inched towards passing their tax bill. chief tax writer brady leaves that got the votes to pass it by thursday. central bankers convene in frankfurt. europe divided. the u.k. grappling with high inflation and subdued growth as germany's economy heads towards its best year since 2011. from new york city, good morning. this is bloomberg daybreak: asia daybreak. i'm jonathan ferro alongside david westin and alix steel. let's get you up to speed on some of the market action this morning. the countdown to the open with futures just a little bit softer after a streak yesterday on the s&p 500 the euro responding to some strength across the continent. gdp numbers out of germany. growth numbers looking rally -- rather good. two basise in by points at 239 on the u.s. 10 year. alix: let's look at what the data out of germany did for the

dax. inflation only hit 3% last month. ray dalio putting his money where his mouth is why trickling his bets in some of the gold etf and brent a little softer as the iea warns of instructed demand. jonathan: was that in his principles? was that in his book? he never told us about his position in gold. david: maybe for good reason. alix: it's a huge bet. david: for news outside the headlines we head over to emma chandra. hisresident trump has ended trip to asia declaring that .rade rules have changed he left manila after two days of meetings with leaders from southeast asia nations. he tweeted all countries know the u.s. must be tweeted fairly. he didn't get any specific assurances of on intellectual

property theft. the chief tax writers says there are enough votes in the house to pass the tax reform bill this week. house ways and means chairman kevin brady says he has told the senate that preserving deductions for property taxes is a high priority. the u.k. a warning for russia from prime minister theresa may. she told vladimir putin that britain will retaliate against meddling in elections. she said, we know what you are doing and you will not succeed. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. jonathan: the world's most powerful central bankers dissented on frankfurt. they all met in germany to discuss the future of monetary policy communication. the debate had officials in accord on the use of forward guidance as a tool of monetary policy.

here's what some of them had to say. we also formulated a framework where the various parts of this forward guidance the interest rates on one side and the asset purchase on the other would interact in synergy. >> for us almost all guidance should be conditional and related to the outlook for the economy. >> to a much richer instrument. >> expectations are formed not but backwardng way looking way. >> in the end it's a bit of a rounding error relative to agents in the economy. households and businesses. >> it's a matter of policy itself. jonathan: joined us now from frankfurt is matt miller. a rare opportunity to have these

incredibly powerful figures on the same stage talking about the same thing. what did we actually learned today? matt: the main thing we learned is they are in agreement that transparency is an effective monetary policy areas cash -- policy tool at least to a point. each one had a slightly different take on communication but all seemed in favor of more transparency and none seemed to even question the possibility of going back to the days of alan greenspan where everything was very opaque and all of communication had to be somehow figured out and investigated. they all want to deliver a clear and solid message to a number of audiences. jonathan: yellen is stepping aside. in 2019.is time is up

was the regime of the last decade or so. we talked about radical transparency and ray dalio. these are the guys that have pushed it forward for monetary policy. do you hear the same thing in as?any he takes over the federal reserve? powell for example has never dissented on any decision so it seems like he is one to go with the flow. was an experiment that basically was born of the financial crisis, forward guidance at least according to what the central bankers said today has been very successful and even if you look outside the walls of the central banks and look onto wall street goldman sachs has recently put out a

piece saying they think the transparent communication has been a very successful tool as well. doesn't look like there would be any reason for the next generation to throw the tool away. said this doesn't mean they will be using forward guidance forever. it is something they could put back in the box it will always be there. jonathan: great to catch up with you. joining us now around the table, anastasia amoroso. and from amsterdam, simon wisner. let's begin with you. -- it seemsnce in to me they're finding it a lot more difficult as they are trying to tighten. does it work for you? >> i think it does work. janet yellen went out of her way trying to explain the dots.

her way of explaining was this is never the set in stone projection. frame the decision. we have to define a little bit which market. the fed funds futures may not be quite there with her. if you ask the primary dealers their estimates are actually very well aligned with the fed dots. david: i wonder if there is a point at which you can be too transparent. sometimes total transparency about every indecision and conflict does not give you a clear message at all. is there a point where there can be too much transparency from the central banks? too don't know if there's much transparency. markets like transparency of course. their ownake conclusions. transparency is ok but not always a correct guidance of the future. do to what could they improve communication?

do you think the central banks have been doing a good job? said, when weady come to quantitative targeting it will be hard to prepare the markets for that. alix: what does the stage look like in a year-and-a-half? it could be quite a bit different. janet yellen is not going to be there. potentially kuroda is not going to be there. what's really important is not just that stage but the committee around the room as well. one thing we are looking for is a turnover in the fomc committee. have a number of dovish least you'd members that are going to be rotating out and a number of more hawkish members rotating in. even though jay powell has historically voted with janet yellen and we would consider him a centrist you can still get a modestly hawkish tilt to the

fed. jonathan: the concept of forward guidance was really good to lower longer-term interest rates and tied the hands of the rest of the committee. it doesn't give you much space to dissent. , do you're talking about you sense more dissent around the corner? i think we could see that. the reason is that inflation is likely to firm up in 2018. you have to decide whether to act on inflation or financial want ton or you still deliver stability to the markets. we could see more dissent based on that. alix: who has a harder job? we saw this begin to play out with the ecb. the more hawkish rhetoric seems to be let's look at a wide variety of economic data instead.

you have to look at if you want to inflate the financial markets or you want to inflate the real economy. what we have seen until now is inflating the financial markets. i don't know if they can at if u want to inflate the financial even get it ready to inflate a real economy. that will be always and also next year a tough decision. jonathan: you are sticking with us. anastasia amoroso and simon wiersma. they are discussing the eu withdrawal braille -- bill. saying there's only a 50% chance a divorce deal gets done by december. we will take a look at what's next as the clock winds down. from new york, this is bloomberg. ♪

50-50.n: the u.k. chief brexit negotiator says those are the odds on whether he gets a breakthrough in divorce talks by december according to european business by david davis yesterday. his spokesman says it is categorically untrue. for the latest we are joined from london by emaar ross thomas. europe divided once again. what is going on here. davis said yesterday that the chances of a deal or a werethrough by december just 50-50. the reason december is important is the clock is ticking. britain will leave the eu in march 2019 with or without a deal. be final deal really has to

done by october of next year to give time for the european parliament and the u.k. parliament to rubberstamp it. you're looking at very complex negotiations about the future relationship being crammed into something like seven months if a deal isn't done by december. there wasnegotiations about thee relationship being crammed into something like seven months if a deal great hope that progress would be made in october. the next goal if you like is december. that's a mid-december summit and the deadline is more like the end of this month because the machine of the eu requires a certain amount of time for documents to be drafted and positions to be agreed. you're not going to see theresa may throwing an offer on the .able it's more about the back room preparations made before that date. jonathan: it seems to me the terms of this debate are being set by the european side and it

appears to me that the u.k. side can't meet any of these things. conversation that has gathered pace recently is a serious situation where the u.k. just walks away from talks. is that a negotiation strategy you are hearing about? is that something you hear more about in the coming weeks? >> we haven't been hearing about that tactic in recent weeks. we did hear about it before the october summit. it didn't come to pass. leaders rallied together and tried to give a rather encouraging message to theresa may. that was just words. they did offer anything else. the u.k. agreed to the timetable back in june. they have been pushing back against it and the u.k. position is they have already made concessions. they have set out a certain amount on the divorce bill. they haven't put a final number on it and they haven't agreed to all of the demands from the eu side. their point of view they

have made one step and they want the eu to meet them in the middle. the eu is saying that basically they need more before they can -- sufficient progress has been made and they can move on to the next stage of talks. politics is messy. the data not great. u.k. inflation rose less than analyst estimates. cheaper fuel offsets rising food prices. i want to bring back in anastasia amoroso and simon wiersma. i'm sure that carney is happy because he doesn't have to send a letter to the chancellor because it's just below 3.1. it is still not great. i think the politics is worse. sincee seen it happen december. the pound should be rallying than other central banks.

clearly there is a risk premium assigned to politics and the chances of brexit talks fall apart. the risk premium and probability certainly reflected in where the pound is today. alix: does that mean inflation has peaked? part of the weakness came from lower fuel prices but that is unlikely to last and you have brent at over $60 a barrel. >> i don't think inflation prices will decrease. inflation expectations will go onagain and that will happen the currency and the expectations. inflation is one thing. politics is another thing. from one time to another they will switch places. the policy is weakening even further. when this vote happened 18 months ago the one thing businessman wanted was some certainty about something. is there anything we know today

that we didn't know 18 months ago? has there been any certainty injected into this process? >> not too much. do know is that the consensus is emerging for a softer transition into eventually a harder brexit. by march of 2019 there will be a change. do know is that the transitional arrangements with keep a lot of the status quo. in of our predictions back when brexit occurred is this is going to slow down investment in the u.k. and we have absolutely been seeing that in the numbers. capital spending is running about five percentage points below where we would expect it otherwise. it's definitely having an impact on the economy. david: what happens to that money? does it sit on the sideline or does it just go other places and it never can be recovered by the u.k.? but theldn't say never

first thing will be that people will find other interesting places to invest. there's not any progress being made so they will find some other places to put the money in. one area we are seeing a pickup in investment today is in the eurozone. this is the first time we are seeing a pickup in. perhaps that's where the money is going. wiersma, thank you for joining us. anastasia amoroso will be sticking with us. coming up, junk bonds stabilizing after their worst run since march. is there more pain coming? we will talkit's definitely havt on the economy. bond market next. this is bloomberg. ♪

