jonathan: president trump heading to the house to rally republican lawmakers ahead of an anticipated vote on tax legislation. mergeryan fueling speculation in germany. around of consolidation may start next year. angela merkel struggling to put a coalition together at home, worried the pushing too far in brexit talks could backfire. good morning, this is bloomberg daybreak. i'm jonathan ferro alongside alix steel and david westin. futures this morning are positive after a pullback yesterday and a bounce off the lows, up by about seven or eight points on the s&p 500. market as we snapped the five-day winning streak on euro-dollar and pullback yesterday, down for a second day with euro-dollar at 1.1764. a big bid came in yesterday for treasuries. a flatter yield curve. steeper yields up for basis points. ..36 on the u.s. 10 year

we will get those walmart earnings as well in a moment. alix: we are looking for estimates of $.98 per share revenue to come in. stock is moving higher in premarket. a nice boost up by 1.3%. we are also looking at the m and a action. anderson confirming its bid to buy rockwell automation for $225 a share. we follow that the hour. walmart earnings beat estimate, one dollar a share versus estimates of $.98. it boosted its full-year adjusted earnings view. we take into account fourth quarter, sales. now looking at the high-end to be about 2% when they came into .7% for this last quarter. that is a killer number for them. the expectations were for about 100 basis points lower. jonathan: if you heard the conversation about retail you would not think walmart was up almost 13% year to date.

they bought jet.com to turn things around. david: they are really going the other direction, bucking the trend. alix: finally they get to reap all of those benefits of jet.com. we are going to get more details as they cross but this looks like a solid quarter for walmart so far. earnings, one dollar per share. david: tax reform now. a big day in washington for that tax reform the vote scheduled in the full house on its version of the bill and the senate finance committee expected to pass out a bill for a possible vote as early as next week. pimco pus head of public policy, libby cantrill and michael mckee, bloomberg's international policy corresponded. they lost one senator perhaps on republican side. what is their margin and how many can they afford to lose? -48 count so they can only lose three senators. a number are on the fence.

senator johnson has declared he's against it because he does not like the way pass through legislation works. says it favors too many small businesses that are not paying taxes at this point. he wants changes that will be expensive to make. they've got to rob peter to pay paul in the bill. if the bill increases the deficit by one penny, it obviously does that. senator collins, one of the people who helped sink the health-care care bill said she's wavering on this. she brought an analysis to the senate republican meeting yesterday that showed the medical deductions are a problem for her state and she is not convinced that this is going to be something this -- something she can vote for. david: how much is against it to a -- to negotiating with the conference? libby: senator johnson came out

against health care and one point. ultimately voted in favor of health care. for folks i talked to on the hill, they believe he's a solid no on this at this point unless there is fundamental changes in the bill. they run up against something called the bird rule, which in the senate if the bill at the used -- it cannot be cannot pass with reconciliation which means it has to get 60 votes, not 50. at this point, it looks like a pretty firm no. if there are fundamental changes, they might have a process -- might have a problem. jonathan: how much attention should investors pay to the bill today? libby: it's important. if we see anything on tap, it is going to resemble the senate bill and not the house bill. the house bill, not to get too into the process issues, but right now the house bill could

not pass the senate under these reconciliation rules. 60 votes, not 50. as of right now, the house bill is important. it shows you where members are on certain issues. it's going to be the senate bill, if we see anything. i think everyone has viewed this as the foregone conclusion. so much political will to get something done there are some real obstacles. jonathan: the portfolio managers view today as mood music? libby: sort of the fifth or sixth inning of a ninth inning game. some people sort of think this is the eighth or ninth and they are a long way from here. a lot of political will to get something done. things are going at a fast rate. just a couple weeks ago i would've said it was absurd. again, you have to get something

through the senate finance committee and then you have to go through a conference because of inherent differences between the house and senate. david: clearly a long way to go. they come further than people thought they would get in this process. starting to hear of this pay-as-you-go, that might actually force republicans to reach out to the democrats, something they said they don't want to do. michael: this is a problem a lot of people don't appreciate yet, the bills out since the george h.w. bush days has come in and out of favor. you increase the deficit in any particular fiscal year, you have to do some offsetting cuts. if they are going to cut taxes and increase the deficit, they have to do some spending cuts. omb came out this week with an analysis that said they would have to cut about $134 billion out of the budget 15 days after tax reform passes. 15 days into january at they do it by the end of the year.

this would not affect a lot of social safety programs like social security, medicare, but it would affect across the board many other operations of the government, including medicare. $25 billion cut out of medicare according to omb, which is a political nonstarter. to get this through, they cannot do it by reconciliation. they would have to get democrats to vote to waive this. republicans are counting on the idea that republicans would not want to see cuts to social safety programs let medicare but democrats are saying maybe you bought this, you own it. david: a lot of members of congress have not focused on this. and now they are with enough to say we're going to do this. is this an impediment to getting this done or more a speed bump? libby: usually this is wage. you can get 60 votes to kind of wave this point of order. what democrats are reviewing as potentially adding some leverage

to get concessions out. there is another inflection point that i think folks need to pay attention to, which is the potential shutdown of the government. if congress does not fund the government by december 8, that could lead to a shutdown and i think democrats will use that inflection point as a way to get concessions around immigration and daca. michael: one other unappreciated point i don't think people are following. polls show about 25% of americans are following this and really care about it. quinnipiac poll out yesterday. voters disapprove of the republican tax plan. what this means is individual senator goes back to their state and people say, you don't have to die on the hill for this bill and if there's enough opposition , maybe there's enough opposition to derail the effort. david: all of the representatives have to worry about this come november.

michael: constituents are not saying you have to do this. david: mike mckee, thank you for being here. libby cantrill will stick with us. we want to find out what's going on outside the business world. emma: roy moore faces more .ccusations three more women make claims against him. wrongdoing.nied any he says it's a politically motivated attack designed to hurt his campaign weeks before a special election. in puerto rico, an indication of how much that hurricane's attestation will affect debt restructuring. a lawyer for the u.s. territory 's oversight board says puerto rico may suspend debt service repayments to five years. it's unclear if that would apply to all of the government's $74 billion of debt. in zimbabwe, mugabe'st robert refusal to resign publicly --

being urged to quit so the military can claim its takeover is not a coup. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. alix: thank you so much. walmart up 3%, best buy down by four. full-yeard their earnings forecast. e-commerce killing it up 54%. best buy, different story. come sales came in light. we are looking at emerson and rock way. bid,on original rockwell rejected it. a 29 million dollar, $225 a share. the idea is that emerson's revenue is down 25% in last

year's fiscal quarter of two dozen 17, so needing to help offset that, emerson a little light on the news. jonathan: quite a spread. alix: 90% premium from that. cash. 40% stock, 62% -- 60% cash. alix: 4 billion in equity to be able to do this at their rating. jonathan: coming up, the white the yogurtone thing, says something else. what recent action in the treasury market says about expectations for long-term growth and tax reform. ♪

jonathan: the white house says it's tax reform plan will lead to economic growth. bond investors are saying otherwise. take a look at yield curves. breaking even lower yesterday. we trade south of 65 basis points. levels we have not seen in about a decade. joining us, credit suisse -- topless andon -- looking at the n with the bond market, there is a message of the d.c., from the administration that this will lead to growth, message in the bond market that goes against that. yiannos: potentially the market sometimes over reads in the sense that we are not talking about an inverted yield curve. people are thinking of the metta trade. the simpler explanation is the

-- mostlyf the curve because of international influences. the short and is the dislocated part. in an environment which is conducive to good growth results out of the u.s., the short and will keep going upward and that is where the gap is and the market has to get used to it. that is a mental block for the last six or seven months. the market will plow through it. jonathan: when the yield curve was flattening the used to blame the savings glut. this time around we blame central bank stimulus. >> it's important to note for bash backe two year to the widest level since the 90's. it's not just the shape of the u.s. curve, differentials with other curves as well. that is testament to the influence of other central banks.

very impactful at this point in time. to some extent, distorting the message that the u.s. curve gives us about the state of the u.s. economy itself. david: going back to jonathan's question, who is right? you have the republicans in most the taxtalked to saying reform will really change things. you have the bond market and economists say that is not going to happen. when you advise people at pimco, what you tell them? libby: these aggressive growth estimates that have been coming out of various economic policy not think this will do much in terms of productivity, potential gdp. this could at fiscal stimulus. if you look at the senate bill, it is consistent with what our view has been. 2018 probably won't see fiscal expansion. it will come in later years. it fundamentally

changing the fundamentals of the economy? what i've seen so far from the senate and house, we don't think so. david: when you look at the bond yield curve is it they don't think the text reform will have the effect of growth or they don't take it will happen? barrick, heth tom thinks it will get done. >> it will absolutely get done. all the boys and girls have to learn to play a little more kindly in the sandbox with each other but they are all consented -- there are incentives to get this done. both articles facing midterm elections. the productivity of this tax bill is essential. david: as you look at that yield curve, the long end of it, do you explain what is not going up because they don't think it's going to get done or there are other factors such as ecb?

the optionare not in of business. , whatit might get done sort of package we end up with is the important level of detail. between lows moving multiplier and high multiplier package. pricing fairly decent probability of meaningful fiscal .ackage here obviously, if we get something more meaningful in terms of size , much more than one trillion in terms of fiscal impulse and if it ends up being highly efficient in terms of shifting, you will get a shift. that shift in our calculations is in the order of 50 basis point or so. your strongest scenario you might see the course of the next year or so. .he pricing is well anchored if it happens faster i think we get shift in yields but it's not going to go out of hand so there are limits.

