less visible than the republican party. you have the bernie sanders wing of the party urging a more aggressive stance both in terms of government and going after the president and then you have the more moderates. so what type of candidates you see emerging for the 2020 presidential candidate? you'll probably see bernie sanders in that race. camilla harris, the senator from california, you also probably will see candidates like mr. patrick from massachusetts and andrew cuomo. francine: who could potentially win against a trump candidate? dan: it's going to be a function of whether the democrats take over congress in the 2018 midterm elections. then you'll have a fight whether they should impeach the president and that will form

the basis of who will take on the president. so i would say it would be a little early but looking at what happened with the republicans after obama, they move far to the right and you see that same trend developing on the left in the infant stages. what we think, if trump is not successful in getting growth higher, you'll see the populist rise up on the democratic party side. tom: thank you so much, dan clifton, all fired up. rrific note on policy in washington. the 11:00 hour this morning, an important conversation with the governor of new jersey, chris christie. this is bloomberg. stay with us.

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call, visit, or go to xfinitymobile.com. ♪ tom and francine from london and new york. director secretary answering questions from the committee, talking about everything from eu national right, the brexit

divorce bill. he says the u.k. parliament would vote on the final brexit deal but maybe after the country leave the block in 2019. logically, it means that the u.k. parliament has not voted on a final brexit deal because it would be implemented and they vote afterward. he was one of the most famous pro-exit people. -- brexit people. i cannot tell you the level of anxiety within the conservative party which means we need to take these pronouncements with a word of caution. let's get to the first word news with taylor riggs. >> a big with for financial firms on capitol hill as the senate overturned the consumer rule that makes it easier for customers to sue banks. republicans have fought against the agency since it was created after the financial crisis. only advocate in

the white house may be president trump. she was impressive in an oval office interview with the president last week according to people familiar with the sources -- matter and the president is expected to make a decision next month. president trump is urging republican senators to push ahead with their tax cut plan and went to capitol hill for lunch with lawmakers. some republicans have complained about the lack of direction from the white house and details of the tax plan have not come out yet. in iraq, kurdistan's regional government is offering and all of branch, they are prepared to freeze the results of last month's independence referendum and the vote led to deadly fight with iraqi troops and for oil exports. curtis -- experts.il -- hurt oil experts. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries.

this is bloomberg. francine: xi jinping has closed the congress party with more power than any leader in a generation. politburombers of the will be too old to rule after he finishes his second term opening up the prospect the president will stay in office beyond 2022. let's get straight to hong kong with our chief asia economics correspondents. take you for joining us. of power consolidation make it easier for president xi jinping to deal with deleveraging? >> this is a big question. he has consolidated more power but not clear where he will go on the economy agenda, will he be a molding to shake up the state own secretary and go hard on cutting debt and the flow of credit in the economy. there were suggestions during

the congress that he is open to supply-side reform, suggesting putting back on overcapacity and spoke about curbing financial risk. no clear indications on where that may go. there were some reformers promoted but some whose background is not in finance or economics. any -- will there we have a policy update in the next couple of months? goes or can as she he relax and focus more on thaneraging them growth -- growth? out conference will plan the economy for the year ahead. , a fivebroad frameworks year plan, a meeting of financial regulators in july that set up objectives. the objective when they meet periodically. they will go to a planning phase

in december and party congress next march. tom: what does this mean for the people of china? to take shanghai, what does this pageantry, pomp, circumstance, what does it mean for the man, the woman, the family in shanghai? >> i think one important and interesting message to come out of it today -- the authorities want more sustainable growth. they want more equal growth. xi jinping is sending a message that he wants the benefits of the spread to all of those in china. he is trying to lift confidence that their system and the party that theyd the value run the government by our necessary and will benefit all people in china. there is an important twist out of this congress.

it is no longer about breakneck growth, equal and sustainable growth which will trickle down to people on the ground. tom: our chief asia economics correspondent. brian levitt listening to this from oppenheimer, how does a big platform like oppenheimer funds -- how do you by china --buy china? >> we look at trends in china taking place below the macro numbers of whether they are growing 6.5% or 6.2%. when you look at the trends on what is the world's largest population, you see trends in online gaming or online retail, .r search, or social media things in the united states that have grown significantly are growing significantly in china. tom: you and i studied this book, i speak for myself, you used to buy concrete in mexico or concrete in thailand.

