♪ >> top dollar: a part of a budget resolution, and speculation about a hawkish john taylor pleading the fed. catalonia on edge. the senate is set to give the green light for control of the region, where live in barcelona. lenders capital buffer rebound has been switched. this chief -- the chief executive tells us it's too early to talk my back. this is bloomberg survey -- this is "bloomberg: surveillance".

let's check equities on track for the six weekly gain. big is -- boost yesterday. declined continues. biggest two-day drop, two days after the ucb cut its qe buying program to 30 billion from 60 billion starting in january. the biggest week in -- the italian 10 year yield, a big top yesterday. we saw yields fall across the european bond space yesterday. the italian 10 year yesterday fell by nine basis points. continuing to decline today. so it is an early september, crude has little changed. isdi arabians crown prince backing the extension of the opec-led output cuts. your sebastian salek with first word news.

price investors -- a drop in a key measure of financial strength. $2.4ankrolls other 2.4 -- billion of money focuses on wealth management. there plans to return cash to investors. >> we are looking to continue to implement our progress for a dividend.our cash and, eventually, we will complement it with capital returns, but it's too early to talk about it. sebastian:sebastian: on the korean peninsula, u.s. secretary of defense james mattis has accused -- others of like using -- others of building a nuclear arsenal. they pledged solidarity with south korea. he also says trump -- the trump administration wants to avoid war if possible, and continues to insist north korea disarm. catalonia's march for the edgence is on

today. there is expected to be legislature passed later, allowing the prime minister to seize control of the budget to its police force. one of the person -- the president will address barcelona. remainskey price gauge unchanged, ahead of next week's bank of japan meeting. percent up10 of a from me -- from a year earlier mark --. from a year earlier. the current course is expected to continue, even as global peers begin to normalize. the u.s. president has blocked the release of hundreds of records on the assassination of president john f. kennedy. transit in a memo i have no choice, -- trump said in a memo, i have no choice. those files were placed under six-month review, while letting 2800 others come out. in kenya, results of the

countries free-run presidential election do this morning. is --ainty about the vote has unnerved investors. share has anmark exit poll of seven point 6%. the election outcome was declared void on december 1. climbed to024 has 3.6%. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. and sebastian salek, this is bloomberg. mark? thathn taylor has argued foster economic growth is possible in the u.s., if policymakers focus on investments and hiring a stanford professor, who is seen as a front-runner, to become the next fed chair, who will likely for a peruvian -- dave roofing -- will find an approving white house audience. the cohead of global fixed income at goldman sachs and

another guest joining us now. latest, stille top of the pile. 63%, john taylor 25. yellen seven, kevin warsh five. -- i'm notou putting going to say putting your money. [laughter] which way are you leaning right now? >> gravitating down, certainly with the two front runners -- jeremy, jerome powell, and john taylor. suddenly, john taylor teams to be catching the imagination of the, of the, of the markets and press, despite where he stands. i think at the moment, we would take the view that, a little bit like how janet yellen took the chairmanship in the past, they -- their particular -- their particular policy stance will

have an impact on policy going forward. ultimately, they will be the chairperson, and they will gravitate to the center ground. some of the other appointments are just as instrumental. we are very fascinated by the chairmanship. some of the other seats will be quite significant. mark: could you get a double-header? could you get how and taylor in the top two positions? >> absolutely. there's a composition of people -- which might be incrementally more hawkish, not just as a function of the chairmanship, but the broader conversation. mark: that's what we would be looking for. there is a fed meeting next week. the boe, i think overshadows it, which we will come to. the odds of a move next week, .3%. it ain't going to happen, is it? >> doesn't look like it. mark: will they go once more this year, the fed?

we will talk about next year and a second. we think >> they will -- >> [inaudible] we think they well. [inaudible] so with the bank of england yesterday -- the fed is leading this up -- approach to the debate, which is giving front run information, telegraphing intentions. i think that is exactly what is in the price. we will see that, i think, with the bank. mark: what is the fixed income telling us? what are .46 on the 10 year? what is this shift? >> the fascination of markets in the short term, you will see, like policy events over the next month or two, or week or two. it has been -- and clement tilly led to less sick -- incrementally led to use -- less significance. we are seeing much better looking macroeconomic growth potential. if you take hard and solid data, you would suspect that growth is

very strong, the united states, much stronger than the gdp. all that is going to continue to drop more upward pressure on yields. you bet on the difference of the long end of the short end, it narrows -- is that a fed proved that, or not? we would take the opposite field. yield curves are declined -- there are competing portions as always. one of things to think about is the risk premium built into the you curve, incredibly low. way that the same things are incredibly narrow -- that sense of surprise is not been markets anymore. any sort of progressive grexit renormalization a policy, from u.s. federal reserve stash we should normalize those risks. that will have a tendency to steepen your curve, rather than -- mark: ian, stay there.

he stays with surveillance trade allots coming up. we are going to speak that -- to a chief executive, after the todaynce giant had things -- announces things later today. we will bring you the latest. this is bloomberg. ♪

♪ the operating properties of the third quarter, came in 2.1% above estimates. the chiefed by executive of electrodes -- thanks for joining us. -- electrolytes. -- electrolux. >> we are executing on our

strategy to deliver on our long-standing objective of improving our margin. we are seeing in proven -- improving margins, four of our businesses over 7%. we're focusing on making our most competitive products and really driving those, that sales growth, in combination with really strong cost efficiency. our focuslly raising on delivering, and on our cost objectives, and seeing good traction on that. mark: how long is it going to take to reach market profit target? >> we're at 5.8% on a rolling 12 punt -- 12 month basis, 6.1% on the first nine months. mark: tell us about the market of elements in europe and the your -- and the u.s.. demand plus 3-4%,

european demand 1.4%. >> starting with europe, we see it -- we see quite solid demand in most markets, except for the u.k.. we also have the middle east and were nearrkets, or we it japan the middle east, where we are not seeing the development. fees, it's ar quite solid demand, and has been for a while. picture, it'snd quite solid, we have seen -- and as been for a while. we are seeing market growth, driven by, again, recovery from the financial crisis, and growing employment. we see that going on at a lower pace, but also into the coming year. mark: on the u.k., which you cited as one of the strong areas of europe, this is purely down to brexit?

>> i would guess so. course,eeing, of currency-based price increases, which of course has an impact on demand. we are also seeing some weakness on the construction site. mark: mr. samuelson, are you still there? >> i'm here. mark: you are still there. you promised a string of product a roboticollowing lunch. what will they be, and how are they going to help you? leader inreally a these containers, and we are recovering that strong market position. really, with, again, robotics, with cordless and battery driven products, a strong focus on design, usability.

we are back to improving our confidence. .ark: you have been busy at m&a what's next? what opportunities are out there? what parts of your portfolio what you want to improve? >> we have three focused areas, in terms of m&a. it's a professional business area, where we have an opportunity to further improve our reach in professional kitchen appliances, mainly in north america. we are looking at some key emerging markets, like southeast , and,latin america increasingly now as we come back on track our small appliances business, we seen interesting opportunity for the growth. those are our main focus areas. >> thank you for joining us. >> chief executive of electrolyte -- getting some breaking news out of spain. a prime minister speaking at the

senate. he says they confront in exceptional situation. he says the situation is quote, exceptional, and has asked the .enate to accept his proposal that's the latest from madrid and catalonia. pokemon isnt because due to address the original parliament in barcelona -- the catalonian president is set to speak there. with this,tart maria, to go yes -- to describe yesterday. try and some up yesterday for us in under a minute, if you can. maria: that's right. i think it's a good idea. what we saw yesterday explains what we are seeing today. on thursday, he started the day with this declaration of independence, very much on the table. kindems that the decision of had some vertigo -- led to

some vertigo. his major tension between those who want to do this unilaterally and those who think this is a big trip. at one point, the president backtracked on that yesterday, and said he wants a way out. the way out is in the form of a regional election. this has been floated as a potential third option that wouldn't apply article 155 going forward, and wouldn't apply unilateral declarations, either. he got public -- the minute there was public reaction in barcelona, people showed up to his office, shouting, you have betrayed us. we've seen that come up multiple times yesterday. he backed on this idea of a reelection. he said, there should be a vote today to respond to what the central government is planning a vote now in the senate. it's unclear what exactly will get a vote today, and what they want to do now, with what we saw yesterday with a lot of

hesitation, and members of the coalition who resigned late thursday. he offers his bond in line with a unilateral declaration of independence. the problem for dumond is that he backed so many times, that now, he's looking pretty weak in the eyes of madrid. also, barcelona was disappointed with the fact that he got them on this idea of independence. mark: spanish markets remain relatively calm, maria. i mean, the ibex is slightly down today. the spread between germany narrowed yesterday. a big part of that was the ucb. is there a feeling that this still contains, when it comes to the impacts on markets? the feeling for markets is that article 155 is going to go ahead. there is nothing to suggest the government will pull back. again, from what you just

