francine: the prince -- the saudi corruption crackdown removes ministers and leaves one of the world's richest men under arrest. trouble in paradise. allegedly offshore tax avoidance where both gary cohn and wilbur ross are mentioned. paying peanuts for chicks. hong kong is to send off a 100 billion dollars takeover bid. good morning everyone. this is bloomberg surveillance.

we have a very packed show. quickly onto your data and onto your markets. this is how we are looking in terms of the picture. a little bit of the markets moving sideways. i'm getting some of your areas service p.m.. it is in line with estimates and it is what i am looking at. overall, they are moving sideways and if you look at bonds, they are rising climbing on the back of will be did in saudi arabia. those are the markets. we had a great guest lined up for you today. will be speaking to the former president of the ecb. wilbur ross joins me a little later today. we will talk about the tax plan and the paradise papers. let's get to the bloomberg first word news with nejra cehic.

nejra: in the u.s., 26 people have been killed after a gunman opened fire at a church in texas . another 20 were wounded in the attack at the first baptist church, in a small town in burleson county. victims ranged in age from five to 27 -- five to 72 years old. japanese prime minister shinzo abe has announced lines to take additional sanctions measures against north korea over its escalating missile development. he will announced tomorrow a freezing of the assets of 35 north korean groups as japan's own a sanctions measure. he maybe investment at a joint news conference. ross faces questions about his financial disclosure to congress and the government after reports that he didn't disclose business ties to the son-in-law of vladimir putin.

we will be joined by wilbur ross time.30 p.m. u.k. in the u.s., michael flynn is reportedly close to being charged as a part of the investigation being carried out i special counsel mueller. mother's team is looking at charges of money laundering and lying to federal agents. is considering charges against flynn in relation to a possible plan to remove an opponent of turkish president erdogan. bill dudley will announce his retirement as early as this week , according to the "new york times." since joining the new york fed, he has been a key player to shore up the just economy. he has been a vocal proponent for proponent -- for improving

the culture at banks. and for formernt members have been freed on bail in belgium ahead of a court ruling. the five separatists are prevented from leaving the country without consent from a judge. he turned himself into belgian police yesterday and will face court within 15 days. the uk's prime minister faces the tightest desk the titans of british is this today. may's deputyresa denied a report that police found pornography on his computer in 2008. may will be at a conference where she will face president -- face pressure to give reassurances. global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. cehic.jra this is bloomberg. francine: and says -- princes,

billionaires and ministers have been arrested. the purge in the name of the anticorruption drive brings the prince closer to power. yousef gamal el-din is joining us from riyadh. has the market reacted? yousef: remember this conference -- you are looking at moves in terms of arresting some of the senior officials, former and current, coming into riyadh. there are tensions. a little less busy as people digest this. for really sets the scene another run-up in terms of additional momentum, because over the summer, we thought the political drama was over. clearly that was not the case. this is a country that is not used to radical change. you think about the amount of

radical changes we have had, that is a lot to take in. we're seeing sharper selling on the benchmark tadawul index. these good proxies for risks, the teacher told months forward. to the currency is going behave four months from now. not as high as it was on the gulf crisis corrupted over the summer but the standoff in qatar. francine echo francine: what does this mean -- francine? francine: what does this mean that the prince alwaleed is arrested? yousef: it is nothing short of remarkable. he is on the global billionaires list. the kingdom tower right behind me, that is his.

it is a landmark of the capital. riyadh. that is significant in terms of global indications because of the assets he holds. it includes citigroup and twitter. fox andst century recently the stake in the fifth-largest bank in saudi arabia, the anticorruption committee mccain clear it has the power to trade assets which raised a lot of questions about what is going to happen to those arrested, including prince alwaleed. griffith joinsm us on the phone from dubai. great to have you on the program. this seems to be -- mohammed bin salman just consolidating power. is a good? -- is it good? >> in the short-term, it raises a lot of questions.

it is unprecedented in scope and scale? it has to race questions about someone like our lead is a great repetition abroad -- someone who has a great reputation abroad. people will be wondering about the partners will be swept up in the next round of corruption investigations. in the longer term, if they can demonstrate this is about cleaning up the system, that will be a good thing. they are going to have a lot of trouble convincing a skeptical community. francine: how can they do that? graham: being much more clear both the process going forward is. we don't know what the judicial process that is going to be followed is. is it going to be transparent? what are they going to contempt to do this is people -- going to attempt to do to these people?

about thes concerns state attempting to grasp or take back private assets. i think being very clear and transparent about what process will be followed. francine: the crown prince has ambitious economic plans to clean the can the model of oil. graham: they will move in the direction that this is a chance for mission that other countries have attempted. no one has succeeded at the scale. it is better to look at this as in theterm gradual shift saudi economy. not something that is going to be possible to be achieved overnight. they have indicated it is the direction they want to move. they will move in that direction. francine: how significant will the next couple of days be? graham: the next couple of days are going to be full of

uncertainty, as to whether this is the first round of detentions, or this is going to put everyone on notice and they are going to wait and see how both local business communities and the royal family reacts. everyone is going to be waiting to see what the next move is. francine: what do you think the next move is going to be? graham: it is difficult to know since they have released so little information. narrows this going around social media, the numbers don't quite add up. first thing, clear up who has and detained and arrested whether they propose to continue to hold them or whether some will be released pending further steps. griffiths,raham

talking to us from dubai. stay with surveillance. the coming up. -- plenty coming up. theresa may faces the titans of british business today and her government struggles to get ahead of the scandal that has rocked the political establishment. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i am francine lacqua here in london. let's get to the bloomberg business flash. nejra: house republicans should slow down the consideration of a tax bill after investigating reports alleged offshore tax

avoidance by u.s. multinational companies including apple and nike. the republican chairman of the house ways and means committee has indicated the panel would stick to its plan to consider the bill. donald trump has lobbied saudi king salman to list aramco on the new york stock exchange between a phone call. he treated his hope that the listing would occur on a u.s. exchange. qualcomm music -- is the parent to fend off an unsolicited takeover bid -- it will argue that the offer undervalues the company. that is the bloomberg business flash. francine: think is a much. this is what you should be watching for this week. donald trump is in tokyo as he continues his 11 day trip to asia.

tomorrow, finance ministers discuss financial supervision and capital market integration and on thursday, the k and e u resume brexit negotiations. house republicans are facing calls to delay their tax overall . documents show the u.s. wilbur ross has investments in shipping ross has notes -- been alleged to have broken the laws. joining us now is kathleen hunter. good morning to you both. kathleen, what do we know about the tax reform? is it linked to what else is happening in washington? kathleen: the main issue with this paradise paper document dump is it creates another kind of political problem for republicans heading into this already difficult tax bill. the timing could not have been

worse. the tax ways and means committee is going to vote by the end of the week on a tax proposal. democrats have been saying that this proposal is going to benefit the argument -- going to benefit the wealthy. having it come out that allegedly top trump administration officials have been using the tax code, not in a legal way but taking advantage of the tax code is currently written to shield assets. that lens more fodder to the argument. it creates a deepened politcal problem for republicans. francine: to wilbur ross, he is in london today, he hasn't broken in the loss. it is whether he has broken ethics are not. kathleen: no one is suggesting that he is done anything illegal. the question that people have

raised is to know whether or not he fully that's when he was going through the vetting process, whether he disclosed what he should have disclosed to a committee that considers his nomination. the key question -- is not yet done anything wrong with taxes -- but he may have done something wrong in terms of being transparent. francine: peter, what is your take when you look at tax reform? we don't know whether they can get it through. if they do get it through and it is a big tax cut, does it help with gdp? peter: i will think it will help with inflation. the biggest criticism is it benefits the wealthy and bigger corporate's. sense, no matter how big impact on bdp which people expecting, you may have profits

but that is not necessarily the same thing. francine: can it be changed to seem less favorable to the rich? >> an important thing to keep in mind is we are very early in the process. in's debt she is open to some modest changes in the policy. they are going to try and recruit changes to the bill when it hits the house floor. the senate meanwhile is talking about releasing their own version of the proposal. what would be contained in that bill is still to be seen. there may be some differences there. there are several inflection points along the way, whether there can be paid -- they can be changes made. lc fundamental changes to republicans approach when it comes to, that will assuage immigrants criticism. criticism.democrats

francine: peter, how much do you look at the politics in the sea at the politics in d.c. to see -- >> they're very interesting. i am not an expert on that. i do my best to keep up. another organization that is looking carefully at this, but the simple truth is politics these days seems to be very much at the forefront. we going through a major political shift across the whole of the western world. that is changing the way which investors operate. at the moment they are very focused on policy, markets are going up. it is very important for us to remind our clients that at some point --

francine: the new york fed's may be retiring. this is speculation for the moment. to have someone like that leaving and through the reappointment we have on friday, what does it mean for the composition of the committee going forward? >> the fed is going through a major change. it is all happening in a very short space and time. i am surprised that bill dudley butd go quite so soon, maybe they think it is time for a change at the top. my sense is where we are now, it is likely it will continue along the yellen lines for some time. the balance sheet will continue to be run down. we get to the next year or so without any major upsets.

