a remarkable success story. strengthenedn has and spending multipliers have taken hold since 2016 -- ♪ >> house republicans take a victory lap.the u.s. passes its tax bill , and a major step towards historic overhauls. the saudi arabia's energy minister calls opec and him it out -- opec and its allies. for britain plans leaving the eu, as it will be put into law. this is "bloomberg: surveillance." i'm mark barton in london. check out what's happening to european stocks.

>> thursday stoxx 600 down by six of 1%. loss trade that was the worst run in over a year. ellis for a seventh consecutive increasing for a seventh consecutive week. nymex crude is above $55 a barrel, still for a weekly loss. agency, anal energy trim for demand estimates. as u.s. crude production continues its record run -- a busy day, busy week. draghi would be working to monitor this, he is giving a keynote speech in frankfurt.

we did see consumer price inflation data yesterday, still well below that 2% target range. this is both on a core and headline level. he says now is the right time to put the fiscal houses in order. draghi is pushing for structural reform, something he has done. we will get back to draghi. let's move away, get to the u.s.. house republicans have passed their tax bill.senate republicans approved their own package . the proposal will now be sent to the floor, for a vote that could come as early as the week after next. the senate is far from certain. republicans, who don't plan to rely on any democrats votes, could lose two of their members before the legislation and collapses. we are joined by stephanie baker

come and sebastian regular, -- and sebastian radler, head of european equities and deutsche bank. so, there are concerns still about gop members. how would gop leaders -- how are gop leaders going to bridge concerns? stephanie: they've gotstephanie: an uphill struggle ahead. remember back in may, when the house passed the obamacare repeal bill, and everyone celebrated. then, it's faltered in the senate. there are questions of whether or not -- it faltered in the senate. there are questions of whether or not this will suffer the same fate. there are differences between the house and senate version. we should be looking more to the senate as the version that will be passed. they have a slim majority there. they have inserted a repeal of obamacare as a way of paying for it. that has complicated passage, because you have certain,

several republican senators who are opposed to that. we already have another republican senator who has come out and criticize both bills, the house and the senate, for favoring big corporations over small businesses. mark: the house bill, stephanie, doesn't comply with recent rules. to figure that up -- figure that up when it comes to long-term deficits. stephanie: the house bill, as many have said, it provides a permanent tax cuts for corporations. the tax cuts for individuals expire, and i think that is a real issue that they will have to face. once that happens, how will they sell this to the public? many analysis of said that actually, for some middle-class americans, their taxes will go up.

sense for them to be politically passing this massive tax cut for corporations, that will result in an increase for lower and middle class americans? mark:mark: i know you are in it -- i know you are in inequities man, something is achieved by then what the year, is the spillover effect from the u.s. to europe and other equity markets? >> there are two potential avenues by which this could happen. the first is the question: will it lead to stronger growth? our economists are cautious. they say if it passes, as wellanie was telling us as , there's a positive spillover, but a minor one. if you get more, will push up on deals? yields?ategists -- bond

rate strategists are saying it would be negative because of that issue. 5-*6 sixs is a big weeks -- 5-6 six weeks for president trump, isn't it? this is the last chance for a legislative win in his first year of office. he is desperate to get something through, isn't he? absolutely. -- stephanie: absolutely. if this happens, it is a huge win for him. people don't understand the ramifications of this bill. it's a massive change in the u.s. tax code. the benefits to corporations will be huge. the risks for the republican party going into the november midterms are also huge, depending on how this plays out. ofk: those are the words stephanie baker.

thank you. sebastian from deutsche bank stays with us. it's get back to mario draghi speaking in frankfurt. tightening of financial conditions. these factors should slowly fade away. with well under inflation expectations, the effect of inflation, in which permission should not be persistent. market tightens and uncertainties falls, the relationship of wage growth should reassert itself. we have to remain patient. explanation that globalization and visualization -- digitalization have made it more difficult for banks to stop domestic inflation. we don't see evidence to suggest that -- much evidence to suggest e-commerce is as big as the extent that can be measured.

the same is true -- as the global economy recovers, before an outcome cap is moving in the same direction as the euro area outcome gap. we aren't yet to the point where the recovery of inflation can be self sustained without our economic to monetary -- economitive monetary policy. there are financial conditions facing households, which are, in turn, heavily contingent on policy measures. an apple monetary stimulus remains necessary for underlying inflation pressures to build up and support headline inflation over the immediate term. this is reflective in the positions.u these into signal growing confidence in the economy, while also acknowledging that we must

be patient and persistent for inflation to return sustainably to our objective. reduce a piece to 62 billion euros, while extending the horizon of this purchase until the end of september 2018, or beyond if necessary. in any case, until we see a sustained adjustment in the path of inflation. this recalibration of our asset , thehases forthcoming investments, it offers guidance on interest rates, and helps maintain the necessary degree of accommodation, and thereby to a helpnt -- and thereby, to recovery. this follows the same logic as those in december last year. when real -- when we reduce the

pace of purchases. our monetary policy influences long-term use through both its main components by compressing the term premium, and by anchoring the expected path of policy rates in the future. by accumulating a portfolio of long duration assets the center bank, can compress the premium by extracting duration risk from private investors. via this duration extract and affect -- extraction affect, the central bank has various capacity markets, it spurs a rebalancing of private portfolios to securities, and thus, lowers premiums across a range of financial assets. their heightened perceptions, and the euro system

had to purchase large amounts a month to have it impacts on long-term yields. as market conditions have normalized, and economic outlook capacityved, the tubes or risk in private portfolio has risen. we reduceins why monthly purchases. asset purchases matter for the signals they entail about the path of people -- future policy rates. the so-called signaling effect. in the euro area, this effect is reinforced by the sequence in which are instruments were authored. specifically, the statement that our policy interest rates are expected to remain at the present levels well past the end

of the net purchases, mechanically affects the time of the first expected rate hike. that anchors the path of expected policy rates over the lifespan of the net as a person -- purchase program and beyond. the signaling effect of our purchases is therefore naturally increased in prominence, relative to the duration affect green this explains why our decisions three weeks ago to reduce the pace of purchases, while extending the horizon, left on impact, financial conditions largely unchanged. let me conclude. mandate is framed in terms of price stability. if this is the best contribution -- and ensuring

price stability is a precondition for the economy to be able to grow along a balanced path i can be sustained in the long run. principle ofuiding all of our monetary policy decisions. now, with atime recovery ongoing. it's the right moment for the euro area to address for the challenge is to stability. this means actively putting our fiscal house is in order, and building up buffers for the future, not just waiting for growth to gradually reduce debt. implementing structural reforms that will allow our economists to converge and grown higher speeds over the long term. as charmingly mayor is observing -- as john is observing in his introduction, it means progress in european integration, and

especially, the remaining gaps in the institution of architecture of our monetary union. thank you. [applause] italy president mario draghi, saying the yuan area is the midst -- the u.n. area is in the midst of economic expansion. he says it is signaling effects of the ap pa increase relative to duration. now is the right time to put the fiscal house up. inflation. there was concur, sebastian, with the ecb president's comments? the ecb is in the midst of a solid economic expansion. what is this for european equities in 2018? >> i think he's right that we