,entioned, this is exceptional and they want you to vote in favor of this bill. have a tough article 155, or you could potentially go for a version that might not be as tough. again, the? -- the question, mark, independence, can article 155 go ahead? are we going to get those crucial -- that crucial , what we -- reception will get here in barcelona?what kind of reaction will we get once the vote is through? mark: great job today, maria. we will talk -- check with you later. -- chat with you later. how do you view events in spain? moment,i think at the

it doesn't have, as you mentioned, a great deal of direct market impact yet. that it'sppear following its natural course, at least at this point in time. the next critical thing for markets will be to what extent we do see potentially significant social unrest on this, and to what extent that does unnerve market sentiment. at the moment, it is somewhat contains, but it could flare up and become more of a risk. mark: talk about the ucb. someone told me earlier, when i did radio at 7:00 a.m., draghi had a class of key auntie last night. [laughter] lastglass of chianti night. investors responded to yesterday's move. cause toht have more celebrate, quite frankly. one of the interesting snippets he had was the notion that there is going to be a conference in a

couple of weeks time, between the ucb and federal reserve in frankfurt to discuss medications. i think it was another master class in preparing markets well. and, critically, to prepare for the statements provided, and have -- repair optionality. they have kept statements deliberately beyond this, they will just to circumstances along the way. their fault, quite frankly, in terms of delivery history. mark: impacts on markets? -- investors focused on yields declining. a backup today, but nothing like the fall before yesterday. what would you say the output is now for periphery? >> think the main market response was, -- i think the main market response was, this is more about when does that take place? that has been pushed further and further into the back end of

2019, it would appear to read subject to macroeconomic events. in that sense, that's what has reassured markets, is that the context of any rate increase will change, monetary policy stands, is a long way off trade it has still been a risk on a environment. you see that in equity markets three to a certain extent, you see that with riskier elements within the eurozone context. therefore, markets, such as italy, can do well on the back of that, at least in the short-term. --k: you commended draghi excuse me one second. we are getting more news from catalonia and spain. the catalans are proposing elections, instead of declaring independence. they want to madrid to spend article 155 and help free a couple of jail activist. the catalans are ready to pull back and make exceptions from madrid.

rajoysaid they -- addresses the issue. he says the catalan government legal -- the legal actions are hurting the economy, speaking on catalonia right now. he says it was illegal, he is speaking to the senate. he said spain is confronting an exceptional situation. exceptional. he has reiterated, the catalans responded. the plot thickens. i want to move it on, because there is so much to discuss. to the bank of england. >> yes. mark: it's interesting, you said how well draghi has communicated. communicator, a man that almost invested -- forward guidance. how has it worked out so well to see this step back over the years? if the bank -- wasn't to raise rates next week, how much damage would it do to his credibility?

>> that would be a major shock to markets now, particularly when you think about the latest macroeconomic data, it has basically consolidated this statement of intent that the bank of england has made. therefore, it's all things pointing in that direction. the probability of the fed now pricing the market is superhigh. the near -- the notion, if it was to follow through now, would be damaging to his credibility. canada, hot kiss -- hawkish stance over the body of the year. the decision remains unchanged. the bank is now committed to making this move. that said the, the policy shift these days, given the preamble of communication, the policy shift itself lacks surprised. markets are -- on that. >> it's all about what happens after. >> when is the next move, and is

that going to be a one step move, a long plateau? >> let's talk about value and fixed income. is there any? >> yes. there certainly is. mark: where? >> the way we are looking up on markets right now would be -- k and opportunity we think is very much in the interest rate and currency world. it is best expressed through relative values. canada relative to the united states. there might be sweden relative to the united kingdom, there's a number of relative opportunities that make good sense. while a number of states central banks and macroeconomic movements are taking place -- and there's a greater agree of unit since, in that regard, there are still differences. if the differences that can offer real capital gains. it comes to income, there is a real opportunity at the high-quality end of the income spectrum. people are still buying corporate bonds, high heeled

bonds, emerging market debt securities. some of their high-quality securities, which offer attractive income, are some of the most favored places we think to get good quality income. so, be careful not to stretch too far. mark: just getting back to aren, the catalans proposing elections, instead of declaring independence. they want to suspend article 155 comment help free jail activist. theprime minister addresses senate's, in front of what he calls, an exceptional situation. it's happening -- we will monitor this. this is bloomberg. ♪

♪ mark: we're life from bloomberg's world headquarters and london. i'm mark barton let's get a roundup of bloomberg news. here's sebastian salek. sebastian: on monday, brexit

legislation through parliament hit a new roadblock, as the opposition labor party threatened to unite with labels, exalting a victory brought home from a summit. theresa may's victory was .nderlined by issues there were major changes to her landmark legislation -- in the brexit is undermining confidence a lot -- among business investors. according to a report, factories invested 6.5% more for new clients -- 6.5% for new clients, down from 7.1% previously. the european union has agreed to start internal preparations for the possibility of brexit negotiations at a summit. on wednesday, the eu's 27 governments without brexit , allowing trade

talks to begin at the end of the year. preparations will begin at the same time as a more positive outcome. car production in the u.k. fell 4.1%, a six drop -- monthly drop this year. led by a a decline drop in domestic demand. core production falls 2.2% to 2017. the lack of project -- progress is raising alarm in industry, dependent on supply of content. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. salek, -- i am sebastian salek, with bloomberg. mark. mark: the u.k. should sign up for a method to calculate for the eu to move brexit talks on to trade, according to a person for the ut -- the uk's chief brexit negotiator. this comes a week after discussion was said to not have made significant improvement.

the prime minister will allow them to trade as usual for two years after leaving. she has signaled a transition would only -- a deal is not shortly to be finalized before brexit in march of 2019. let's bring in our guests, professor, senior fellow with the u.k.. professor david blake, a member of columnists for free trade. how are you feeling, gentlemen?how are you feeling about how much progress the u k and e u are making over this brexit negotiation? >> the problem, at the moment, is not the lack of progress in negotiations for the u.k. and eu. it's the problem -- negotiations between the u.k. and himself. the reason we haven't made sufficient progress is not that there is this huge gulf from the

eu position and u.k. position, because we don't have the u.k. position. accepts not said, yes we this part of the bill, we don't accept those elements. that's what the eu is waiting for. the problem is, theresa may does not have agreement among her own party or the cabinet -- perhaps the country as a whole -- to put constructive reform on the table. mark: david, are we close them to the cabinet uniting are not? what's going to make them united? david: we are not united until we know what the final outcome is. you can't work out the bills of something until we know where we are heading. we are not heading in any particular direction that allows us to find out what this bill is. until we do that -- mark: are you blaming the eu? david: no, the sequencing -- we are in this position now because of consequences. you can't work out a bill before

you know how much you have used. it's like staying in a hotel -- the nextd then in the day after that, simply because they are turning around might not getwe anybody to come in to the hotel tonight, we have to pay it until we find a guest. no one will accept those terms. can turn around and say, they will not like. we wanted to have a good free trade deal. you don't want to do that. we can go through to beat -- we can go through our turns, and we can trade with the rest of the world, and you can abide by the tariffs we set ourselves. we should have done that from the beginning. mark: d recommend that game, jonathan, or not? jonathan: no. yes, we could do that, but you had guest, i'm sure -- you have had guest's, who ensure have

said this would be a disaster for several sectors. said thism sure have would be a disaster for several sectors. in the streets will lose access to the single market. i don't think that's realistic. i don't think anybody is serious , the u.k. government actually thinks this is difficult to pursue, which is why we are where we are. the consensus among external economists is that it would play a significant medium and long-term counsel for the u.k. economy. : not serious, -- mark: damaging to sectors, not serious, although's -- all those? david:david: the single market is one of the most protected institutions in the world. paying big businesses lobbyists hundreds of millions of euros a year to try and get regulations, consumers paying 20% more -- manufacturing and

food they had they need to. if the u.k. brought those tariffs down, we do have certain interstates that we are asked -- we have certain industries that we ask, why do we have tariffs? there are tariffs on oranges because spanish producers wanted to have that degree of protection. this is not good for consumers in this country. we'd be far better off having lower tariffs trade this would help increase productivity -- help lower tariffs. his would help increase productivity -- this would help increase productivity. jonathan: as i said, there is a wide consensus among ex-economist that moving to wto rules would have a significant effect on the u.k. economy. , some tariffs eu are economically damaging. every country in the world has

those. the large, integrated single market with no tariffs, has -- there are relatively low tariffs on average. some prices, it's not supported by evidence. mark: the discussion has just begun. stay there. blake.n portes david -- jonathan portes, david blake. what can we expect for the rest of the world? this is bloomberg. ♪