a new fed chairman is as to do with the crisis within the first year of office. francine: where do you see dollar? peter: pretty much sideways. there's not much of you to change our views on that. for -- we've got three more next year. under those circumstances, i the dollar will gain a lot of ground or lose a lot of ground. francine: there is not a lot of huge movement. this is a chart outlining the 10-year yield. -- peter: itdoes does feel so. obviously, there might be some additional political risks.

they could add to the problem. i've seen a little bit of volatility. i don't imagine the trend is going to change. francine: do you look at markets different? we are from governor kuroda and that inflation having a little bit of an impact on yen. it has had -- there is talk about what he does when he goes uneasya? is it always when the president is abroad? peter: obviously he pulled the rug on the dpp. this is a long trade he has to deal with a number of allies and potential enemies. korea, the situation is tense. china, the situation with the

trade negotiation is particularly awkward. avoid tweeting because that could cause all sort of upsets. but this mean for the relation with china? -- francine: what does this mean for the relationship with china echo -- with china? peter: many people have said the same thing. the chinese have a lot of leverage over the u.s. in terms of the treasury holdings. if we wanted to play hardball -- if they wanted to play hardball, they could. it is -- it could be used to get a little bit of leverage from

the u.s. recognize. trump does that as a businessman, it is in the u.s. best interest to make relationships with large trading partners. ultimately that can and will be resolved the way. francine: who has the toughest job right now? becauset is the u.k., we have economic cycle which is doing one thing and we have a political and external environment to do something else. the bank of england has taken last year's rates of. it is heading toward intimated brexit headwinds. the bank of england's task is

more difficult. ecb faces an upper task because it has to figure out how quickly to one back and perhaps it should be perceived as a more rapid pace. the problems is what will the actions be? and what will they did the markets? francine: what about boj? we heard governor kuroda talking about a 2% inflation target. does it mean lower for longer, forever? >> the japanese economy is growing but unemployment is low. it is an aging society. aging consumers are not going to spend huge amounts of cash i is a the japanese economy relatively probably growing economy, to a slower more mature economy.

there is a consequence if the target remains on the table. francine: peter, thank you so much. --gle speaking to rebel ross to wilbur ross at 12:30 it up next, we talked the future of the ecb with francisco public dire desk francisco public deal -- will be talking about some of the difficulties. anything thatand has to do with the periphery catalonia. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua. let's get to the bloomberg first word news. -- as anl the client

anticorruption probe and saudi arabia was deemed to consolidate of cash kinghands salman -- king salman ordered a purge. u.s., 26 people have been killed after a gunman opened fire at a church in texas during sunday services. another 20 were wounded in attack at the first baptist church. the victims ranged in age from five to 72 years old. the shooter was later found dead in his vehicle. donald trump said "this is not a gun situation." arguing that it is a mental health related one. shinzo abe has announced plan to korea.tion against north he will announce that the assets

that she made the announcement during a joint news conference during talks with donald trump. u.s. commerce secretary wilbur ross faced questions about his financial disclosure to congress and the government. that is after a report that he did not disclose is this ties to the son-in-law of vladimir putin. the story was a part of a rash of articles based on the paradise papers. we will be joined by the ross at 12:30 p.m. u.k. time. the u.k. prime minister faces the titans of british business after the government struggle to get ahead of a sexual-harassment scandal. been mean green denied the report that police found pornography on one of its parliamentary computers in 2008. they will speak at the cbi's annual conference.

global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. cehic.jra this is bloomberg. -- after ahe age of decade of qe, central banks will start turning up the taps. bonds to expire without replacing them. -- tapering those purchases starting in january. how successful with the taper be? joining us now is francesco papadia. -- he knows monetary policy and qe. he is senior fellow at google. mr. papadia, thank you for joining us.

when it comes ecb policy and what they decided to do which is basically have the asset monthly purchases. francesco: there was no tamper tantrum at all. easierse this was a bit because it was on the dovish side of things. it would've been on the hawkish side of things, it would've been more difficult. i may need to look at the president of the fed and ecb managed to do think smoothly. i was a bit surprised that it was so dovish. i thought it could have been a little tighter. francine: for example, would that look like putting a mandate to the program? wanting, would that have helped with the tone?

to -- wepected them would be done by -- i think there was an extra caution. the reason why i thought they couldn't get a little more as the european economy is doing pretty well and it is not on the unemployment that has gone down by 5 million people, it is employment bit has gone up by nearly 8 million people. the banking sector is on the mend, even in the periphery. is aannot say that there macro economic problem with the banks anymore. i would've thought they could have but we are talking about nuances more than anything. at which point -- francine: at which point does a to dovish central-bank do more damage?

francesco: there are two issues, the first one is about financial stability. the jury is still out but people feel that there is a bit too much risk appetite. this may be dangerous for financial stability. the other thing is that at a certain point in time, since a banks may be forced to do more more quickly if it hasn't prepared enough. maybe, maybe they could of done a little more so that they would do a little less going forward. francine: do you think the markets can function without these interventions from such a francesco: the basic issue is whether qe in the u.k. and u.s. works on flows or

stocks. if you think it works on stocks, then you should be fairly relaxed, because the more advanced which is the more u.s. is decreasing the stoxx at a very slow pace. there is no sign that the ecb is reducing its stock. it is not surely that it is this -- maybeis -- anchors i am $.75 from bank and 35% market. i tend to think it should not disruptive at the exit. francine: when you look at the the ecb watching, whether there is this draghi console by enough bonds. his incredible when he says he can wrap up qe?

>> if they reduce the purchases of government -- good german, then their tax is much easier. i did not find the answer nonetheless press conference completely satisfactory. know -- to think that now they will concentrate the 30 on nongovernment bonds, more than they have done in the past, i think they should not have problems. francine: do you think qe will end next year ago -- next year? >> he said will not that -- we will never stop working toward one goal. maybe because i

was on the hawkish side, i think if there is something more to be done, it would be that by the end of the year. getting to the end of it by the end of 2018. francine: are you confident in francesco:e jekyll the big question is is germany? i see things going in different directions. on one hand, ms. merkel has a chance to get fully into the looks. -- into the books. she is not an innovator. a partner wants to move things in europe but in france.

the things that the germans thought they should be doing. there is an awareness that a lot has been done but much these to be done. -- other hand, we know that you could see a situation where the green would be given some of the environment and the s&p would be giving something on europe, meaning that they would not be ready to do anything significant. at the end, something will come out of it. --will depend a lot on the francine: are policymakers worried about italian elections? asked -- >> we have seen the election. we've seen the exit results. most european parties got a bad

bruising. seen't think you will something dramatic carry out of the election. i don't think you'll see a euro referendum. muddling through is not good enough. muddling through is the most likely event. francine: there seems to be a backlash against banks, especially in italy and the trusting of the banks. -- shape thepe the capex for the general election? francesco: yes. relativenow the responsibilities of congress and when the banking system goes in

such difficulty as the tiny one, it is to vote not to say that someone is responsible. i don't think that should be the main animal. francine: thank you so much for joining us. he is senior fellow at google. make sure to keep it right here on "bloomberg surveillance." we will be speaking to jean-claude trichet a -- jean-claude trichet. teresa gives ready to tell a business leaders to be more optimistic about brexit. this is bloomberg. ♪

francine: you are watching "bloomberg surveillance."

let's check in on your markets. nejra cehic is following all the action. nejra: we are seeing european stocks trading sideways. you got miners heading for 2013 high. the stoxx 600 flat after its seventh weekly gain. that is a big of context -- a bit of context it also focusing on dollar yen. we saw dolly and hit a seven-month high. after comments from hirohito kuroda showing the real commitment and priority of hitting that 2% inflation target . that high has come a below bit at 114.16. we are flat. with dollar yen, the one thing to watch is the treasury jgb spread. they have dropped on the tenure wide. when it comes to treasuries, it is the curve that everyone is keep an eye on. on the five 30's you're not seeing that -- at 71 basis

points. bill gross says that mr. drop another 20 to 30 basis points to show signs of an economic slowdown. reader saying treasuries at the long end are very much overpriced. themuries, if you compare to what is happening globally, gilts moving lower, caps off this flattening yield curve not a sign of economic doom. the curve is something to keep an eye on. dready, keep an eye on continue to rise. this after developments in saudi over the weekend that fueled -- this is the bring curve of the brent futures spread. that is moving higher. some see it as a sign of

tightness in the oil markets which could be a bullish signal. francine: theresa may is set to face the titans of british business shortly as she struggles to get ahead of a sexual-harassment scandal. the pressure increased on her yesterday after the deputy of pornography being found on this parliamentary computer back in 2008. we will listen to the prime minister shortly. let's get back to peter dixon. i am not sure to look for next it if you look at blow-by-blow negotiation tactics, where the configure out the position this a it will be hard or soft brexit. peter: you have to look at the information as it comes out. not necessarily from the u.k. side. interesting has

been the shifting of the uk's hardline position. it has moved closer to the brussels redline. i think over the course of the next few weeks, brussels will be looking for more accommodation for the british side. hopefully that will open the way for discussion about a trade deal potentially an agreement in december. we can talk about that in 2018. francine: is this conservative in siding -- conservative infighting. is this trying to negotiate a deal that supports the british economy? cooks i long thought that the brexit problem is a considerable infighting problem. conservatives the don't know what they want. yet the altra's the one -- you ultras.