-- then: we are basing signals you may or may not take from a flatter your curve. does it mean anything for credit creation? for bank lending, regardless of whether you should take a signal of it or not? yianos: i think the market is telling you they can take it in the sense that most of the action is happening on the short end of the curve. that basically means growth expectations are reasonable. good for credit markets, good for equity markets and from the perspective of the investor, the combination of actually being invested in a way markets and the yield curve flattened her in the u.s. is having great properties. truly, the action is on the short and it is good news. the fed is moving because it actually has -- we're enjoying easy financial conditions,

growth numbers are good inflation is moderate. we can complain about it but it is a good picture. alix: libby cantrill, think you yinaosining us, jan andshahab are sticking with us. coming up, walmart's big beat. shares up after the company delivered shrug as u.s. sales years. walmart surpasses an intraday all-time high if we stay at this level. ♪

alix: walmart to a strongest u.s. sales gain in years. strong buy rating on walmart. intraday here at an record in premarket while us through the highlights of the quarter. joe: the company reported a dollar eps that beat out

estimates of $.96. they raised annual guidance from 438 436 ahead of our 436 estimate. ahead of ourcantly 1.8% estimate which continues a trend of positive traffic. the ticket was high compared to our estimate. inyou percent growth e-commerce -- 50% growth in e-commerce. .com acquisition last year. driven by organic growth at walmart.com. 10 of the 11 international markets posted confidence. alix: i want to get back to the ticket price. a lot of the story has been how much retailers have to sacrifice on margins to get people in the door. what is walmart's view on that especially as they wind up coming in for their fourth quarter with sales 2% on the high-end?

joe: the 1.2% ticket growth shows trying to gain share within customers is lessening with the customers. incentivizing going to the store to pick up items their purchasing online, adding grocery delivery. these initiatives are showing in the number of 1.2% they are being successful here in the early stages. jonathan: for investors it's been a story of walmart versus amazon. the question that stuck with me a techte a while, company specializing in retail or retail company trying to specialize in tech, which company do i want? joe: i don't think it is one verse the other. both could be very successful. a secular trend toward people moving online. ,mazon is well-positioned having that dominant distribution system. i think walmart with their sales and customer loyalty with customers coming to stores every week can benefit as it

significantly spans and skews supply chain to speed up delivery and intensifies them to use in-store and online delivery. both companies can be successful. jonathan: at this point the squeezing to becoming for coming from both sides. target is sacrificing margins in the short-term, boosting wages. you get the squeeze in bricks and mortar and you get the squeeze from amazon online on price. which one is more significant? joe: i think there are a lot of different competitors competing in different ways. that's the way walmart is going to win, by expanding the number of offerings to be a one-stop shop or if you want to try to get more aggressive on mine and that is what you see them expand their skews and offer different types of delivery options that they can meet your needs. regardless of what other people are doing, by being that

one-stop shop in having everyday low prices i think walmart is --sed to be positioned poised to be well-positioned to gain market share. jonathan: great to have you with us on the program thank you for joining us. from retailing the banking over in europe, deutsche bank sales. john kline fueling speculation of consolidation in the german banking industry or we discussed that next. two hours away from the opening bell. about oneunce back up third of 1% on the s&p. dow futures of about 75. ♪

jonathan: a nice rebound in risk appetite. those two hours away from the opening bell in new york. futures are firmer up about one third of the s&p 500 up a third of 1% on dow futures.

in europe, all of the industry groups tracked by the stoxx 600 are in positive territory. the ftse up by about 10 points, the dax up by almost one half of 1%. dollar with a bit of a rebound. five straight days of euro strength that broke yesterday and add to that weakness today. 118.ef visit up to dollar yen getting back up to 1.13. in the bond market, big theme over the past couple of weeks, the flatter yield curve. we are steeper today, 10 year yield of about four basis points to 2.36. headlines outside the business world. emma: house republican leaders have cleared the way for a vote on tax reform bill today. that is pushing lawmakers from high tax states to vote for the measure by promising's date and local property duction's will be

in the bill. senator ron johnson is the first republican to come out against the senate version of the tax bill. he says it does not do enough to help so-called pass-through businesses. angela merkel is facing her first big test since being reelected in september. merkel is up against a self-imposed and of the week deadline to get coalition talks going. trying to set up an unprecedented for party government. his agreement on in -- on and carbon emissions have slowed things down. whatommerce ministry says it called outbound -- irrational outbound investments have been curved. chinese officials have been pushing to halt capital outflows. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra. jonathan: shares of georgia bank and commerzbank are rising -- of

deutsche bank and commerzbank are rising. the 3% stake in deutsche months after taking a slightly bigger position in commerzbank made it the leading shareholder in commerzbank. a top shareholder in deutsche bank. the ceo fueling speculation, speaking at a conference in london yesterday. he said the german banking market may see consolidation in 2018. for more we are joined from london by argent barry. right to have you with us. is the shareholder government still but below that you have cerberus taking a big stake. people's imaginations are running. cry and's comments did not help. arjun: if you're looking at consolidation in the german market, 2018 is probably still a bit early. deutsche bank and commerzbank are in the midst of large

restructuring programs. politicians have to get on board with any deal. we still need clarity on so-called basil for rules. we still need clarity in all these fronts before we get any realistic chance of consolidation. jonathan: i think what we grappled with in the past 24 hours as wide as a bond -- what is a buyout firm like cerberus want deutsche bank. it would be over in the periphery. italian bank loaded up with nonperforming loans, something more nimble and we get deutsche bank trying to work out what the goals are. ?and we got any color on that arjun: if you look at two of the key exit strategies for cerberus, consolidation, again i don't think that is in the cards in

the near term. a much longer term solution. when you think about it terms of the general german economy, yes, the german economy is strong but profitability in the banking sector remains low. we know it is a fragmented market. the rigidity of german labor law means extracting synergies takes time. you only have to look at deutsche bank as current synergy targets with integration of retail bank. synergies have taken four to five years to realize fully. will profitability in fruit rapidly -- will profitability improve rapidly in the near term? i don't think so. statesn: in the united -- they need some serious consolidation. we caught up with chris whalen, a bank analyst and this is what he had to say about the future of john cryan. take a listen. >cerberus is in, how long has

john cryan got no? >> weeks. vision. to articulate a he has to tell us why this very impressive and long existing shop like cerberus has decided to put a bit down on him. he's got to tell us why. jonathan: not so much that john cryan steps down in weeks, what he's trying to say is he's essentially got weeks to come up with a new plan to communicate what he's trying to achieve and not just to clean the backup -- clean the bank up. how big is the pressure on john cryan at this point and is it a matter of months for him to start showing results? arjun: the pressure is certainly growing. weeks, willie seen in number of stories where deutsche bank is investing more heavily in parts of their investment bank in certain areas like

leveraged loans and equities. this is something john cryan has flagged in previous quarters, that this investment was coming. the pressure is growing and he will be under pressure to deliver improvement in revenues going into the year-end and first quarter of 2018 as well. jonathan: great to catch up with use or. thank you for joining us. still feels like the toughest banking job on the planet. .lix: maybe barclays both of them probably need a vacation at the end of the day. david: the addition of cerberus does not make it easier. he's got hot breath on the back of his neck. alix: in the u.s. we saw financials technology lead the rally. that was not so for european equities. the divergence we've seen up to normalize basis, all in u.s. dollars. , theave the yellow line s&p, the white line is european stocks in the blue line is msci

aipac. european stocks have underperformed aipac and have declined significantly while the u.s. has stayed steady. you ask everyone come all they want to do is by european stocks. what is happening here? why the underperformance in europe? always -- it it is always depends on your perspective. common currency or the home currency. in general, we will find in common currency terms there is a fraction and we are talking about a global phenomenon here. kind of the distribution of their returns is essentially happening with the currency at the end of the day. that is a next donation, differing performance from the currency front. to some extent, one could argue that you have different speeds in terms of closing the output

gap and that will affect the behavior between the different equity indices. , iyou take a closer look think it's the most important characteristic, that there is a lot of movement in that great markets. i would not prescribe particular importance to those. we have not heard drastic moves in the last few weeks in currencies. fair point. what part of this has to do with the stronger euro and wha? shahab: the strong euro has been a feature of the year. the performance of equity indices, the euro will continue to go higher three at something to consider here to read because of the 3% or so gdp currency .ount backing it up

when you combine that with strong growth numbers we have in countries across the euro area, the natural path is to go up. these rate differentials you have between the u.s. and germany, almost a prerequisite to stop the euro going up as opposed to a reason for it to go down. we think any equity investor has to take account of stronger euro. jonathan: the current account surface has been there for a while yet we been down to parity almost. the current account surface in that time has not changed. why did we decide when it's going to assert itself and when it's going to reassert itself again? it is always asserting itself in one form or another. surplus in astrong weak economy, that is a different situation to having a large surplus in a booming economy. the currency tries to relate both of these factors.

that is essential when you about euro going forward. up, angelang .erkel's postelection test we look at the challenges faced by the german chancellor at she tries to build a coalition. if you can't watch television, tune into our colleague tom keene on radio. bloomberg surveillance can be heard in new york, boston, all across the united states on sirius xm radio. ♪

emma: this is bloomberg daybreak and this is the hewlett-packard enterprise greenroom. , coming up. this is bloomberg.

now to your bloomberg business flash. shares of best buy are falling and pre-markets. the consumer electronics chain posted sales that missed estimates. hurricanes in texas and florida did not help. iphone this year affected his performance. walmart keeping pace with amazon as we head into the crucial shopping season. walmart same-store sales rose 2.7% in the third quarter. e-commerce increased 54%. a price tag big enough to make a billionaire gasp. a painting rediscovered -- a painting by her leonardo da inci has become the most -- it wants changed hands for less than $60.