♪ let's check in on the markets. nejra has been following all the action. nejra: mario draghi's dovish

down citing just don't call it the taper -- brought of the bulls and european equity markets. more than 1% higher yesterday, euro zone equities on the euro stoxx 60 had their biggest gain after a meeting in 2017. we're seeing that continue today. stocks up 4/10 of a percent. the gains are a bit more muted. more industry groups gaining if you dig into the industry groups open on the imap. energy and consumers outperforming along with tech stocks, perhaps gaining following earnings out of the u.s. section on the downside. some of those commodity producers -- producers perhaps choosing those. this is seeing its biggest drop in six weeks -- weeks. euro-dollar at 11635. if you are on the 118 handle, it is at its lowest since 14 weeks now.

since the 100 day moving average since this dollar record following the dovish message from mario draghi and the ecb. they're looking at the bloomberg dollar index at a 15 week high, highest in more than three months. it may catch its long-term resistance on that momentum, looking at the 200 day moving average and play. it's moving higher on fed chair speculation, also the u.s. house passing a budget resolution. a tiny bit of hope moving forward on tax reform. when you're talking about the dollar, you have to keep an eye on the treasury. i've got this year to date. you can see how that spread has been moving higher, significantly in recent days. we are seeing yields continue to move higher for both treasuries. now, coming up a little bit, the 10 year yield down some. 10 year point yield moving lower. >> thank you. some politicians at the u.k.

have been talking about the politics it -- the possibility of a deal. a former voice says the u.k.'s goals for brexit trade are a fantasy. they said they would end up with a relationship similar to canada's deals. >> this is in the interest of both sides. there are things with -- we will be able to achieve that third agreement for a negotiation. >> mr. speaker, i am now worrying to have a sense of groundhog day here. >> we have not reached this agreement, but it is going to happen. >> on the implementation, earlier than that i will be able to gets, certainly the outlines of it, agreed if we could.

>> after another round of talks, we are still no clearer as to when negotiations on britain's future with our largest trading partner will actually begin. >> we will be able to get to the point of sufficient progress by said -- september. >> as talks prove their difficult, how will the country fair with dealing with the rest of the markets? you are professor -- we have jonathan portes and david blake with us. david, you are suggesting going to wto rules to you see that as a realistic outcome? david: we need these at the moment. we have endless transition deals. we have new trade deals. we should get certainty quite easily. we mentioned canada. if we switch in the document,

the thousand page document, we switch canada for the united have 95% of a reasonable trade deal with the european union. australia today trade deal with china -- did a trade deal with china, japan, and korea in less than a year. mark: this kit -- doesn't cover financial services. david: it doesn't. we have to do modifications for support for the european union capital markets. this is the kind of thing we should be working out. what are the merchant -- one of the marginal changes we need to make on existing relationships, we don't have any of the uncertainty -- it's damaging. there are ways in which that can be done. at the moment, our side and their side aren't bringing us closer together. >> jonathan, you said it's not about our side and their side. you've said this is the difference within governments.

paint the picture. october was pivotal. it's now moved to december. can we move on to trade negotiations by december? the you this week, we discovered, maybe we can't. there's a contingency. jonathan: we can. it's going to be hard for two reasons. -- article 50 negotiations we have to offer a position on the brexit bill, on elements of the bill we are going to pay, and what we said we're not going to pay. they're waiting for us to come up with a position. we have to accept this. once you do that, we need a position on what sort of trade deal we want. there's a perfectly reasonable case we are looking for something that looks like this. ministerw, the prime has refused to discussion a certain -- what sort of trade

deal the u.k. wants to put on the deal --. there are no concessions within cabinets, let alone the conservative party, or parliament. let alone within the entire country, we want our post exit relationship to look like. it's going to be quite hard to negotiate. plus this canada realistic? even that isn't looking good for some. david: ivan rogers said it -- his preferred phrase was canada dry. [laughter] >> the answer is, until we get into the heart deal of negotiating, we don't -- the hard deal of negotiating, we don't know. i think it's realistic to do it by march 2019. we know the medium term isn't realistic, but we have to put out a position. the eu has to respond. we are not close to being there. mark: will parliament get a vote?

they might not, because we might just fall to the ends of the period, march 2019, than they would get the vote. david: there lots of nanoseconds for the 59th minute. it got that fraction of a second down to vote. it's clearly unrealistic. we ought to get the deal done. we can't have a long-term position -- this is going to be more damaging than anything else. there has to be certainty. oncan go for world rules march 2019, we can do that. companies -- some certainty about where we are going. mark: now, we've discovered this week that transition only happens once we have marvin outline on trade, like the copy of bridge to nowhere.

we were led to believe businesses were -- transition to be implemented. jonathan: the government's position on this is incoherent. what theresa may said, while -- we would have certainty -- would not have certainty until we had a full, final deal signed, makes no sense. it's not realistic. indeed, the number 10 official spokesman refused to back it up afterwards. davis, what he said is, that's not really what she meant. i think the government, again, has not got its act together on this. we have to be, we have be of to say, yes, we want transition, it looks like the status quote, and that will be agreed on before -- well, we might have free trade, but before the future trade arrangement nailed down. that is realistic, but at the moment, the government doesn't seem it -- even to be a will to say that.

that's what they're thinking about. mark: as soon, david, transition? assumed we move on to it? it's far too late. david: it is. the transition is the most damaging of all. we have financial services firms , we need some certainty of her where we are going. the government will have to introduce that. it's not forget the companies in this country who deal with the eu, they tend to get the you involved. sells more toctor the rest of the world than it does to the eu. we have to look positively about the economy as a whole and try to deal with this issue. you need good will on both sides. about --hnson's point i accept johnson's point about

the cabinet is not united. so, they do have to get their act together. let's be realistic about where we are, and the fact that the world is not going to end on march of 19 that -- 2019. mark: excellent come back. but great discussion. blake.n portes and david up next, theresa may faces a revolt are members of her own party on brexit. may has refused to put in writing. this is bloomberg. ♪

♪ mark: members of theresa may's party say they are serious about rebelling against their government. promised there will be a vote on the outcome of the talks, but are resisting calls to put it in writing. rebels in the conservative party are pressing to -- for an amendment to the eu withdrawal bill. a co-author of betting the house, the inside story of the

2017 election. tim ross is here. hmm... this is interesting, isn't it? so... could members of the against,ive party vote or king up against theresa may over this issue? cards, very much on the in fact. if the government doesn't give in to keep demands to put it in self, afor the bill promise the parliament will get the vine -- binding vote of this, we will see probably a big rebellion, won't we. would be too late -- for the eu to vote on the change? >> think timing is a big? . >> parliament not -- might not get a vote until after the eu. the other question really, is what would the choice b.

saidr, the government has you can either vote to accept the final deal, or vote for no deal at all. you vote to make us ministers renegotiate. >> in the week where we have for this mightses -- seem unusual, given where we have covered the last year. that shows they view the labour government realistic in waiting. >> given the state of the party at the moment, make lost her election in june. carbon, the supporters see this is one more heave away from power. they will start reaching to the labour party given that situation. the labour party has worked to do to make sure that it is seen not to be simply a hostile influence on the business front. certainly, they are working hard on that as well. mark: before we talk about the

disunity, are we any closer to getting unity around exit? >> think there's still work to be done, given the noises we've seen this week. clearly, from the european union's perspective, they need a onfied u.k. to make progress the negotiation. there are only seven weeks left before the crucial december 7 -- december summit. approach to-- their trade unveiled in the next seven weeks? >> the next seven weeks will be about how much money the u.k. will into that state of trade. >> great to see you. surveillance continues. ♪

tom: the euro weakens after draghi the dollar ascended.

will chair yellen blank on december 13? ups is not barclays are deutsche bank. sergio ermotti delivers profits. 388 miles from barcelona west and south to madrid. will catalan sent an emissary to ?alloy -- to rajoy extraordinary news flow. a megamerger proposed in the united states and health care of of amazon. you have another merger going on, a non-merger going on over there? guy: clarion. they can look at what is happening there stock price. kerry and down sharply. the transaction is not happening. we have some extra shareholders. tom.deal is off, tom: ge with a traditional

bombshell of exiting the railroad business. with your friday breathing, here is taylor riggs. taylor: starting in spain. the government is taking a less this effort. wants toresident convince supporters to accept regional elections -- regional elections. a senior official will ask the spanish government to suspend the process of seizing direct control of the region if there is a snap election. in japan, new data underscores the challenge facing the central bank cosi makers next week. inflation remains unchanged in september. prices rose from a year ago. the bank of japan is seeking 2% inflation. capitol hill, republicans promised to unveil their tax reform bill next week.

approving a budget resolution but a stumbling block has reemerged whether to limit a federal tax break that benefits high-tech states such as california. one of the contenders to be the next fed chair is calling for reforms. stanford professor, john taylor, possible ifit is policymakers focus on the changes that encourage investments in hiring. he said there may be too much micromanaging of banks. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: fascinating. vincent reinhart will join us in the next hour for window into the fed. this is on the norway sovereign fund. this is really appropriate after our conversation yesterday with the hedge fund giant, ray dalio.