and then you have the pragmatic wing. it is not clear at the moment was winning. the political distractions we are seeing have made that -- francine: do you need star modeling what the german would look like? francesco: we do some .timulations -- simulations in terms of what they mean for the economy, probably not a lot. everything will depend on the deal would get the -- get with the eu. if you don't get one, then hard brexit will cost a huge amount of economic output. that.n't really model it is going to be painful.

francine: i think we do have theresa may starting to fetus from cbi. i think we are getting some live pictures. theresa may due to speak very shortly. there she is. she will be trying to reassure businesses. we understand that this be a tough crowd. this is the crowd that is the most to lose. theresa may phases and then usually hostile audience. >> to be here with you. last year, i spoke to you about my belief in a well-regulated free-market economy. i said it was the very best way to spread opportunity and to lift people out of poverty. we should never underestimate the immense value and potential of open innovative free-market economy when they operate under the right rules and regulations.

around the world over the past century, it is than those countries with well functioning free markets which have enjoyed the great economic and social technology: advancements. at its best, when a free and open marketplace is combined with the rule of law, individual freedom, equality and human rights, and a representative the marc veasey, ratings possible. people live longer and more secure lives. they have the freedom and means to fulfill their ambitions and make the most of their potential . to bring up their families, care for one another and give something back to the local communities and a wider society. i believe that the approach i set out for more cooperative, hardship between business and government is the right one to build the even stronger economy that we all want to see.

and economy fit for the future, ready for the next decade. believe the opportunities ahead are enormous. the government i lead is determined to support it is business -- support british business. i have led trade delegations to india and japan. who iways impressed by week week in and week out. i am proud of what they have to offer, international investors. last year, britain enjoyed record levels of foreign direct investment and we have seen toyota announce a 40 million pound upgrade. and bmw announced they will build a fully electric version of the many -- of the mini.

with support from the department of international trade, there have been contracts won over the next five years. alexander dennis secured a 44 million pound deal to export double-deckers to mexico city, supporting hundreds of jobs. willin london, google build a london office with 100 billion pounds of investors paid as we celebrate, we should keep in mind what it all really means. if not -- it is not something numbers on a balance sheet but an investment in people's livelihood and economic security of families. it is the vote of confidence in the u.k., and our talents, our skills, our infrastructure and our ideas. and the reason we want a strong

and thriving economy is because we want to help more people to lead a full and happy lives with good quality jobs and rising living standards. to build a country that works for everyone and an economy which is fit for the future. the last decade, the biggest economic challenge facing the withnment has been dealing consequences of the financial crash and the great recession which followed. thanks to the innovation and entrepreneur ship of british is this, the artwork of the british people and the government plan, the situation has now been transformed. may speakingresa at cbi where she will be facing many leaders and many questions on brexit. peter dixon, we were listening to the prime minister. is it a done deal?

there is no done deals in robotics. theresa may sounds very authoritative and she is able to stand up and from cbi and give a very confident speech. the difficulty is there is a huge amount of infighting within the party. until they decide they want to think is going to be tough for the prime minister. francine: what does it mean for pound going forward echo >> it is treading on thin ice. it is held up well on expectations that the bank will raise interest rates. the measures were not quite as hawkish. it should hold up but it is prone to a change in political risks. if that would change, i could

expect a bigger dip. francine: i'm being unfair ask you all the difficult questions. be three months before the deadline? or can be eight or nine months from now? iser: my working assumption we will have some kind of deal which prolongs the deadline, probably for two years. problem out to 2021. the final form of the deal will not occur for another 10 years. i think it is going to be long, drawnout process. my money on to put

any deal right now. francine: peter dixon at commerzbank. wills be speaking to the uk's -- and edwards will bring us the interview and will ask plenty of things on policies. bloomberg surveillance continues in the next hour. tom keene joins me out of new york. it on, don't miss my interview with wilbur ross -- later on, don't miss my interview with wilbur ross. what some of the trade deal with nikkei could look like. -- with the u.k. could look like. "bloomberg surveillance." -- could look like. this is bloomberg. ♪ retail.

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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. whentertaining us,es getting us back on track,hing? 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. francine: the prince's purge.

one of the richest men is under the microscope. trouble in paradise. gary cohn and wilbur ross are mentioned. could it mean a delay for tax reform? we will be speaking to the commerce secretary at 12:45 london time. qualcomm prepares to sign off on a takeover bid, arguing it undervalues the tech giant. this is "bloomberg surveillance. " i'm francine lacqua in london and tom keene is in new york. i'm looking at some of the european data. we need to look at some of the changes in the fomc. tom: the interesting news flow this morning. the president of the new york fed will announce his resignation from this most important divisional or regional fed position. he will be speaking at the economic club of new york and i

am honored to be one of the questioners of william dudley at that event. it will be a perfect venue at the hilton hotel on 6th avenue, the perfect avenue for him to announce that he will be leaving. francine: that is today, right? tom: yeah. francine: we are lucky to have you there, tom. let's get straight to the bloomberg first word news with taylor riggs. taylor: it's being called the worst mass shooting in texas history. authorities say a man walked into a church in a small south texas town and opened fire. 26 people were killed and 20 were wounded. the suspect was later found that inside his vehicle. one u.s. official says he does not appear to be linked to any terrorist group. u.s. commerce secretary wilbur ross faces questions. there are reports that he failed to disclose to congress his business relationship to putin's son-in-law under u.s. sanctions.

it has to do with russia's ownership stake in a shifting company. documents were leaked from a law firm in bermuda. we will big with wilbur ross later this morning, that is at 7:45 eastern. over in japan, president trump and shinzo abe are talking tough on north korea. abe said he will impose additional sanctions over north korea's nuclear weapons development. president trump warned that what he called the era of strategic patience with north korea was over. francine, as you mentioned, saudi arabia has been shaken by an anticorruption drive that arrested the former top officials and crown prince. rounded up by top officials over the weekend. it appears this was aimed at young saudi. 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. oil with a lift off of saudi arabia. the curve is flashing, 71 basis points. we had really interesting conversations last week, particularly with william gross, aware that curve flattening begins to show economic contractions. he made clear we are not there yet. 55.89.s american oil, we have a record dow. the 30 year benchmark, 3%. it is not moving, francine. francine: it is a cautious start to the week for the market. look at saudi arabia, tom, the biggest movers, definitely oil gains.

there are questions about what happens next. you can see crude oil -- that was my top chart. tom: here is oil adjusted for inflation and then adjusted for an approximation of rising income and rising wealth around the world. again, this is an approximation of the great decline, francine. thank daniel juergen and his wonderful book. this is the soul of the family of the saudi family in saudi arabia. this was the collapse in 1986, persian gulf one we are back. -- we are back, fraincine, to oil price in about 1966 dollar.s there is the agony of the sauds. francine: let's continue with the shakeup by the crown prince, adding to uncertainty in the

region. we now go live to riyadh, where yousef gamal el-din joins us now. there is a concern that this has nothing to do with the crackdown. that this has to do with the consolidation of power. how does the crown prince communicate to international investors today? the message we got over the weekend was quite clear and it came from the king himself. it said, we will fear no one, big or small. this anticorruption committee rounded up these top tier names. i cannot underscore this enough for you. how massive a move this is. a lot of these names, you probably just heard the tip of the iceberg. we are talking about the foreign ministry of finance. plenty of others as well, taken into custody. the charges have not been laid out. that remains to be seen, but a

very bold move from a crown prince that has proven he is willing to surprise. ,e saw that after the summer without the political drama was over, but apparently not. francine: if you are an investor, you are not used to this. this is new to saudi arabia. who comes next? thwho replaces these people? yousef: there is no clarity at this point. the announcement was, the anticorruption committee has been set up. the crown prince is chairing it. there's clarity about what or who will replace. we do know they have the power to trade assets. isnce alwaleed bin talal especially sensitive. again, there is no way of telling of where this goes from here. investors will say, i will wait to see how this plays out. tom: we watched this unfold over the weekend. thew it remarkable to see