>> this is bloomberg daybreak. i'm emma chandra. spending on hurricane recovery -- growth at home depot.

the cleanup and rebuilding efforts in the wake of hurricanes in august and september. home depot sales rose almost 8% beating estimates. profit was up more than expected. billionaire activist investor pulsing or is targeting mall owners. elliott management has taken a stake in taubman and plans to push for changes. they say elliott has had talks is -- and is exploring going private. google is facing another antitrust lawsuit in missouri. the attorney general is investigating whether google manipulated search results to favor its own results over competitors. that's your bloomberg business flash. jonathan: in the bond market, a after calm in high-yield more than two billion dollars in

outflows. still with us around the table, anastasia amoroso. we can bring back this chart on the bloomberg terminal. high-yield credit versus the s&p 500. the s&p looking really resilient in the face of fragility in credit. what do you make of that? >> the technical issue is about a dozen names were responsible for about half the spread last week.we have seen a lot of it had to do with telecom. awouldn't say this is systemic risk but i will say that it did call investors attention to the tight level of credit spread. at 420 basis points we are still above the tight we have seen in june of 2007. one thing i want to caution investors on is we may not be

getting back to those tight levels we have seen back then and the reason is remember what happened post-financial crisis is the liquidity retrenchment at the same time with the demand for bond liquidity actually rose. because of that there is a premium that has to be accounted for and embedded in the credit spreads. we may have to start thinking about just how rich the valuations are. jonathan: was the strategy? is you may use some of the strength we are seeing to put on a hit. we are looking at opportunities to take advantage of potential spread widening in the cds of some of these indices. the other reason to look at that particular opportunity is that if you do it in the options format the implied volatility for positioning for wider credit spreads is very low. it's as low as it has been in november of 2006. and thatn opportunity

is to add protection, to add a hedge because some of the risk can't be foreseen. thingsn: a lot of the that happened last week revolves around the following. is that more risky to take credit risk off and put duration risk on? >> i think both have elements of risk at this point. i do think the recent cause we have seen in treasury yields is just a pause. i think we will see shorter rates going up and i do see upside to longer-term rates as well especially of tax reform passes. the playbook for higher rates to me is if we see former inflation that should cause the fed to hike rates and that should cause the short end of the curve to move higher. if we get tax reform which i also believe is not a question of if but when then i think that

boosts real growth expectations and i could boost long-term rates as well. i would be positioning accordingly as well. jonathan: anastasia amoroso. us. friday you can catch 30 minutes dedicated to fixed income. still ahead, attorney general jeff sessions is back on capitol hill. he will be facing the house judiciary committee over russia's involvement in elections. markets about two hours away from the opening bell in new york city. futures a little bit softer. we are down almost five points. -25 on the dow. this is bloomberg. ♪

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two hours away from the cache open. marginal gains on the s&p 500 to snap a very small losing streak on the benchmark in the united states. futures little bit softer this morning. dow futures negative about 30 odd points. the -- i elsewhere promised i would dedicate this story to the italian goalkeeper. yields command two basis points. what a depressing day for italian football. alix: what happened? jonathan: the team just wasn't good enough. out ofthe u.s. has been it for a long time. jonathan: the italians feel very differently about football. alex really doesn't care about these things. let's cross over to emma chandra and get some headlines. the justice department may appoint a special counsel to investigate trumps political

rivals. prosecutors are examining allegations that the clinton foundation was tied to it a decision by the obama administration to let a russian backed company -- access to uranium in the u.s. republican senators are joining those who called on to more to drop out of the senate race in alabama. this afternoon allegations against the republican candidates surfaced monday. a woman accused more of sexually assaulting her when she was 16. president nicolas maduro's governor road to investors about $200 million in interest on its debt and failed to make payments . venezuela has struggled with payment delays in recent months in part because of u.s. economic sanctions. theu.s. is on the verge of biggest oil and gas boom in the history of the industry according to the international energy agency. give the credit to shale oil and

gas. in u.s. oilgrowth production will equal that achieved by saudi arabia at its peak. global news 24 hours a day powered by more than 2700 journalists and analysts in over 120 countries. i'm emma chandra. this is bloomberg. next revolution will be -- the next shale revolution will be playing over the holidays. jonathan: do we have to pay for this now? there will be a box set online. shameless plug. oil has not found a floor at $60 per brent and higher prices could lead to demand destruction. joining us from london is will kennedy. what struck me most is let's juxtapose the opec report we got yesterday with iea report.

>> that's report. opec was very bullish about the demand outlook next year. they have actually trimmed their forecast for 2018. strootman by two things. is starting to crack demand and forecasts offer a warmer than expected winter in the northern hemisphere which is always a big driver for oil demand. the: i brought up distinction because it is significant. the difference is about one million barrels of oil a day. that's kind of equivalent to what opec is cutting right now. those numbers at the margin really matter. >> they do and they especially matter two weeks after and opec meeting where the ministers are going to be sitting down sketching out their strategy for next year. they really need to know what the market balances are. they will need to keep their policy in place. if it looks like the opec

numbers suggest than actually the markets close to balance -- people will start arguing about how much policy they still need. alix: we are seeing a little bit of weakness. the yellow line is the brent price. the white line is they brent contract for january and december of next year. if it weakens it means the current month's getting weaker. prices rolling over. it tends to signal more than oversupplied market. does that mean more downside for spot oil? >> quite possibly. people really do look at this spread to give an indication of how the physical market is feeling and the fact that this indicator -- traders may feel the market got a little overbought and the should be a correction. alix: thank you, will kennedy. also on set with us, anastasia amoroso. energy, you like it?

>> i do. it is a place you want to be at. we have been looking for oil equilibrium and i think we are finally discovering it. of a shalerspective well producer or even a u.k.-based company you can make money at 55 or $60 a barrel. oil breakevens are quite low in some parts of the basin. you are filling in for me now. some of the u.k. producers can cover their dividends at 55 to $60 a barrel through the earnings of these companies are back in black. even though we don't see materially higher prices it is possible for cash flow of these companies. alix: what part of energy?

you want the oil services or the midstream, was going to be the most value? >> oil services might be an interesting place to look at. the big theme for us this year is going to be the pick up and global. happening across different sectors. it is yet to happen to a greater extent in the oil and gas sector. that could be a catch-up trade. one line item in the tax reform way is that either identical to both the senate and the house is the full and immediate expensing of capital equipment. that could actually be an extra boost to the cap backstory. oil services fit into that seeingand we have been cuts in oil services pricing. we see that pricing firming up. we could potentially see service inflation going forward. jonathan: are energy stocks less sensitive to the price of crude

now? some are. i would not say all of them are immune. that charges.e at the end of the day very much depends on the price of oil. i don't think we can escape the relationship. i wonder if the sensitivity has changed considering the amount of efficiencies these companies have generated. i'm sure they would love higher oil prices. looking at the breakeven cost things have changed quite radically. costs have fallen. because of that we don't need to see $100 barrel of crude oil. persists, if quo supply growth continues to be balanced with demand growth and inventory continues to be drawn down then oil companies can be

much better positioned. a lot of people were out there for value and the cyclicality. that was too early. why do you feel like now is going to be a better time? >> we have seen the balance is improved so much. storageook at global that has come in quite a bit over the summer. before you would look at the versus the five-year average and have a huge gap that opened up. we are much closer to closing that gap today. demand growth for next year is being offset by supply growth from the u.s. shale. if the opec cuts gets extended that could actually lead to further inventory draws into next year as well. that's why i feel it's a much better balance. alix: if you wind up getting oil

services does that read true to industrials? that could be a big boon for them. to look very carefully at capital goods suppliers in the u.s. and globally. one idea we have been thinking about lately is the japanese industrial straight specifically. you find that tends to have the highest beta to the production. as it is picking up around the world as a function of capex that could be very powerful story for industrials whether it's in japan, europe or the u.s. as well. alix: still ahead, attorney general jeff sessions is back on capitol hill. he will be facing the house judiciary committee over russia's involvement in the u.s. elections. we will tell you what to watch out for. you can tune into my colleague tom keene over on radio.

tune in to him and when you get somewhere turn on the tv and watch us. this is bloomberg. ♪