then you buy concrete in china? >> the days of the big super cycle of commodities is beyond us. inhave seen a large move people from more rural areas in the city and we are not replacing that. there is not another 700 million people in china to move into cities. in china, we are moving into a postindustrial world, a movement from a more manufacturing crimmins society into a service-based and consumer-based economy. there is a significant rise in wealth. those who have it are participating in a lot of things i just mentioned. tom: what is the adjacency of this? people in beijing are clapping like this. is anybody clapping in thailand or taiwan or south korea? >> what you have in those other parts of the world are more market driven economies that

have benefited more recently from some stimulus in china. chinese growth is going to be more modest going forward. it will be a higher quality level of growth. it will not be the industrial-based level of growth . and what that means for the people around in the adjacencies is more products to export to a growing consumer base in china. francine: i am so confused about the clapping. [laughter] i am thinking of people in the china congress, i do not know how to clap anymore. my china-u.s. tenure spread. what -- 10 year spread. it is the story of currency and treasures, what does it tell us? >> in the united states, you have seen a prolonged time of low rates and that is the result of modest growth in the united states. in the u.s. treasury is

on the back of hope of a pickup in growth in the u.s. that i do not believe is forthcoming. what you end up with in china is a transition to a lower rate of growth. likely a more sustainable and higher quality level of growth. -- that: what happens it be plain sailing in the next 12 months, do they need to figure out how to deal with the outflows? they extended -- the money still wants to go out of their. >> right. what the chinese need to do is continue to proceed on a path that leads to sustainable growth. and sustainable growth is likely to keep capital from fleeing to the united states substantially, like we saw in 2015 into 2016. inflation inflated

in the emerging markets and a fed promising more interest rate hikes. short of that, you do not see significant capital flight out of china. tom: bring up the chart. that is my drug. get with it -- chart. get with it, anthony, that is a great chart showing the steeper spread china and the u.s. my chart is the real rate in china which goes to the search for real return. down,y the real rate is inflation-adjusted yield in china. it is a massive 2.7%. it is big versus the rest of the world. >> that is not just in china but in other emerging markets as the -- when the federal reserve rates tapered in 2015, he did not have significant real yields and the emerging markets and it is higher now. that prevents a lot of capital flight we saw in the prior time. tom: brian levitt with us from

oppenheimer funds. every day, they put capital to work in foreign markets. bloomberg television, bloomberg surveillance. in your car, your commute, bloomberg daybreak, on radio, in new york and boston and the bay area, in washington, in los angeles. mr. kershaw's l.a. ♪

♪ francine: this is -- >> this is bloomberg surveillance, let's get the bloomberg business flash . for you to will cut its investment in a new mexican factory by 30% in the auto marker/production target in half, they say it has to do with .emand and not political games

president trump has pressured manufacturers to keep more production in the u.s. american movie theater chain regal cinemas will test demand pricing for films which could lead to higher prices for big hits and cheap seats for flops. they plan to test the idea early next year and the goal is to boost revenue and fill more seats at nonpeak times. alternative asset joint blackstone group plans to get a lot bigger, erik schatzker spoke to their ceo stephen schwarzman. internal targets, plans, aspirations to basically double where we are. $800uld take us to about billion. in five years. we have not finished our plans. we will see if weekend accomplished that.

can accomplish that, it would be a substantial increase in what we are doing. >> they are considered a bellwether for the alternative asset industry. .rancine: thank you the european central bank followed the path went bought bonds but set to take a different route in getting out of qe. the ecb will begin with stimulus even with inflation projected to be below target. all will be more clear when it make it policy announcement tomorrow. we are back with brian levitt from oppenheimer. when you look at what the ecb needs to do -- we are talking about withdrawing stimulus, inflation below target, it is also dealing with a shortage of eligible debt, how much does that shortage impact ecb thinking? >> it does to the extent that they are starting to taper some of their asset purchases. it is thehink

appropriate policy to proceed with significantly tighter policy. you are seeing a modest normalization of policy i think that will be prolonged and drawn out. the inflation rate remains below their comfort zone in europe. given the misadventures of raising rates in 2011 and he forced austerity on the european countries, it would be inappropriate to tighten policy significantly during a nascent recovery and expansion. francine: by nature, certain countries are hawkish. does it mean that a lot of -- does it need to come with an expiration date? will we hear from the ecb when this ends? brian: when the rate tightening cycle begins? francine: yes. brian: the ecb will provide guidance that is dovish. even as they taper asset

purchases like we did in the united states, it will be a prolonged. as we see in the u.s., not disruptive to markets over a longer term trajectory. tom: i have been looking at this every day as we get to this important meeting and we will have the mario draghi press coverage tomorrow. this is the transatlantic fred, the positive u.s. versus negative german two-year spread, down we go. what is critical is this is convex, the first and second derivative of this spread is ugly. what does it mean for mario draghi we get this ever wider divergence of yellen and draghi? brian: it means we are waiting to see the trajectory pickup and sustain itself in europe. you have the demographics are in -- as they are in the united states and growth rates are not as good in the united states. europeans need to tread