the buyer has not been identified. to 450 million, not a bad investment. jonathan: we sit here and bank -- blame central bank stimulus. alix: what's interesting, diamonds at the sale to not go very well. a few of the diamonds. david:. opportunity. jonathan: the whole team is chipping in. david: from christmas gifts to sincey, almost two months the german elections. chancellor angela merkel has yet to form a government. she's been in talks with attention coalition partners but thus far has not been able to narrow the difference is enough to move on to formal talks. to take us through the bergen.ities, reiner the most basic question is, what is taking so long?

unprecedented task ahead for merkel. never before in germany's history postwar have they tried to forge a coalition of four parties that are very far apart on many issues, such as migration, energy, and the environment. it's never been tried before and that is one of the reasons why it is taking so long. david: you mention what they have agreed on -- what they disagree on, what has the agreed on? rainer: a few points. germany's digital infrastructure is poor. it lacks behind many of its international competitors. fiber optic broadband is hardly something consumers can use for super high-speed internet. 's schools and education system once one of the best in the world is quite poor. schools with leaking roofs which is mainly because the

communities that have to pay for the schools are so poor. they tried to find a way to pump money into that, improve education, spend more on r&d. david: if angela merkel cannot pull this coalition together, what are her options?is another election an option ? i understand that has never been done in postwar germany. rainer: migration and environment, if they prove to be contentious to solve, sounding , if they fail if they cannot agree on anything, merkel would have the option to go back to the fpb, the party with which she had a ground coalition asked them if they would but to join coalition talks. if that fails, we would see new elections and that would be a sign of instability in germany and something that has never happened before in this country after the war. david: the spd has said we are not interested.

thanks very much. rainer: that is what they sense once before. david: they can always change their minds. shahab, does prime minister may have a friend in chancellor merkel at this point? shahab: it's a tough call i'm not sure. jonathan: do you think the situation in germany leads her to be more sympathetic to prime minister may's position? shahab: maybe in an emotional sense but in a tangible sense of that is a different question. jonathan: is the politics mincey enough in the u.k. -- sterling versus the rest of europe? shahab: we don't think that is a great idea. the market right now is cognizant of the problems that exist in the u.k. on the political side. it has for some time. remain short sterling

as a structural position. any progress that could be done at this point, not just in the u.k. itself but also in terms of the uk's relationship with the eu, anything that can come through between now and december eu summit has the potential to lead to a material sterling rally. alix: if pricing and political risk did not work for you when you were trading sterling or the euro, why would it work on the upside? shahab: the reality is at this point in time so much focus on the risks. collapsing,ernment jeremy corbin government being created at some point next year. multiyear negative implications potentially for sterling. so much focus on this in the past few months. it takes very little in terms of an upside surprise between now and december. a basic framework for potential transition, we've taken well.

yianos: i think the market's base case is flatness on sterling for the year. this is a great macro trade for a much weaker sterling in the course of the next one to two years. i would not necessarily disagree b.withhahab -- with shaha there is a structural push irrespective of brexit. it is a catalyst but not the driver of the balance of payments for sterling to move towards parity against the europe. there is a good cyclical story that supports sterling. sterling is the most leveraged currency for global economy. good global reflation helps sterling. we had that in 2017. profile an asymmetric ahead of you which sterling can remain stable or it can actually

keep weakening. it's a very good hedge and the market will keep using it as a hedge going forward. alix: thank you both for joining us. coming up next, emerson electric sweetens its bid for rockwell taking its third proposal. we will have the details, next. check out tv go. click on our charts and graphics. interact with us directly. this is bloomberg. ♪

alix: emerson's plea to rockwell, upping the bid to 4.7% , to her $25 a share. the third try emerson has made. emerson down by almost 2%. joining us is at hammond -- ed hammond. is this going to happen?

ed: probably not. this looks like a desperate deal for emerson to be trying to do. rockwell, not keen to sell. i just think fundamentally there is a big difference between what these companies do. culturally, how they see themselves. this would be a tough one to see happening. desperation on the part of emerson. a very small bump from where they were before. there's not much new in the deck . they got color on the slides but in terms of -- it is fairly thin. market says no. there are issues with this. emerson has a history of acquiring companies and not doing a good job of integrating. you can think of emerson as an old-line conglomerate. they do a lot of automation but they have big businesses as well. rockwell is a pure play, darling of the space.

share prices of these two companies going back over a couple of years, rockwell going up and up, the market likes these pure plays and that is what you get with the conglomerate model. seeing it across the space. alix: is that what you guys do? let's pretend this does not happen and emerson does not get rockwell. ed: one of the things that has , davidised around this farr, the ceo of emerson's looking at this as a legacy deal. he's been in the job about 17 years. speculation he maybe is going to retire soon. if this deal does not work, does he try one more big deal or does he leave and see what the next management comes to do? this would be huge for them in terms of the size of the deal. they been a lot of m and a. about 10 times bigger than the next biggest thing they've done.

does not an obvious second choice. if this one falls through there is not a rockwell part two they could go after. david: right now the investment bankers, what are they telling the ceo of emerson? they've have that much debt in their balance sheet. the don't go much more in debt in a given year. our investors say you could make this a richer bid? ed: what interesting is emerson has been in private trying to get this thing done. it went public through a leak probably about three weeks ago. rockwell has an investor day today. rockwell going in front of investors, they will get asked about one thing, this new bid. there probably is room to go especially is emerson are out there with an aggressive i synergy number of $6 billion to read what does that relate to in terms of jobs? they will put these companies together talking about a big amount of savings they will

make. does that mean that a lot of people lose their jobs? jonathan: a deal that the market says is unlikely given the spread between the offer price -- [indiscernible] jonathan: deutsche bank's chief international economist on the flatter yield curve and what is happening in a world of high-yield credit in the united states. the story of the market so far, it's a bounceback. dow futures are down of about 78 points from new york, this is bloomberg. ♪

♪ jonathan: president trump

heading to the house to rally republican lawmakers ahead of a much-anticipated vote on tax legislation. deutsche bank fueling merger speculation in germany around consolidation -- in germany. a round of consolidation might start next year. city, to our audiences worldwide, this is bloomberg: daybreak. i am jonathan ferro alongside david westin and alix steel. now, a big energy story breaking with crude down 4/10 of 1%. alix: huge news coming from norway. a trillion dollars fund proposing to the vest oil and gas stocks. they own a portion of large gas stocks like bp, exxon and chevron. norway is a huge buyer of stocks. they are able to up their allocation. they had been drawing down -- drawing down some of their money

to offset the oil price crash. i find this to be confusing because oil price is at $60 per barrel. going to bet is good for norway's economy, yet they are thinking about selling those stocks. jonathan: this has a time horizon longer than five minutes. they are doing multigenerational investments. the moves in the market are pretty interesting, a holding of 5%. the second-biggest holding in royal dutch shell and that stock is down by about 2%. you can see the ticker in london, down almost 2.5%. where do they get their money to begin with? oil and gas. what does this say about where they see the future in energy? alix: a couple questions with

this. what are they going to buy instead? they were turned over 3% over the third quarter. it is not terrible. they also have a 470 -- they also have $470 million invested in saudi arabia. is that a risk? jonathan: it sounds like pure diversification. planning fores are life beyond fossil fuels and they are planning for generations beyond the one they currently live in. david: the question i have is diversify, fine. we don't make an announcement. we don't do it in one fell swoop as a big gesture. you do it quietly over time. jonathan: when you are so big, you make a point. you don't want to go through parliament because the market is going to move against you and that is clearly on the screen.

not dramatic moves, but it is happening. the market is moving against them as they think about selling. alix: all the big oil players are going to be in huge pension funds. yoenis us for more is berkman. tell us the why behind it. yoenis: it is important to emphasize that this is no a proposal and it needs to go through the government's and potentially parliament, so they have not sold any of these stocks yet. this is not what they call a exclusion, but their take is that norway is so dependent on oil that it does not make much sense in owning oil stocks. will kennedy joining us. a proposed potential to roll back some of their equity stakes in big oil.

is that a concerning sign for the oil market? what it illustrates is there are real issues with these big oil companies over the next 10 years and 20 years. the norway fund is looking at the time horizon. overyone expects oil demand tp peak at some point in that fundamentally changes the outlook for these stocks. i think long-term investors like the norwegian fund are worried about what that means. the whole idea of stranded assets. with a very good investor particular concerns about diversification. it illustrates of the issues. jonathan: jonas, you touched on something important. we can discuss the potential rationale for doing this to make sure you don't add additional

risk to the economy and norway. to me, the process is going to be interesting. made has been no decision at this point but as the market begins to move against them, walk me through the potential process, the dominoes that have to fall to get to the position where the norwegian fund says we will start to move out. jonas: this is a letter that goes to the finance ministry. they will potentially need to involve parliament. there definitely will not be a decision this year and potentially as late as may. the opposition in norwegian muchament would be very pro-this move, while the conservative left government has been more skeptical in climate risk. it is a interesting dynamic, building up in terms of how the government will come out. doubt, the environment

movement in norway will cheer this on as a major victory. pointed outkennedy the possible effects this might have for the big oil companies. what about other big institutional investors, like pension plans that are invested in these big oil stocks? i know they say we will make our own analysis, but as a practical theyr in -- matter, do take a fresh look? i think everyone is thinking about how to approach this industry in the era of electric cars and combating climate change. a lot of these stocks, recovery in share prices trailed oil prices. oil is up about 8%, this year whereas exxon is actually down almost 10% which tells you something. they tried -- they trade with very high dividend yield.