3.2% in 90 days if equities rally. i talked to ray dalio about the underperformance of the hedge funds in general, not just bridgewater, where they got a strategy to take out risks. how can you run sovereign wealth fund and take out risks when you're making a big 3.2% in a quarter? delly a is a big guy on parity trades? i'm looking at the norway numbers, interesting. you can convert the world's equity markets into the norwegian krone and you can figure out exactly what is going on. s&p 500, if you are a dollar investor has done the .46% this year. the norwegian currency, you have done 8%. they've got a currency story to deal with. tom: we will stay on the chart. on the right side is the column

which is your to date and he has had the ability -- you can instantly convert to another currency. there is whatever is on top, the dow up 18%. we all know that the but the dynamics of the norwegian currency, you are only up talk percent. those are that's only up 12%. those are double-digit concerns. let's be quick through here after we spent this time. euro weaker. down from 118. 10.92 on the vix. there is a eurosterling was guy knows more about. i'm looking at the emerging markets, turkey ever weaker. guy: keep an eye on that turkish story, very relevant to germany. today is a day of stocks here in europe. you mentioned ubs at the top.

down.is clarion that exxon mobil reporting numbers later on. foot.agen on the front stock stories sometimes matter. today is one of those days. tom: $66 billion, it is a bombshell speculation. .all street journal reporting our global audience, this is because of amazon. let's go to the chart, this is bloomberg and the idea that cbs joined at the hip. about two years ago, you can see they amazingly split. cvs rolls over. aetna moves up. all of this off of the affordable care act. this is technology where amazon considers directly entering the business of cbs.

guy: amazing stuff. such a big night overnight for the tech stocks. we talked about the wei early on. your investors may have something to share about, equity investors going into year-end. they suffered. if they have been investing into the equity have been underperformed. where come to year-end, books are but a closed. i'll be going to be seeing this euro down story been changed? stephen gallo, bmo, joins us now. does this move have legs? stephen: at least in the short-term. -- if youdium-term are medium-term like myself, you wait. positioning has been horrible in the dollar for a while. agreement within the g20 that emerged late august

which has caused or been responsible for a 5% rally in the dollar, it is still in vogue. the fed has been consistently hawkish. other still banks have resisted dollar weakness. i will thing draghi accomplished huge things yesterday. think draghi accomplished huge things yesterday. wholeou just listed a bunch of factors, pretty big factors. they are providing this tailwind for the dollar. , doesake out one of them the dollar keep going? if i take out two of them, does the dollar keep going? stephen: the tax reform thing, the market seems to have it backwards. on the texture from side, you could get a temporary boost in the dollar -- on the tax reform side, you can get a temporary boost in the dollar.

planther aspect of the tax , whether they are partially funded, unfunded or whether they do not happen at all, the fiscal deficit is still going to increase because of demographic factors. is in opinion the dollar a 3% to 5% downdraft. not much is going to come under the tax situation. , not the is dxy bloomberg dxy. everybody follows that number. here's 94 down here which we just first through. what is the distinction of this dollar rally? is it a dollar rally against asia? what is the character of this rally? stephen: if you're looking at .he dxy, it is mainly euro down.euro-dollar upside

the factors that were in place . over the course of 2017 that drove the dollar weaker work middle in growth, solid growth abroad, firm commodity prices. these factors are recipes for dollar weakness. over the medium-term, we think that is going to continue. you are looking at dollar positive noise. quickly, how correlated are the markets? how tight of the markets rates with fx? rates with commodities? rates areight now, working in favor of the dollar, this is not because of a seismic shift in the u.s. economy or the fed. is because the fed -- the markets have under press -- under price the fed dots.

the more hawkish fair chairperson coming in, there was vulnerability and so you are seeing differentials work in favor of the dollar versus the euro, versus the commodity bloc currencies. this is a temporary move and it has been prompted by the vulnerability of dollars short. tom: very good. stephen gallo. our -- hour.0 vince reinhardt joining us. withe that, nathan sheets page and fixed income. from guy johnson's london, look at that. gorgeous weather in mayfair. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to bloomberg business flash. there are reports that cvs is in talks with aetna for $66 billion. the talks may not lead to a deal but the ceos are said to have met. edna says it doesn't comment on rumors or speculation. ubs has increased a key measure of financial strength. it rose to 13.7% in the third quarter after surprise drop in the previous three months. ubs continues to focus on wealth management and added $2.4 billion of new money. -- 18% jump in operating profits

. iag said third-quarter profits were assisted. plus, operations improved because of several european arrivals being driven into insolvency. that is your bloomberg business flash. guy: taylor, thank you very much. madrid expected to pass .egislation to seize control meanwhile with its options running out, catalan president is due to adjust the regional parliament. i have more -- i have a my bloomberg, the catalan parliament is to be asked to be vote on independent declaration. let's get the latest. maria tadeo joins us. the catalan parliament asked to vote on the independence declaration. in expectation on how it will vote? -- any expectation on how it will vote?

maria: what we are hearing is the document has linked and we understand the document will be put forward to a vote. we want to trigger a negotiation with madrid in terms of how we move forward. that if thiss hypothetical catalan republic were to take place, the debt would have to be negotiated. immediately after, they are going to get in touch with european authorities to say we want to stay in the european union. we feel like we are a part of the european community. this is a document that has linked. desk that has linked. -- that has leaked. the pro-independence majority has a majority in the catalan parliament.

let's go back to that hypothetical catalan republic. a significant development. guy: maria, the simple question is, is today the day the catalan declare independence? this could be imminent. be.a: it could we know the vote is scheduled to take place at 12:00 p.m., barcelona time. that is in 40 minutes. it was unclear whether the parliament was good to vote on it. yesterday was a roller coaster day in barcelona. carles puigdemont kicked up the day with the declaration on the table. at one point he seemed like a reasonable election as the way out. they are going to vote to make sure go ahead and make this -- they are going to go ahead and

vote to make this declaration. the declaration was made but it wasn't voted. this time, it seems it will get voted. tom: what is the mood in the streets? we have seen more counter protests. are we going to have protests/riots on friday? saturday? sunday? maria: we could see that, because the declaration is made and it does get voted, it will trigger action from the central government in madrid. there are consequences when you do this. the declaration is made, puigdemont could be charged with 30 years in prison. the are people arriving -- there are people arriving, pro-independence groups. we are already seeing them arrive here in the catalan parliament. there will be a reaction in the

streets, whether this gets voted or madrid moves to suspend the region before they do it. guy: looks like it is going to be a critical few hours for the future of spain. maria tadeo joining us. let's bring back stephen gallo. this this move the dow for you -- the dial for you? stephen: not really because the ecb is supporting the bond market. guy: spreads don't blowout. if i look at a distribution of outcomes, the tales are getting fatter. will i start to move toward one of those -- say catalonia does declare independence, at one point on that decision curve do you start to think it does have an effect? scenarios,y of those there will be an impact, but the

question is to what degree? going back to the 2011 days? note. -- no. the ecb is the glue. holding the monetary union together. we think the euro does carry on depreciating but it is one to be appreciating reluctantly and climbing with worry. tom: are you following italy? ,very research i go through whatever the country, down on page three, there is italy. is italy really the backstory? another factor burning one. when you are the establishment and you don't like the risk of potential outcomes come you change the rules. that is what they have done in italy with the new electoral law. it probably reduces the political risks surrounding the

election. which will probably happen next year. it is another slow burning factor trying to continue to create tension between the antiestablishment movement which initially is quite large at the national level. the establishment. it is one. when you are the establishment and you don't like the risk of potential outcomes come you change the another link in the . along with to go in this chain. tom: let's continue with stephen gallo. how about this? television, radio, i am going to .how up with my calculator wexler's article about what you need.- wax about what you television and radio, this is bloomberg. ♪

tom: how about a chart on technology? a number of ways to slice and dice yesterday. the fang stocks, let's ring of a chart. red, netflix. white, apple. there is the normalized chart. let's expand into where we are. it is simple. these lines are moving upward in the right direction, even within a market that is very indifferent. netflix is the outlier. amazon needs to get it going. a $1200james going on price target on amazon at all that based off revenue growth and amazon is just one example

that is nearing 20%. that is a miracle. guy: that is. , thei find amazing is techs have driven the market. one of the reasons people argue for it in europe is there was a tech hedge. fold, you'llstill be insulated from it. tech eight folding. folding.in't the numbers posted last night were phenomenal. if you thought about getting out, maybe it was too early. tom: a young guy like you is in a test to all of this hipness. for your week in reading, here is your friday morning tip and your week in reading, scott galloway's book, it is fabulous. i'm reading it right now.