see impressive data on the economic front. year, beginning of the the consensus for us for the euro area to grow 1.2 percent is now at 2.5%. indicators which impact stocks, are consistent with three and a half percent. if you would have set a year ago we will be consistent, people would have left a you. we have seen a tremendous acceleration. that is what has pushed up equity markets. our point is, at the current level, the probability of this is significantly higher area mark: you are suggesting we could see a mild pullback for next year in european stocks? >> yes. we have a target level of 375. he said we had a set up over the last couple of weeks to come close to that level. we conclude that we are tech -- tactically neutral. it would limit potential for equity markets. mark: next year, your forecast

is 396, roughly 3% above current levels. it's not a lot, is it? >> it's not a lot. what you have in the euro area, you are been obtaining from a goldilocks -- benefiting from a goldilocks situation. the process we have seen over the last three or four years, this widening of the gap, growth will be accelerated. we are seeing that is a benign process. growth momentum will soften, and rates will stay low, but what you have seen will dissipate. mark: etf growth, you are saying 2% this year. what is the projection this year, 11? >> it's quite a step back. [laughter] you have seen double-digit eps growth this year for the first time since 2010. average growth of the last six years was -1%. mark: this is the outlier. >> you've had tremendous gdp

growth. the euro was falling earlier this year. bond yields were rising. next year, what you will likely get is more euro strength, some deep south -- some deceleration and the global economy. good enough for positive growth, but not as impressive. wise, is it time to switch? >> it is. it's good to ignore noise and focus on what really matters: the direction of growth momentum. isn't accelerating or pulling back slightly? you had a six year high consistent with a growth rate of four times your sustainable growth rate. it means some pressure on markets. it means that six local -- cyclical stocks don't get the same treatment. mark: piercing every day we look at u.s. markets, over the last week or so -- we haven't seen a record in europe since 2015.

your 396 level is below that. why can't europe reach the sort that the u.s. reaches on a daily basis? you're making a call that the yuan -- you and stock market will fall the u.s. -- fall. -- earlier this year after the macron victory, people got enthusiastic. there was a strong consensus this would be the year for the euro to outperform. it has since. what we would need to see for europe to start outperforming, either a shop session sharp drop in the euro, or boosting growth tree or, euro area growth. if you finally got the euro economy to a 4% growth rate, it would help, so benefit from a strong global growth backdrop.

we expect growth to slow back to the 3.2%. mark: sebastian, stay there. thanks for your time. with get back to -- we will go to mario draghi in just a second. we will to john cryan of course. we have chairman, who are also speaking in frankfurt today. cryan, sebastian starlike. here's the bloomberg business flash. sebastian: u.k. caribbean has plummeted in trade this morning. the struggling construction company -- has discussions with its lenders, after profits were hurt for project delays. 5.7% --urported eighth above and he has reported a 5.7% increase. there was the first growth and customer numbers since the turn -- start of 2015. authorization came in at 293

million euros. comcast and for rise in our work -- and verizon have talked for televisionm and assets for walt disney. comcast, the owners of networks such as nbc and universal --tures, approached control for control of the media assets. people at verizon, the biggest u.s. wide -- wireless carrier, has a similar collection. the keystone oil pipeline has been shut, after the line, which can carry about 600,000 barrels of crude a day from alberta to ,exas, spilled 55,000 barrels days before a nebraska later -- regulator would decide whether transcanada pipeline can proceed. has revealed what else will be the reason for investors to take seriously -- terrestrial transport. in losiled a tesla car

angeles. the company said the truck will offer autopilot safety features. >> one of the biggest questions we have been asked about vector trucks is, how far can they go? let's find out. 500 mile range. [applause] sebastian: that's the bloomberg business flash. mark. mark: thank you. let's go back to the deutsche bank chief executive, john cryan panel in frankfurt. >> mr. draghi made interesting comments. one was on duration. that is going extremely well. on other was the messaging the slowdown in purchases of bonds. where i would actually try to supplement what mr. draghi said

-- i agree with virtually everything he says -- interested -- interesting on the price stability point. we have seen, and a narrow respect, lots of inflation, deliberate inflation. objective of policy, and has been successful. we have seen price inflation. that's a consequence of a producing interest rate. whenever a commodity is bought yield, obtaining of a policy rates will increase the price of that commodity. it's largely been, obviously, manifested self and debts. this was related to their securities. it's a finite term. a change in interest rates will lead to a reduction in debt securities. we need to make sure that that is managed as carefully as possible. so far, very good.

when he to find the next step in and the ecb policy, for further price inflation and securities. more broadly, into a modest amount of price and wage inflation. they think that there is a map to how to get there. it's to do it relatively gently. the message of doing it carefully, over a longer time, not doing it abruptly, would allow the market to accommodate this change in asset prices, which will lead to the ultimate manifestation, demonstration of , which will policy be in achievement of ultima's -- price instability. i think the fed had charted a

path, which allows us to understand and learn from that. it will try to understand transfer that standing to the european markets. trends are different. just to inform ourselves how to do that -- so this could be out of the system. you have said in the past that negative side effects of that-loose monetary policy you see this coming to the fore. audience andn the saying that is perhaps the unwind? risk that would > you see this all isolated bubbles , to not necessarily anything that should be a system.

>> this would be the black swan one. this is by ecb -- on the financial crisis, it was successful. ecb and all the regulators, we have heard of that. they made a good job to step alive. it was not easy situation. that is unquestionable. is, i don'tstion know, 7-8 years now. if you have medicine for problem , they would need to find a way out.

they would have to cope with this. , think to write a way out there be a generation in europe, which is a challenge. ask a part of the , itwould say 4s would be helpful if it would later toer rather increase a little bit, or in normalized these financial, financial situations. it's a complicated situation. financial markets overall need orientation there.

if we have a clear orientation, how is the way out? even if we have to be careful to bethat, it has to understood. >> thank you very much. president draghi mentioned an increasing preference to take risk. that is the thing that causes people to worry about bubbles. we have so much money chasing, perhaps, too few opportunities that there is perhaps exuberant about. what is the credit standard that you apply, for example? i tend to rephrase your point. they take risks, but don't see them. [laughter] >> that's the difficulty. when you have achieved money,

you invest. you buy at a high price. you don't care so much about political risk. the cost of it, i can say that sometimes, the price of the risk is gone -- not embedded in the market. the real question is how much, what does it mean, what will be ? we need to be mindful of this. if we look at the opposite way, we make a mistake. i understand the point made by , whichsident of the ecb is that there is a capacity of the private sector investors to buy bonds.

may go back to your initial question? you have raised this, which is what about the risk, and how to mitigate the risks you have mentioned? notably, the fact that investors to what couldeact be the monetary policy. if i may say so in this room, in front of mr. draghi -- listening to his speech, it's a mix of certainties. -- and nervousness. [laughter] >> that's the definition of guidance. >> which is perfect guidance. >> what does it mean? you speak about our reaction, the way we are reacting in risk policy. what does it mean? -- be careful.