they are not loved by investors cloudyt adds to this long-term future as investing -- investment managers make their choices. alix: what what they buy instead? are we looking at a bigger investor into apple? that is their top holding. jonas: if they take out the oil and gas sector, they will probably boost all the other sectors of the investment universe. tech stocks, industry stocks. it makes up about 6% of the portfolio, so 6% of roughly $800 billion would need to go elsewhere. alix: what does that say? we already have a rush in technology stocks. is anyone else nervous? david: it is not bad news for tech. jonathan: fascinating story. bergman,edy and jonas

thank you for joining us. we will continue our coverage of that breaking story. coming up, tax reform debates. president trump heading to the house to rally the gop. portman joinsob us from capitol hill. this is bloomberg. ♪

emma: this is bloomberg daybreak. bid to has made a third buy rockman automation -- rockwell automation. premium toents a 30% rockwell's waited average share price. rockwell is the leading supplier

of software and controls for assembly lines. walmart is keeping pace with amazon as retailers heading to the shopping season -- holiday shopping season. rosert's same-store sales 2.7% in the third quarter. it e-commerce business growth -- through 50% -- grew 50%. hurricanes in texas and florida did not help best buy. that is your bloomberg business flash. jonathan: just want to get our audience up to speed on that breaking story. $1 trillion fund might want out of the oil and gas stocks it owns. the norway finance ministry is to up -- update the parliament in the spring with a white paper with a decision in the oil and gas stock story. this is going to take a long time to make a decision on.

alix: if you are an investor with shares in shell, what do you do over the next 12 months when this could be a significant seller in the market? jonathan: you start to factor that in. david: it really puts the test about the dip. or cussed -- or the companies could be saying let's boost our dividends. jonathan: this one is going to take at least 12 months to play out. the story for the federal reserve. still on pace for a december rate hike. one looming concern is the flattening yield curve with the potential for short-term rates to rise above five-year rates. joining us now is torsten slok, deutsche bank chief international economist and james barty, bank of america merrill lynch head of global cross asset management. torsten, we want to begin with you. a bit of a snapback, but what is your message for investors? torsten: the fed is trying to

say they want to raise rates. it is driving a lot of the flattening, but long rates are not moving. they are flat because we are not seeing inflation quite yet. not seeing strong signs of the fed being aggressively behind the curve. still -- still slow, steady and cautious. the most important thing is the world is printing money -- the rest of the world is printing money. the ecb just promise they will do that until september of next year. that is what is an important driver of why long yields stay so flat. jonathan: this is a contentious debate in the bond market and the world of investors, around whether you should take any signal from it. i want to focus on the consequences. , whatless of the signal are the consequences of a yield curve around 65 basis points? what does it mean?

torsten: the economics textbook would tell you that if you hold interest rates lower than they should be, you will have more bubbles in asset prices. up, stocks will go prices will go up, they will be more hunting down risky assets across the board. we are essentially inflating the bubble in asset prices for longer, the more we have rates at such a low period. alix: james, does this derail the fred? james: no -- derail the fed? james: no. fed, it is like what can we control? one of theremember weirdest things about the curve flattening is we are doing it of tax cutsckdrop next year, potentially.

my guess is that it is going to be much more difficult for the curve to continue to flatten, next year. for other asset what are the consequences? treasury ishe yielding 1.7%, that is not attractive. jonathan: contentious for investors and we get some interaction from terminal clients. a user writing in saying the yield curve is not signaling a recession, but credit could begin to dry up and cause a slowdown. banks borrow short and lend long and they both the difference in between. that is simple banking. starts to get that flat, does it start to eat into credit? these verycause of flows thet sunol me come in from abroad, as a result of easy money in europe and japan, that is holding down the

long end, in a way where it is no longer a signal, but you are right to say that the flatter the yield curve becomes, the harder it is to see credit get a boost because it hurts the financial system more generally become -- because it becomes less profitable for the financial sector. alix: 3.1%. what is thing going to look like in 50 years? week,an: we said last once credit is softer and bonds are nervous, they will be able to get that 50 year away. torsten: that is why it is being overwhelmed. thatmentals are being fundamentalists are being overwhelmed around the world. an enormous amount, the matter what happens the fundamentals, that will keep invading -- inflating asset prices. jonathan: torsten slok of deutsche bank and james barty of bank of america, staying with us.

bloomberg will week -- bloomberg real yield coming up at 12:30. david: it is today we expect the senate finance committee to vote on the house version of tax reform. we welcome back senator rob portman of ohio. he is a member of the finance committee. good to have you here, senator. sen. portman: good to be with you. david: we have become amateur experts in this, as it were. you have a fairly narrow margin. 52 republican votes in the senate. you perhaps lost one yesterday in senator johnson. we are told he is a pretty firm no. do you believe so? sen. portman: he has concerns about how we are dealing with the pass-through companies, which is about half of the employees in america are employed by companies that are taxed at the individual level. smaller businesses, llcs and so on.

those companies get a substantial tax break to encourage more investment in jobs, so it is something of the national federation of independent businesses endorsed, yesterday. i do think it helps in terms of the economy. it makes our company's, globally which makes our workers competitive globally and provides considerable tax relief which democrats and republicans have said they like. i think we will get it on to the floor and of the end of the day, i think we will get it passed. david: you are pretty confident in that number, at this point? we. portman: i am, and should not discount a lot of democrats will be interested. if we can stick to the basic formula which is to provide real middle-class tax relief. the family income in my state of ohio would get about a $2300 tax break, just based on the

legislation we arty have before us, some changes being made to increase that amount, so it is a substantial tax break for people who are struggling right now, paycheck-to-paycheck and it also provides for a real shot in the arm to the economy because of the 20% rate in territorial. ensure been trying to that american workers are not competing with one hand tied behind their back. david: overnight, something i am not sure i knew about, which is the pay-as-you-go legislation that says each given year, if you reduce revenues and increased cost, you will have to match it that might trigger automatic cuts that have not been anticipated. does that require you to go to the democrats? sen. portman: if we have the votes for the bill, we have the votes for the waiver which has been done routinely by democrats and republicans, so i don't think that ends up being an issue. the issue is whether democrats

believe this to actually that is going to be good for their nottituents and i am suggesting there will be a lot of them, but there are several who i have talked to who are expressing interest. they're democrats who have talked about the need for middle-class tax cuts and to make our workers more competitive and that is what this legislation does. inserteden the senate a repeal of the individual mandate, didn't that make it a lot more difficult to get democrats to go along? the individual mandate is not popular out there. if you look at the polling on this, people don't think there ought to be attacks or penalty if they choose not to elect be a formal care act insurance. for the most part, these people cannot afford it. in my state, 84% of those currently penalized under the mandate have family incomes of less than $50,000 a year, so it tends to be a regressive penalty

. it is also part of the international revenue code so it fits with the tax reform bill. it depends which democrats you are talking about, but this is one where we are providing relief to some people who would be otherwise getting a tax and because of the proposal, we are also giving tax relief there. for many of these families, it is relief. david: what about the relief on the estate tax? -- real estate tax? you said the senate is going to repeal them altogether. we had chairman brady said he could not go along with legislation that did not include that $10,000 real estate tax the election. -- tax deduction. sen. portman: i am not making a prediction. the house needed to have that $10,000 deduction for property

taxes. think when you look at how that would work in terms of the tax code, because it is capped at $10,000, it would help a lot of middle-class families. david: thank you so much freer time. -- for your time. alix: that drama playing out in u.s. stocks yesterday. in europe. , it has been an interesting couple days investors keep saying buy buy buy. that is the area where we see monetary stimulus having the greatest impact. is just starting to ignite the cyclical parts of the economy. >> we think core europe is exciting. we start in both greece and italy, some of the issues hit them first in the financial services, particularly in greece. the u.s. has done

very well for us. in terms of relative value, we believe that is a fair amount of value in europe, today. alix: you end up having european equities underperform. with us is torsten slok of deutsche bank and james barty of bank of america merrill lynch. if you look at our survey, one of the biggest overweight globally, europe has been trading heavy for a little while. why did japan perform so strongly from september into just recently? a market where people have had positions fundamentally into next year, -- if you look at the consensus earning numbers of next year, it is just over 8%

and given were global growth is, you can do comfortably double digits growth, next year. it is a market you are going to have to be patient with. alix: i keep hearing 125 -- 125 targets for 2018, whether it is morgan stanley or unicredit. can you have a higher euro and double-digit returns? james: the higher the euro goes, the more pressure it puts. issue. it is a bit of an if you are a u.s. investor, my own them and unhedged, own them in euros. at least to get the currency benefit. -- you get the currency benefit. jonathan: are we going to get that expansion? james: my point is you don't need to expand multiples if you get double-digit earnings growth. jonathan: a lot of people saying

they are underground and of the multiple needs to expand because we have been down here for ages and evaluation of these companies has got to go up. are you saying that is not going to happen? world,rtman: in an ideal you would get both. the reason european banks have been under pressure is because one of the assumptions has been the ecb would eventually be raising rates. the longer the ecb keeps raising negative territory, the more damage to profitability. jonathan: what are your thoughts? by negative talk about adding credit positions at this point. would you want the credit risk in europe or in the united states? torsten: in germany, the highest level in 48 years, that is just crazy. this is telling you the german corporate sector is doing extremely well and the qe is still running from the ecb and you still have negative interest rates.

the analysis has been that they are not going to be doing too year, whenq2 of next the ecb has to slow down purchases and also change their message. jonathan: i look at the 10 year rate over in germany and it is down to 40 basis points. james barty, it is great to catch you -- catch up with you from bank of america merrill lynch. torsten slok of deutsche bank staying with us. weekly jobless claims on deck. this is bloomberg. ♪ is this a phone?