>> this is bloomberg dave reichert i'm emma chandra in the hewlett-packard enterprise greenroom. coming up in the next hour, the tellurian ceo. this is bloomberg. david: jeff sessions is back in the news today when he appears before the house judiciary committee to answer questions once again about what he knew between contracts -- about contacts between the russians and the campaign. or hadve never met with

any conversation with any russians or any foreign officials concerning any type of interference with any campaigns for election in the night dates -- united states. george papadopoulos has pled guilty to charges brought by robert mueller and told him he specifically told sessions he was talking with the russians about getting information to help the campaign. one of those who will be questioning attorney general today is hakeem jeffries. we welcome him now from capitol hill. welcome to the program. welcome to bloomberg. as you look forward to oversight committee hearings what will you be trying to get out of him? successfulbe a hearing from your point of view with respect to the attorney general? the attorney general has been less than truthful on multiple occasions when testifying before congress about contacts between

himself, the trump campaign and russia. today he has the opportunity to finally come clean. the stakes are that our democracy was attacked by a hostile foreign power despite what president donald trump may think that the direction of vladimir putin in order to help place donald trump at 1600 pennsylvania avenue. that is a great risk to the integrity of our democracy and the american people deserve to know the whole truth and nothing but the truth and that's what we hope to get out of jeff sessions today. david: certainly a really important goal. what we have heard so far is that although this was raised by mr. papadopoulos with jeff , jeff sessions immediately shut it down and said we don't want to deal with of the russians. if that is the testimony under oath does that take care of the problem? >> it absolutely does not because as you indicated on multiple occasions jeff sessions came before congress, testified

to one thing and then facts were subsequently revealed that clearly made his testimony inaccurate. in january he tested before the senate judiciary committee and said he had no contact with russia whatsoever. it turned out he attended a reception with ambassador at theg act in april mayflower hotel. it also turned out and he admitted that he had a meeting with the russian ambassador in july of 2016 at the republican national convention and he also met with the ambassador in september. why was he initially untruthful? and then jeff sessions came back before the senate intelligence committee in june and he said that he had no knowledge, had aboutard even a whisper possible connections between the trump campaign and russia and then it turns out based on the play by george papadopoulos that there was a meeting in late

march of the foreign policy advisory committee that jeff sessions chaired a trump tower and in that meeting papadopoulos raises the issue about a connection between the trump campaign and russia. russia having helpful information. and then it raises the suggestion of donald trump perhaps even meeting with vladimir putin. again why was jeff sessions inaccurate in his sworn testimony before congress? david: you just laid out a pretty compelling brief. i would expect no less out of a former paul weiss lawyer. are you pressing to say that jeff sessions should not hold the job of attorney general? that he is not fit for office? >> i think that remains to be seen. the more we learn the more troubling things become as it relates to jeff sessions's truthfulness. today he has an opportunity to come clean before the american people and we can make some determinations.

i will point out that when jeff sessions was in the united states senate he voted to remove oil clinton from office on the basis of perjury and during the speech he gave on the senate floor he talked about the importance of the rule of law and not holding the president of the united states to a different standard. the attorney general of the united states of america should be held to the highest standard possible under the law. david: no question. , this isme time something americans have trouble understanding as they watch this transpire on capitol hill. there are real problems in the country. people are hurting. they are worried about growth in the economy. they are worried about infrastructure. what does all of this have to do with the business of the country? is this going to make any progress at all helping the country? of ourintegrity

democracy was attacked. judiciary committee has not locate an to get to the bottom of it on behalf of the american people. we need to continue to focus on creating good paying jobs and strong economic growth. a plan to focus on better jobs, better wages and a better future for the american people by raising their pay, in theg their costs areas of health care, child care and education and also making sure we provide the american people with the tools to in the areas of health care, child care and succeed in a 21st century economy as we move from an industrial base economy to a digital technology-based economy. these are all very important challenges we will continue to focus on. david: you are in a minority at least until next fall. right now there is a tax reform bill pending in congress. are there things you can put into the bill, weights the democrats can reform it to make it better for your constituents? it'se product is so bad

not clear that it can be improved. i had a former partner tell me that you can never edit a bad draft. this is a bad draft and it's not clear that any real improvements can be made. the problem is the premise of the so-called tax reform bill is that we would provide significant tax cuts and relief to middle-class americans. as a result of the details of the bill middle-class americans are going to get hurt because of the elimination of the state and local tax reduction, the limitations on mortgage and theerty tax deductibility, limitations or infect elimination on the medical expense deduction. on and on. these are all things that are like heatseeking missiles aimed working-class and middle-class americans. i think we have to defeat this bill, start over and try to come together with something bipartisan that actually helps the middle class and the companies of america. david: let's assume for the

moment you don't defeat it. right now it looks like it might go through. i suspect you are going to say if this becomes the law of the it's more likely that democrats will take over the house of representatives. if that's what you believe why? >> there's a body of evidence that continues to come out. that was the effort to take away the health care of 23 million individuals throughout this country. tax bill would impose an increase on at least 38 million american middle-class families and there's no real evidence that the republicans have kept their promise to do anything about tax bill would ie an increase on at creating more good paying jobs, improving the crumbling infrastructure in this at an, arriving comprehensive solution as it relates to immigration challenges in this nation and instead they have embarked on an effort that would essentially be

a massive giveaway to special interest companies, millionaires and billionaires without providing any meaningful relief. that will be a brick problem -- big problem next year. at&t is readyp, to take on the white house. the company says it is willing to probe the trump administration's role in its deal for time warner. we will discuss the details next. if you have a bloomberg terminal, check out tv . tv on your terminal. this is bloomberg. ♪

david: this is bloomberg. i'm david westin. at&t wants to buy time warner but were now is out of the justice department that they have some problems with it on antitrust grounds. now overnight bloomberg is reporting that in fact the time warner lawyers and the at&t lawyers are making it clear that

we are going to seek discovery of everything the white house had to say to you about this deal. joining us now is paul sweeney. this is pretty tough talk. saying we are going to subpoena, we are going to get all of the information about possible white house interference. . >> i think this is just another round of posturing on the part of at&t. they would consider blocking this transaction. i don't think this is necessarily a route that at&t and time warner want to go down. they recognize their transaction is facing probably higher level scrutiny than they had expected or the market had expected. david: that's brave talk. when you try to subpoena the white house, there's something called executive privilege. the interesting question was murdoch hadrt

dealings with the white house. >> we see other media companies who may be harmed speaking out in the justice department. i had dealings with the white house. suspect fully well that rupert murdoch and other media companies, we know that dish network has already voiced concerns about this transaction. the question is were the communications proper in the proper channels. they want to tell us some things we have to comply with. promises we have to make about how we treat competitors. what is the justice department's route? >> is unclear and i think the level of scrutiny the justice department just recently has in putting on this transaction has really caught investors by surprise as this is a transaction that is a vertical transaction. typically gets approved with some behavioral remedies and it's very much in line with the

comcast acquisition of nbc universal. the question is what is justice looking for. is it just behavioral things? very uncertain. david: paul sweeney of bloomberg intelligence. is it going to apply to other companies or is this a one-off? jonathan: i thought it was going to get easier. program, megthe gentle. an exclusive sitdown interview. she joins us to discuss her firm's $15 billion agreement. that's coming up very shortly. in the markets one hour and 30 minutes away from the open in new york city. a little bit softer on futures. down almost five points on the s&p. this is bloomberg. ♪

♪ jonathan: house republicans aims toward their tax bill.

they have -- they believed they had the votes to pass it by thursday. discusssits down to communication and the u.k. grappling with high inflation and subdue growth as germany's economy heads toward its best year since 2011. from new york city, good morning, good morning. this is bloomberg daybreak. i am jonathan ferro, alongside david westin and alix steel. yesterday, a marginal move higher, snapping a two-day losing streak. today softer on s&p futures, down .2.if you are looking for direction in the fx market, in the g10 space, the euro stronger against everything. in the treasury market, yields are up by a single basis point. 2.39.

alix: let's see how that strengthen the german economy is speeding through, the dax is down, softer on the day. sterling relatively flat. a little below estimates. we will discuss that. gold down by .2, despite that ray dalio buys big time and tripled his stake in ishares gold trust, so putting his money where his mouth is. bitcoin: and they get on the pull back the last couple of days, so you have bitcoin, dalio into gold. david: interesting. bug people,e gold bitcoin is the craziest and i never thought i would see the day. jonathan: it was a religion in bitcoin. there is a god. what was his name? the japanese fellow? david: that allegedly started -- jonathan: exactly. ok, now, headlines outside the business world.