there is a chaplain after -- there's a chapter on apple, amazon. the revenue growth yesterday just extraordinary. guy: this is why have four children because they can teach me technology. tom: i put in my preorder on the iphone apps. children because they can teach meguy: coverage story on the bloomberg right now. .t is selling out in asia tom is going to carry on the come station and what is happening in the foreign-exchange markets. we will focus on this week's edition of lumber business week. -- bloomberg businessweek. this is bloomberg. ♪ who knew that phones would start doing everything?

entertaining us, getting us back on track, and finding us dates. phones really have changed. so why hasn't the way we pay for them? introducing xfinity mobile. you only pay for data and can easily switch between pay per gig and unlimited. no one else lets you do that.

see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. tom: good morning, everyone. "bloomberg surveillance." getting you ready for this active day. guy johnson in london. let's dash to our first word

news. taylor: james mattis visited the demilitarized zone that separates the two koreas. he accused north korea of using weapons to threaten other countries. and it shall profits in china rose last month by the most since 2011. earnings were up 28% from year ago. that is the sign of the resilience in the chinese economy. authorities have stepped up to reduce pollution. a national archives has released 2800 records of the assassination of resident john f. kennedy. president trump block the release of hundreds of others. the president said releasing those documents would potentially harm national security. it is the most expensive wristwatch ever sold at auction, a rolex that was owned by the late actor.

the same still watch was a gift to newman from his wife. the buyer wants to remain anonymous. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. indeed.nk you very much in peas and theresa may's parlay -- party says they are serious in rebelling against -- ministers promise there will be a vote on the outcome of the talks but are resisting calls to put that in writing. now and theight founder of the consultancy, still with us, stephen gallo. good morning giles.

how do we change the conversation in the u.k. about brexit. the tone is very negative. can it be changed? giles: they do need to change the conversation. the narrative is all about what the u.k. should do. it is not a zero-sum game. there are lots of this is which are financed out of london and they need to change the narrative back on that. what theresa may needs to do is get exit off the front page. it is difficult job but it comes down to having a distinct domestic agenda. at the moment, there is an one. what she stands for echo i don't know. guy: this the biggest thing to happen to britain and many generations. why du one it off the front page? giles: all you have is a lot of destabilizing speculation. to the rest of the world with state despite brexit, it is business as normal. we have a radical domestic

agenda. we are stable country. holy see is brexit and a lot of destabilizing speculation. and speculation about her future and it doesn't lay out well throughout the rest of the world. guy: do we need to change succumbs asian? just change the conversation? >> it could well trigger her downfall. it is much more about ideas and personality. tom: giles, fabulous to speak to you. i would suggest you are maybe the most important person in the conversation, not the politicians but the people doing the spin game. from a distance, i have been stunned at the lack of organized spin by the conservatives in london. what is your to do list for britain to get to spend together

just get the -- that the spin together? giles: you are exactly right. the first thing they need to do is turned the screw on juncker and barnier. the art european tests and are european businesses financed out london -- there are european businesses financed out of london. let's look at the eu. this is a huge issue but they've also got issues of catalonia on.g they need to sort these things out. ultimately, the u.k. did vote for brexit. on. they need to sort these things they need to mobilize public sentiment and say, these are the reasons and get back on the front foot. we are being very sensitive. tom: i want to look back and be careful how you answer this because it gets really important.

can a rolloff of harvard three or four days after the brexit op-edrote a scathing about the idea of the 51 to 49% vote versus a more constitutional vote of 62% to 30%. was there regret at any time in the cameron administration? did you see an understanding that a straight up and down vote could lead to a brexit? giles: openly what happened actually vindicates what cameron did. that is way they voted. there is nothing to rerun the vote. the question being asked in the media about hypotheticals, we've got to move forward. tom: come on, this is a major look back to june 23 of last

won by thebrexit barest of margins. this was a single her decision. how did that decision get made to have a vote that could be 51-49? how was that decision made? giles: let's respect the democratic will of the people in the manifesto. you put it there. you put into the public vote. unfortunately, we lost. remain if there was a vote today. i don't think there's much to be gained by being incredibly retrospective. tom: i'm in a retrospective mood. guy: the prime minister and of and should the question -- prime minister answered that question. she cannot answer that question. that comes down to the heart of

the question. britain is not completely unified in this process going forward. stephen gallo, asked you earlier about catalonia. the bank is now what moves the dial when it comes to the pound. stephen: that correct. the hike is now done for november. if you had to put a trade on, it would be to bet against that because so much is already priced in. i would do nothing. they are going to move 25 basis points but less conviction around that. the risks are 60-40. guy: is the british consumer ready for rate hike? giles: there's been so much speculation about it for so long . guy: the person on high street, are they ready with a sticker shock? wages are being squeezed. how are they going to react when they get a letter saying

mortgages going up? giles: i don't know where public sentiment is on the decision but it is going to hit people. there is a huge amount of uncertainty. not good for business in the current climate. looks like it is coming. tom: i am going to bring up a chart for stephen gallo. you know this chart. this is sterling after brexit. the red circle being brexit. idea, this is where giles, you loaded the boat. that is why he is buying 6000 square feet. down we go with brexit weakness. stephen gallo, this has been a huge surprise, the sterling strengthgiles, you loaded the bd gloom. does that speak to a resilient united kingdom? stephen: part of that is the dollar story.

part of it is the dollar weakness. we think that continues. we have noted that the tone coming out of the october summit was better than it has been. there is still a long way to go. over the next two or three months, that tone remains. we reserve the right to switch our forecast on the nose, if the tone deteriorates. tom: guy, that is really important what stephen gallo just said, the idea that a seat strategists set to turn on a dime. giles: she needs to get some kind of quick when cash quick -- quick win out of the december summit. the ftse 100, they need some kind of certainty. guy: how do we play angela merkel?

she is trying to figure out how to former new government. she is trying to keep the french happy at the same time. how do we help angela merkel isp us? >> her perspective goes, she doesn't want boris johnson the table because it will be a lot worse. guy: play to weakness. giles: at the moment, that is theresa may's biggest weakness. what is behind you guy: it could be worse -- was behind you? it could be worse. people are like you are not going to be here so why should we help you? i think that is a massive statement. guy: giles, thank you so much. tough decisions made in 2016. mr. cunningham -- mr. cunningham is the strategists for prime minister david cameron. we will continue on television,

"bloomberg surveillance." your briefing. robert boone. this is bloomberg. ♪

guy: guy johnson in london. tom keene in new york. reboundseen its capital after a surprise investors with a drop in a key measure of financial strength. billion.$2.4 it focuses on wealth management. told manus cranny

about lance to return cash to investors. sergio: we are looking to continue to implement our progress and policy on our cash dividend, and eventually come to make it with capital returns to share buyback. guy: bloomberg's finance met it editor -- finance editor. to return of capital seems have been the headlines this morning. are we getting overly excited? >> it is possible. we're coming from a disappointment last quarter. we are reassured to see what drove capital lower was not repeated. clearly, at this point, that is what investors have the looking for for the motto.

clearly, at-- the model. guy: is ubs a chief gatherer elisa: so presley point this quarter. quarter a really strong and equity underwriting and equity derivatives. it doesn't drive the profits but it is good to see that short-term investment bankers are doing quite well for them. still coming in and the growth margin there being flat which is probably not bad given that clients are not trading. guy: that is the big issue is the people under their wings are not pulling the trigger on execute trades. -- on executing trades. you try to manage a business, one of the key levers you have is the confidence of the people. elisa: they do not see the end

in sight. and geopolitical side, the uncertainty remains. they are not expecting to suddenly be trading. that is a challenge. tom: absolutely fascinating time. what do you predict for december and next year? yesterday was a barclays doesn't know where to fit in in the strategy of global banking. the challenges of deutsche bank. are we going to see the european mergers that too many of our guests suggests have to happen? elisa: we are hearing problems something.ing while i don't think anybody expects landmark deal in the next couple of months, i think there is going to be more of those types of discussions at least given that they are still

having. tom: let's go to the cocktail conversations. the idea here of ubs merging with morgan stanley. gorman, isn't that a no-brainer transit letting merger? -- transatlantic merger? --sa: more of the consultant domesticre of the mergers. we are not getting the sense the types of deals that you're talking about just yet. guy: stephen, let me ask you a sidebar question. the swiss franc, it used to benefit when europe saw political turbulence. money flowed into this was economy.