events, including the prime minister in fear for his live, the missile attack, the speculation about "a missile or missiles attack from yemen." wheere these linked? was the prime -- was the crown prince able to say, this was the last straw? yousef: there is no tangible evidence at this time. we are not hearing that at this point from investors. it was a ballistic missile that flew over the skies of riyadh and that is not something that happens often. it is significant that you point out the external challenges. this is not just a domestic situation. you have the gulf crisis, the crisis to the south with yemen, and the areas of lebanon and syria, and iraq as well. the region is already boiling,

so to add any domestic turmoil will make things mark obligated. tom: yousef, a question, if i may. what does israel want to be the outcome of the turmoil? they have this stage, not taken a clear position on that front. we understand there have been some attempts. enemiesly, these are that have been enemies for a very long time. it is quite a sensitive area. there might be some back challenging going on, but there is no official stance about how they want this to end. francine: yousef gamal el-din there, the anchor for "bloomberg markets: middle east." we are joined by rupert harrison. rupert is now at blackrock. when you look at -- thank you for coming in. when you look at the saudi

conundrum, what did international investors want to know about where the kingdom goes next? rupert: i think tom asked a good question. there are three important elements behind this. the first is a very ambitious attempt at economic transformation domestically inside saudi arabia. that is linked ot the graph we saw earlier about long-term declines in the price of oil. the second is regional conflicts. a series of proxy wars between saudi and iran nin various settings, and the link the lebanese prime minister. the third is the consolidation of power within saudi arabia by the crown prince. i think investors are familiar with those three things already, but i do think these developments speak to the implementation risk. there is obviously a reason for caution. but, there are risks both ways.

forerms of the implications saudi arabia, if even half of these things are being talked about were to happen, it would be pretty serious investment opportunities from that. equally, the risks -- for global investors, they lie on the oil side. i would not expect a change in strategy. with a is alreadk is always change in production. tom: is saudi arabia broke? within all of the corruption and theirafts can we assume balance sheet is sound? i'm not sure we can go there. rupert: i think the issue is about looking ahead. a lot of this reminds me -- though there are enormous differences. we have been talking a lot about china over the last month. we have a lot people questioning the ability of the chinese to

make the transition to a different economic model. we've seen an anticorruption campaign in china that has strengthened the position of president xi. we could be seeing something similar within saudi arabia. thehould do underestimate potential for delivery on at least some of the things. the issue is always around, can we get an edge on knowing whether implementation risks will crystallize or not. francine: rupert harrison there from blackrock, he stays with us. we speak exclusively with the former ecb president. we will talk to him about asset purchases, qe and the euro. this is bloomberg. ♪ taylor: this is "bloomberg

surveillance" and i'm taylor riggs. it would be the largest technology acquisition ever. broadcom is preparing to make an unsolicited $1 billion offer for qualcomm. the bid could be made today. those people say qualcomm will probably reject the offer, arguing it undervalues the company. the fourth-largest u.s. wireless carrier sprint faces an uncertain future after talks with t-mobile collapse. sprint has not had a profitable year in a decade and has $38 billion in debt. that is your bloomberg business flash. francine: taylor, thank you. two of the world's major central banks are taking their feet off the gas. the fed me the first move in october with a long way to taper, allowing a portion of bonds on the balance sheet to

expire without replacing them. the ecb is still buying bonds. tapering those purchases start in january. it is a different story in japan, which is likely to remain within its qe path. kuroda said it is important for inflation to exceed its 2%. he needs no introduction, but he ,s the former ecb president jean-claude trichet. rupert harrison, thank you for sticking around. when you look at central banks, it seems the ecb was dovish because we don't have a lot mandates for the program. at what point does being too dovish hurt, more than it does good? jean-claude: first of all, i think the policy of the central bank, of the ecb, has been successful, obviously. when you look at the large isber o in the economy, it

going to be very robust in the future. we have the overall anticipation of the next moves regarding inflation, which are not that bad when a look at the five years forward. the benefit is not fully in line with the definition. the danger of deflation is thought to be over and it seems to me that all indicators that the governing council had were justifying fully the fact that they start tapering next year. it's not, i would say, a decision which should be considered. it's not a doveish decision. we will see what happens and the will look aty that overtime, including at the end of a nine month period, we will see. they will make the decision

which is the most appropriate, but until now, that decision is fully justified. francine: central banks around the world have trillions of debt in yen, but also the euro and dollar. can the market function without these interventions? jean-claude: well, the problem we have is not the problem of the central bank policies. economy.problem is the f the fact that we have other reasons. -- ave a surprisingly surprising absence of inflation. that is something that is really profound and is capturing a number of factors that are out o f the reach of the central bank. banks, and central they are right to do so, they are calling other partners to step in, not to leave them with the full burden of the

difficulties of the advanced economy that are generalized. the japan, the u.s., and europe. it's time for the other central banks to not be the only game in town. tom: we are hearing mr. trichet speak about the convergences and divergences of the central banks. in your experience, and particularly working with mr. osborne, is there a lot of discussion between central banks? anert: yes, there is enormous a lot of discussion , in the g7 and g20, but also informal discussion about financial ability and policy. i think more than people realize. i agree with jean-claude trichet . the problem is common around the world. this puzzling lack of inflation. we're still quite a long way away from sustainable, domestic inflation being generated by the eurozone. that's why the ecb is pushing

its policy to the next on that it can, in terms of buying bonds. tom: let's come back and look at this. maybe we will get a chart of the five year. mr. trichet, the former president of the european central bank. and mr. harrison with us from blackrock. this morning, an exceptionally important conversation. the fireworks over the weekend of the allegations of the secretary of commerce with relations with russian oligarchs and the putin family, wilbur ross in the 7:00 hour. this is bloomberg. ♪ tom: good monday.

"bloomberg surveillance" in lond on and new york with francine lacqua in tom kenne. let's speak without a claim to guest, jean-claude trichet. this is quite simply the vix. quietne indicator of the of the market. we are getting into a duration and depth of quiet that exceeds what we saw in 2004, 2005, and 2006. let's bring in jean-claude trichet from paris. mr. trichet, forever associated with a wonderful word, brutal. how do we avoid brutal moves when we normalize, when we normalize rates, our balance sheets?

how can we avoid brutal moves as measured by the foreign exchange and within the banking system? jean-claude: well, it is a very important question. the response which is given by the central bankers at the present moment, rightly so, is to be as clear as possible in what they are likely to do. the reaction function is really now in all of our advanced economies better understood and they preannounce when they are engaging in various moves, whether embarking on tapering or stopping the tapering to maintain the appropriate level or get to the appropriate level for a portfolio. all of this is preannounced. the market is not surprised. but we have a problem, which is undoubtedly an under assessment economy ats in the

the level of the entire world and of course, the advanced economy. it is important for all market participants to be aware of the fact that these risks are still there. whatever is the skill of the central bank to eliminate accommodations that we have now. tom: mr. trichet, you are the engineer from france. mr. powell is the lawyer from america. what is it like doing central banking surrounded by phd's in monetary theory when you are now an engineer, as you are? well, i think both have multiple dimensions, to be frank. we are also not engineers or lawyers, but we are also economists. newid in paris, our

president chair of the fed has a lot of experience, has been in the treasury in the united state s with president bush senior. he's been a anchor and investment banker that she has been -- he has been a banker and investment banker since 2012. so, reducing himself to the dimension of a lawyer does not seem to capture what he has, namely many experiences in domains that are perfect for the central bank. francine: thank you. that was jean-claude trichet. we will be back, talking about brexit and theresa may. this is bloomberg. ♪ retail.