you shouldn't think money will continue forever. you buy access at a too high price. be careful. mark: brexit show live from europeans headquarters in london. i'm mark barton. let's get around about this week's brexit -- brexit stories. here's sebastian salek. sebastian: the pound dipping after the sunday times reporting that the parliament agreed to sign a letter of no confidence in ukip prime minister theresa may. to maintaingling her power, after resignation of two cabinets. as the eu raises the prospect, brexit talks failing to reach a breakthrough -- breakthrough. will get aief brexit breakthrough by december,

according to european business leaders. said it was untrue that they had said that. germany's angela merkel is said to be wary of pushing theresa may to harder brexit talks. officials has excessive eu pressure over this, and says it could we can make at home. brexit -- told them that they would be weeks for clarity. this is not to put politics above its people. the community will not be passive observers of the brexit process. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.

and sebastian salek, this is bloomberg. theresa may could give into the demand of her own party, with plans to get a brexit date. dominic greene, who said they could vote against it -- they said they would listen. ms. a 30 continues to look shaky. how long can she stay in the job ? the chief executive of market -- market research organization. thanks for joining us. is this a decline on setting the brexit date in, legal stone? >> yes. it looks like it is going to be. they haven't climbed down yet. to do one's very hard of those when the spotlight is

on you. yesterday, david headington addressed lunch, and somebody asked him, what about the brexit rebellion over the date? he said, we will listen, we understand. it was very emily and language. the reality is, this morning, george freeman, who was not previously identified as the rebel on this, out of himself on twitter as a rebel. he said it's enough to bring it down. >> there are so many amendments. how will this be over eight days? >> he's got her member, this is not sitting for glue debates.

there are important details. they would like to have another go. in terms of people's clinical support, this seems calm for the election. may isn't doing well. she is having -- bedtime. jeremy corbyn is only 1, 2, 3 points ahead. mark: saving brackets for now. you look back at mays government of the 1990, you look at the cultural problem for mr. corbyn. wrap it all up for me in a nice bow >>. the calculus is this: the tories two the their

prime minister, lead them into the next election. getting rid of her is painful. as long as getting rid of her remains more painful than keeping her, she will stay. these dreadful things you write about, there is a scenario that she is gone by christmas. as long is she can stay in post -- i will be happy. [laughter] >> that calculus could change, way tobecause they see a give it of her painlessly, or would be an obvious replacement. the cost of replacement drops, or they think she is doing so badly she won't get a deal. it's those two bits of calculus. you have an anointed successor. processes --e can

there is no election. there is only one candidate. they start having the election inside the conservative party. >> then you waste time. >> all of that. it's the only way to do it really. they managed to fix amongst themselves who is the anointed success. >> give me names. this, other thing about one thing the betting markets are is almost always wrong. the moment is a possible successor for boris johnson afterwards. but what actually happened -- i'm not saying anything. you say something. mark: have interesting things

happened? >> first of all, we lost michael fallon>>. -- wes another out writer lost another out prater. the scandals of the weinstein stuff -- out writer. the scandals of the white -- weinstein stuff, there might be something in other people's past. that slims the field down. >> she has a good majority. maybe that wouldn't be a problem. there's something called davis state -- david davis. he's not out in the idea last night. i'm sure people came to him and asked him. he ran for the tories. >> he has wanted to be prime minister. >> yes.

-- they is a rhinoceros are not shrinking violets at this stage of their careers. mark: he is suggesting we might , are you glassof half-full or half-empty on this, gentlemen? >> i will look at the public. they're becoming more and more dissatisfied for the way and's are being handled. it is clear that there is a gradual movement in favor of making sure there's access to a single or market upon a reasonable deal, as opposed to controlling immigration. the public is bearing in that direction. this is going to be a shock, whatever happens. from the point of view of

things that may push may out sooner, one thing, this might be a disaster budget, but the other two tos you get december, this isn't a deal. it will go past christmas, then suddenly, maybe that sees tory mps going about constituencies, saying that they can do this. from her point of view, there was quite a strong incentive to get here. the europeans know that. >> there is david davis is line. this morning, he was saying the obstacles, locals have their own problems in germany. none of this is straightforward. from the european point, there is some argument they might want to get off of -- on with it. on the other hand, there is some view in europe. when you talk to european diplomats, with -- what is

fascinating is how little our government thinks. what did they do, what is their plan? [laughter] mark: ah, yes. help, so, so, so they may that -- hope britain decides this is a terrible idea. mark: i think that's unlikely for us not to leave the european trade and put aside customs agreement. think that's almost an -- unthinkable. we could chat for hours. en stays with us. tech companies in london trying to hire since brexit. this is bloomberg. ♪

-- nejra cehic has been watching all of the action. , reports found in asia of declines inequities for several days globally. they halted in europe, stocks 600 down. i have to apologize. for some reason, my terminal has logged in in french. the general theme is that both industry -- most industry groups are in the red. ,inance stocks outperforming the one above that might be materials but not entirely sure. overall, you've got health care underperforming. most industry groups in the red, as i say. the rebound halting in europe. part of that is a stronger euro in the session. speaking of the euro for mario so, we the past hour or

did see that inflation is not quite at the point yet where we can call it sustained. five-yearros five-year inflation. you can see that expectation has risen this year. we are at 1.69% there. still, he did say that that keeping a prospect for rates anchored. take a look at dollar-yen. we are seeing this had -- head into a second weekly loss. this is been struggling to consolidate above the 50 day moving average. we have seen oil higher today. overall, it's heading for a loss on that weaker demand and outlook. we dates are out of the u.s.. mark. london technology companies say they are losing eu on new hires leaving the -- since the u.k. is leaving the eu. threat.s their biggest

they say this will damage the international reputation of the city's tech sector. joining us now is at tech advocate founder -- tech london advocate founder. tour --he tech world was the tech world tour? >> amazing trade we had over 500 advocates, the immigration minister speaking about immigration policy. there is some concern from tech entrepreneurs out there about what's happening with talent, immigration policy, and the broader market uncertainty. mark: what is happening with talent? what's the news on the ground? ofwe're hearing that a lot talent, particularly from the eu, is thinking twice about whether they should come to london. we have sectors growing tens of thousands of jobs being created trade we don't have enough of our own homegrown talent to fill those rules, so we are looking to the eu, beyond that. given broader uncertainty, the question marks around

immigration policy, some people want to go to the you pick -- you can't this point. mean london's reputation has been damaged as a big tap -- tech hub? is that a category guess? >> i wouldn't say category. things need to be solved from it policy point of view. people are on the sidelines. if we don't sort this out, that will be a categorical yes. looking atve been how britain is regarded across the world after brexit. haveows that the europeans surprisingly become more saying we us in saying they are less likely to perhaps want to trade. it's only a small drop. because of trump, kushner is better regarded in america. we might sure ourselves up with that fact at the moment. the key points -- we interviewed the ftse 500 boxes that we have

done every year since 1971. what they are saying about exit is that they are worried about access to skilled labor. on the international reputation, it goes beyond the eu. i was in shanghai months ago, i was in singapore this summer. people are wondering what's going on here. they don't quite understand this. when i speak to government london, ihe mayor of say we have to get the message back on the front foot and make it targeted and informed statement about, yes, there is some uncertainty, but this is still a great place to open and start a tech company. there's great pools of investment available, and there is still good talent here. >> the state -- the ceo of blackwell, chief digital officer, what are you hearing from them? >> very positive statements. brand is lewis -- brandon lewis yesterday made a compelling statement about what the plans

are for immigration. we heard the prime minister this week announce another exceptional challenge offered for doubling the number. our feedback is that's not enough. we need to look at other pieces. he made positive statements about the eu national here. we are very concerned about the eu national. one in five london tech workers are from the eu. they are uncertainty about what this means for them. having him there to speak to the he could make -- a lot of definitive statements, but he was reassuring to say we are concerned about you. we want you to stay, we don't want to be. >> the government has softened its position behind the scenes. in a way, they are able to do that. they're concerned about immigration for this country, they've been gradually reducing over the last 18. some about his brexit voters. they're going to be able to deal with it. it's also true that if u.s.