we will go to emma chandra with first word news. emma: president trump has ended his trip to asia, declaring trade rules have changed. he left after two days of the beams -- of meetings and tweeted when it comes to trade, the u.s. must be treated fairly, that he did not get assurances of issues like market access and intellectual property theft. on capitol hill, the chief tax writer says they are confident their are enough votes to pass it this week. chairman brady said he told the property uptaxes of to $10,000 is the priority. campaign toat manage credit risk is taking hold. the economic expansion there slow down and retail sales were less than expected. meanwhile, china's fixed asset

investment for the next 10 months of the year met expectations. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. jonathan: thank you. the world's most powerful central bank will this end, they all met in germany to discuss communication. the debate on communication had officials and agreements on the issue of forward guidance. here are some of what they had to say. >> we also formulated a framework where the various parts of this with interest rates on one side and the asset purchase on the other would synergy.in a >> for us, really, almost all guidance should be conditional and we waited so the outlook to the economy. use a richer instrument. expectations are formed not only

by forward-looking, but also backward looking. >> in the end, it is a bit relative, more than a bit of a rounding error relative to agents in the economy, so you have to get out. >> eight is a matter of policy itself. jonathan: joining us from frankfurt is matthew miller. it is a fascinating conversation and when you put these guys on the same stage, we are listening. how can we apply what we learned to help monetary policy might or might not be bald in the coming years? -- mike evolve in the coming years. matt: at least for now, it has evolved, forward guidance into a permanent tool in the box that said governors can grab. we have had jawboning, people talk about -- job owning, people talk about it is supposed to be

more transparent, solid delivery of the message for the economy, and they talked about delivering forward guidance to market participants so they want to tell the public, whom they serve, what they are doing a make it easy for everyone to understand as easy as they can. they want to keep using this. that is the one message we got from all four of those federal bankers that control half the world economy. --y like -- four of those half of the world economy. they want to use it as a tool. jonathan: they sit there and have to discuss what it means for monetary policy, what they do not mean. that is what it has come to. do they understand from the market perspective, this is a whole lot less effective with the timing? dot: that is right, the

leads to a question of reliability. you are putting yourself on the line there and at the end, you are very easily proved wrong depending on how they turn out. showsnow, the dot plot three rate rises and the market does not believe that. fed comese if the to the market or the market moves to the fed. what they said it is as long as they get their best forward guidance and not completely target toward guidance -- for example, they were not say, other than showing you a dot plot, which is not the same as they will say they will raise rates in december or float something to see how the market feels. they say they do not leak things like that. they are trying to make forward guidance the best practice and they all use the same kind of tools and guidelines. jonathan: they do not leak anything. there are no stories, sources

about central banks. alix: never. miller, do you want to weigh in? matt: i wanted to point out you bitcoinking about that earlier. jonathan: that is right. thank you. we have the head of microstrategy and we have scott wren, senior equity strategists. you write the following -- central banks have a policy discussion from the viewpoint nothing goes wrong and complain about market rises that reflect the viewpoint. the forward guidance they offer us, if it is a smooth path, means everything will be ok. these can move up and down and we will respond and they will make it a smooth half.

they complain about complacency and asset prices at the same time. a do not add up. scott: correct. i think the last ecb meeting was the perfect example. they cut purchases in a dovish way. we are setting up where they are walking us push us, forward, and if you look at the front of the yield curve, they are flat, so for the long time -- for the first time in a long time, we could be surprised. jonathan: what struck me was the group think, that all agree with each other. pretty much everyone around them to a degree agreed, as well. is that dangerous? >> that is dangerous. the ebb and flow of the economy, u.s. economy, european economy, is generally caused by said mistakes. the fed is telling us in fed speak they will raise interest rates three times.

in the stock market in no way believes they will see three hikes. but next year is what the market is going to be about. i would argue that is going to override what happens with taxes . it will be what the fed will do. a raised rates three times, some competitors think potter times. that is a problem for stocks. raises antt interesting points, not just this time but often in recent history, the fed has over predicted rate hikes. is that part of the success of the communication because they like it when it is more dovish and may not like it if it went the other way. >> that is one of the times the market was behind and we did not realize how committed the fed was to hiking rates so they have gone out of their way to be more dovish. they are also shrinking the balance sheet by $6 billion a month now, up $12 billion in the

first quarter, so that talents she shrinkage will be another effect. if it is it effective to the dovish side of what they predicted? >> i think it is sometimes instance, aor december rate hike was telegraphed well. next year, it will be interesting in the next meeting or two, where they have press conferences after, are they going to change with the languages? they did not after september but the market did not believe it. i think we will come to a point where if they keep pounding that three rate hikes home next year, we think there will only be to, but if they -- only be two, but if they do, that will affect the market. >> we see this in that 10 and two treasury spread. for a while, i was able to

ignore that because there is purchasing going on globally, central bank policy globally, but i think it is affecting the market. you are running the risk they will slow down the economy, and create problems. jonathan: who is the most complacent on that stage, the market -- who is the most complacent, the people on the stage or the market? >> i think the people on that stage. up, presidentng trump is heading back to day twoon, where it is of this senate tax bill market. details shortly. this is bloomberg. ♪

♪ bloombergs is daybreak. sales growth at home depot, the largest home improvement chain, from rebuilding efforts in the wake of hurricanes. sales rose almost 8%, profit was up more than expected, too. congress has its best chance in years to change regulations after the financial crisis. the republican leader of the key senate committee struck a deal with democrats to ease burdens on financial institutions, providing relief to small and regional lenders. and paul singler is targeting incentives. elliott management has taken a stake and plans to push for changes. they say they have had talks and will explore going private.

trump is on his way back to washington after his five nation tour of asia. he had strong words on trade, delivered by twitter. this is what he said -- after my tour of asia, all countries dealing with us on trade know the rules have changed. united states has to be treated fairly and in a reciprocal fashion. here to report is kevin cirilli. the president said the rules have changed. does he get to do it by himself or does he need agreements from the countries? has been: he will :eed those countries -- kevin he will need those countries. are not indicate they sure entirely with the endgame for the president would he with regards to the trip. the president is expected back in washington i will be at the white house tomorrow. we are anticipating some type of

announcements on economics but i can tell you in terms of deals that have gone through, there have been a host they're hoping to tell as success for the trip. works his way back to the united states, he is coming back to assume tax reform talk. i understand he may get involved personally. will the president hurt or help? kevin: depends on the lawmaker, i think, but he has been involved in the process, similarly to what we saw during health care. works long hours and calls offices around the clock. in terms of crafting and the policy legislation, that is being done on capitol hill. there is a hosted difference to the house and senate and it will when thisting to see goes to conference, which would you next week or the week after the thanksgiving holiday, but

they are on pace to get this done by the end of the year. david: who would have thought? kevin: [laughter] alix: the bull case for volatility is tax informed but the new york fed has another take. the author side historically, volatility may have been abnormally high rather than the current been low. the correct level for the vix may have changed, while the current level is low, it is difficult to pinpoint the mayzon over which the vix increase. here at academy securities, chir and scotland. what was your take? >> i agree a little bit. one of our games has been there strategies,ty like richmond someone owns it stocks and bonds on a global basis. in oppositehey move

directions, there is less to do, so you have less trading, less need to buy protection and that helps drive volatility. it started post-brexit, were strategies for risk were well and you have seen influx of every strategy that does that, so i think we are in for a time of lower volatility the curse people are managing risk at a portfolio level rather than asset class by asset class. >> when you have global lowation convert jet levels, and these markets just grind slowly higher, you will have low volatility. when volatility picks up is when you have inflation and interest rate differentials meaningful between countries and central banks that have to step in and try to do things. when none of that is happening, which we have not had for quite a while, volatility will be low. until we see higher inflation

and see some meaningful central-bank action, or they feel they need to step in and stop the train, so to speak, volatility will stay low. alix: a couple months ago, we were talking volatility has to pick up and now the narrative seems to have changed. when you are taking a look at volatility re-rating, is it the number or speed you have to look at? .> i think it is both i think we will stay low for a while. volatility is traded in separate asset classes now. i think we have to start viewing volatility more as a traditional asset class. jonathan: if i want to get long involved with the vix, what is positively correlated to it that i can buy? where do i go? to sellu want

volatility, right now selling credit spreads, which is reasonably attractive -- we are wider than we were precrisis -- and everything is heading well for the large companies. even in the stock market. in qualityeen an up trade, both in stocks and bonds. i think that is a safer area and volatility is so low that i think you are safer than that coming into year end. jonathan: we will have you -- thank you for having you on the program. -- thethat we see in flat yield curve in the treasury market. we will discuss both, next. this is bloomberg. ♪

♪ jonathan: high-yield bonds stabilize for the worst go back

in more than seven months. stocks slipped thursday and friday. still with us, peter tchir and scott wren. i want to bring up another chart because there were two big things, one was the corrections and credit and this has been a trend in the kluber, a flag or yield curve. that spread narrower and seven basis points. this onee signal in that wasn't there before? >> i think the fed is trying to make every effort to get people to believe in the dot. i think we are seeing no real -- of inflation and when we start seeing these get that slots, you talked policy mistake. jonathan: scott wren? the yield on the 10 year is not below to 40 for nothing.