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see how much you can save. choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. jonathan: some breaking economic data coming up in about 25 seconds. about an hour away from the opening bell. futures looking ok, a rebound in stocks and u.s. credit as well.

the story of the bond market as follows. yield lower, yesterday. the curve was flatter and now it is steeper. the fx market, the dollar making a bit of a comeback against the euro and the yen. for a second straight day, we slide lower. 249 is your print or jobless claims. higher than the previous numbers. we are wait -- we await the business outlook. the import price index disappoints at 0.2% month on month. we were looking for 0.4%. numbers. the headline alix: also taking a look at capital goods prices. they did rise 2/10 of 1%. you also had auto prices falling. we saw used-car prices rising.

consumer goods prices falling 1/10 of 1%. why aren't we seeing inflation in court goods? -- core goods? jonathan: historically, 249 is still incredibly low. torsten slok, deutsche bank chief international economist still with us -- still at the table. why aren't we seeing the pickup? torsten: normally, with the dollar goes down, inflation should go up and it is still not quite feeding into goods prices and we see a little bit of goods price inflation, but when you blitz -- when you split cpi into goods and services, services still hanging nicely between 2% and 3%. are we having to wait longer before the price inflation comes around?

this is your world, the economic textbooks of pure supply and demand. the labor market does not make sense when you look at it that way. on a historical basis, they are so low and yet we have not gotten wage growth. you mentioned the dollar, weaker but import prices have not gone up. torsten: the fed has this economic frame weight -- framework that says we should see more inflation but then you look at the actual inflation numbers and that shows you that then i have to have a view on health care inflation and housing inflation and education. those things become very different questions compared to the broad brush fed macro textbook. we will also get industrial production and capacity later today, but that has not shown this strong sign of inflationary

pressure. the answer is that i think we will still see inflation. the fed has been saying that for a while, what apparently we have to wait longer. show you the does consensus view of when inflation will be coming and the answer is second quarter of next year. we are holding on to the view that inflation will remain low for the next four to six months. alix: on the flipside, you are combating inflation expectations. about 1.8%, there is a story developing among a new fed with powell in charge that you change the inflation guidance. you look at other factors and do other things. is that going to take hold? all, powellst of has barely sat down in the chair. it is whipping things around a

little bit. that being said, there have been a lot of voices in the last few years about going through price level targeting. it is not rocket science, it means if you are under inflation targets, you should allow some overshooting for the following years. overshooting, maybe the fed will decide to ignore the overshooting. will long rates also say all is fine? i have a hard time saying -- seeing longer writes -- longer inflation.ting the question is, are markets going to buy or will it wake up the bond vigilantes? the risk of course is that long rates will become unhinged. david: the senate has to give jerome powell the chair before he can sit down in it. torsten: that is why this is complicated.

you don't know if he agrees with it. jonathan: isn't that a great tactic? you introduce the question and hand it back over to the senate and he -- and they throw it to powell before he even takes the seat. david: torsten slok will be june -- will be staying with us. amazon keeps pace with as retailers head into the crucial holiday shopping season. the world's largest retailer delivered its best u.s. sales growth. in more than eight years the stock is up in premarket -- growth in more than eight years. the stock is up in premarket. -- we welcome back sarah halzack. how do you look at these numbers? sarah: this is a really encouraging report walmart. that was crucially driven by better traffic to their stores and the other piece of the puzzle was e-commerce growing at 2%. outpaces the --

david: they made substantial investment in e-commerce and their stores. they said we are going to take a hit on the margin and the profits. are they passed that or are they still taking a hit? that or are they still taking a hit? sarah: you don't want the alternate universe if you are invest -- are an investor in walmart where they make -- where they are not making these hard choices. they are still working through that, but they have to. david: are they ahead of everyone else in this move to e-commerce? yesterdayabout target and it sounds like they are starting to do what walmart did a couple years ago. amazon remains the gorilla that nobody can touch in the online space, but when it comes to old-school retailers, walmart does appear to be pulling away from the pack.

that growth exceeds the 25% growth we saw from target and walmart is doing more innovative stuff, things like offering discounts if you pick up your online order in the store. that is a more profitable way to do e-commerce because they don't have to pay for that last mile of delivery to your doorstep. instead of just trying to do amazon same -- amazon's same playbook, they're doing their own. alix: what have we learned about who is doing it well and who is not? sarah: i think department stores remain extremely challenged. we saw macy's, jcpenney and kohl's in a tough spot and that is a structural issue with enclosed malls. those retailers have struggled on the e-commerce front. discounters like walmart and target, there is a path forward for them. best buy had strong earnings as well, suggesting the big-box format is not totally dead. alix: torsten slok is still with

us. how is the consumer? torsten: look at the fed model of where the consumption -- consumer should have been. consumption is driven by wealth, and wealth has gone up. you should have seen more consumption on the back of the wealth increase and some studies show the wealth effect, meaning the wealth increase has fallen in -- fallen in half because consumers are far more cautious. on-the-job side, we are seeing some slowing in jobs growth. wealth should have been higher than where it actually is, but we do believe that given the job growth is still ok, that consumptions outlook is still roughly around 2.5%. david: is it the consumer is more cautious or that the wealth is going to a relatively small knot of the population and is not trickling down? torsten: 10 reasons we are

seeing a low wealth effect is indeed that the income distribution has changed quite a lot and the wealth distribution has changed. a lot of the wealth is in fewer hands and as a result, we just don't see the same effect on consumption. this is certainly one of the key suspects of why the wealth effect has dropped so much. jonathan: let's fold in the tax of -- text of a. does the text bill you have seen still the hands of those with a tendency to spend or those that don't? torsten: the tax bill so -- supports corporate front of then individuals -- rather than households. at the end of the day, this becomes a second -- this is very different than other strategies we have seen. bush basically sent a check to households to go out and spend this which is another way of giving tax relief, but this is designed to help corporate's. the jury is still out. the --

jonathan: is that a mistake? torsten: i am not in the business of forecasting political resource allocation. jonathan: is it a mistake to have a tax bill that focuses on corporate and not the consumers? torsten: it depends on the purposes of the bill. one purpose can be to boost the economy here and now and the other purposes could be to redesign the tech system and change the way the code is written. on those fronts, this certainly meets a lot of good criteria. on other criteria, it is not doing it because that is not the way it was intended. david: torsten slok from deutsche bank, i do so much. coming up, we talk with the ceo of one of the largest real estate companies in the tri-state area. scott rechler of rxr realty will be here on tax reform and structure spending. you can always listen to the radio.

tune into tom keene. bloomberg surveillance can be heard in new york, boston, the bay area and washington, d.c. this is bloomberg. ♪

emma: this is bloomberg daybreak and this is the green room. hour, -- in the next discusses the company's record $50 billion deal. this is bloomberg. now to your bloomberg business flash. norway's trillion dollar sovereign wealth fund was to

dump about $35 billion -- -- the norwegian bun says the nation will be less honorable to a drop in oil by not being -- ined and produces producers such as royal dutch shell and exxonmobil. spotify is moving to a new office in london so i can double its growth in the next two years. spotify will add research and develop and staff to its current 200 member workforce. it's a price tag big enough to make a billionaire gasp. a rediscovered painting by leonardo da vinci has become the most expensive artwork ever sold. for $450 million at auction in new york. it once sold for less than $60. that is your bloomberg business flash. were you happy when you got it?

with ao to jason kelly very special guest for us, discussing tax reform and infrastructure. at a big nyu here conference on real estate and finance. i will be walking around later to see if we can find that buyer. i don't know if it is scott rechler of rxr realty. we were talking about the da vinci painting. scott: i would rather buy a piece of real estate. jason: a lot of attention being paid to tax reform. there are some implications for the industry, but what do you make of it? scott: the country needs tax reform. i would not have started with tax reform as the administration has. it seems very challenging to get done. there are winners and losers.

big businesses versus small businesses. state versus state. the elimination of the state and local tax creates this double taxation that kill states like new york, california and new jersey. i wish they had started with infrastructure. that is an investment in our future. 1.7 trillion dollars being used to reduce corporate tax rates should be going into our bridges and tunnels and clean water. that would be something that helps us drive our economy. by not doing that, we are taxing our children because eventually, we have to make that investment. thenld rather tax myself have our children be taxed in the future. jason: let's talk about infrastructure. that is something the administration has talked about since day one. nothing has happened yet. how confident are you that that is on the front burner or on the minds of this administration? scott: if tax reform is past, it

is unlikely you will have a infrastructure bill of any meaning. trillion will1.5 be used in repatriation. it is going to be used on this tax reform bill. it is making the decision to basically cut taxes today and effectively tax us in the future. jason: infrastructure is obviously on your mind because of what you do for a living but also because you were on the port authority. what is the state of infrastructure in new york? scott: infrastructure in new york city is in dire straits. --re has been willful under willful underinvestment. we are living on borrowed time. averages 500 -- it years to 100 years old. at any moment, you could see some collapse of something, whether it is a tunnel that has

to shut down and 75% of the workforce the comes in the new -- thaty cannot get in comes in to new york city connected in. it drives the economic engine of the city and is also the achilles' heel. if nothing happens from a federal level, what is going to happen to fix that infrastructure here? scott: we have been fortunate that governor cuomo is very focused. will be the most infrastructure focused governor this state has had. some of that is reliant on federal funding, and some is reliant on state funding and user fees. we need to realize that we need to pay for infrastructure, so there are topics like conjecture pricing that are being raised today, where we create sustainable revenue sources for infrastructure.