stephen: or money didn't flow out. catalonia is out there, where is the french franc -- the swiss franc going? catalonia is outstephen: lower. if you go back and look at the balance of data for the ones we have available for this year, what you see in the data is the smb through its foreign exchange purchases has been helping the move along, but as the euro has strengthened, they have come off the accelerator a little bit. there has been a shift in private sector flow. there has been outflows from swiss portfolios, investment assets from nonresidents and there has been some domestic outflows so residents in switzerland taking money and putting it abroad. the private sector capital, there are signs their shifting. the problem is you take switzerland with this massive current account surplus, they are going to have a recycling problem.

as the swiss franc weakens, they will continue to have a recycling problem because the current account surplus will not come lower. purely on a balance basis, most of the evidence suggests that the frank is not overvalued. it is actually undervalued. 118 inern is we get the euro swiss, my concern is that with a number of political tensions and still fundamental issues in the eurozone, swiss investors will still not see value in buying euro denominated assets. that is going to be a persistent problem. ,ntil we have full integration banking union completion and so on. tycho -- guy: we will wrap it up there. stephen gallo joining us. let me show you tv . fantastic function. interactive tv, radio.

whatever got coming up. dalioatch videos, ray saying that bridgewater is long the equity markets. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. there is a report that drugstore chain, cbs, is in talks with aetna for $66 billion according to the wall street journal. the talks may not lead to a deal with it ceos have met. aetna says it does not comment on rumors or speculation. nissan has been conducting its unauthorized inspection checks for vehicles sold in japan since 1979 according to persons familiar with the matter. the government ruled that those inspections are fawlty, that led to the recall of 1.2 million cars and a temporary such down -- shutdown. that is your bloomberg business flash. taylor.y good, let's begin the discussion for the next hour. nathan sheets will join us.

right now we go to dr. gallo on the february. here is the chart, mr. gallo. it is folded into foreign-exchange, folded the bonds. i think it folded the pork bellies. the absolute clariant thing that gallo lives is the duration. we have a little bit of lift up and rates. the time function is extraordinary. how many more rate rises do you need to see by the next fed chairman before we get back to normal? just going with what the general consensus is on the neutral nominal fed funds rate. call it two to 3%. that is the benchmark that i have to work with.

tom: is that the benchmark the john taylor has? or is he going to have to amend and adjust? stephen: i will think that the fed in john taylor are a galaxy away from each other, i think it is about the speed. having said that, i don't think that taylor -- if he gets the nomination -- i don't think he rate rises,rush because in this world today, in the world of global capital flows, extreme capital flows, the central banks are a slave to investors in the market and the markets are slaves to central banks. they are both dependent on one another. any central banks that russia's a quantitative tightening on normalization process will be handicapped by financial market forces. guy: they are not galaxies far

apart. what is the spread between powell and taylor? stephen: for the markets, think taylor is still a hawkish outcome. if taylor gets the nod, there will be another rising yields in the u.s. dollar. sheettephen gallo, the you -- appreciate you being on capital markets. our, an important interview on heroin and opioids. vincent reinhart will joinyou -n capital us who is headed economic research. thrilled to speak to him about professor taylor and mr. powell. stay with us will wipe from london and from joe girardi's new york, this is bloomberg. ♪

tom: this morning the euro weaker. we consider the fed chairman and central banker to the world in this hour.

nathan sheets who will be the next reserve fair -- reserve chairman? can they reserve -- in this hour, vincent reinhart and heroin and opioids. this will be a much watch interview. do not do drugs. it.le phrases will not cut i am tom keene in london. guy johnson. inerrific almost industrial stock news flow over the last couple of days. tell us about the swiss united kingdom merger? guy: huntsman is going to be clariant.th that deal is now off. we have seen shareholders not on the front foot about this one. that deal is not clariant. happening.

the m&a story is there. 20 of things going on in m&a. --plenty of things going on in m&a. tom: right now with your friday briefing, here is a taylor riggs . taylor: in spain, the rebel government is making a last ditch effort to win concessions from madrid. catalan president, carles convincet, wants to voters to accept independence. he will as the spanish government of seizing the -- the central banks policymakers next week. inflation remained unchanged in september. consumer prices rose .7% from year ago. the bank of japan is seeking 2% inflation which means it will maintain its stimulus until well into next year. hill, u.s. on capitol

republicans promised to unveil their tax reform bill next week. they cleared the way for the legislation by approving a bucket resolution but a stumbling but -- stumbling block has reemerged whether to limit a tax break the benefits high tax states. agenda.dent trump's john taylor argues a faster road is possible if a policymakers focus on changes that occur -- that encourage hiring. he said there may be too much micromanaging of banks. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: taylor, thank you so much. a quick chart and want to get to our two esteemed guests. i notice euro weaker off of draghi. next screen.

10.80., the emerging-market currencies are fragile in the last few days. guy: i'm not sure that is lucky. i want to show you a bunch of stocks because there is a market of starks -- market of stocks. the stocks now soft. i mentioned the clariant deal. you've got chevron a little later on, exxon a little later on posting numbers. volkswagen actually upgrading forecast this morning despite what is happening with diesel. a real mix in europe. tom: let me get you a quick chart. how about this? amzn, this is aetna and cbs joined at the hip. aetna with a moonshot and all of this as amazon considers going into health care.

vincent reinhart will join us in a short bit. it will be wonderful to have these two colleagues together. but first we speak to nathan sheets. remind me what you did at the government. nathan: i was the undersecretary for international affairs during the last three years of the obama administration. tom: do we have one right now echo is there a nathan sheets footage of administration echo do we have one right now? is there a nathan sheets for the trump administration? nathan: he is in play. malpasst, the way that said fast. the dollar moving fast now? nathan: the dollar has inflicted

based on the discussions of tax reforms expected to support the dollar. in addition, the discussions about the possibility of john taylor taking the fed perhaps in a somewhat more hawkish direction. it seems developments have cost the dollar to shift -- have caused the dollar to shift. if one of those two things actually materializes, then it could be a more rapid trajectory upwards. guy: good morning. we are coming to year-end. dollar invested 20% of the dax. if i am a euro investor, i have only made 15%. mi wickmayer and thinking i'm going to close my books soon, do i lock in those profits nathan: over the next month or so, as s are result,ee

that there is more upside than downside risks in the dollar. especially given the fact that through much of the year, it has been a soft dollar story. there is scope for the fundamentalist to shift the debt and for market views on the dollar to reassess. tom: let me bring up the chart. i'll to talk about the fast and slow dollar. up we go, the dollar. is this a real dollar rally? ontrack are saying maybe not. i'm sorry, nathan. a second derivative is contracts up in a way. nathan: it puts pressure on them. through 2014 and 15, the dollars has appreciated. for many inhallenge latin america.

tom: post trump election helped them a lot. nathan: it did. it takes pressure off the balance sheets in those countries. as long as we have the story going, that means we have weak currencies in the em. central banks need to respond. tom: is vince reinhart on the short list? nathan: vince reinhart should be on the short list. tom: this is what we want to do, we have nathan sheets and down the hallway, his former colleague, vince reinhart. how good is this? sheets and reinhardt on the next fed chairman. stay with us worldwide. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get to bloomberg business flash. there are reports that cvs is in talks to buy the health insurer aetna for $66 billion. according to the wall street journal, the talks may not lead to a deal. the ceos have said to have met multiple times. airwaysing of british are projecting an 18% jump in operating profits this year. iag said third-quarter profits were boosted by higher fares in the u.s. several european rivals being driven into insolvency. that is your bloomberg business flash. tom: taylor, thank you so much. what a week it has been for a bloomberg surveillance. we really end on a high point. sheets, he is a chief economist and has served

the nation in international economics and now joining us, vince reinhart who more than anyone guided the research tone of the greenspan fed. these two colleagues served for years quietly driving forward stability in our nation's economic. mr. reinhardt, wonderful to have you with us. the question i have asked this week, the amelio ability, can movie -- move the new chayote? vincent: john taylor would do whatever it takes. first, he talks about how he would not advise anyone using this mechanically. he will take the incoming data, he will form an economic outlook and set policy at what he thinks is appropriate. if the data don't cut its way, he will adjust.

tom coburn the sub right now, rally. -- tom: bring this up right now, riley. , 1, 2,einhart knows this 3, 4, 5, 6, seven attributes of the taylor rule. do rules work given says been -- given seven optional points versus discretion? greenspan liked discretion. vincent: my guys were greenspan and bernanke. i too far nathan and back in time. the biggest unidentified flying object in the taylor rule is the intercept, i.e., what do you think the real interest rate is? john taylor looking at the history of the greenspan fed said, g, a real equilibrium of around 2%? description of the short range.