people detailed questions about it, they are concerned about and peopleigration from the commonwealth. they're joining their families. about highite happy skilled workers coming here. this is impeccable -- some are impeccably imposed to immigration. deter spotify,t facebook, apple releasing that massive space of power stations in the world. the big boys, if i can call them out, they are not concerned. , butt only from the u.s. around the world. they still see london and the u.k.. put more pressure than what was raised on the tech

pressure yesterday. clocks its us more he will stay with us. the labor of the anti-ahead of the conservative budget. is the message getting through to u.k. voters? this is bloomberg. ♪

♪ mark:mark: welcome to our weekly brexit show live from european headquarters in london. i'm mark barton. theresa may is an impression -- under pressure. days from the budget, a resurgent labour party trying to push this. they probably spend the next for 17 billion pounds a year. they were his taxes on the rich. some warning, an election could be called. on brexit negotiations. throughmessage getting question mark -- is that message getting through? is this a potential stumbling block for this coming week? >> not a lot of people would like this to be here. a lot of people say we need to make cuts.

there is still a program of cuts for things like welfare, particularly over the next few years, which will make poor people poor were. what has happened is that the portion of people who say cuts are necessary to pay off debts has fallen from 59% in 2010, now only 22%. that is reflective of the general election were jeremy corbyn's later party -- labour party did much better than others, myself included, were expecting. there's a revenue brand taken away from them. quarks what are the satisfaction levels like -- mark: what a dissection -- satisfaction levels like? >> his labor voters, jeremy votershas 71% of labor saying it's a good job. that's a good score for him.

he went below 50% before. theresa may is down from the heights of 90 percent at 72%. politics,rliaments -- despite the noise and theory, parties are neck and neck in the polls. mark:mark: what is labor have a bigger lead --why doesn't labor have a bigger lead? >> because of concerns. people are keen on that. there was an idea of making higher rates taxpayers pay more. top 1% of british taxpayers currently paying a lot of the taxes. there's an argument of how much 10%can get out of the top

or top 1%. mark: they say this is backing labor, is it? >> if you talk to the ftse 500 bosses, absolutely not. mark: even on a low level? >> i think it's fair to say they will be talking to labor, but they are not backing labor. mark: it's a great distinction. great to see you. us today. joining surveillance continues over the next hour. nejra cehic, tom keene in new york. later, they will talk -- talk the chief economist. this is bloomberg. ♪ .

♪ tom: this morning, from panic to almost calm, market improve over

high-yield and commodities press are there any week with equities threatening record highs. may is setter adrift, talk of constructive suggestions to make government listen. paul ryan delivers a tax bill to the senate and senators will make modest adjustments. good morning, this is bloomberg "surveillance." i am tom keene and nejra cehic and for francine lacqua. will prime minister may be prime minister on monday? she has tost like look just a few days ahead to see what will happen. she has been at the eu summit and leaders have been saying we need more concessions and details on the brexit bill with more heart commitments.

they canion is whether move onto the trade talks in the december summit. there are no more negotiations between the diplomats scheduled. tom: i like what martin wolf calls it, a brexit meltdown. with the first word news, here is taylor riggs. taylor: house republicans passed their version of tax cuts by slashing the corporate tax rates and lowering burdens for most individuals and adding an estimate $1.4 trillion to the federal deficit over the next decade with studies suggesting most of the benefits would go to the highest earners. the senate is debating a separate plant and not clear if they will have enough votes to pass it. ryan: i am from this conference, tax reform is very hard but we know there are people who are really struggling in this country. we know we are coming through a decade of real economic anxiety.

we know this is a nation that has so much potential that is not yet been tapped. taylor: robert mueller as served donald trump's election cap a subpoena looking for documents. according to people familiar with the matter, it was served in the middle of last month and to more than one dozen campaign officials. that came on the same day the top republican and democrat on the senate judiciary committee press jared kushner to provide additional documents for its investigation. ecb president mario draghi optimistic that euro area workers will help we need block all stimulus. he reiterated that a key issue, keeping prices down, is a lack change growth that sees underway after pumping the economy with stimulus that has helped bring down unemployment and spurred consumption. india's sovereign rating has

been raised for the first time since 2004 by moody's investors service, stocks rallied after the ratings were upgraded. they said reforms being pushed through by the prime minister will help stabilize rising levels of debt. that is one level above the lowest investment grade rating and puts india in line with the philippines and italy. >> it is the combination of these measures and reforms. they are measures addressed, broadening the tax base, direct benefit transfers, monetization, improving the business environment. taylor: global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you. ,quities, bonds, currencies commodities, what difference then monday, tuesday, wednesday, what a glorious day yesterday, 25.81 -- and euro part of the story.

oil in the vicinity of a $54 handle. that is american oil with a nice bounce. curve flattening. down to 11.94. there is the 30 year bond. you do not have a bloomberg in your car, you can look at the long u.s. fees, what gary shilling looks at editor gets near 3%, a higher yield. we are at 2.81%. you can shop this weekend i know what you are doing. nejra: a little bit of stronger waiting oncould be european equities with a rebound in the asian session but it has not, stalling in europe. unchangedr bund yield as it was moving higher early with european bond yields in a different direction. basis points on the 10 year

bund yield. tom: i like you put germany and the swiss twenty-year is positive. how much of the world for a faith in credit has a negative yield right now. let's go to a positive chart. we showed it earlier this week. it is simply high yields. this is etf. down we go. this is monday, tuesday, wednesday, thursday, with a nice rebound of the last few days, not near the nirvana of the colliding moving averages but a nice bounce to the week. you see that in equities as well. nejra: yes. i am looking at bonds on my chart. this does not show yields, this shows the percentage return on the u.s. treasury total return on hedge. dged.he a company has said that you will see treasuries fall more.