people still do love real estate, commercial, residential. what is the supply demand right now, especially on commercial? the challenges we have with infrastructure is that we are a victim of our own success. new york is going through a renaissance. record population growth, joe josh job growth, tourism growth -- job growth, tourism growth. comes to newhat york, companies come to take advantage of that talent pool. whether it is spotify, amazon, google, cadillac. they're locating here because talent is what drives business in the idea based economy we have here, today. that creates demand that needs new supply. buildings in midtown and downtown providing supply that are averaging 75 years old. jason: you mentioned hudson

yard. there seems to be this shift going on. a lot of companies potentially moving to the west side. forward ins, going terms of how this city moves around and where the real investment is going to come from? scott: as the has continued to grow, it has forced us to open up new neighborhoods. the hudson yard is one of those new neighborhoods. a great public partnership with a tremendous amount of infrastructure which sets the foundation for what is going to be a new market within the city. if you think about new york, we have the same amount of real estate as we had, 20 years ago yet we have 30% more jobs. we needed to have the hudson yards built and have downtown built and it has changed the dynamics a little bit along the

way. even if you add all the space of it onlybeing built, increases our supply by 1.8%. it is really going to be absorbed and help some pockets that need to be dealt with. jason: you've got a lot on your plate, scott rechler. we will let you get back out there. thank you for being with us. alix: thank you so much jason kelly. coming up, tesla gets ready to unveil an all electric heavy-duty truck. the one to gety driverless cars on track? this is bloomberg. ♪

david: tesla is expected to announce an all electric heavy-duty truck and it will be partly autonomous. boston consulting group except by 2030, one quarter of all

vehicles will be autonomous electric vehicles. if it is -- if that is what happened, it will have to pass the safety tests of the national -- we welcome david strickland. by 2030, a quarter of all vehicle miles traveled will be not vehicles is that realistic? low-speedckland: than 25 milesmore per hour, doing delivery and taxi things in congested cities. that will be the foundation for that estimate. david: how do we know that is safe? what is it's a going to do? strickland: a combination of things. they will have to show the systems in terms of redundancy and durability, if they have an

issue, that they fail safely. going to build up and get into oversight in terms of how these vehicles are designed, not necessarily thinking of how you test things like brakes. self driving vehicles can't do anything on the roads. you have to think about a process and that is what the agency is working on. are we in far along that process? how confident are we that we can have these safe vehicles? strickland: really confident in terms of safety, but it is still early. right now, you have a number of vehicles doing testing. is working to get for testing so we can have some assurance. david: who is ahead? strickland: right now it is everybody. a lot of san francisco, tremendous work in arizona, texas, michigan. there is work all over the

country. they have begun testing this out in a truly self driving environment. david: exciting to watch. david strickland of the noble. venable.erable -- we can just go in without a driving license? david: just a credit card. demand.d then peak oil jonathan: coming up, the u.s. open, 34 minutes away. stocks holding their slide. this is bloomberg. ♪ retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store

near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ jonathan: president trump to

rally republican lawmakers ahead of a much-anticipated vote on tax legislation. norway one-sided energy stocks. $35 billion could be for sale as a fun looks to reduce oil risk. walmart chasing gun amazon online for its strongest u.s. sales growth in more than eight years. good morning, good morning. this is bloomberg daybreak. on jonathan ferro. 30 minutes away from the opening bell in new york. yesterday's callback, risk appetite makes a comeback. we are up about eight or nine point. bureau softer for a second -- the euro softer for a second straight day. in the bond market yesterday in reverse. the yield curves, yields lower. today, steeper. yields up three basis points. 235 so far. 30 minutes away from the opening bell. alix: end punch on retail

earnings. best buy off by about 2%. sales rising 4.4%, clip that was below estimates. they only predict about 1% to 3% growth in the holiday season. it tags along with the theme of retail. if you are not awesome, the wind of getting hit. if you are ok, your stock winds up getting hit. a different story for restoration hardware. that's popping about 20%. preliminary third-quarter earnings total blowout. revenue, 2% better. shares already having a monster run this year. 172% upside. initial estimates for sales show growth in the high single digits. why not remodel your bathroom? that is what restoration hardware will do for you. walmart, a really nice move here. up about 5%. it will be a record intraday high for the stock. earnings for the third quarter were better, but sales were 2.7%.

100 basis points better than estimated. online sales getting a nice 50% pop. they raised their earnings forecast for the year. we will dig deeper into warmer earnings later on in the hour. we will talk to the senior retail analyst at 9:30 eastern and you definitely don't want to miss that. jonathan: walmart up almost 30% in 2017. today is the big day in washington. president trump heading to capitol hill to rally the gop for the house tax bill vote. joining us is kevin cirilli. always great to catch up with you. from the investors perspective, how critical is this vote for tax reform to move forward? kevin: massively critical. president trump anticipated to be on the hill at around 11:30 meet where he will b with house republicans ahead of about that will be around one:

-- 1:30 p.m. quite frankly all the sources i'm speaking with this morning suggest this will be an easy vote in the house of representatives, even though tension in the senate is really starting to become the story here. after this passes out of the house, a goes to the senate where some republicans are increasingly voicing concerns. david: one of the questions to come up his individual mandates. the senate says they will repeal. some really may have some negative effects politically for members of congress. we talk with senator rob portman of ohio. senator portman" it is not popular. if you look at the polling on this, people don't think there ought to be a tax or penalty if selectoose not to affordable care act insurance. for the most part they can't afford it. far voters really paying

enough attention to what is going on on capitol hill right now? or my day wake up and say, oh my goodness, this affected my health insurance? kevin: a lot of democrats raising the concern. senator susan collins of maine saying she is undecided as a result of that repeal of the individual mandate being lumped in with this. senator ron johnson of wisconsin saying he has concerns about the right of the -- the impact on small businesses. there are some undecideds. he went as far as saying he would vote against this bill. just like the health care issue, the republicans could only afford to lose two votes in terms of folks going against this. it will come down to the senate. on pace tohey are have a senate vote in the week after thanksgiving. jonathan: kevin cirilli, great to catch up. a busy day for you. the markets regaining ground

after a two-day slide. appetite for risk returns. equity futures are positive today. we rebound, easing concerns the stock selloff could become a rally. as they risk off trade fades the dollar gets a bit higher, jumping 2/10 of 1%. now dead flat over the last two days. joining us is chris grisanti. and bloomberg chief equity strategist. c. is making some progress. the republican party making progress. yet on wall street it is like tumbleweeds. chris: you have the house of representatives with will almost certainly vote to approve. the tough act will be in the senate. there are still some a moving parts. that is what is going to drive the market over the next week or two. david: is that what you think? is uncertainty keeping the market from reacting? i find a disconnect the twinkle

republicans will say what happened and what ceo's say will happen. gina: i think so. it is one of the many issues the market is facing right now. earnings season is winding down. we are not getting a lot of earning reports to keep the juice of the market. we were so overbought at the end of october. it was so highly unlikely because sustain those gains. we were going to correct. maybe tax reform is the catalyst. technically we are in a correction. david: i have another question. we hear $1.5 trillion. that is over 10 years. $150 billion a year. is that big enough to make a substantial difference in the market? chris: we will know 10 years from now. the market does i care so much about that as they do lower corporate rates. that is the pot of gold at the end of the rainbow for the market. you can get rid of health care mandates, a lot of stuff, but the market is obsessed with a 20% corporate rate.

alix: how do you hedge? gina: equity investors tend to focus on cash equities. within the equity market the way you hedge is you tend to sell lots of winning positions that surged tremendously. that is what is happening in tech right now. a 30% tech stock gain this year. you also tend to rotate. of that withle bit utility stocks picking up a little bit of action. consumer staples, real estate to a lesser degree. i think rotations are generally a better way to deal with heads right now. -- hedge right now. within the equity market it is more about rotation. underlying all of this is the assumption nothing really negative is happening with earnings growth. we are continuing to recover. valuations are expensive but central bank to keeping the money flowing to assets. you don't want to fight against those trends. jonathan: the story, how do you

hedge? how do you diversify? yesterday they said we are long everything. she was long pretty much on everything. this st couple of days, story seems resilient. is this a long everything story, for you can you get deyverson vacation somewhere in the world and an asset class we need to discuss more? chris: i think it is the former. buy the dip story still. that is tough for me to say as a value guide. it is a good way to diversify, but it has not worked all year. the winners keep winning and the losers keep losing this year. jonathan: does that worry you? this long everything story? chris: for those of us old enough to remember the late 1990's, it reminds me of 1997. it's a two more years for them to get ridiculously

extended. looking at groups like media and health care china participated so much. media got some yesterday. reversion notion of has been around for quite a few centuries. the downside risk is greater than the upside of this point. gina: it works over a long time period. when you're focused on beating and index over a quarter or a year or two or three years, it is a tough argument to use. this is the big story of this year. i think the correlation with the light 1990's is relevant. if you look over the s&p 500 is training today, it is right around where it was in 1996 or 1997 and valuations kept rising. there is no way to tie market valuations. you can't time that point in which they revert to the means. if you have a 10 year time horizon you expect equity returns over 10 years to be lower today because valuations are so high.

your one-year return is not dependent upon the level of valuation. alix: you mentioned media stocks. pair with me the value you are looking at. you are doing individual stocks. which do you like? chris: disney is a favorite of ours because all the negatives you might bring up right away which is espn, people cutting the cord. that is all reflected in the price of the stock. at the end of the day i will go back to what gina is saying. over a long time value will win out. theree are thinking is was a time when tech stocks were twice the multiple of disney. you feel ifwould they bought some assets from mr. murdock? chris: they have been historically good at buying good assets like pixar. bob iger is a smart guy. i would trust them and this is a chance to buy some good content relatively cheap. times a wasting.

gina, chris, sticking with us. coming up, an important conversation. they will have a catch up with an interview with the chief operating officer. more on the company's record $50 billion deal in the future of the airline industry. coming up, 19 minutes from the opening bell. futures of 31% on the s&p and the dow. this is bloomberg. ♪