-- below 2.40 for nothing. inas an equity guy interpreting this comment the fed is going to make a mistake next year, hike rates too much, and that will be a headwind for the economy and that will put downward pressure on the 10 year yield. we have a lot of retail investors who think because the fed is raising rates that the yield on the 10 year will go up. 2.3 toll not happen in a 2.4 economy. the yield will go down. jonathan: let's say someone is watching now and says this has no economic signal whatsoever, it is about central bank purchases and nothing else. whatever is going on, that is not a signal, what is the real world impact of a flat yield curve, regardless of what is driving it? or anyoneks,

generating income from higher yields, it is a problem. you have flight occurs and you cannot do this trade. jonathan: does the fed need to listen, regardless of what they think is driving it? >> i think they do have to watch this. at this isremember occurring as our balance sheet is shrinking and draghi is pulling back. it is weird that is going on now that nothing has changed. i am more concerned now been six months ago. jonathan: here we are with 3% inflation and the united kingdom, but deeply negative real yields, what is the message that comes from that? acrossuld say that europe, monetary policy, these negative yields, you know, it is a problem. it was a central-bank problem to address certain issues on certainto address

issues and it has been difficult to work every out of. they have inflation -- of course, the pound has been weak, but monetary policy in europe is in a real top spot. i think the surprised there would be that the ecb tightens down. for that matter, the bank of england times done more than what the market banks. jonathan: we had a guest on yesterday, they called for a steeper yield curve. how brave do you have to be? >> very brave. you can trade around it, but until the fed changes their message, it is a tough trade. jonathan: coming up, inflation in the u.k. a 5.5 year high. that conversation is next. this is bloomberg. ♪

♪ inathan: from new york city, am jonathan ferro. one hour away from the opening bell. after two days of losses, we had a day of small gains, softness

today. price action muted globally today. staff futures up by 34. flatter.ury curve we grind lower on 10 year yields by two basis points. the fx market is a euro strength story in g10. ppi finalpped on demand month on month, the estimate 0.1%. 0.4%, and thehat previous number was 0.4, so in line with previous months, but better than estimates today. treasury at the moment is a bit of an unwind. right lower on the day single basis point at about 2.40, though we do bounce off the lows. through pricewhip action elsewhere, a tiny bounce

up on the dollar index, down by about .3. an expectation we would create lower from the previous month but still firm on ppi. david: and the big number we are looking for is cpi. for immediate reaction, we still have peter tchir and scotland. -- and scott wren. reaction?ur initial you are sane people were talking about coming in light. >> i think this will be a surprise, i think it will extend flattening we have seen, where it will put the ability for the fed to hike and people do not believe we will get the growth, so we will see flattening. i think the reaction will be muted. if we get the same number of cpi, i would expect a more dramatic move. relevance --mainly is that the main rebel -- relevance of the number? >> for us, let's face it, the

fed is watching core pce and that has nosedived over the last six months. change yeard 2% over year. that is fine. i do not think the market is paying attention to either. they know what pc is doing and that is another thing that makes the curve flattening. alix: it has been services class that has led inflation higher but in this read, pharmaceuticals hard a nice climbed by about 2%. i bring that up because what will be sticky in the inflation readings we do see? >> some of the things that will be sticky are wings like pharmaceutical pricing. we had a big campaign last year, a political one, where price controls and all those rings were talked about constantly. health care stocks got hammered on that initially but we thought that was overblown. i think you will still see the pricing in places like arm circles.

let's face it, if you look across all indices, there is not a lot of pricing power out there. jonathan: why is this only a front and story? shouldn't we expect inflation forces to build up further out? >> i think we need to see that in ppm -- in cpr. cpi. is -- and this will get the fed ammunition to talk about rate hikes in the market does not believe we should be as aggressive as we are. jonathan: do subscribe that you might get the short-term because the federal reserve will move and step away and the potential inflation further out? >> that is right. it is when the fed hikes interest rates through 2018 -- i mean, three rate hikes next year is a headwind for the economy.

it is a complete headwind for long-term inflationary expectations, and that is. we how i read it and that is why the 10 year yield is as low as it is. david: what would you need to see her not to be a headwind?would it be wage pressure , is that the key? >> wage pressure is the most important number of every monthly employment report we get, and i do think that right now, corporate margins are high. i think finally, the labor market is tight, and 2018, at aret based on the work we doing, there is a meaningful potential to the market to perceive that higher wage compensation, the biggest part of every company's expenses, will negatively affect corporate earnings, so wages are part of the inflation story but we think it is more applicable to negative effects on corporate margins and what that is going to do for stocks, which is create a headwind. alix: so you see margins

rollover for companies? >> i think we will see margin pressure. the market right now in our thesen is pricing in margins, at record high margins, will keep expanding. we do see wage pressure creeping in next year, at least the perception of it that year average hourly earnings number, if we see it 3.9 print in the months, which is possible, the market will worry about that. >> that is one reason we have corporate bond issuers and recommend they tap the market now as they can and go as long as they can. you reduce that risk of uncertainty and you are not paying that much up to move to that longer data maturity. i think they should take it vantage and for the next three months to six months, we should see longer issues in general. one we heard is

compression a margins and the other is more money in the pocketbook, which can help the economy, why couldn't that help? >> i think it could over time but we will have to see could translate into more spending and the of the real big issue is labor force for to sit -- participation rate remains low. up, thatld get that would indicate more people working, more money from the economy in new sources. i am more focused on getting it up rather than wage inflation. david: scott, do you agree as you look at the question of keeping the margins up an economy growing for the consumer? is it more labor precipitation then >> wage loss? i think labor participation rate is a problem in that a lot of people are able-bodied that are not in the work force. they are not looking for ways to

expand their spending. the other looking to tighten down the hatches and not spend as much. participation rate sucks spending out of the economy. if we can get that number up, it would make a difference. jonathan: if you are advising companies to sell more and lock in low rates, are you advising investors to stay away? are stillhink there demand for investment grade corporations. so long as volatility stays low -- that is my big concern when i look at risks of the market -- days like thursday and friday, where you have bonds and stocks go down, i think that is the biggest risk because it forces unwinding on asset classes. i do not think we are close to that. jonathan: we cannot be winners in this market, apparently, issuers and buyers. >> up here -- hopefully. david: thank you both for being here. coming up, bullish on russia.

its stock market is among the worst performing but a stock fund manager says russian equities are cheap and attractive. details, next. you have to leave your television sets, you can tune in on the radio. bloomberg surveillance can be thed in new york, boston, bay area, washington, d.c., and on sirius xm radio. live from new york, this is bloomberg. ♪

emma: this is bloomberg daybreak. republican congressman caven brady -- kevin brady will speak at 1:00 p.m. eastern, this is bloomberg.

♪ russia has been in the news, and not for good reasons always. with the u.s. attorney general about to testify about possible interference of the presidential campaign and last night, theresa may said this -- 80's seeking to organize information, deploying its state run media organizations to plant fake stories and photoshop images to undermine our institution. avid: we welcome someone with more positive view on russia when it comes to investing, g partners, gq chairman and they have gained 27% this year and emerging markets up 26%. you cover a lot of the world but let's start with russia because

it has been a lot in the news and you are not alone in saying it is an opportunity that should not be overlooked. think it went from optimism to pessimism. if you are looking that russia, it was one of the more expensive markets and oil was $100 plus. a $50, $55.80 still one of the cheapest markets. billion be close to $70 so for that, you are getting paid a lot. i think you are getting paid a lot of dividends, so the good news is you do not have to wait for corporate earnings. david: talk about the growth in russia because they have had rough patches with the recession and they started growth. one of the things it illustrates is while it was growing robust, it has come off some.

numbers say gdp growth is trailing off. are you concerned? you can see it was up and has come down. are you concerned about the growth in russia? good: gdp is not a indicator of equity returns. china, lastook at .0 years, it was 3% russia around 8%, so it is in the best indicator. the question is where our court heard -- where are the corporate offers and what do you pay for that? despite bad news, and because of the bad news, they have a lot of corporate restructuring, hence, the property growth is strong. jonathan: how open are investors to the message that politics doesn't matter? rajiv: the question is how much has it already priced in? with oil at $40, sanctions,

right? and general bad news anyway look at it, you can find a company at five times earnings. how many banks make 20% in the middle of a recession? so companies now make 20%, the banking system is consolidating massively. three banks control -- five banks control almost 60% of the banking system. so that is happening from a corporate earnings perspective. you are getting paid a lot. plus, you're getting 5%. jonathan: give me more insight on the companies you want to get exposure to. when we think of broader em, we think about natural resources, and recently, they are not thinking about technology and allocation they are getting when they go with emerging markets. we're thinking about the exposure you get to oil and gas.

nothing else. how much as that changed recently know what are the sectors you want to get exposure to? rajiv: a change is a lot. it is financials and technology. it is interesting. not very different from other markets. if you look at the two big sectors in u.s., it would be the same, so i think the sector breakdown has changed radically. you are not risking making a call on oil and gas alone. russia had surplus at 45 for oil, so oil is less of an issue. you are definitely not making a call on oil. jonathan: you mentioned europe, with multiple expansions for the warrior, the rest the united states, it is difference. are you playing to the dividend or looking for multiple expansion? rajiv: i think you will get both. if you take a long view on

equity markets, if you look at u.s., for example, you go back in 1999,rly 80's, and russia in 2007, thanks for setnd 1415, and now it is five, 5.5 earnings with 20% here., so you do not need looks to make decent money out of this. it would be but at the multiple, but a six multiple for a bank that would make that profit. it is not a microcap. fact thatspite the they run up a little bit, one of the things that happened is because of sanctions, companies are forced to get back together.