carefully in regards to tighter policy. the last thing you want to do is take away the proverbial punch bowl when the credit cycle and the earning cycle is finally gathering some steam. francine: should they worry about euro strength? if they do, nothing they can do about it. should worryhey about euro strength to curtail export driven recovery we have seen in europe. europe has been a bigger and a fishery of this recovery in the emerging markets. ,hey can do something about it which is to provide guidance and say the policy will not be as tight as perhaps the market expects. the euro had gone down to 110 versus the dollar and back up to 1.20 and stabilize a little bit. it means that the european central bank, if they want to continue to promote growth, will be mindful not to allow the currency to appreciate further

and become a headwind of activity. tom: when your portfolio manager , eastern europe, emerging market area and with -- you say to promote growth, does oppenheimer suggest they are clear of eurosclerosis? in a far better position than we were a few years ago. we are in a better position in mozart's -- in most parts of the world. what you are finding in europe and a good exercise to study in history, when you promote -- when you have policies that promote growth, rather than policies that are procyclical during weak economic downturns, you can get good outcomes. stepping away from the rate hikes in 2011, scaling back on forced austerity on the peripheral countries, finally credit growth in europe and earnings growth in europe. companies growing into their

multiples in europe. it is a good backdrop. francine: unclear white bonds in euro area nations are weathering the prospect of what we were just talking about. the stimulus reduction. is there a mismatch between what markets are predicting in equities and the euro, at what is happening in euro bonds? brian: euro bond yields in the periphery remain quite low. some of that is based on spreads compared to more developed parts of europe, or the more core parts of europe. i do not think there is a disconnect. what we should expect going forward is a very long and drawn out tightening policy, one likely to keep rates low across europe, given the structural issues facing europe, not the least of which is aging demographics. what it should mean for investors in the slower rate environment, they should not

expect yields going up substantially to solve their problems. it likely means the equities are the asset class of choice in europe and around the rest of the world. tom: brian levitt with us from oppenheimer funds. to get your briefing, you have your terminal at your desk and the beach house, tv brian levitt,, a bonus round, click on a previous interview and you get my ugly face and a chart. an elegant dollar chart, bonus round, you can steal, follow me is theft. -- full on the u ♪

♪ tom: bloomberg surveillance, a washington in the vicinity of december and that the 2018 will look at the single best chart. the deficit back here, the ugly deficits of the 1980's, the clinton surplus, gop grinding their teeth right now.

there is a crisis, the denominator moved and rolling over. five, 6%, 7% of gdp. --- how does this fold into international investment, it is a u.s. deficit, is it their problem? brian: no, the u.s. is a great credit risk. people worry about the u.s. that level of 20 trillion dollars but we forget the federal government has assets of 200 train dollars, 300 train dollars. -- $200 trillion, $300 trillion. you could stand to see some fiscal spending in the united states, should we choose to do so to augment growth -- wrote% -- 2.2% run that not necessarily good enough or the politicians or people on main street. you could augment growth with deficit spending.

it remains to be seen if we get there. it will be tough for the republican party to find offsets for this. hiscine: you know what buzzword for 2017, animal spirit. where are the animal spirits? brian: they are not robust in the united states. that is a lot of the reason i believe this cycle is not over. normally at this point in the cycle, you would see significant pickup in capital investment and a surge in m&a activity. you would see equity valuations trading expensive to bonds. we do not have that today. cuts, sustainable deficit financed tax cuts could create a surge in animal spirit. i think it will be difficult to get that through the senate. tom: very good. i am bringing up animal spirit,

here is nominal gdp. we will dazzle people. let me bring it forward into the next quarter. we used to be at the green light and now at the red line. that is the animal spirit issue of the united states. brian levitt, thank you, i'm eclectic our. eclectic hour. we thank oppenheimer funds. weaker swiss franc and safe havens and retreat. -- in retreat. ♪ retail.

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tax cuts as senators flake and corker deliver blistering criticism of the president. republicans gave a show of hands about potential fed chair nominees. and bond shares, the moment of truth has arrived for the market should for our audiences worldwide, this is julie: -- this is "bloomberg daybreak. " we close at another all-time high after yesterday's session. the selloff in treasury higher by the yields three basis points. in the fx market, high-yield supporting a stronger dollar, and the german confidence index comes in at a record high.