♪ david: it was a record deal. that is what airbus scored at the dubai air show this week. the playmaker security $50

billion deal for aircraft, the biggest commercial plane tracks action -- transaction and the company's history. matt miller is live with the chief operating officer. matt: thank you very much for that. talking about a $50 billion deal. it was a massive headline after a massive show. year.s john's last what will you do without him? fabrice: it is difficult to imagine he can be replaced. he sold 60,000 aircraft. however, they are leading the market. it is a great market. and we got the historic order, the biggest ever for airbus. matt: it's an incredibly successful airplane. indigo is focused on the low-cost model.

as of the future for air traffic? fabrice: this is a big chunk of the market for this kind of aircraft. i believe the trend is towards long-range aircraft at low cost. we can see european allies moving as well. the big legacy alliance will continue to dominate this market. matt: i wonder about the low-cost model because i see when i think of the decadence of first-class travel, of going in style, i think of the a3 80. you have not been selling the plane as much as the a-320. not as much as expected this year. fabrice: the market is much more narrow. -- i thinko sign they were very close. we will need a few more weeks. the reason is simple. this is an aircraft which is favored by the passengers. you feel very comfortable. it is quite.

at the same time it is seen by many by many airlines. we will make tons of money with this fantastic aircraft. emirates basically guarantees you will support this plane, produce and support this line. katie give them those guarantees? -- can you give them those guarantees? fabrice: we will be committed to producing this aircraft at least for the next 10 years. we expect to get additional upgradend we expect to it massively for the new wave of replacements. this is the plan. emirates is the only major customer for this plane. steve expect to clinch this deal for another 35, 36 airplanes before the end of the year? let you known't

the details of negotiations. between --d said between 30 and 40. we have other customers. if we take singapore airlines, it is 19. they decided to refurbish the whole fleet and take the new in the next few weeks. matt: you have a good customer. all customers that pay are good customers, but you have good customers for the a350. notoriouslyes are ticky buyers. will they take the first one you send over? fabrice: they wanted, they needed and they will love it. yes, they are demanding. we will have technical certification of bigger versions of the 1009 suite on the 21st of november. -- of the 1000 on the 21st of november. this is the challenge. atar is having

political issues with the saudi's. emirates, tim clark will not be there forever. buyersse middle eastern a little bit uncertain right now? fabrice: i don't think so. the trend will remain positive. you are right, there are tensions and i can't tell you when they will stop, but they will stop. the trend is towards more investments in aerospace. these three customers will remain very strong buyers. backlog is only about 10% located in the middle east. matt: i want to highlight this chart. a lot of times i will show the five-year return of their stock compared to the cac industrials. you are killing it. 271% in the last five years. can you keep this kind of momentum? can you keep this kind of trend? fabrice: we have it in the

backlog of close to 7000 aircraft. 321's weity of the know, but the challenge is to ramp up. if we continue to ramp up, well beyond what is planned today in the market will -- i'm sure we can continue to climb. matt: fabrice bregie joining us from airbus. jonathan: matt miller, great work. can you imagine $1 trillion worth of product? 16,000 airplanes to your career. david: i can't imagine the responsibility to sell that much and sustain the business. what happens if you don't sell? jonathan: that must've been a lot of fun. chris: and he is an american. a great american success story. jonathan: signs of recovery in the high-yield bond market. why junk may have a comeback ahead. 11 minutes away from the opening bell. risk appetite back.

this is bloomberg. ♪

♪ alix: the high-yield bond market not shaken out of bed again today. this is the high-yield spread, the orange line. the lower it goes, the wider the spread. the white light is the s&p. since 2015 they tend to move in lockstep. we want to look at the right hand side. you see spreads widening while the s&p was holding steady. joining us is ari wald, head of technical analysis and crisper sak -- chris grisanti. polish -- bullish shout out for equities. our point is that this is not late cycle conditions we are seeing. this is midcycle. we are in the middle innings of

a new bull market that started in february 2016. we think the cycle continues. you will have overweight equities specifically cyclical. alix: what does that mean for the job market? -- junk market? ari: credit is one of the positive points right here. -- at theg at b the points, trulyg not good if your holder of the etf's. a lot of thatser, weakness has been concentrated in the telecom sector. it makes up about 25% of that etf. they credit spreads we track are still healthy. you brought up the one we like, the spread between the corporate triple b's and the 10-year

treasury. usually what you see is this credit spreads will peak before the s&p 500. look back at the 2015 period, it peaked a year ahead of the s&p. we have nothing that divergence yet. jonathan: chris, telethons have been so weak. i run a company called sprint, when the deal with t-mobile fell out. north of $30 billion worth of debt. the future questionable and yields north of 6.5%. does that compensate for the risk around the company? chris: if they don't find a suitor, the options become more and more limited. it is like driving down a cul-de-sac. for us value guys, that is a tough proposition. jonathan: the question for air. it -- air. ri. this selloff will not discriminate.

the etf will drop. your point about this being telecoms is valid, but unless you are active it will hurt even you either way. is there a problem here? ari: i think my point is that is not representative of what is going on in high-yield. -- let's speak about this high-yield etf in particular. that is where you are seeing weakness. the credit says we have not seen that weakness. it is really just starting to crack a little bit. going back to that 2015 period, this peaked a year before the s&p 500. it is something we are watching but i don't think the weakness has gotten to that point. even the optimistic viewpoint is there is this etf that's the most oversold it has been since november 2016, which proved a great time to buy stocks. jonathan: let's finish up by saying let's not overemphasize the pullback.

we all get that. the message of the last week that if you're getting involved in high-yield, stay out of the passive strategy and remain active. chris: sure. there is less upside than there is in the equities. high yield is just sending the buy signal. that makes me a little uncomfortable but we can about the grief we are heading higher -- we can both agree we are heading higher. jonathan:. thank you very much coming up, walmart poised to open on a record. the stock of the premarket of 6% after a close to 30% rally for the year so far. futures up. up about nine on the s&p. this is bloomberg. ♪

♪ jonathan: 26 seconds away from the opening bell. a two-they pull back. -- two-day pullback.

of about nine points on the s&p 500 futures. over in europe, 18 at of 19 and t index groups up. there's the opening bell in new york city. yields are lower. today, the opposite. yields are higher. the dollar trending more at 93.87. crude, up for tens of 1%. -- 4/10th of 1%. alix: dow is up. the nasdaq up by 1/10 of 1%. we reversed it at the close but now the buy the dip is in full force. we had 50 days without a .5% pullback for the s&p. wrote that streak yesterday. again, on the riskier feel for the markets. looking at individual names.

it is not just making retail. png. rockwell automation thinking about a bid for $225 per share from emerson. cisco up by 6% for sales growth in two years. they are switching to subscription rather than hardware sales. intraday read on walmart. we are now at a record intraday high for walmart. after a very good quarter. sales 100 basis points stronger than estimated, but they raise their guidance for the company. let's look at one part of the business doing particularly well. that comes from e-commerce growth. they bought jd.com, and he saw the effects this quarter. online sales of 50%. 60% in the second quarter of 2018. growth you can argue is slowing in that arena.

e-commerce grew to 50%. when you are big like walmart, it makes a difference when you're competing with the likes of amazon. they are raising their full-year forecast and ticket prices even rose, meaning they do not have to discount as much to get people in the store. they had a little bit of pricing power which is very different from some of the other retail stores and earnings we heard from the earnings reports. walmart having a nice day. intraday target for the stock. jonathan: great work. joining us to talk walmart is chuck grom. rating and a $95 price target. sara, let's begin with you. this is the king of u.s. retail and that ugly right now. the stock rally over 30% this year. what are they getting so right? sara: it is on two tracks. they have made a lot of improvement to their stores. things they are doing better and stocks.

they cleaned up stores, improved produce and all that is paying off and pulling people into the stores. the e-commerce number is really important. 50% growth was especially impressive when you consider they now have lapsed the acquisition of jet.com. they are seeing stronger organic growth. chuck, it is through your target price on the screen at the moment at $95.37. are you sticking with it? chuck: that's a good problem to have. as her prior guest just said, the numbers continue to go higher in the performance of the third quarter really was phenomenal. 2.7% increase. every 10 basis point is roughly $75 million in revenue. that would be roughly equivalent of dollar general doing close to 140 basis points of copper increase.

comp increase. walmart is getting more people in the stores. it is back into the initiatives the company put in place several years ago. we think the stock will continue to hire. retailer will box not survive amazon? they can fight them off. chuck: i think you are seeing a real divergence in the have and have-nots and retail. long-term winners will be walmart, costco, dollar general, dollar tree. we think home depot and lowe's will be winners. i don't think amazon will take on everybody. the department stores have some fairly large structural headwinds that are probably not so amazon specific. walmart is going head-to-head with amazon. the one asset they have that amazon does not is their stores. they are looking to get more people to come in their stores.

they are discounting product to get people in their stores. of expensele delivery is the most expensive. walmart is able to solve that better than amazon. we like them out there. of this ismuch really a matter of corporate leadership? i was at the new york stock exchange two years ago with doug mcmillon. he said we will take that are profits in the next two years because we will invest in stores and .com. is it paying off now? chuck: it was october of 2014 when doug realized they were under investing in their stores. greg the leadership of foran, they removed inventory, they pay their employees more, they empowered employees to be successful. i think a lot of that was based

in the rebates of earnings. this is something some companies need to do. they need to take a longer-term look. our big thing is culturally -- it all came from leadership. the fire regimes of walmart were largely focused on growth, both bigger stores and more stores and internationally. this team is focused on what they need to be focused on, the u.s. customer. focusing on getting people in their stores, growing their e-commerce business and stock is up 6% today on a lot of the efforts from a couple of years ago. thank chuck and sarah, you for being with us. we want to bring back chris and air. ari, you follow the sector of retail. give us a sense of the story of retail. we have a chart to put up of the

etf a retail. does it tell the story? it is a story of winners and losers within the retail space. ari: that is exactly what it is. there is walmart and then there is the rest of retail. you want to be selective when investing in this space. the chart we brought is the equally weighted s&p retail spider. more or less training at the same level it has been at for four years. what could be this big distribution pattern. very telling this is occurring in what is been a very positive market set up. we like to pose the question, if we are wrong about the market, retail maybe underperforms on a relative basis. if the market turns lower, you are at risk of seeing xrt dropping and seeing losses pick up. there are winners in the market. that is where you want to be invested in the industry. jonathan: chris, you are invested in walmart.