there was a massive procession, so there is massive cost-cutting . revenue growth means significant earnings because of the leverage. different from the potential margin squeeze in u.s. companies. jain,d jane, -- rajiv great to see you. coming up, an interview with make gentle m -- meg gentle. check out tv to interact with us to radically. have a question? send it in. we will basket. this is bloomberg. ♪ -- we will ask it. this is bloomberg. ♪

♪ emma: this is bloomberg daybreak. chooses to block at&t's takeover of time warner, do not expect them to back down.

at&t is ready to dig into whether the white house influenced the deal. the speculation that president trump once to block the takeover as he has been a relentless critic. apple is taking another step toward turning the iphone into an augmented reality device. apple was working on a 3-d sensing system for the iphone in 2019. it is a different technology from the new iphone 10 id system. the u.s. is on the verge of the biggest oil and gas boom in history, according to the international energy agency, hitting the credit to shale and gas. by 2025, gross production will the saudi arabia and its peak. -- will beat saudi arabia at its feet. alix: what do you do with that natural gas? exported. one company is currently shipping it abroad, but a competitor was started and their

goal is to have five plans to liquefied natural gas, 20 trains for a capacity of 27.6 million times per and him. accompany got one step closer on monday to the goal. an industrial company who built a hoover dam is committed to building facilities with facilities for $550 a ton, the lowest contract so far in the industry. gentle.me now is meg i have been trying to get you here forever, so two r. jaw-dropping, how did you get that cost so low? for we have been working over 15 years. teams andly, from two we have constructed about 20% of all the liquid fraction plants

on a worldwide basis. and try tok together reduce the design and changed 1000 different things to reduce the cost, so there no one big silver bullet. we went back to basics and tried to get an assembly line process for as much of the manufacturing as we could, which led us to the smaller liquefaction units so we will have 20 trains instead of larger facilities that have much larger refrigeration units. alix: the upshot is you get to go to an investor customer and save this is i've hundred $50 a ton, you want to invest with us, walk me through the interest you expect to see from investors? do you have a different contract? meg: the epc contract is so critical for customers to be able to even begin their final

approval process. first really green sale facility in the u.s. to have a lump sum turnkey epc contract makes the project real. and we get really to the next threshold of being able to commercialize the project. we have an overwhelming response from lng consumers to become partners with us in the project, so for our commercial structure, we will pursue a partnership structure, where the buyers of the lng will be investors in the driftwood lng plants. aix: if they give you guys 1.5 billion dollars and they get interest in the pipeline, they can use the natural gas themselves, sell it or use it as a customer. meg: that is correct. we believe we will deliver for three dollars and the consumers will take it to their markets all over the world.

alix: how many customers do you need to see to make your final investment decision? meg: you will get to our phase one final investment decision in 2018 and sell about aids million tons -- sell about 8 million what it will produce and that will come from a portfolio up customers, so four and between eight customers. alix: when do you expect that? meg: sometime in the first half of 2018, which means we will be in construction from 2018 and produce lng from the client in 2022. alix: with oil prices so low, how do you describe the lack of competition? lng does not look as to say. meg: maybe not as juicy but competitive because we will be able to deliver lng into asia were about $4.50 and into europe

for about $3.50, which really makes the u.s. competitive with all commodities and natural gas around the world. alix: even with the supply from russia, new guinea, you can still compete with that because it is closer? meg: it is, but we have different components of a value chain, so the cost of supply itself producing the reserves, now the u.s. is really one of the lowest cost supply areas of the world. the cost of constructing the itselfl, the ecb contact , and the cost of financing and shipping. we are pursuing an integrated chain tried to get the lowest cost of those components. alix: you did not go to president trump's trip to asia, have you spoken with the administration? meg: we are in constant contact with the administration. thatnt them to understand driftwood is a new facility in

louisiana, it will be important for a a lot of their goals about $25 billion of direct investment in manufacturing and construction, 50,000 jobs that will be created, reduction of the trade deficit, so we are trying to do our part. alix: real pleasure, we appreciate you coming in. thank you. coming up, michael purves, one of the more bullish analysts on the street. we will discuss tax reform, global growth and why he likes financials, coming up. right here on bloomberg t.v. ♪

jon: house republicans and towards passing their

tax bill. the world's most powerful central bank is going to convene in frankfurt. they sit down to discuss communication. europe looking very divided. u.k. grappling with high inflation and subdued growth and germany heads towards its best year since 2011. good morning. counting you down to the opening bell. this is "bloomberg daybreak." 30 minutes away, the story is as follows. futures a bit softer, session lows, down about .3%. the euro a lot stronger against everything else in the g10 space. these and data out of germany and the growth picture looking good across the continent as well. the ppi number coming through a bit further than expected. maybe the inflation story gave pace, 240 some

is your yield on u.s. 10 year. earnings, home depot killing it, but the stock not really moving, flat on the morning. it beat estimates, comp sales beat estimates by 250 basis points. they rose 7.9%. the company feasible your cocktails come in at 6.5%. that sees -- the company sees full-year comp sales come in at 6.5%. taking a look at buffalo wild wings, a potential takeover here, up 27% in premarket. the private investors had to make a $2.3 billion bid that would value the company at over $150 a share. that is a really big jump. the private investor really known for investing in these kinds of chains like arby's and auntie anne's.

down --porting-goods they see earnings falling up to 20% next year as margins compress. they say the current sales environment is highly promotional. they did raise their fourth quarter and 2018 guidance but it was the lower than when it was -- what it was last year. president trump returns to washington, facing a battle over tax reform and hearings over his administration's ties to russia. i want to begin with a twitter caused -- this tweet has so much attention in the last 24 hours. don't know the time, don't know the date, don't know the content.

can you report on anything you've learned down in d.c.? kevin: i have spoken with a couple of sources who suggest that tomorrow the big announcement could be coming, but it has been clouded in secrecy. a host of topics and should the president take questions tomorrow on his return trip, he's likely to get questions on a host of issues ranging from tax reform to the russian investigation and even roy moore. a lot of chatter in washington about that topic in particular. just under one from jeff sessions testifying before the house judiciary committee. that will kickoff at 10:00 a.m. jon: what are we sent to learn from that, if anything? what are the questions that will be asked? does one inform the other?

does one stop the other from happening? kevin: it does complicate it. could get republicans who want to be talking about tax reform of bit off message with regards to russia or roy moore. privately, behind-the-scenes, they are very much still moving ahead and likely will get a tax package done by the end of the year. jeffrms of russia, sessions will get grilled from democrats on russia. republicans also trying to push back, trying to raise the issue about why the justice department has an investigated -- has not investigated the clinton connections and the russia dossier. one with theum clintons. all of that is really heightening the stakes for the attorney general, who quite frankly also will get at least one question on roy moore.

roy moore in alabama fighting for that seat that jeff sessions held. jon: u.s. equity futures a bit softer. the stocks a lot move from asia, tax reform on the table, preparing for a surge in the u.s. dollar. joining us now, michael purves from weeden & co. for an investor sitting here in new york, does it matter? michael: it certainly does matter. you look at trump's approval ratings and the dollar index, they've been both traveling south together through most of this year. i don't think there's anything new there. you were talking about the euro strength here. you had a classic head and shoulders pattern on the euro

over the last five months. it was so obvious for that to break and go down to 112 and here it's not. if we can get through this from a technical point of view and rally back to 120, that will be a real statement about how people perceiving -- how people are perceiving the political situation and the relative growth. jon: you think it is on the european side of the story? michael: right now, we've talked about this in the past, the sensitivity of the euro stocks to the currency is more and more pronounced once you are above level.6-117 that is a more macro trade. david: as you look at currency versus other indicators, what indicates best the roles of strengths of the economies? michael: if you are going to look at the european data, we just got strong german data

again this morning, it's interesting to point out, you look at bloomberg consensus gdp forecast for the year, china, japan, europe, all of those have been substantially upgraded. the one major economy that hasn't been upgraded this year is the united states. that goes back to the why is the dollar not rallying narrative. the forecast that has been the most upgraded, the european ones. david: if i get a choice between tax reform and monetary policy, which will drive the economy more? michael: from an economic point of view, that's a great question. fromve this transition monetary stimulus to fiscal stimulus. that has a lot of risk, just that transition will have all sorts of risk, just getting tax

reform doesn't necessarily mean the economy will do better. you want the economy to be doing better from good old-fashioned improvements without the monetary stimulus, right? if tax reform is one way to achieve that, there's a lot of inefficiencies and how the corporate and personal tax code are designed, if those can get work through and stimulate growth, that will certainly be preferable. alix: you mentioned something interesting, the divergence between the dollar and the five-year, hitting its highest level since march. that is difficult in terms of equity investing, right? financials do well when yields are higher but then you have technology and growth doing well when you wind up with a weaker dollar. michael: it's a multifaceted discussion. let's start with the yield curve first. a lot of people have different views on this.