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in new york city, your first word news with taylor riggs c/ taylor: the attacker in new york does not seem to be with a terror group. say the man carried an assault rifle when he opened fire inside a small church in south texas. 26 people were killed and about 20 wounded. the suspect was later found dead in his vehicle. of new study suggest the house republican tax bill would eventually raise taxes on some low earners. the studies come from an official congressional scorekeeper. house speaker paul ryan defensive bill saying it is a clear middle-class tax cut. in belgium, the catalan president and members of his government have been released. he turned himself in to authorities yesterday. a court in brussels will have to decide whether to act on a request to arrest and after that him.

u.s. commerce secretary wilbur ross faces questions about business ties to russian president vladimir putin's inner circle. they are saying that he disclose business -- it has to do with his ownership stake. the reports are based on documents leaked by law firm in bermuda. we will talk to wilbur ross later this morning at 7:30 on bloomberg television and radio. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 20 countries. tom: thank you. francine are looking at images of the president in the beginning of a 12 day trip. be twoder if there will scoops of vanilla ice cream in tokyo. these are grinding troops, francine? francine: not whether it is sure

the vanilla ice cream -- but i am looking forward to when he travels to korea and then to china. talking about possible trade wars. tom, let's move it onto brexit and theresa may. she has been speaking at a conference in london. vote of it is a confidence for the nation. this comes as the bank of england raised rates. mark carney says the ble may not be able to cut rates in the future. let's go to rupert harrison. when you look at brexit, does mark carney and the boe have the toughest job when it comes to central banks? that mark have to say

has the problems of the other central banks. a problem that is fairey, fairey important -- very, very important. i think the decision was pretty well explained. participantsrket -- have been done quite well. but the challenges are enormous. for brexit, you need as much certainty as possible. certainty is the enemy of the economy and the enemy of business. a certaincould have amount of certainty. francine: rupert harrison, you were chief of staff for many years.

what is the relationship between the boe and people in the cabinet? do they need to get a heads up on what the brexit negotiations will look like? >> the relationships are more strain than they used to be. the brexit and mark carney has had to navigate his way through this very divisive debate over brexit. from somee under fire members of parliament and some members of the government for doing that. i think that he has sort of managed keep the right side of the line this comments locust on the evidence. i think he will be speaking very closely to the treasury around this issue of productivity, which is the issue that links the bank of england's decision and the challenges for the budget. it is a problem for philip hammond.

they have a shared problem. and for the united kingdom the european central bank, there has been that word diffusion, and diffusing productivity nation to nation. right now, we are trying to --fuse migrants, refugees how will we diffuse refugees and --rants of us all of europe and migrants across all of europe? >> it is a major problem, and it explains the populace boom that we have seen. it is not directed against europe, as we see in all elections, but it is reflecting the many frustrations of societies come including not only economies' frustrations, but the immigrant issue. there is an emerging consensus to consider that we have to treat the problem very, very

seriously, and control our borders. in order to be responsible and serious. not of course, neglecting our values, but being able to tell our people, we are taking care of this problem at the level of the continent as is necessary. at least at the level of these countries. tom: what leadership can france provide? i look at the mixture, and with berlin brussels, london, -- what can france and emmanuel macron provide to this debate? macron, ourmmanuel new president, has been extremely useful in particularly in a speech that he delivers in the french sovereign, in order to say, in his mind, would be

the various avenues for making proceed in the direction, the major direction. not only did he mention as , the economicnomy aspects, but the reinforcement of the government, but he also ,entions security, defense control of our borders, and all of the other elements that are very, very important in the current situation. europe been backed by the recent elections from the various countries come even if we have a populist move, which is very important, but europe was confirmed, corresponding to on the continent, but on top of that, you have overwhelming support for

organizing better defense, security, fight against terrorism, and control of our borders. so, there are a lot of things to do. we will see what happens. the french president presented his ideas. and now, the other partners, and germany is of course a far --ortant partner, but partner, so we will see what happens. francine: we're also talking about leadership and changes in leadership at central banks. we talked about jerome powell and of course it is a question on mr. mario draghi. rupert harrison has a question. >> i wanted to ask the big vacancy at the ecb coming up. we had a french president of the ecb and an italian president at the ecb. is it time for a german president of the ecb?

first of all, i would say, it is not a decision to take necessarily. -- it is adate of mandate that goes up to october 2019. so he has time. he is there. he will continue to exert his own presidency and leadership over a long period of time. i would not embark on premature discussion. it is a decision of the heads of state and government. and experience has demonstrated that, i think, i should not say that for me, but a widely in-depth decision of the ecb. i have full confidence. but i will not engage in the conversation on the next president. francine: i want to ask you about bitcoin. what is bitcoin? , i have to say, i don't

consider at all that they are currencies. any of they have not characteristics of the currencies that are essential, which is to keep its values on the business of sustained -- assisting the value. --on the business of sustaining the value. keeping the value is fundamental. you see very clearly that the bitcoin goes up and down, up and down. to --arly response but behind the bitcoin, you have the block chain concept. have destructive, new in ledgers. it seems to me at the problem is to adapt the block chain to a number of other domain.

but again, these cryptocurrencies, as a central banker, seems to me something that is more dangerous than useful. tom: thank you so much this morning. the former european central bank president. and rupert harrison, he will continue with us with blackrock. good morning from london and new york. coast-to-coast and across canada, series xm channel 19. san francisco bay area in washington. stay with us. this is bloomberg.

♪ tom: good morning, everyone. terrific news. i'm tom keene in new york.

francine lacqua in london. william dudley scheduled to resign from the new york federal reserve. we are naturally that is today. he will be speaking at the economic club at about 12 noon. really looking forward to that. that is according to reports this morning and we will see further. we have that working on bloomberg news right now. on the fed and on everything else, the idea of tax reform. it can be global tax reform, but certainly, front and center. rupert harrison from blackrock with us. enron temple with us with lazard -- and ron temple with us with lazard asset management. how does this sit with you? what does tax reform me to lazard? >> it is important for earnings growth for economic growth. if we look at the proposal as it

stands now, a 20% statutory tax rate to basically increase s&p 500 earnings by as much as 15% depending on the combination of territoriality. number two though, there should be -- we should be careful about getting excited about tax reform because it is very complicated and it is not a done deal. the provisions, there are quite like changes in a limited and deductibility of state and local taxes. given the republican majority in the house, any of these items could be somewhat precarious in terms of passage because there are over 20 republicans from high tax states might not be able to support this policy. more important for earnings and growth though. tom: rupert, help us here. the president is speaking in tokyo right now at a state dinner. you lived through this, and the fact is, all residents are distracted -- all presidents are

distracted by domestic issues on the road. and we have a hugely contested tax reform. what happens in the government when everybody, including the lobbyists, are piled on on tax reform? >> i think that the issue is that for the people at the top, the issue of the day takes up the enormous amount of the issue. what is important tax reform is what is going on behind the scene. toadapts what is going thes interesting looking at market reaction to the news on taxes the last few weeks, it hasn't been -- there are various baskets of forecasts. those have not been moving. it has been about general sentiment or small-cap stocks in general reflationary at the moment. it is too early to know what specific measurements will be a part of the final bill. francine: will it impact gdp?

>> i think the impact is far less. if i look at the tax proposal as it stands, it is a 1.5 chilean dollar increase -- it is a $1.5 trillion increase. there could be better ways to enhance gdp growth. $170 billion of that cost is eliminated the state -- the estate tax. will that increase productivity growth? probably not. >> you have to watch the frontloading aspect of it. depending on how you added up, the proposals we have now are loosening of over 1% of gdp in 2018. over 10 years,, in that first year, -- that changes what you think about rates. francine: what happens if dudley resigns? you use -- you lose a key thing here.

>> i am not sure it would change paulo's calculation around policy -- jerome powell's cap volitional policy. assume heonfirmed, we will continue with his same policies like continuity. i don't pick a deadly resignation would change that in any material way. we have been optimistic on u.s. growth and we are entering a new leg of recovery, the biggest risk to that story is that policy change potentially disrupting it. i do agree with rupert's comment to the extent with extra fiscal stimulus, that should change the calculus for the fed in terms of thinking about rate increases, and the policy of normalizing interest rates. francine: thank you both. rupert harrison and ron temple. in the meantime, you can load up tv on your bloomberg terminal. it is as simple as it sounds. and you can optimize your questions to our guests.

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♪ francine: this is bloomberg surveillance. taylor: i'm taylor riggs.

getting into the american wireless business. the company has struck a deal with friends that allow the cable company to sell wireless service using sprint's network. merger talks between sprint and t-mobile collapsed after months of negotiation. qatar airways has agreed to buy a 10% stake in pacific at $662 million. the deal would give qatar a foothold in though world's second-largest aviation market. they dropped a plan to invest in american airlines a few months ago. that is your bloomberg business flash. francine: thank you. china's central bank governor is sounding the alarm once again. in an article published, he has cautioned that risks to markets are too waiting. the edit high leverage was thinking china's financial system physically -- he added that high leverage was making china's financial system

physically demanding. rupert, when you look at china, you are fairly optimistic. we keep on having these warnings from the pboc. how should international investors look at it? it and it ist clear that his concerns are seriously internalized by the new leadership. we saw that coming out of the party congress. advisers to him talking about downgrading the importance of the growth target, which is something a lot of economists want to see. we should expect no let up in this cracking down on the rapid balance sheet, risks, and property. what we have seen in terms of the direction on credit and the fiscal impulse, while you are right that in the medium-term, you are not going to make money for a long time by

betting on a china crash, i would expect the activity indicators in the short term to disappoint a bit on the downside. they have signaled their willingness to do that. >> i would agree that we will see a deceleration and growth in the near term in china. but i take issue -- the talked abouts structural change and financial stability, but we have not seen enough action on that front. i do believe longer-term, the sustainable growth rate for chinese gdp is in the 3% to 4% of men are not 6% to 7%. arena, not 6% to 7%. i think that chinese authorities need to be a bit more aggressive in terms of restructuring some of that debt and moving to more productive uses of capital rather than the process we have seen thus far. tom: rupert, i believe the new phrase is in doubt america, or indo-pacific.r

what is the symbolism that the president of the united states is not saying asia-pacific, but indo-pacific? >> you have to look at what politicians are not saying. [laughter] tom: thank you. >> but not talking about china. this whole trip, china is the elephant in the room. the trip is all about concerns in the u.s. administration that china is a growing tower. perceived abuses by china. this strong alliance seems to be building between president trump and abe in japan. they are calling it indo to make the chinese feel like you know, america is trying to surround their era of influence. but the big issue is when trump meets xi, do they meet -- do they discussed the big issues? tom: gentlemen, thank you so

much. ron temple, peggy for your attendance. mr. temple is with lazard. and we really thank rupert harris. francine: we just had breaking news. this is on fox news. agonow a couple of weeks that regulators were a takeover of sky. they sound -- they found actually disturbing behavior at fox news. ohey were going to refer t fcom. is this a phone?