chris: it is a good day to talk to me. we only own 19 stocks and one of them is walmart. with think walmart is about the only one that goes directly against amazon on the sku and can still hold their own. because of their size and they invested heavily in their dot com presence. jonathan: target is starting to do the same thing. you have got this squeeze from both sides. from online at amazon and brick-and-mortar from target. what is the biggest threat right now for you? ory have to look at amazon, do they look behind them? ari: i think they play in a different marketplace and walmart. i think walmart has a broader, lower income customer. i think they have done a good job. the key to success with walmart, and they seem to be doing it, is the dot com. they have not lost that. they are 50% year on year.

that's an incredibly strong number. we were expecting 37% in italy that away. alix: looking at the price-to-earnings ratio. why are they a value stock for you? chris: they were a value stock we bought them a year ago. they just blew through the price target. it is that kind of market. you hate to sell this kind of thing. when you see the winners in this market, they got 20% to 30% higher. jonathan: will you have to reassess that position? chris: yes, we are. isn't worth what is now being offered? it was a lot different in 1995. we will see. those of the kind of meetings you like to have. alix: he will not answer your question. jonathan: thank you very much for joining us. chris is very happy this morning. nine minutes into the session. two-day pull back on the s&p 500 amounted to about 8/10th a 1%.

of about 6/10 of 1% on the dow. from new york, this is bloomberg. ♪

♪ waters,ming up, maxine democrat of california and making the road the house financial services committee will be talking tax reform. this is bloomberg. ♪ alix: norway's $1 trillion sovereign wealth fund is proposed getting out of oil and gas stocks. making the decision in the auto

quarter of 2018. the gas index falling on the news, erasing an earlier gain. a lot of the equities of the norway sovereign wealth fund also down. off by 2.5%. the entire fund, oil and gas makes up 6.5% of it. we are joined by will kennedy in jonas bergman. jonas: the fund has been going through fossil fuel investments. growingeen growing, discontent with norway's investment in the oil sector. i think they just sort of saw the writing on the wall that this was a good thing for them to propose given the state of the oil market right now. and given the fact renewable energies are gaining more and more sway in the global energy markets. alix: if i'm an oil trader, do i need to sell over the next 12 months?

did you have norway calling a top in oil? is an investor looking ahead in decades. there has been an upswing in oil which makes it a good time to think about selling. the real concern for the norwegians is how the oil industry develops over the next 10 to 20 years. theyone is talking about prospect of peak oil demand as we switch to electric vehicles. there will be no more growth in the oil industry and some point between 2025 and 2040. what that means is the stocks go from growth stocks to being of different beast altogether. managers like the norwegian position. alix: holy executives play along with this change? do we have to start looking at different types of management? will: i think those are important questions. already they are paying quite

generous dividend yields for these companies. shell pays more than 6%. even before the norway decision, these were not universally loved stocks. i think buybacks is one option to fill the overhang. these companies are not totally out of the woods. they are starting to make money again but they don't have an awful lot of free cash flow to play with. jonathan: talk to me about how long this could take and how small the exposure of this fund is to oil and gas stocks. $1 trillion. oil and gas is just a fraction, isn't it? roughly $8006% of billion. they have fairly large holdings in bonds as well, $1 trillion holdings. it is a sizable return, but it's

interesting that the fund says it sees no appreciable effect on returns from selling out of the oil and gas sector. that tells you a little about how the sector has been performing. they think they can pretty much generate the same returns without that sector in their portfolio. jonathan: if you want to get out of a position typically you don't to go through this long process of informing the ministry and the parliament and having a big debate about it. talk to me about how difficult this process is actually going to be. we started talking about it in november 2016. how much longer will we be talking about it? jonas: probably some sort of proposal in the white paper, which is usually released in may. and then a parliamentary debate moving up to the budget, the big-budget in norway which is in the fall of next year, which the

finest ministry said -- finance ministry said. decides when they will have announced the decision to get out of these stocks, the move will probably already have happened. that is an interesting fact of the whole debate. alix: will kennedy and jonas bergman. still with us, chris croissant risanti. frakinge think has changed oil, ruining it for everyone. i think the story about norway is significant, not because they are dumping their oil stocks, the biggest oil is -- no way is an oil-producing country. we are selling oil. it is kind of a significant story from a mind share rather than it investment. alix: saudi arabia is kind of

doing that. they are kind of moving away from oil. chris: i'm sure that will come down the road. alix: is a value investor, energy is a hot place for you. at what point does value outweigh the negatives, or do you wind up going to some place like solar or wind? chris: every time oil pops its bigotsove $50, $60, this get turned on in the united states and that will eventually start happening in other places that are fracking. the only oil positions we have is -- it has been poor. more so every day. like the guy selling shovels of the gold rush. we are hoping that works but not so much. alix: you have been with us for an hour. i want to end on a broader note. what is your strongest conviction for 2018?

chris: my strongest conviction is i am too old to know everything. we were talking about this before. as valuations get extended i have to keep reminding myself as a value guy, look, don't sell to send because of walmart now pushing 20 times earnings. there is still value and they have a tail wind. for me the hardest thing is sticking with quality even as it gets expensive. even if you are wrong in the short-term, over a long time you will get bailed out. avoid really expensive stocks that also maybe not around in the next cycle. alix: don't sell, don't sell. thank you very much. great to see you. if you have a terminal will not check out tv . interact with us directly. jonathan: almost 20 minutes into this session. we snapped the pullback. of by four tens of 1% on the s&p. 120 on the dow.

this is bloomberg. ♪

♪ jonathan: lloyd blankfein got a twitter account and is been tweeting a lot about brexit. now he's over in the u.k. "lots of handwringing and ceo's over brexit. a tough and risky road ahead. a vote on a decision so fundamental and irreversible. why not make sure consensus is still there?" i'm reading between the lines and saying some people might say lloyd blankfein is suggesting maybe a second vote? alix: that is kind of what it seems like. david: i'm not sure it was a consensus the first time. jonathan: a referendum is a referendum. david: if you are a ceo, you think things. it is a little harder in your running the country.

jonathan: what we are learning from lloyd blankfein, he might like spending time in frankfurt, but ultimately ceo's want the status quo. david: he hopes they will be able to filter building and london. -- in london. jonathan: i think they know. they want to stay in the city of london. david: he is enjoying it. it has been 30 years since the u.s. has rewritten has tax laws. today there may be big steps towards doing that on the senate finance committee is about to send out there bill to the senate. kevin cirilli, start with a house. kevin: in about two hours president trump will be up here on capitol hill meeting with house republicans where he will urge them to pass the tax package. they tell me this will be an easy vote. it will come at about 1:30 or

2:00 this afternoon. then all eyes focus on the senate where politics surrounding the package have definitely emerged as a contentious battle. susan collins, a centrist republican from maine saying they have problems of repealing the individual mandate. senator ron johnson of wisconsin, a state president trump won, says he's not ok with the pass-through rate. clearly this will be heading for a collision course. all the sources i'm speaking with suggest the senate should likely take up their bill the week after thanksgiving, putting them on a path to get this done by the end of the year. david: how much moving around is going on in the senate? ron white said the target is moving constantly. it sounds like there is open negotiation going on. kevin: there is very much open negotiation going on on a host of issues. most notably is the individual mandate repeal.

during the health care debacle several republicans ultimately went against voted with republicans as a result of their own constituency. that repeal of the individual mandate and how voters react to that on the ground in their states will be key the tax reform's chances. david: we just had rob portman of ohio saying he thinks some democrats michael along. joe manchin west virginia. kevin: i just don't see it. i have spoken with several senior aides, all of whom suggest the working framework as it stands right now is something they would not be able to get on board with. it is too risky politically. they love the sea bass republicans would love to see that happen, the white house would love to see that happen, but it's an uphill battle. how the left is framing this with regard to whether or not the middle class will ultimately see at tax cut in their final version when this is passed, it

is really coming down to a political battle. they stapled will lose coverage. republicans that you will get rid of the health care tax that has dogged the middle class. jonathan: it is a fascinating story and we will continue to tell it. bloomberg's kevin cirilli ahead of that vote in the house. president trump making his way to rally the troops. 26 minutes into the session. that does it for "bloomberg daybreak." we are up 130 points on the dow. 40 of that comes from walmart. it is up almost 7% after another solid set of earnings. from new york, this is bloomberg. ♪

>> it is 10:00 in new york. from new york, i'm julie hyman in for vonnie quinn. mark: live from london, i mark barton. welcome to bloomberg markets. -- i'm mark barton.

welcome to bloomberg markets. ♪ julie: here at the top stories we are covering from the bloomberg and around the world. are back in rally mode today snapping recent declines. we will speak to deutsche bank's binky charter. choddha. walmart delivering its strongest u.s. sales increase in more than eight years. should amazon be worried. in politics tax reform faces a key test. president trump will be on the hill to rally the troops and about 90 minutes. -- in about 90 minutes. a have