that is the taylor rule, 2% isn't probably the real equilibrium rate now. tom: go back to the taylor rule. here it is over here, to present idea. michelson rowley said this is baloney that neutral real rate is lower. needthe next fed chairman to adjust the prospect down to a weaker american growth? gdp?ker potential god unemployment -- maybe even and odd unemployment rate? nathan: i agree that that god u- maybe even and odd unemployment 2% is no real risk to the economy today. i agree that john taylor recognizes that. i've heard that john taylor refer to 1%. tom: i'm going to plug in 1% to dazzle you with our taylor rule

function. we did down to 1% and the blue line over on the top -- guy johnson, help us form our nerd nerddom.ur guy: i'm going to get a bit more humid -- human. is john taylor a convincing man? is very john taylor thoughtful. he has reflected on these issues for decades. in that sense, he is persuasive. john taylor is sometimes reticent to engage in vigorous back-and-forth. i think the question about the you -- how united will it be guy: will he be a to bring together -- how united will it be? will he be able to bring together -- have a cohesive monetary policy.

guy: vincent, let me ask you the same question. if it were taylor, would he be a but to persuade the rest of ?ommittee -- of the committee vincent: i would say that john when heonvinced me taught me advanced macroeconomics when i was in graduate school. i haven't really noticed a big change in him over the years in terms of the sincerity of views. second thing is the next fed chair is going to have an issue and the issue is the governors and bank presidents have been freer to speak, freer to express their views, they talk more often and that is a one-way trip. it is harder to bring everybody together. third issue is, you are talking about an assessment of the economy that has to be responsive to the facts. tom nailed it earlier when he

said potential outlook growth slowed. we have had a point in a half slowing of potential output growth. that means household should be saving more, firms should be investing less, market outcome is a lower equilibrium real rate . haven't talked about monetary policy. that is out demographics and productivity. that is the cards that taylor the justat powell fed fed will be dealt with. -- fed will be dealt with. ay: stan fischer brought in lot of international experience into the fed. does the fed need that still? is that a domestic focused fed again? former: my bias has the director of the international the international

aspect of monetary policy are enormously important. both an understanding of what is happening in the rest of the world and the effective ability to be able to communicate what is happening in the united states to international cap the ports is accrued just international counterparts is of crucial importance as essential banks formerly the policy. during times of financial stress and financial crisis, it is absolutely essential. i think of the swap line programs and other international measures, i think that a central. tom: this is a critically said of important to questions. nations authority on the behavioral dynamics of the fed. .arry myers wrote a monograph i thought it was brilliant about the nakedness, the conversations in the hallway that you guys

have everyday. how does a chair and vice chairman work in the next fed? we have a pretty good understanding of yellen and fisher. what is going to happen with taylor-powell are powell-taylor? up,ent: the point you bring it is not just the chair job that is up, it is the vice chair that is up. president of new york. the white house will have the chance to completely change the tone of what goes on at the federal reserve. reality is that in the modern era of communications, of press conferences, of having to read the transcript of what you said of the fomcdays meeting, the conversation is not as free and open as when larry meyer was at the greenspan fed in the early 1990's.

tom: i think this is extraordinary. mr. reinhardt nailed the idea. the answer is this new forward says,ce is that bernard just the sheer volume that we saw yesterday from draghi shows we are all living in another time and place. guy: draghi is on a different page two where the fed is right now. don't you think, tom? the fed needs constructive ambiguity. tom: we are going to come back and try this conversation forward. there is a lot there. are we going to see an example of fed press conference? monday, i will be tweeting this out this weekend. maybe it will follow me. maybe i will get a direct message from jack dorsey. ♪

guy: welcome. we have breaking news on barclays. renewing talks over toxic mortgages and the settlements surrounding them. the department of justice is said to have responded to barclays request to reopen talks . jes staley maybe looking to draw a line under this unit. waiting to get a little more news. not getting much in terms of the share price reaction.

we will watch and see what is happening. tom: run the video again. this is the most inside baseball video and the history of bloomberg surveillance. run the barclays video again. this is absolutely hilarious. got.is what we've barclays.s, guidedeks is what barclays into trouble trying to figure out what to do with the greek letters of optionality and derivatives. was that enough of a nerd fest for you? guy: i wonder why the camera crew was there? guided barclays into trouble trying to figure out what to do with the greeklet's bring back in our gu, nathan sheets and vince reinhart. vince reinhart, let me ask you. we are talking about tax. a quick conversation about financial regulation. jackson hole, janet yellen was pretty clear that financial regulation should not be rolled

back. i haven't heard a great deal about what mr. taylor things about financial regulation. can you enlighten me? book. i look to his last he is pretty straightforward arguing for deregulation. capital saws a lot of problems in terms of making banks safer. you don't need as nearly large of regulatory apparatus. either any of the choices on the short list will essentially be any of the choices on the short list will essentially be the wind under the wings of vice chair randy quarrels deregulation efforts, because remember vice chair is the person who is the point on supervision and regulation now in the federal reserve system. tacos too much to talk about here with vince reinhart and --han sheets -- too much

tom: to must talk about here with vince reinhart and nathan sheets. that who the next fed chairman is going to be. the importance of the vice chair as well. we will continue with nathan sheets, continue with vince reinhart. let me look at the new business week. this is an interesting issue. i saw megan murphy the other day and it really comes down to a lot of the pharmaceutical. i don't do botox under my eyes. my glasses would save me as well. from new york and from guy johnson's london, this is bloomberg. ♪

♪ definitive up, your interview on heroin and opioids. guy johnson thrilled to get to this in a moment, and

-- discussion on what the president said and did not say yesterday. taylor: u.s. defense secretary james mattis visited the demilitarized zone that separates the two koreas. he threatened north korea of building nuclear weapons to threaten others with catastrophe. issays president trump committed to forcing north korea to disarm. up almost 27% ramy year ago, a sign of resilience in the chinese economy. authorities have stepped up efforts to reduce pollution. the national archives has now released 2800 records on the assassination of president john f. kennedy. appealsident gave into from the cia and fbi and blocked hundreds of others. global news 24 hours a day, powered by more than 2700 journalists and analysts in more

than 120 countries. i'm taylor riggs. guy: thank you. the governor of the russian central bank has done some incredible work in bringing russian inflation down. that inflation has provided a problem, how can she now managed the rate environment going forward to produce stability and that story. russian central bank has cut rates again. it has lowered rates to 8.25%. stability is what she is looking forward to. tom: thank you so much. kevin cirilli in washington. in this section, we are doing heroin and opioids. what did the president say yesterday? who did the president disappoint? he had a mixed or of policy, politics, and personal

life. he called on private partnerships, utilizing the private sector to unleash innovation, to work with the government, to work with state and local officials to combat this crisis. tom: we will stay on this and maybe avoid the soap opera of washington. did he speak to the senator of ohio, rob portman, yesterday? did you get a message through to someone like rob portman who has led this discussion in washington? kevin: that is a good point. i don't know whether or not they directly communicate it. praiseech yesterday drew from across commerce, including senator elizabeth warren, who said for once the president was able to do something she would be able to speak highly of. clearly, she is critical of much of his agenda. his speech yesterday from washington's perspective hoping to restart what has been a

horrific crisis for this country. tom: it will be political. there will be a debate. guess what, it will end up in court. a tort is a civil wrong. this goes back to all her when the holmes junior and his wonderful work in the 19th century and forward. read all her when the holmes holmes.r wendel he has done extraordinary work. wonderful to have you here. pending litigation against the pharmaceuticals. do you blame the pharmaceuticals for the heroin epidemic in america? >> i absolutely blame the pharmaceutical manufacturers.

this is the result of a decade-long conspiracy, not unlike the conspiracy tobacco companies engaged in many years ago. tom: why is it a conspiracy among pharmaceuticals? was it a conspiracy with doctors who give out too many prescriptions? >> no. it is really a conspiracy among the pharmaceutical manufacturers along with so-called thought leaders, prominent physicians that were paid tens of millions of dollars to promote opioids. travelat i get when i abroad, it is unique in america that we have advertisements during football games for pharmaceuticals. the pharmaceutical advertising industry is its own beast. is it just the same old thing for paul hanley, or is it something different this time? >> we are suffering from the worst public health epidemic since the pandemic of 1918 involving flu.