in other words, treasury yields will move higher than bonds and it has to do with central-bank policy as they think the market is underpricing what the fed will do with hikes and they think the ecb will stay pat until 2019. according to this chart, investors have seen negative returns on treasuries and positive on european bonds. tom: that was way too smart for friday. that was really, really good and i may have to steal that from nejra cehic. the house feels way too smart, that would be the house of representatives in the united states of america. stephanie baker is the only one who has read the document and she joins us, the senior writer for bloomberg news. the new york times -- how far apart they say the house and senate are apart and they are miles apart, aren't they? >> they are at it from i see if when the house passed the

obamacare repeal and everyone celebrated to see if all through the senate and there are questions as to whether we will see a repeat of that this time around. there are huge hurdles to overcome to get a senate bill passed because of the slim majority. we should be looking at what the senate is passing, because that is more likely to be the final version. they are far apart. they have complicated things by inserting this repeal of obamacare into their legislation . it raises questions as to whether some of the moderate republican senators will back it with that in it. tom: for our global audience, you are the voice on the american fabric. the republican party started in michigan and wisconsin. does this bill have anything to do with the republicans of the previous century? the republicans of george bush the younger? or the republicans of mitt romney? >> i think people are

underplaying the significance of this tax by pitch, if it does get past. it is a huge deal with a massive change to the u.s. tax code, the biggest tax cut for corporations in my lifetime. it is a massive tax cut to the wealthy. i am surprised by the fact that the democrats are not getting the message out more clearly. that three quarters of this tax cut looks like it goes to big corporations and the wealthy. they can limit the estate tax. for millionaires. no one is making a big deal out of that and that message is not getting through. tom: we will talk to kevin cirilli about that but the president and the advantage to speak arrived or did the president get in the way? >> i think the house -- i think that he rally the troops. people said they had the votes

anyway and it did not move the dial very much. i think it is the senate where the balance is far more delicate. his interventions will have more of an effect. -- weigh in?in we have seen them stay out of the debates with the senate race in alabama, not going in on the allegations are roy moore. and then getting involved in the allegations without franken. n. with al franke calling him al frankenstein. nejra: the senate finance committee approving a far different version, this is on the bloomberg, to what the house bill is looking like. has it postponed the more difficult questions around this

even though the senate finance committee has approved the bill? >> the challenge facing the senate -- they are trying to figure out how to pay for this. there are far more concerns about deficit and how it will add to the deficit in the senate that in the house, which is why you have seen measures they have introduced to pay for this bill, quitting delaying the corporate tax-cut, inserting this repeal of obamacare, which they think will save them $300 billion. those are the challenges that they face, deficit hawks in the senate. nejra: the other news overnight about robert mueller. this seems to be a reason the dollar is weaker, despite the incremental progress we got on tax reform. what are the implications of this? >> it is interesting because he has issued subpoenas at a time when the campaign said they were cooperating and handing over all the documents that they were being asked for.

this raises questions as to whether robert mueller thinks that perhaps they are holding things back. asre have been disclosures part of the investigation to raise questions that they are sitting on documents that he wanted. tom: stephanie baker, thank you for the briefing. usare fortunate to have with the global head of equity derivatives strategy at bnp paribas and he looks at the quantitative dynamics of the equity markets and the flows of the equity markets. inside -- we can also look at tax reform. there is a great believe that tax cuts will lead to cash flows to corporations, which will lead to dividend growth. why won't that money go to your expertise, which is dividends?

why won't it go to dividends and share buybacks? >> let's assume tax reform does happen, probably early next year , given the difficulties still to be resolved. some money will go to dividends. but we also have to think about wages. at the same time, wages in the u.s. are clearly rising. you have unemployment at 4% which may go under 4%, already very low. ,nd tax or firm, -- tax reform it could spur wage growth because it may increase the squeeze. the availability of work is low in various sectors in the u.s. and that figure worst. companies may have to pay out more in wages which means less profit. tom: i want to talk about the mathematics, it has to do with

growth rates versus one timeshift we could see in the dynamic linking finance into the american economy. unimportant conversation this morning -- and important conversation this morning. on this friday, stay with us. from london and from erin judge it --on's judge ♪

♪ taylor: let's get to the bloomberg business flash. after zynga and talks to settle a lawsuit over its top drug,

texas city drug maker in 2013 to claim it had targeted the medicaid program in the state by urging doctors to prescribe a powerful antipsychotic for unauthorized treatment, particularly for children over six years. vivendi has reported a note most 6% increase in third-quarter earnings tuesday life acquisition of advertising group hamas and canal+ reported he first wrote in customer numbers since the start of 2015. came in at 293 million euros. that is bloomberg business flash. nejra: the past -- t. rowe price predicting the curve will plan to zero in 2018 and the current trend has occurred near its loudest level in a decade. they expect the fed will do to hikes to three hikes next year and analyst forecast the world's largest central bank will tighten for -- tighten in the

coming year. we are back with edmund shing of bnp paribas. we are obsessing about the yield curve, how does it translate to your world? >> in a sense, it is the problem of yield. people around the world are hunting for yields. theom mentioned, much of bond and credit world are at negative rates. everyone is hunting for something positive interest rate and cash is worth pretty much nothing in the bank and that is what we see in the bond market. i find troubling we see wage inflation going up in the u.s.. wage inflation should lead to consumer inflation higher and we talk about curve flattening, which is the opposite you expect the bond market to do as a result. we are expecting the fed to put on the brakes. if the bond curve will flatten, it means the fed will put the brakes on and the risk when you

get that curve flattening is the same, the fed puts on the brakes too hard and we hit a recession. that is where you start to get worried. volatility is low. no one is expecting any bad news. let's a, and the equity world, we see the yield curve not only get five and that negative. that's not only get flattened, but negative. volatility could spike enormously. volatility trade, which people are engaged in, would be wiped out. nejra: that is the key in terms of -- does it go negative? if you heard and version, rather than a -- curve inversion, rather than a flattening, it could go to zero in 2018, how do you prepare your portfolio for that? >> it is difficult because the

inflation picture tells you something different. inflation in europe, whatever mario draghi says, talk about wage growth, good luck. not sure we will see it soon. in europe. in the u.s., we see wage growth now and it tells us there is more ways growth ahead. -- wage growth ahead. how do you put it together with curve flattening? i find a puzzling. -- that puzzling. tom: very quickly, off the end of every equation is the greek letter epsilon. you have a tattoo on her left arm of epsilon. where is the epsilon of next year, the risk and the noise we know is there and we cannot see? year, howit be that

big will the epsilon be? 2017t look at it this way, has been a year which is very good for investors with very low volatility and good returns. unlikely 2018 repeats that story to the same degree. bold spikes are coming and they will be driven by inflation to some extent and geopolitical concerns. on the inflation front, i talked about wages but would focus on oil. if they go towards $70, that could cause problems because behind that will be geopolitical uncertainty. jump conditions of oil coming out of $55, $60 and jumping up. we see that in the politics linked into finance. edmund shing with us of bnp paribas and we will come back and discuss in the next hour, willem h. buiter of citigroup will join us.

on policy and our economics. this is bloomberg. ♪

♪ finland am nejra cehic and with tom keene in new york -- in that london with -- in london with tom keene in new york. bitcoin, a record high earlier but back down. is this about bitcoin or the search for risk or volatility?