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among eagles, william am dudley will resign from the federal reserve bank of new york according to reports. the committee at 33 liberty street will have the most delicate decision to make, 2018. new highs as the prime minister of lebanon resigns in fear for his life. the saudi family, they stand the world in a generational changing of the guard. it was a massive presidential nod for the imperator as the president demands massive purchase of u.s. arms in japan. good morning, everyone. this is "bloomberg surveillance." we are live from our world headquarters in new york. in london, francine lacqua. francine, important news from sky. this is like inside london baseball, isn't it? tom: not really. -- francine: not really. it is a takeover that is 12 billion pounds. it is actually quite a bit takeover.

what they are saying is basically, they have had a disturbing behavior at fox news over in the u.s. and so, they are trying to figure out if the takeover can take place are not. the culture secretary is referring to ofcom. ofcom saying today during challenging with fox news and its breaches -- tom: to be clear, when you say fox news, are they applying actions in the united states over to the united kingdom? atfrancine: they are looking this deal in general. if you are buying something that they think is impartial, they can block the deal. they are citing hannity and tucker carson, saying this is breaching broadcasting right in the u.k., tom. tom: terrific briefing. let's go to first word news with taylor riggs. taylor: it is being called the worst mass shooting in texas

history. authorities say a man walked into a church in a small south texas town and opened fire with an assault rifle. 26 people were killed and 20 were wounded. the suspect was later found dead inside his vehicle. u.s. officials said he did not appear to be linked to any terrorist group. u.s. commerce secretary wilmer ross faces questions about president's russian vladimir putin's inner circle. it has to do with ross's ownership and a shipping company. the reports are based on documents leaked from a law firm in bermuda. and we will talk to wilbur ross later this morning at 7:30 a.m. eastern on bloomberg tv and radio. in japan, president trump and prime minister shinzo abe are talking about north korea. at a news conference, shinzo abe says he will compose additional sections over north korea's weapons program.

says patientsp with north korea is over. and as tom mentioned, saudi arabia has been shaken by an anticorruption drive leading to the arrest of billionaire prince and a former top official. they were around that up by security officials over the weekend. the crackdown is seen as a move by the crown prince. it appears that there has been complaints. global news 24 hours a day powered by more than 27 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: taylor, thank you. this is not just another ceo announcement. them over the weekend -- anthem over the weekend, gilbert guard will take over. bregard will take over. .he will take over at anthem

equities, bonds, currencies, commodities -- negative three on the futures. equities up to record highs. oil is elevated. the fix is nice and a 10. -- the vix is nicely under 10. overall, it is a very similar day to yours. a lot of the story has to do with oil and because of what we are seeing in saudi arabia. stocks fluctuating in europe, bonds advancing. seems to be a cautious start to the market. tom: very good. fromomberg surveillance" london and new york and now from washington with kevin cirilli. kevin, i asked about how the president greeted the import of japan. but there are a lot of issues in

washington is like tax reform. i was really surprised by the concerted push back and the thundering silence from republican leaders over the weekend on tax reform. what brings monday? kevin: all the attention focuses on this markup committee, which is anticipated for early this week. going to be hearing a public hearing of the grievances on a host of issues including from realtors. later this week, we are anticipating new details on the upper chamber, the senate, and a version of the tax bill. what i will be looking for at the differences between the senate bill and the house bill. tom: i agree, the senate being the real point where we get constricted here. here is a senator from florida, marco rubio. this is a really interesting op-ed. since the 1960's, there has been a consistent gap between intended children and total fertility. raising a child is more expensive than buying a house

are getting a college degree. you think? [laughter] tom: the crisis of the working-class family is steadily grown under the backdrop of out of touch, ruling class delete in the wealthiest country. simply, kevin, will this resonate in the senate as it does among conservative and southern conservatives in the house? senator rubio really making the case why tax reform is needed from a middle-class perspective. quite honestly, we have seen some house members try to do that, but he was much more successful than some others. i would look for him to be pushing -- to be the face of this at the messaging most forward in the senate. that said, democrats are trying to frame this as something only beneficial to the wealthy and to big business. so, people like senator rubio really do have a voice here in terms of their role for this week. i want to jump in with a very short question on the

paradise papers. kevin, there are ethical questions. i know gary cohn was mentioned. does this change our impact the tax talk? kevin: quickly, no. these were questions efforts came up during the then-nominee ross's confirmation hearing. democrats had questions about this. this is different in terms of the shipping from the panama papers. he said in a statement that he has recused himself from any of these business dealings, so unless this continues to develop , we will monitor it, but it is not looking like it would be too much -- it is looking like he is recusing himself. tom: kevin cirilli, thank you so much. chief washington correspondent. jonathan gollum with us. he is with credit suisse with a very optimistic call for 2018. but we need to get to carl weinberg as we see the

announcement, or i guess the reporting that mr. deli will resign from the -- that mr. dudley will resign from the new york fed. tell everyone why this fed is so different from atlanta, richmond, washington? >> this is the operational side of the fed on an international and domestic market operations. this is a part of the fed that goes to the fomc and says what the financial markets think about issuance, bond purchases, about policy. it is the 20 and of the ship -- it is the point tm of the ship. francine: confidence is so important. that a fedu worried in transition could shake confidence in your optimism? >> we were just doing some work on this. d think markets are less tie to the fed the narrative that

they are ultimately driving everything. but i think an announcement about powell on friday was assigned from the white house that what we are going to be hearing from the fed is pretty much what we have been seeing over yellen over the last several years. francine: jonathan, are the markets underestimating the withdrawal of all the stimulus, steady as they go, it is a huge amount of money? we don't know what the markets are left with basically. >> first of all, you have a fund -- you that is so it's have a fund's rate that is so obscenely low. i think you are right, francine. there is a real confusion on what it means when you unwind this qe. and carl is probably better to answer that than me. from an investor that summit at the investor point of view, i don't think we'll have to calibrate. one move you have the fed fund's

rate and then you have one on policy. this'll be uncomfortable for equity investors as they try to calibrate these two things. >> the question of the flow of funds for investors is totally unexplored territory. there will be money coming out of the market that could have gone into stocks before. so the question is, what happens to the wall of money that has been going into stocks? we are really in unexplored turf. overall, we think the general process of unwinding is going to go smoothly from a mechanical point of view, but what happens if we get a shock? what happens if the market gets nervous about it? we are in place we have never been before. francine: carl, what would happen? is there a specific asset class that will go haywire? grid you see the stress? -- where do you see the stress? >> we have gone from

quantitative easing, to tapering, to steady as she goes, to rate hikes. there has been a progression, and so far, it has been pretty smooth without any pain in any asset class. you think about what quantitative easing did. it put money in the hands of investors that they did not otherwise had. that explains a part of the stock market, but we have not seen that unwinding. we are learning as we go in this process. tom: we are going to come back to you john on your equity market call. market call from john gollum. carl weinberg from frequency economics. and the report that william dudley, the president of the new york fed, scheduled to resign. we don't know if it is today or later in the week, but he will speak to the economic club of new york at lunch today. wilbur ross, the secretary of commerce, and the 7:00 hour

worldwide. this is bloomberg. ♪

♪ taylor: let's get the bloomberg business flash. it would be the largest technology acquisition ever. broadcom is preparing to make a $100 billion offer for qualcomm. according to people familiar with the matter, the bid could be made today. those people will probably reject the offer sing it undervalues the company. the fourth-largest u.s. wireless carrier, sprint, faces an uncertain future after merger talks with t-mobile collapsed. softbank is giving up control the company. sprint has not had a profitable year in a decade and it has $30 billion in debt. and qatar airways has agreed to