that nothesis here is only are we in the middle of a tightening cycle, which will be pushed down, the back end of the treasury curve is heavily defined by what's happening in japan and germany. they are the marginal users sers right-- ea now. you will not get a steeper yield curve until those policies start reversing in a more obvious and aggressive way. jon: it will be a long time before we get there. michael: i know. exactly. you will see maybe some improvements in the yield curve. in terms of changing that trajectory, yes. we see the german trend we got nd ismorning, the bu trading in a 30-50 basis point range. itthat were to go up to 120,

will lift our 10 year yields up with it. it has them at four significant implication for how u.s. equities trade -- it has a far more significant application for how u.s. equities trade. on a good day. jon: imagine getting the most powerful central bankers in the world into one room. today,e all in frankfurt talking about central-bank communication. we will bring you some of the highlights in just a moment. from new york, this is bloomberg. ♪

saw the framework where the various parts of this forward guidance, interest-rate on one side and the asset purchase on the other, will synergy.in a almost allreally, guidance should be conditional and related to the outlook for the economy. >> inflation expectations are formed not only by forward-looking ways, but also backward looking ways. it's a marker of policy itself. four, all intastic the same room, all on the same stage in frankfurt talking about communication of the central banks. joining us now, michael mckee. did we learn anything in those

two hours of the fantastic four onstage? michael: i just imagine janet yellen with a tape -- alix: this one has the elastic arm. michael: it could be draghi at this point. they are still putting money into the system. more a push back against the markets than anything else. yellen made the case that basically the market will bet on every move the economy meeting to meeting on the fed and they will make money or lose money based on those very short-term bets. that's not what the fed or the other central bankers are looking for. they are looking to meet the mandates of lower inflation and stable inflation and maximum u.s.h in employment in the they are looking beyond that and sometimes the markets aren't going to get it right. she went back to 2016 when they went into the year thing they would have four rate hikes and

all we heard was that that screwed up, the fed screwed up because they did only one and she said we changed our view as the we went -- as we went along. her andney agree with basically said the money these people lose is a rounding error compared to the overall economies. jon: some of the terms they've used for forward guidance and transparency, they were designed by chair yellen when she ran the subcommittee to development occasion -- to develop communication. do they need to change things and adapt things so when policy moves away from using and towards tightening? michael: they say they don't need to. they may want to. none of them like the dot plot. they feel it's been misinterpreted by the markets. opportunity for

jay powell to drop that as part of their communications tool. they should be publishing their views of where the economy is going. it's one thing for the central bankers to say they are doing it right. to the markets think they are doing it pretty much right? is there anything you would like different? michael: you step back for a whend and think about, ok, they launched qe in the u.s. and it got adopted globally, this concept of gradualism was understandable. the markets had all that -- they are almost creating a certain new kind of tail risk here. you have this massive buildup and qlik technologies coupled with this extreme gradualism. when you look at the vix, when

you look at how many prints we've had this year under 10, as we start normalizing policy and the economy is hopefully continuing to grind forward, are there going to be liquidity black holes? concurrent with this massive buildup in central bank balance sheet, we've had a change in market structure. we've had a change in how many liquidity providers are out there. what machines are doing to the markets on both a longer-term and very medium-term basis. you look at the vix going ever south and volatilities across assets going ever south, when things go bump in the night, i wonder whether the systems will be better tested. gradualism, all of policy tools, that's the one they really need to get off. of weeden & purves co sticking with us.

the house hashes out its next .eform plan we will hear from an investor whose place on banks long-term -- who is bullish on banks long-term. s&p futures -.3%. points.down 60 odd this is bloomberg. ♪

david: as both houses of congress take of tax reform today, one group paying the most attention is financials. how might they be disappointed? we welcome gerard cassidy of rbc capital markets. welcome back to the program. from the point of view of management banks. gerard: from the tax reform

standpoint, it will be very positive for the banking industry, particularly the regional banks that focus most on business in the united states. they use some strategies to reduce their effective tax rate such as buying municipal bonds, the interest is tax free. they do lower it from the statutory 30%. if it goes to 20%, you could see earnings growth reach 20-25% just from the text change. m&t bank is the best example of that. they would get a real boon to their bottom-line earnings if tax rate was to 20% from the 35%. david: what about unintended consequences? gerard: that is going to be something that will have to be watched carefully. many businesses are still going to borrow. if the capital project they are going to invest in covers the cost of interest even when it's

not deducted from their taxes is still going to do it. if you are borrowing a money to do a stock buyback, that may not be the best use that borrowing. there was aly, bipartisan proposal yesterday to change the level of the designation from $50 billion to $250 billion. gerard: those will be the beneficiaries of this. many investors were quite surprised to see a bipartisan effort to get the moderate democrats to join with the republicans to do this. if you're a bank under $250 billion in assets, if you are not going to go through the sea car process -- that is going to be a real positive. it will take time, but the

important message to investors is this is a new administration, is changing its view of the banks and this is the best example of what we saw yesterday coming out of the legislation coming out of the senate banking committee. david: one of the questions is, when you look at financials as an investment, is it a matter of the steepness of the yield curve? xlfael: a year ago, the was trading take for take with the 210 curve. the correlation faded and what started -- it came back in fashion three months ago. i would say right now, i like the financials into your and -- year end. there's a value their relative to the market. this various call options for

, the economylief in the u.s. seems to be taking a slight uptick from where it had been. even with fic earnings being a spot, fromroblems the top down level, it looks pretty good to me. david: how about from your point of view? loan origination seems to be banks. a number of the the trading has dropped off because of volatility. gerard: that is very true. michael made a good point about the fic trading. what we have seen this year has been very weak. what we are looking at over the next 12-24 months is the tax proposal goes through an economy picks up, the fed will start unwinding its balance sheet next

year, if we get more volatility in the market, it will lead to penetrating volumes and better opportunities for the global banks. on the loan growth, it has slowed on the commercial side. it willumer comes back, be positive. the stocks that have run very well since the election, there's -- thatreal upside comes back to allow the to compete more effectively in the digital and allergies space against the big banks. alix: and then you don't have to be scared of consolidation. is this the way you want to be playing it? both,l: you almost play reke the cary and xls -- k

and xlf. as a play on better net interest forward, thegoing banks are the obvious beneficiaries there. jon: sticking with us, gerard cassidy of rbc capital markets. the story as follows. a bit of a rebound yesterday -- a bit days of weakness today. this is bloomberg tv. ♪

jon: the opening bell 20 seconds away. let's get you set up for the cash open. futures a bit opera, down a third on the dow.

a small push higher in yesterday's session to snap a losing streak. the euro very much on the front push, stronger against the whole of g10. that's why you are seeing so much weakness on the dxy today, down .5% going back to the 94 handle. the story of the day in the u.s., ppi coming in quite hot. what are you seeing on the front end of the treasury curve is treasury yields go higher. further down the curve, treasury yields come in once again with a flatter yield curve. very much aprint front and story for what the fed will do and not much of an inflation story the further you go down the curve. you wind up seeing

softness across the major equity -- the nasdaq off by 21 points. the soggy session we saw unfold over in europe still spreading here in the u.s. as well despite the better ppi data. let's take a look at the movers or nonmembers in the case of home depot. buffalo wild wings up 27%, getting a big bid from a private group. wells fargo thinks that could be a big competition -- the whole deal values buffalo wild wings at $100 a share that's $100 a share -- $150 a share. elliott management took a position in this company. they are looking for changes like making the taubman center go private. in.e seen third point get

there's a lot of retail action in this space. home depot, very interesting session so far, down .6% despite the fact their earnings truly crushed it across the board. they surge on hurricanes, upgraded their 2018 forecast. home depot has added 250 points to the dow's monster rally so far this year. take a look at these blue bars, that's the comp from a year earlier and the yellow line is the johnson redbook same-store sales on a quarterly average. i wanted to highlight the powerhouse that is home depot in terms of its sales in particular last quarter. on the salesmance level and now the stock is stalling out. what does that say for the rest of the retail sector that is still struggling? jon: from washington, sarah

halzack. hurricane offering a volume story. sales higher. it then tookre away from the bottom line. sarah: what we saw with home depot, it certainly drove the topline sales because people needed materials to rebuild their homes. unfortunately, those particular items don't come with particularly high margins. this is still a really healthy company. we are at a point in the housing market where people are wanting to reinvest in their homes and home depot will continue to get a sales when from that. jon: amazon couldn't touch it. it's not something amazon can execute on. is that a sweet spot for home depot? is that something analyst investors recognize? sarah: those items are so big,

it's really hard to do e-commerce profitably. contractors, a big part of home depot's business, they are often working on a same-day basis. that insulates them from the amazon threat. alix: t.j. maxx's midpoint guidance missed estimates. it's been home builders and the discounters and the luxury guys that have crushed it this earnings season. what will we see from walmart and target in the next 48 hours? sarah: i expect we will see reasonably strong results from walmart. they been a long streak of positive traffic and positive comparable sales growth. there e-commerce growth has been exceptionally strong, really outpacing industry. target is more of a wildcard. they saw improvement in traffic

last quarter. investors are looking to see if they can keep up the streak that was started last quarter. alix: michael, you like retail? gerard: no -- michael: no. selectively, there's a certain situations -- home depot is not necessarily macy's and all that. if you were a hedge fund long , stripping onks amazon, you would have hit the most amazing home run. i don't know if that train will stop here. so many of these retailers are coming up with whatever tactical response they can to the steamroller of amazon and amazon's strategic position is only getting stronger by the day. little dust asuy

a technical trade -- as a tactical trade. jon: in equity, show me growth. maybe that story is still questioned. maybe we haven't got the entry point to justify a lack of growth in the future. in credit, has there been enough pain in the retail sector this year and enough of a promise by some of the positioning of these companies to say i will get paid to get in? michael: it is still too early to tell. remember circuit city back in the day. a fantastic story for certain price levels. i would just say this -- the fication of the retail sector is so powerful right now,

we are still in the early stages here. i'm sure there's some assets -- even macy's. if you try to figure out what the real estate is worth underneath macy's, take the flagship store on 34th street, if it doesn't serve a retail function, are you going to build condos there? i don't know if i see that. what is the intrinsic value of retail space regardless of what the retail is doing with that? we have seen activist investors coming into these real estate plays. holsinger and elliott management going into taubman centers . brookfield getting into one as well. is this where we will see the action in the next few months? sarah: i don't know if we will see a ton of action here. the action we are seeing is somewhat warranted.