>> i think it is a search for risk. if you interviewed 100 investors in big going -- bitcoin, they invested because it was going up. the room -- the real world use behind it or the long-term future, i am a believer in blocking technology and alternative currencies but not tcoin is the one. it is today. interesting when they bring in futures and if you short it, then we should start to see the real path going forward. nejra: is their feedback where something happens with bitcoin where the immediate response? >> there is a great chart which relates to the number of twitter mentions of bitcoin.

they both go up. the media has a big role two point. nejra: and edmund shing loves twitter. you can read more by picking up the latest issue of bloomberg businessweek and our cover story is a disunited kingdom and theresa may and the tories cannot get their act together. we discussed it yesterday, a fantastic story. subscribe to get it. this is bloomberg. ♪

♪ surveillance in london and new york. i am tom keene and nejra cehic is in for francine. news about tax reform, maybe

cut. u.s. house republicans passed their version of legislation to overhaul the tax cut my slashing the corporate tax rate and lowering tax burdens for most individuals. it would add an estimated $1.4 trillion to the federal deficit over the next decade with studies suggesting many of the benefits may go to the highest earners. the senate is debating its separate plan and not clear if that chamber will have the votes to pass it. is ecb president hearted rocky -- mario draghi reiterated a key issue keeping prices down is a lack of wage growth. he sees change after pumping the economy with stimulus that has brought down unemployment and spurred consumption. be a fax of past low inflation in which it should not be persistent.

as the labor market tightens and uncertainty falls, the relationship between slack and wage growth should begin reasserting itself. but we have to remain patient. taylor: a panel of derivative dealers and investors have ruled that payment delays by venezuela and the state of oil companies have death the ruling will affect more than $1.5 billion after the committee ruled oath borrowers caused a failure to pay credit event. there were net wages of $1.34 billion tied to venezuela and $250 million on their state oil company. limbo.e in is inlitary said that it discussions with the 93-year-old president and has made

significant progress and what it says is an operation to remove criminals surrounding him. however, it gave no indication of what is likely to happen to be president or who will eventually lead the nation. global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. . this is bloomberg. on -- the ousted caps gallo numeral president -- catalonian president expected to be in court, facing charges of rebellion, sedition and misappropriated of funds. us -- ofund shing is there with us -- is here.

people in catalonia goes to the polls and pro-independence parties are set to defend their majority. is this telling you that there should still be some push for independence? >> there is still a push for independence and it is legitimate. we think in europe and the -- we need to integrate more in europe and to build copper and gas common governor structures. we hope we have a majority. people have to realize the unilateral way to independence was not a way to solve the problems in catalonia. losing 2000 companies and the biggest banks and almost a third of the catalonia economy is not convincing many people and we all a government for

catalonian's. nejra: if the polls are pointing to a pro-independence bias, is that not what the people want, and therefore how will you heal those divisions? >> it is not clear. the electric has been divided in two -- electorate has been divided in two. somewhat spanish, european and some want to go unilaterally to nobody knows where. being an isolated country. forink there are options the parties to take over the government. probably led by our leader and now the leading opposition party to build centrist, reformist government for catalonia. and to bring it back to its industrial powerhouse it has always been. tom: this place off of leonardo and the auction yesterday.

let's look at the view, fabulous froming, what is the view the bay of thi. what do people outside of madrid want with catalonia? >> spanish people want to have and ass and employment, better education system and to improve the health system, and fight corruption. tom: on the back of the catalonia capitalist excellence? >> i was going to say, and probably bring back the identity politics to where they should be , to the intimate level and not a political level. though back to rationality and talk about policy, numbers, data, and how we can be a leader in the european union and

globalization. there are many challenges. normality go back to and reestablishing restitution order and then reforms. tom: two other cities and other people have the prime minister of spain's back or is he acting alone in madrid? >> we have had 75% basically of the spanish parliament supporting the way chosen by rajoy. iparty proposed to -- my party proposed to go to elections and a democratic way out of the problem in catalonia. whoe are also many people say it is time for a change. we had huge problems with education. dual labor markets. we need to improve governance and institutions. futures probably not the

of our country and a centrist party can offer a better solutions and has less ties and conservative views about the culture. nejra: you say he is perhaps not the future, how do you see the rest of his four-year term play out? years to go two and we are improving in the polls very fast, closed the socialist party which is the second force. probably an alternative to rajoy. we are convinced we have an alternative and we need to build a new deal for spain. we had one in the 1970's with the new constitution after the dictatorship and it has lasted 40 years and we need a new relationship that helps everyone and globalization in spain for the next 40 years. we need some refreshment and

spanish politics. nejra: when will the budget get done and will we see more investment in catalonia? got to a deal with the popular party and we could pass reforms. to improve education and universities, more financing for infrastructure and a number of things that need to be done. we need a majority. i hope the socialist party will soon support the budget. and probably a budget after that. there are alternatives with parties and there could be a majority to pass the budget. spain needs stability. we will be part of the solution. part of the stability and the reforms. tom: thank you, antonio roldan, and economic spokesman for spain's center-right party.

we will continue with edmund shing of bnp paribas. don't forget, cap it in your its bloomberg daybreak with her -- terrific setup of the news to get your day started. coast-to-coast, this is bloomberg. ♪

♪ inra: i am nejra cehic london with tom keene a new york. the saudi arabia energy ministers as opec and its allies should announce an extension of the output curves when they gather at the end of the month. his thoughtsberg on the timeline for the organizations current deal. >> we need to recognize that by the end of march, we will not be

at the level we wanted to be, which is at the five-year average. that means an extension of some sort. is needed. nejra: we are still with edmund shing of bnp paribas. the important thing is, we have heard this from him but will we get a similar commitment at the meeting? >> it is priced into the market that we will get some extension. what is tricky now is that we hear that russia is hesitant on committing to the full-year extension. vladimir putin says he is up for doing it all of 2018 by getting pressure domestically from the oil companies who want to put the caps back on and this production. it depends if russia wants to come to the table and the egyptian minister said he will be speaking to the russian energy minister and counterparts of opec.

nejra: give us more background on his reasoning. >> he says that there are not at the five-year average of inventory and he said they will not reach that in march. he wants a commitment -- he thinks there will be one post march, 100%, and he wanted announced on november 30 because he needs clarity in the market, not volatility or price spikes. this is ahead of saudi arabia's massive ipo. nejra: speaking of saudi aramco, what does he have to say about that? >> i asked him if this would discourage investors and he said that no, it is a domestic issue

and he is in communication with foreign investors and the ipo is on track for next year. nejra: what is your outlook? you said that, if we see a spike in crude toward $70, that will create volatility in the market but will we see that, given the warnings on the u.s. side? >> not in the short term, in the short term, inventories and the opec cut is priced in. the extension of the cut, i should say. the real question is about shale, when we saw a report, the iaea were vrable -- bullish on growing production and not just next year but future years. i have seen a lot of data that said different. that said all of the production growth in shale come from one area, the permian basin and we are reaching the limits of cheap production there. if you want to put in new oil

wells, it will cost money because the breakevens on them will be higher. they will only do it if the price is right. , volumegests that yes can go up but only prices go up alongside. nejra: it is in a bind, chicken and egg situation. >> exactly. shale oil, when you invest in new shale oil wells, production goes up quickly but if you do not continue to invest, they peak and fall quickly in terms of volume production. you need to keep investing and opening new worlds. can they find enough cheap new to wells to exploit, or have wait for the price to go up before the investment comes in? nejra: thank you. edmund shing stays with us and look at tv , she is telling us about her great interview. you can scroll and click into edmund shing's bio, and look

through the charts we have shown in the show and click on the chart and save them to your own terminal. this is women are -- this is bloomberg. ♪