buy almost 10% stake in -- specific. deal will give qatar a split hold in the second largest aviation market. several months ago, qatar airways dropped a plan to invest in american airlines. and that is your bloomberg business flash. tom: thank you. want to get back to john gollum's optimism on the markets. but right now, really front and center is tax reform. here with us is carl weinberg and john gollum. john, who is his tax reform for? do you agree with the critics that it is about the rich guys? >> i have been really confused with what exactly are we solving for putting this taxi from together? is this about we normalizing this really high corporate tax rate, which puts u.s. companies at a disadvantage, or is it as we heard from senator rubio, it is about helping the middle class? there has not been a clear message of what we are trying to

accomplish, which is why after you have this announcement last week, you had almost no movement whatsoever in stocks, even though there were companies with a high tax bracket. tom: the constraint is with the senate with a trillion dollar chunk that they have to fit it into. they have to fit it into $1.5 trillion. how will they change it to make the square peg go into a round hole a? ? >> i don't have the answer for you. this has devolved into politics. john talks about tax reform, but all i am hearing about is tax cuts, which is a different kettle of fish. there are ways to improve the system and make it more equitable. this is not what this conversation is about. it is about is giving tax cuts were they are politically most effective. the newly appointed fed chair just told us, by all measures,

has reached full employment by most entered measures, why do we need more tax cuts at this point? francine: carl, isn't this what the american people voted for? this was one of the platforms for the election that president trump talked about, and i wrong? thee can talk about what american people voted for, and then we can talk about what's it american economy needs. and what they do not need is gross, macro stimulus. we can make the tax system to make taxes more equitable for american middle-class families. we aret is not what getting. we are getting a collection of tax cuts with very, very little reform coming out of it. i think i have a different view in general. if we are going into your recovery with relative full employment, the idea that you are going to do stimulus this late in the cycle, it doesn't

seem to make a lot of sense. the reason that the stock market did respond -- and when you look at the companies with the highest tax bracket better than underperforming for the last six months -- i think the market is saying, one, this will never get past, or number two, it is not the stimulus or process we need. we can agree that reforming makes sense, but stimulus this late in the cycle, i wonder if it will do anything? tom: look at kevin cirilli's comments. does this have a chance of getting through the senate? open to the idea that they may have to fail in order to succeed. of theiew was republicans have to do something, and they will figure out some way to get something done, but they may have to fail first and then rita cross the eye for democrats to get something passed. tom: interesting. francine: carl, if he gets passed in its current form, visit help with inflation or gdp at all?

>> i don't see how it does really. worth .6% of is gdp over the next 10 years with a lot of that stimulus upfront. with the economy already pushing past most people's definition of night rue, we are going to get to a point where prices rise faster. back for johnome gollum's will optimism for the equity market. with us is carl weinberg of high frequency economics and john gollum credit suisse. a conversation today. secretary of commerce wilbur ross, and a former secretary of treasury, lawrence summers in the 8:00 hour. larry summers washing -- riding --article with his criticism larry summers writing an article with his criticism. this is bloomberg.

♪ francine: this is "bloomberg surveillance" with tom and francine in new york and london. we are also live in the middle east where the committee has arrested 11 former senior princes including the recent one. is overwhelming. local and foreign investor struggling to get their heads around the rapid changes shaken the kingdom. joining us is bloomberg's middle

east later. this came as a surprise to a lot of international investors. do we know the underlying reasons for why this happened now? course, it came as a large surprise, even by the prince's standers. -- standards. a few months ago, he said he would crackdown on corruption and no official is immune. we think the people that we spoke with said he wants to boost his credentials, and the crackdown slept one of the senior princes, head of the national guard, was widely seen the last holdover from the past era, who is not an ally of the crown prince. francine: we don't even know the allegations at the moment. do we know who will replace them? well, some of the technocrats

have been replaced. one is replaced by the deputy. one over the national guard was also replaced. we do not know what the charges are yet except for a broad brush corruption charges. the saudi attorney general yesterday said, there is an investigation undergoing. and all of these accused will still be able, are eligible to their assets until there is a formal indictment. francine: thank you so much. our bloomberg news reporter. let's get back to carl weinberg and jonathan column. i don't know how much you focus on saudi arabia, but there seems to be repercussions for the region, but markets such as oil. >> you know, it is hard to know today, with so much abundance of oil in places like north america due to fracking, whether this

will have a real meaningful effect. if this was 15 years ago, i think the market will be much more concerned. you can get some short-term disruption, but i would be shocked if this is going to meaningfully change anything, especially if you are broader based -- if you are a broader based equity investor. francine: thank you so much. later on bloomberg television, we will have a conversation with jeremy corbyn, the u.k. labour party leader and part of the opposition after theresa may, the prime minister, talked to leaders in london. this is bloomberg. ♪

♪ tom: good morning, everyone. tom keene in new york, francine lacqua in london. let's get the taylor riggs. attacker in the

deadliest mass shooting in texas history doesn't appear to be linked to organized peer groups. that is according to the associate press. authorities say the man carried an assault rifle when he opened fire inside a small church in south texas. 26 people were killed and about 20 people were wounded. the suspect was later found dead in his vehicle. over in the u.k., the special process scandal keeps getting worse for prime minister theresa may. it is only for after defense secretary to resign. and now the deputy denies reports that police found pornography on one of his parliament early computers. meanwhile, someone else has resigned over a report that he exposed himself to a male activist 16 years ago. of new study suggest the house republican tax bill would eventually raise taxes on lower earners. the studies come from an official congressional scorekeeper and a conservative policy group. house speaker paul ryan sends -- defensive bill says this is a clear, middle-class tax cut. and in belgium, the catalonian

president and for members of his government have been released. he turned himself in to authorities early yesterday. now, a court in brussels will have to decide whether to act on a request to arrest and extradite him. and u.s. commerce secretary wilbur ross faces questions about his neckties -- about business ties to russian president vladimir putin. it has to do with ross's ownership and a shipping company. the report is based on reports leaked from documents from bermuda. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. tom: taylor, thank you. we will see if we have secretary ross as well. there is so much going on in the markets.

we need to look back and understand the great, great miss call of the lehman lows. it was going to be a single digit world, and then it was not. leadinghe great bulls the charge consistently and persistently through this historical ball mark was jonathan dollop of credit suisse. and bring up bull, the chart. this is the dow back to 1920 with extraordinary consistency. and you still call for double-digit gains. state the case. >> first of all, i think the earnings growth environment will be 6% or 7%, which is not unbelievable. which will -- what will happen is recessionary risk is so low right now and the cost of capital is so low, and companies are doing such a brilliant job of returning capital to shareholders, you will get better market returns been growth for at least a few years.

tom: the idea here of everything is fine and up we go, up we go, up we go, how do you maintain confidence, and yet, have a mental stop loss under your double-digit optimism? >> the key is to understand, what are you looking for to tell you that this is going to go bad? we were talking about the tax issues is that as long as weight inflation is contained -- wage inflation is contained and the fed is not threatened by an increase in inflationary pressure, i think this thing will keep going. 4.1%does mean that unemployment, if we start to see wages come up in the cycle shorten, that reflationary risk continues. i will make you want to get off of this call. francine: carl, where do you think the inflation is coming from? china? will it be quite significant? see any't think we'll

inflation coming out of china at this point. people have been wondering about this for a long time. i don't see the inflation part of china, or the producer-level coming in on the side of the equation. the inflation risk of the u.s. is at high frequency is a domestic story. it becomes from the wager side. we believe in the phillips curve. tomorrow,e today if but as the economy continues to create jobs and there is no stopping, we will see wages at some point and it will require a fed reaction. bonds for stock jocks. bill gross, bond guy, was adamant, we were nowhere near a tip point on a .2% spread.

out forut this bloomberg radio. he would say 40 to 50 basis points are there. what is a flattening yield curve means equity people and particularly the banking sector? >> if you look at the last seven recessions, every single time you have had the yield curve go flat. it is a fantastic signal that recession is near. that is what we are talking about here. as long as recessionary risks are low, the market is better than you think, but went recessionary risks jump at you, that is when the fed becomes more aggressive and that is when the party ends. we can debated, but whether it is bill gross or the two of us, we will get a flattening of the curve. i don't think you will see between now and the end of 2018, which is why i'm confident. francine: jonathan, where would a recessionary risk come from today? >> the biggest issue, and i think i'll hit upon it as well, but we have a tight labor market.

at some point in time, you are going to see wage inflation begin to pick up. and that could very well surprised the fed. from an equity point of view, when wages pickup, profit margins get hit as well and the market gets surprised by that. tom: come on, carl. where is the wage inflation? i am going back here and tried to get back on the bloomberg. the jobs report -- bring up the screen for mr. quarles weinberg, if you would -- for mr. quarle carl weinberg, if you will. we had a revision down as well. where is the wage inflation? thatb is reporting companies have unfilled positions -- more unfilled positions now more than ever before. we are seeing reports of tightness in labor and the difficulty of finding people. these are indicators of wages going up. the economics of the matter is that inflation doesn't take off

if the unemployment rate comes down. wage pressure will pick up. we have to be patient and persistent. i know my selling mario draghi, but we have to be persistent and our belief that supply and demand for labor, the theory has it changed -- has not changed because we are in an extended cycle right now. what causes recessions is the fed. the fed, is right now, on a tightening path. and when the fed tightens, the economy gets into trouble. francine: go ahead. sorry. >> there is a whole out of other signals as well. but credit performance, if you think a recession is coming your way, you start to see businesses strained and not able to make their loan payments. that is not happening. you see public company starting to goof around with the reports and take one time write-offs to make their numbers. that is not happening. you see real estate activity rolling over.