easy centers like taubman and gdp, their portfolios tend to be concentrated in class a malls. we are seeing bifurcation in which luxury upscale malls are doing very well and regional down skill malls are doing not so well. you can see the logic of getting p or a company like gg taubman. jon: great to catch up with you on retail. mergerit was a big media out there -- at&t trying to buy time warner. when it was first announced, experts said it shouldn't be allowed because it's a vertical merger. now, we are told the justice department has real problems and they are asking for divestiture, including a selloff of cnn. we will seekt,

discovery of what the president had to do with all this. jennifer andw, paul sweeney. have you seen anything like this before? >> i never have. i was doing this for 15 years as an antitrust lawyer defending mergers. i've never seen anything like this. david: what accounts for it? we have a new assistant attorney general for antitrust. >> that is the strangest thing, there's been so much information leaking out and available and all of this is meant to be confidential. everything up to this point where the companies get sued. ishis information coming out very strange. as you mentioned before, seeking a structural remedy for a

vertical deal is also surprising and kind of unprecedented. david: assume they do go to court. who wins? cedent, whore wins that case? >> the companies have a good shot here. there's a lot of uncertainty . none of us know what that is showing. there's a lot of information available to the doj that is not available to the public. the companies have a good shot here. david: talk about it from the media perspective. how transformative is this deal itself? what might this deal safe or other deals? -- say for other deals? really cementing the emergence of telecom and media -- that could put a damper on more media m&a.

what investors have been looking for is more consolidation on the content side of the business. people arection, expecting more m&a on the media side of the business. if this deal gets held up, it could put a damper on that. positiveu look at talks between disney and fox, those are two direct competitors. that is horizontal. what does this do in terms of pouring cold water on those talks? >> absolutely. when the republican and an attrition came into office, the expectation was the regulatory environment would become more open to m&a. that was driving a lot of the discussion on the media side of the equation. the big companies, fox and disney and others. this could push the m&a bankers back to the drawing board. >> that is the strangest part about it.

there's been a lot of talk in the antitrust community, particularly from left-leaning thinkers that there needs to be some change in the antitrust laws. they need to be brought in to catch up with the digital economy. this isn't just a one-time political issue. it is a sea change in the way some mergers will be approached. david: deeply ironic. paul sweeney and jennifer read, thank you both very much. jon: a lot of stories to digest. overall, some weakness in this market. down .3% in the s&p 500. from new york, this is bloomberg. ♪

emma: this is "bloomberg daybreak." the chief economist will talk about the fed balance sheet unwind. alix: ge slashing its dividend, getting a slew of target reductions -- it wasn't enough seems to be the theme. the ceo unveiled his plan to try to turn the company around. .oining us, karen ubelhart should they have cut the dividend more? karen: i think we are ok on the dividend. the cash flow will improve next year. $4 billion they can cover. that was expected.

i don't think people were very upset about that. alix: what is dragging the stock down? karen: they give us a preview more.- people hoped for this is a $300 billion company in assets. where's the beef? they will hold a few businesses. they say they are going to clutter businesses. -- they will fold if you businesses. they say they are going to clutter businesses. -- they will hold a few businesses. old a fewill fal businesses. they will take people out of power in energy connections and renewables. there will be fewer people, less plants. they are still in the same businesses. jon: that reduces the size of

the board. karen: 18 was way too many. 12 is better. three will be new. i think the board might have some of that. alix: what does the company want to be? any were a bank, then industrial company and then an oil services company. they had to spin out the baker hughes business. what is it going to be? karen: it is still going to be a diversified company. you cannot say that power and aerospace and health care have synergy. thery will be a market leader in their businesses and markets are good because they are a service machine, unlike most other industrials, they have over half their sales in

service. a market leader in three businesses. alix: good stuff. karen ubelhart of bloomberg intelligence and michael purves of weeden & co is still with us. click on our charts and graphics and interact with us directly. visit tv on your terminal. you can check out the charts. this is bloomberg. ♪

david: we are just minutes away from the house judiciary committee hearing testimony from attorney general sessions. that is the committee hearing room right there. the attorney general is walking in at any minute. the hearing will be on what knew -- asessions

trump campaign advisor turned state evidence. he told the attorney general he was dealing with the russians. to explain what's happening and what could be at stake, we welcome steven pomerantz, former fbi assistant director. muchus a sense of how trouble jeff sessions is in this point. >> i don't think he's in a whole lot of trouble. is tell thet thing truth. as we say repeatedly, the cover-up is often worse than the crime. as long as he sticks to the truth, he's ok in the long run. david: this is the third shot for attorney general sessions. the first time, he said i didn't deal with the russians. then they had him back up there last month saying you met with the ambassador and he says it

wasn't schismatic. now, -- he says it wasn't systematic. >> obviously, the appearance is problematic. it's more the substance than it is the appearance of what took place in those conversations. a u.s. senator meets with a lot of people and 99% of those are innocuous and can be explained. yes, he's told somewhat conflicting stories. the important thing is the substance of what took place in those conversations and at those meetings, setting the record straight. david: we will hear from the attorney general directly shortly. although he told him i'm dealing with the russians, mr. sessions said don't do that anymore. does this tell us anything about the overall direction or substance of the special counsel's investigation? >> the special counsel's

investigation will be very far ranging and in-depth. it will go on for a long time and it will examine a lot of issues. it gets a lot more difficult and a lot more political, frankly, because there's one issue about to what extent did the russians try to interfere in the recent elections? the russians have been doing that kind of activity for decades. i'm certain they will find some evidence of the russians' atte mpt to interfere with our election. that is a given. the more important question i suspect is was their criminal in theon between anybody trump organization and the end?ans toward that that is a much more difficult and much more elusive proposition. you have to look at this thing intelligently and separate those two issues. the politicization of these

things, some people have proclivity to try to purposely cloud of those two issues could -- to cloud those two issues. david: you know how these work. there are relatively few people who know the answer to the question, was there collusion or not? from the indictment of mr. manafort, mr. moore is going after the key figures for ancillary issues to try to get them to operate like mr. papadopoulos did. how likely is he to succeed? >> in terms of how long the process is, no one can answer that. it can go on as long as the special counsel thinks he needs to go. look at the classic cases, the

whitewater investigation and the clinton era. who would have thought that an examination of the rose law firm corporate records would end up with a stain on monica lewinsky's dress? how much money was invested in that investigation? the first time in my career i remember people asking how much money we are spending on this. this can go on as long as the special counsel thinks it is necessary. you are exactly right, there may well be -- i would be surprised if there weren't more ancillary charges to come out of that. they're looking at a lot of people who have a lot of complex business arrangements. i would be surprised if there weren't additional ancillary charges. you are right again that what they attempt to do is when they

charge people with ancillary crimes to have them cooperate for the larger goal. david: steven pomerantz, thank you for being with us. michael purves of weeden & co, thank you for being with us for the entire hour. alix: we appreciate that. jon: great to catch up with you. in four. down day we moved further away from all-time highs. from new york city, this is bloomberg. ♪

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but what about that one? [screaming] tv that's more than tv is awesome. get netflix, youtube and more. now on xfinity x1. xfinity. the future of awesome. >> this is bloomberg markets. we start in washington. will faceons questions and moments. you see the hearing room there.

sessions is expected to get grilled by democrats about the russian investigation. good day from new york. i am julie hyman. mark: live from london, i am mark barton. attorney general sessions it is expected to face questions from his own republican colleagues, sessionsreports that is considering a special prosecutor to deal with the dealings of bill and hillary clinton. julie: we want to speak to some folks to be an eye on it. , and wemichael whitelaw will speak to other folks about this as well p we also have steven pomerantz, now the director of home and security of the jewish institute of national security for america. thank you for chatting with us about this.