♪

let's get to the bloomberg business -- good -- flash. a spill in south dakota in the pipeline, it can carry 600,000 barrels of crude a day from alberta to the u.s. midwest and to texas, spilled approximately 5000 barrels in marshall county days before a nebraska regulator will decide whether transcanada's long-delayed new pipeline can proceed. tesla's elon musk has unveiled what he hopes will be the investors seriously taking the major forms of terrestrial transport. and theyed the semi say it will offer auto pilot safety features include automatic braking and lane keeping system. >> one of the biggest questions is -- howtric trucks

far can they go? 500 mile range. [cheers and applause] taylor: comcast and verizon will look into acquiring a portion of 21st -- 20 century fox. according to people familiar with the matter, comcast, owner of nbc and universal pictures, approached the rupert murdoch controlled media group about the assets at two people said that verizon, the biggest u.s. wireless carrier, has interest in the same collection of holdings. that is your cord cutting bloomberg business flash. tom: you nailed it, this is about cord cutting, fascinating moment for american culture and media. i do not see the overlap. and at&t,me warner

the wireless side and cable side doing what they can to stay ahead of the cord cutters. tom: i do not see where comcast fits in with nbc, if they own fox, a huge part of the american news program. we will see. taylor riggs with an update on what appears to be the fox there be the -- fox derby. edmund shing is with us of bnp paribas. we were talking about the greek letters earlier and i want to talk about the wide path you see and what a corporate officer in the united kingdom would do with brexit. ceo of a idea how a united kingdom-based company of any size, how do they plan for next year or 2025? >> next year is straightforward, nothing changes. whatever happens with brexit, the first deadline will be 2019. that i am glad i

am not in management of a u.k. company tried to figure out what to do because there are so many uncertainties. tom: i know it is inappropriate to talk about any migration at bnp paribas would do out of paris or london and frankfurt, but away from finance, do ceos in the united kingdom have your world of finance, knowing where libor is and where to an five-year paper would or could be three years out? >> i think financing for u.k. is there. i do not see anything changes in that respect for the moment. i do not hear u.k. companies crying out and saying our access to longer-term funding has been cut. the opposite. the banking sector in europe has seen a huge strengthening in balance sheets at they would like to lend more money and like

more business. alan sheets are stronger and they are able to lend money to companies to get them going, not only big companies but in the segment. nejra: corporate have to contend with what the boe is planning, which poses a bigger risk? >> ultimately the currency because what the boe is reacting to is the weakness in the currency, which, in the short-term is pushing up inflation in the u.s. let's be clear about that, short-term phenomenon, a one-off resetting of inflation and prices. we have seen it flow through to retailers. now, we see consumers reacting, spending less. a big risk that christmas shopping season will be disappointed for retailers and the u.k. economy. a consumption driven economy and we see consumption weakening on the back of high prices which

will eventually feed through into inflation. nejra: how does that feed into your equity strategy in the u.k.? >> it means we do not like the u.k. very much. , favoring theole eurozone where the macro fundamentals seem to be stronger at pricing pressure are more u.k. wherein the inflation is a problem and consumption is weakening. , particularly toward manufacturing where you see an uptick in orders and in pricing power. nejra: the u.k. is not homogenous market, you have big global companies on the one hand and a smaller mid-caps, oil and gas, and the consumer stock. is there nothing attractive? >> there are always pockets but i have talking about it in aggregate because when you deal with derivatives, the ftse 100 or not, liquid instrument. in small caps in the u.k., i found excellent companies

working well and will operate under a variety of brexit scenarios. tom: i want to circle back, you mention that the one-off reset. from where you sit and i mean this with great respect for your mathematics, are we having a one-off reset on tax cuts in the united states where we end up with tax cuts and get a one-off benefit, and then that is it? >> i think so. because, in many ways, if we were to think about tax cuts and the stimulation of the economy, you would argue that that will help companies invest more money. is it really? in my view, if u.s. companies want to invest, large companies, they can easily invest with the access to credit, too low interest credit is there. banks are willing to lend in the u.s. and it is not difficult to borrow money.

you have seen the companies borrow money at very low rates already. if they want to invest, they would do so and i do not think a tax cut will change that. one-offit will give a boost to eps, the real question is what happens afterwards? i think that wage inflation may take over at the road profit margins. -- erode profit margins. tom: coming up, a conversation with willem buiter as we see policy collide with the american economy, he of citigroup's next. -- of citigroup is next. 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. ♪ tom: from panic to almost calm, market improve over high-yield and commodities gress earlier in

the week with equities threatening record highs. willem buiter of citigroup on good economic growth and continued financial repression. call the brexit eugenie is best the engineers, prime minister may -- mutineers, prime minister may.- they deliver a tax bill in the house to the senate, senators will make modest adjustments. this is bloomberg surveillance, live from our world headquarters andew york, i am tom keene nejra cehic is in for francine. with brexit, back-and-forth. martin talking about a brexit meltdown. does it feel like that to you?

nejra: i do not know about a meltdown but a struggle for compromise is how i would put it. looking ahead to the december eu summit where the u.k. is hoping to talk about trade but theresa may has been for the eu summit and she has had counterparts say to her, we need more compromise, particularly at the brexit bill. they need more commitments on that. then david davis on the other hand is asking for that. a lot of things going on that may put a break on moving to trade in december tom: let's get a briefing. >> house republicans passed their version of legislation to overhaul the tax code by slashing the corporate tax rate and lowering tax burdens for most individuals, adding an estimated $1.4 trillion to the federal deficit over the next decade with studies suggesting many of the benefits may go to the highest earners. the senate is debating its separate plant and not yet clear

if the chamber will have enough votes to pass it. paul ryan: i have to say how proud i am of this conference, they work so hard and we know there are people really struggling in this country. we know that we are just coming through a decade of real economic anxiety. we know that this is a nation that has so much more potential that is not yet been tapped. taylor: robert mueller has served donald trump's election campaign eight subpoenas looking for documents. according to people familiar with the matter, the subpoena was served in the middle of the last month and more to a dozen campaign officials. the revolution came on the same day top republican and democrat on the senate judiciary committee pressed jared kushner, a senior white house adviser and trump son-in-law, to provide additional documents for its investigation. sovereign rating in india has been raised for the first time .ince 2004 by midis

stocks rallied after the ratings firm upgraded india one notch and said reforms pushed through by the prime minister's government will stabilize rising level of debt, it is one level and puts india in line with the philippines and italy. >> it is the combination of the measures and reforms, measures at broadening the tax base, direct benefit transfers, monetization, improving the business environment. taylor: global news 24 hours a day, powered by more than 2700 journalist and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: equities, bonds, currencies, commodities. assisted on bloomberg radio with the idea of don't panic. features negative after a bang up day yesterday and the euro above 1.18.