that is not happening. i agree with carl. as right now, it seems though the trees have further to go, which is why we have this bullish outlook on stocks. francine: right. but at the same time, jonathan, you can argue that if the fed is to complacent for too long, it becomes more damaging the normalizing. >> 100%, and we would love to see the fed move back towards more normalized rates sooner to , if and when they act, we don't want them to act more aggressively. i think the stock market, while everyone fears the fed is the enemy, we'll look at normalizing as a very healthy thing. tom: carl, a question last week that we can drag forward this week. when the president used the word massive, or fantastic, talks about a run rate of 3% real gdp, can begin their? -- can we get there? >> we are short of that right

now, and it is hard to see with the labor force we have available that we can get at that rate and stay there for very long. we don't have the demographics right now, especially if we see immigration start to roll back on labor force growth or shrink the size of the labor force, which are all possibilities, it becomes harder and harder to get to that growth. productivity has been a problem. we would like to see productivity growth better. until we see the productivity pickup, we are constrained by the labor. >> we don't have a 3% growth rate. and you know this. quarter over quarter, if you do year-over-year which is the way investors think about the world, the growth is like 2%, 2.1%. golub the pessimist and weinberg, the optimist. thank you for being with us. we will continue. in your automobile, bloomberg daybreak.

this is bloomberg and that is post marathon new york. ♪

♪ let's get the bloomberg business flash. in the last hour, anthem has announced key management changes. she was previously ceo of united health care. formerl replace the president. he will inherit the task of solving a legal dispute over a failed $40 billion merger and a separate conflict with express

scripts. in the u.k., regulators say that rupert murdoch breached broadcasting standards. spent of the hannity and tucker carlson programs for lack of impartiality. fox news ceased broadcasting in the u.k. in august, and surrendered its licensed ofcom last week. european investment bank are hiring a wave of traders from the u.s. rivals, firms such as barclays and deutsche bank are offering raises for as much as 30% and guaranteeing bonuses in some cases. the european banks are trying to regain market share after years of cutting costs. and that is your bloomberg business flash. taylor, thank you. now on to brexit at theresa may. struggles to get ahead of sexual harassment scandals rocking westminster. during her speech at the annual conference, she heralded the level of foreign level directors investments in the u.k..

tim ross joins us. story. the inside how is it going? >> we are going to get another round of brexit negotiations this week. it will be a two day session, not the usual three or four. the hopes are somewhat limited about exactly how much progress they can make in that short period of time. francine: there are many leaks out of brussels. we don't know where they come from. it doesn't look great for the prime minister. are her days counted? >> every time something go a spector ofwrong, the election failure that she had in june, the loss of her majority means that people will be asking that question, how long can she last? will the inside try to get rid of her before she can make any more progress on brexit? corbyn, what was the

question you would ask mr. jeremy corbyn? >> a good question for him is really, what would he do differently on brexit on the prime minister? he has talked about putting jobs first, but what does that mean? doesn't mean he would be willing to keeping the u.k. in the single market? francine: very quickly, instead of negotiating with the u.k., this is a conservative party negotiating amongst itself. when do we get away from that? >> when they have agreement, really. they are saying the are fed up with the soap opera of the conservative party's policies negotiating amongst themselves about what they want from brexit. theresa may have to get a grip on that cabinet and state the vision of what the government will try to deliver. francine: tim, thank you so much. let's get back to carl weinberg of high frequency economics and jon golub of credit suisse. it what does -- what does brexit

me for the rest of the world? is it a domestic problem? >> it is similar to the conversations we are having in north america about nafta. the area that it may be more disruptive is as it relates to financial markets in london, and whether or not you can unwind some of the power of london in the global financial markets. in terms of trade issues, it is of secondary importance. tom: carl, you ever heard of a central bank that can raise rates in negative wage growth that we have seen? there is a great essay. seems to me to be impossible. >> it is not standard central banking practices. one can make the argument that they are on the backs of the cuts that they made. that accounts for one of them, but to more than the bank of england sites and conversation

about the assumptions of its forecast, it is really hard to tell what they are coming from. our forecast of high frequency economics, inflation falls all by itself. the year-over-year change in the cpi, drops off to 2% by the end of april as it valuation unwinds from the numbers come in which case the bank in the spring may be looking at an inflationary low target again. that suggests that the fed will not get the two rate hikes. francine: thank you so much carl weinberg and jonathan golub. coming up on bloomberg daybreak, they will be speaking to the commerce secretary wilbur ross at 7:30 a.m. in eastern time. you are driving over to do that interview. we will talk about allocations that ties him to russian allegations. he said the disclosure that he said there was not a disclosure.

tom: it will be delicate and timely, to say the least. look for that in a bit. it is wilbur ross's washington. this is bloomberg. stay with us. ♪

♪ francine: good morning, everyone. tom: "bloomberg surveillance" surveillance --"bloomberg surveillance" from new york and london. jon golub with us from credit squeeze in carl weinberg from high frequency economics. here is a moment that we pass from the 20th century into this century. veto,s the son of hero nominal gdp, the agony of japan from the 90's that in the 1990's. an earlier today, you lose track of the time. the president speaking. ever ande with the interests -- he is there. carl weinberg with us.

carl, you have been dead on on the japanese. eror is worshiped in japan. >> correct. he is a some bollocks leader of the nation -- he is a symbolic leader of the nation. trying to get out front of the generational change, and will step aside. he will step aside into a shinzo abe election, when they are trying to get things better. tell us about the basic concept about deflation. everything in my studies says you cannot do that. were japan is right now, the financial system is functionally insolvent. and the deflation is part of that. the fall in interest rates from 2% to 3% down to 0% has increased the value of liabilities on the books. bankrolled the system and

now they have to play that out and are forced to unwind all of that as a population shrinks and make the call on those assets. tom: and jon golub, it goes to the point of -- where japan has seen decades on and taking john of clearing -- decades on and decades on of clearing. >> investors view the japanese currency as a source of global stability when things are weak. there is this confidence in the underlying debt from an yet, you still have -- >> i don't know why the yen is whendered a safe haven rockets are flying over their heads. ,he nikkei is doing quite well not because the fundamentals of the companies are strong, but the qualitative easing is driving cash out of the bond markets. they are buying bonds faster than the government is issuing. so savers have to put this money

somewhere. it's more money going into stocks, but all contingent on the quantitative easing. >> they do have a healthy, global, equity market to the extent that people are putting money into equity. i would assume that that supports the japanese markets as well. more. are willing to pay >> when you read the survey of business conditions, all companies -- on average, most companies say that prices are going down, sales are going down, prices are going down. where is the fundamental valuation going? it has to be cash flow. tom: can i get a word in edgewise. seeing that you are having a great conversation. let me show you this bonus chart. we do this with jon golub, optimistic on the market. apple up to $1 million -- $1 trillion. where does apple fitted to the valuation right now?

i know you don't do individual staff, but come on. >> apple is trading at a multiple that is below the overall market. when people talk about how expensive stocks are, apple brings down the pe multiple for that overall basket. tom: here is my iphone. i just got my email on my iphone x. it came in today. i'm getting it sometime in march. there it is. good news. i get it in november. just getting. >> mine is coming this afternoon. would you like to buy it? tom: you probably needed on your next trip to china. gentlemen, thank you so much. with credit suisse, and carl weinberg with high frequency economics. at our london headquarters, francine lacqua, our new london headquarters. the newview out of

building with the secretary of commerce, wilbur ross. i don't think i got sterling appear to see if mr. ross can afford it, there it is,. . dollar elevated over the last two days. jon golub, double-digit on equity markets on 2018. again, wilbur ross in the news this weekend. delicate questions for wilbur ross from our own francine lacqua today. stay with us through the day. dudley at 12:00 noon speaking. this is bloomberg. ♪

♪ saudi arabia clenched down on

corruption. economicdent takes his message on call in asia. biggest tech takeover could be brewing. qualcomm braces for a $100 billion offer. good morning, this is "bloomberg daybreak." i am jonathan ferro. we take off a new trading week as we have done so many times through 2017 at an all-time high. 8-week winning streak. futures up and pretty much unchanged. the dollar is stronger against the euro and weaker against the pound. euro-dollar trades at 100 -- 1.1592. treasury yields down a basis point and almost on the average for the 10-year yield. alix: an