this is very different because it is affecting the entire cross-section of our country and communities. guy: good morning from london. tom's point is an interesting one. the perspective from europe is very different on this story. you talk about the pandemic. i think i saw the new york times this morning talking about how this is comparable to the 1980's and 1990's with hiv. how should we think about this via previous experiences? >> it is much more serious. we have 150 americans dying per from opioids.oses as i said to tom, we have this epidemic started by a conspiracy of the pharmaceutical industry to change medical thinking about the use of opioids. guy: should there be new money from the government? we have seen a shuffling of

funding. what about new funding? >> absolutely. that is what is so disappointing about the president's speech yesterday. he did not declare a national emergency, which as you know would clear up substantial new funds. he declared a public health emergency, which does not result in the federal government releasing any substantial amount. don't we have six years from cbc calling it an opioid epidemic. i don't know what it opioid is. hair when gets my attention -- heroin gets my attention from childhood and the response to it. we all know this. tort lawyers this and that. you are at the high-end of the racket. you walk in, and pharmaceutical companies, do they huddled together and fight you together or is it every ceo for themselves? >> they fight together, and they

do a good job at it. that is why our task is somewhat daunting. they fund the best lawyers in the country. they put billions of dollars into the defense of these cases, and they tell me at the beginning of every one of these mass litigations, we will never pay your clients a dime. at the end of the day, they pay our clients. tom: it is almost like the movies. if you are having a cup of coffee with rob portman today, what would you say to the senator from ohio after what we have seen and what you see forward in this litigation? >> i would tell the senator that i am very sorry about what is happening in his state. ohio has one of the worst epidemics of opioid overdoses in any of our states, and senator portman is working hard to correct that. with the president not declaring a national emergency, senator portman is somewhat hand-tied. tom: thank you for joining us

today. somehow i don't think this will be the last of these discussions for many years. excuse me. it is your brain on television, "bloomberg surveillance." coming up, we continue with nathan sheets and coast-to-coast on radio. --new york.a ♪

♪ taylor: this is "bloomberg surveillance." i am taylor riggs. waiting times for the new iphone x are rising. apple has begun accepting early

orders for the device. shipping times lengthened to as long as five weeks in the u.s.. that is assigned supplies will remain tight. nissan has been conducting unauthorized inspection checks for vehicles sold in japan since 1979 according to a person familiar with the matter. faulty inspections led to a temporary shutdown of nissan's factory in japan for local sales. volkswagen raised its earnings forecast for the full year. they reported strong demand or suvs and other vehicles. vw said rising costs from the they commissions test scandal hurt profits. guy: thank you. let's get back to spain. catalan separatists are making a last-ditch effort to get concessions from madrid. catalanle on --

president wants a new election. a vote inut to see the region of parliament which may make a declaration inevitable. what is the latest? maria: good morning. what you're seeing as this takes you inside of parliament right re, is about -- he a thousand protesters. people are gathering outside the parliament to show support and say declare this republic. inside the parliament, the situation is more nuanced. we got this document leaked that the cattle and pro-independence pro-independence a vote.ans of --

the session has been delayed. inhave the opposition here the parliament saying they will not vote and will not participate in what they say is another fake vote. the situation is pretty fluid. we are waiting on what kind of document gets voted. defended, rajoy has the implementation of article 155. he says there are essentially no other options. guy: what is happening in terms of the situation between these two sides? are they talking to each other? are they not talking to each other? maria: that is right. that is the question at this point. what gives us a sense of what is going on is that president put them on did try to go for a regional election instead of

this declaration of independence. that failed at the last moment. some way in the middle deal where there is some regional government here, madrid is saying they don't think this is appropriate anymore. this has gone too far. to,story that you referred they are still trying to get this regional election to happen. inside the parliament, the official line is there will be a vote, and that will enact a catalan republic. guy: we wait to see the outcome from this. barcelona, you see the crowds gathering. still as is nathan sheets, vince reinhart. all fantastic in terms of the picture point of view. we can sit here and look at what

is happening in barcelona. we can get excited about the politics. it doesn't really matter from an investment point of view because the ecb is sitting there, and it is still buying regardless of what mario draghi said yesterday. it is going to keep buying. it is like a warm blanket around the european bond market. does that just dampen everything down? >> the number one piece of evidence for your review is implied volatility is from fromy -- volatilities equities. they are still very low. you can buy protection very cheaply right now. part of it is we know the ecb and boj will be the game of unconventional policy for a long time. whether the next fed chair is, janet yellen has laid down railroad tracks for a very slow balance sheet renormalization. emerging markets are growing

stably. china is the biggest economy in the world. 6.5% growthivering quarter after quarter. that does encourage the local economy. guy: where do i see the most realistic pricing in bond markets? you could argue spain trading a few basis points over germany, italy trading a few basis points over germany is really not that real. >> ironically, i would say maybe we have seen the most reasonable pricing in bond markets in the united states. when you look around the world today and see a 10-year treasury range, 2.30 to low 2.40 that looks good compared to yields you will get elsewhere.

specifically to the point you are making, the signature of the ecb's purchasing program is seen powerfully in some of the peripheral bond markets. i think it is a very good question as the ecb continues italy andng how the the spains of the world, how their bond markets will react to that. tom: we want to talk about the raging debate that is going on over the efficacy of corporate tax reform. vince reinhart loves this. not me and my ugly face. you can watch this off your desk. block with stephen gallo. there it is, the reinhardt chart. you can steal that chart over to your bloomberg. good morning. ♪

♪ bloomberg daybreak will be taking to the airwaves, jonathan ferro, david westin, alix steel.

will you get some insight into those tech earnings? david: we certainly will. we will have an interview with carly fiorina. she was the ceo who ran for president. she was the one who did not get it. she was outspoken about donald trump on the campaign trail. we will talk to her about what he is getting right and wrong in washington. tom: thank you so much. we continue with a quick briefing on technology. paul sweeney joining us from bloomberg intelligence. down on the story for a bloomberg intelligence, everyone is looking at earnings in the single digits and high single digits, and then there are tech stocks. are your people modeling 20% plus tech growth forever? >> i'm not sure about forever,

but they are seeing these kinds of numbers for the foreseeable future. everything that has consumer facing internet businesses, whether it is like facebook or google or an e-commerce company like amazon, they continue to put up extraordinary topline numbers. that is what investors are looking for now, topline growth profits will come whenever companies want to deliver them. guy: the advertising numbers at google were just sensational. you can see that reflected in the way the market is reacting. i thought this company was going to become something different to an internet company. last night improved it is still firmly an internet company. >> it really did. the google advertising business remains the bulk of the company. the company since ipo has said it will invest in what it calls moonshots, which are high risk,

high return businesses such as google glass or the car. we saw the company pullback in investment in those businesses. the ceo said she is redirecting some of that spending into the core business, the cloud, artificial intelligence. i think those are investments that can support its core business. tom: i wish you had told me to buy san francisco residential real estate five years ago. thank you very much. raging debate between lawrence summers, paul hassett.and kevin this is from a couple days ago. kevin hassett questioned the integrity of the tcc, he questioned that it would be a benefit of 300% of the tax cut them with a phd student

submitted the cea announces, summers would have crushed him. i would be hard-pressed to give it a passing grade. kevin hassett will meet with david gura later today. looking forward to that conversation. vince reinhart, let me go to you. this is a raging debate of nerds. is any of this going to benefit middle america? >> i think kevin hassett has the right direction, that the tax system is a mess, the corporate tax system is incoherent. an incentive to bring cash back home and invest in the u.s. will benefit wages. i agree on the direction. the magnitude seems outsized. tom: that's where i want to go. the amplitude, the magnitude of these hope and dreams benefit. is there proof out there?

is there any track record? >> these numbers are speculative in terms of their magnitude as vince says. i think tax cuts for corporations will, on the margin, improve wages, but the upt policy for getting wages is the policy that janet yellen and the federal reserve are pursuing now, which is to allow the labor market to run a little hot and let's see where wages go. even that may not be sufficient. we are in a world of international competition. tom: quickly, what question would you ask kevin hassett at 1:00 p.m. this afternoon? major arts are the at play -- parts at play in the tax legislation? tom: that is a great question. thank you.

greatly appreciate it. nathan, thank you so much. you two together have been so great. just like old times at the fed. if they would let me in the door. guy johnson, thank you for your work today sitting in for francine. dollar stronger. guy johnson celebrating. he will be in amsterdam this weekend partying it up. euro-dollar 1.16. emerging-market currencies weaker today. kevin hassett later today. continued news from barcelona. ♪ is this a phone?

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big way. amazon prime to $1000 a share. alphabet hits an all-time high. weaker consumer spending and shrugging off political chaos in catalonia. markets fromropean drama in spain. good morning. this is bloomberg daybreak. i'm a jonathan ferro alongside david westin. 0.25%s are positive, up on the back of strong tech earnings. that makes up the bulk of the s&p 500. it is the biggest waiting on that index. that index. on euro-dollar at 1.16. down comes through a bit, seven basis points. -