next screen where the vix moves to 11.86. the sterling complex for nejra cehic. nejra: what is interesting about cable is gaining for a fourth day, defiant despite the brexit, lack of compromises we were talking about. european stocks halting the rebound inequities that started in asia with the rebound in the u.s. yesterday following several days of declines. stopping in europe, down 2/10 of 1%. on the 10 year bund yield because it was going higher earlier despite the ten-year treasury yields going lower but unchanged now at 38 basis points. tom: the show can start in washington with our chief washington correspondent, kevin cirilli, as the president wice thisted t

morning. if democrats understood the power of lower taxes, we would get many of their ideas into a bill. i get it. how far apart are the senators from the house? kevin: centrist democrats are not likely to get on board with this. all attention yesterday since the house advanced their bill out of the house and now focuses on the senate. there are differences. the individual mandate, things like the pastor rate with ron johnson having concerns and he says it is not low enough but he would go on board. they can only afford to lose two votes. the senate will vote a week after thanksgiving likely and markup will continue today with the senate finance committee. tom: i read articles last night and for speaker ryan, how is

this playing to the southwestern milwaukee at ease troy, michigan? are any republicans listening to voters or is it the owners, donors, donors? >> i think they are listening to everyone and on the issue of the individual mandate, republicans are making the case to their voters that it is a repeal of a tax. democrats are saying that it will kick people off of coverage. it will be up to the voters. when you talk about things like 401k growth, lowering the pastor rate, that impacts small business owners and medium sized business owners. those same owners or their employees, when they fill out their taxes, and in california and new jersey, will they ultimately see a tax cut? folks i am interviewing are not

saying tax cut, they say tax relief. it is a new wants but in washington, that is everything. nejra: i want to talk about the fact that critics of this bill say it will leave millions without health care and the potential impact on unicycle financing. -- municipal financing. saying there is an element we are ignoring the fact that this tax bill is beneficial mainly to the wealthy. if that is true, how will that impact the republican party in the midterm elections, if at all? kevin: stephanie baker is fought on. state and local tax deduction, particularly how it impacts municipal, it would be significant. in states where president trump one, wisconsin, michigan, pennsylvania, if they are filling out their taxes in the middle class or lower middle

class and they may get a benefit in their 401(k) growth as a result of the stock market, or maybe the pass-through rate lowering, if they are actually not going to see an actual tax cut, they could carry that into .he voter box been -- in 2018 it is why these controversies, roy moore is a culturally significant watershed moment, and the allegations against al franken. from a policy standpoint, beyond these horrible allegations and the impact it has on the culture, it will impact democratsy be -- the and republicans in the senate. tom: we appreciate our friday raising. willem buiter is the perfect guest to speak to on the global economy, central banks, economics, and much more so on this linkage of policy into

economics. let me bring up a colleague of yours in academics. talking about his wheelhouse and your wheelhouse, international economics. i think this is the crux of the matter. foreign investors would be earning profits and taking them home. growth, most of the america would get from cutting corporate taxes what occurred to the benefit of foreigners, non-americans. governmentsng about by wealthy donors for wealthy donors. fascinating, the analysis within an america within walls and borders. we are in and enter national -- we are in an international water, aren't we -- world, aren't we? favor tax changes would

external equity holders. tom: this is a key statement. it would favor foreigners, do i have that right? >> it would benefit them a lot. u.s. capitol -- u.s. equity is owned domestically and it would benefit any shareholder, wherever they are located. because there is a lot of investment, portfolio and fdi, in this country, some of it goes to foreigners. tom: i article today out updating the debate of the chairman of the president's council of economic advisers. let's go to the london school of economics with professor willem buiter. who is right, summers or hassan? >> i am not talking about the tone of the debate. exists that while there abstract simple theoretical

models, they do give you the result that the proposed corporate tax cuts would raise average rates from $4000 to $9,000 per year. i can pick of no model that fits the real world that gets near their. u.s. is beingt held back at the moment by excessive corporate taxes. corporations are borrowing. substantially, summers is right. i would expect to see, in the real world, especially with full expensing of most capex under these new proposals, i would expect minimal impact. nejra: i am just wondering, the

tax plan as they stand, do they just end up adding to the deficit without having any meaningful impact on long-term trend growth? >> they would not necessarily just add to the deficit, even a few do not add to long-term growth because in the short term , they will give us cyclical lift. we expect real gdp growth to go up to 2.7% next year. i do not see how these tax changes will have a material impact on the growth of potential output. ofm not a great fan enthusiastic scoring, there will be some impact on the level of path of potential output. it will be a significant increase in the federal deficit and the federal debt to gdp ratio as a result of these plans.

tom: let's continue the discussion with willem buiter at citigroup. on bloomberg radio, a congressman from ohio, talking about tax reform in the 8:00 hour. worldwide from london and new york, this is bloomberg. ♪

♪ taylor: let's get to the bloomberg business flash. bitcoin with a record high. while multiple reasons have been cited for the volatility, one of the more viable is some

investors are switching to alternative going to -- alternative coin. ago and talk to settle -- astrazeneca -- texas sued them claiming they targeted the medicaid program by morning doctors to prescribe drugs. i will get a better bitcoin chart in a minute. on linkage of economics into our markets, we have willem buiter a citigroup. here is a chart janet yellen cannot figure out. yellen, mario draghi, corroded, carney, their problem is there is no inflation. sector at aice

lofty level. the first derivative is rolling over. how separate are the markets from the economic discussion into next year? >> we have to recognize that inflation has undershot our predictions. that is unlikely to change anytime soon. there are huge problems of mismatch are in the digital outlets -- not measuring -- labor, castle -- tangible capital, intangible capital, it is not debt. tom: so many good guests this week, gary shilling, very was --at --barry was great barry was great. when will we measure the slack? --onomy, which

the guy sitting with his idol car at home is now self-employed. ber. u he is a one person enterprise. we cannot measure all the intangibles. nejra: professor, i want to ask you, you have the san francisco fed and charles evans at the chicago fed calling for the fed to reconsider this 2% inflation target. is this something is should do, given it has undershot so much? >> no, its bad practice to change the target because you cannot achieve it. to keep pushing

and wait until the target is achieved. if you never achieve it, so be it. the only reason to lower the target is there is no longer any downturn. in the next make -- then i would target zero inflation. where we are, about fine. nejra: the problem is that the bond market is not buying the fed's dot plot. will the fed have to slow down is rate hike cycle because of the flattening yield curve? >> i do not think the fed should be worried. about the yield curve flattening. the yield curve is what it is. it is true that downward slope in yield growth has been in the

past often indicating a future downturn. downield curve is coming -- flattening a bit, that means the short end is going up. pressures to push the long end up, fiscal stimulus, and debt issuance because of increased federal deficits is not there yet. tom: let's come back with willem buiter any terrific discussion. fromoomberg daybreak, juan union group. this is bloomberg. ♪

♪ inra: i am nejra cehic london with tom keene in new york. a demand for more compromise, u.k. wrecks's secretary david davis is britain has made all the running in negotiations with the eu by european union -- leaders said any more clarity on what the country is prepared to take when it leaves the block. with us is the citigroup chief economist willem buiter. back into the ball is your court conversation, how do you assess the situation, particularly in regard to the bank of england when they are tying its future policy to brexit? >> as long as we do not know what is the final destination of

the brexit process, and as long as we do not know whether there will be transition, we are just swamped by uncertainty. fogry to see through the and it makes policymaking extremely difficult. it makes investment difficult. this uncertainty will be an economic burden on everybody in the u.k., including policymakers. unlikely to be settled soon. aboutct this kerfuffle going from 28 billion to be settled by the time of the next negotiations. nejra: the hike from the boe this month, was that to be able to cut again in the next year or two? >> it is true that central banks

everywhere, including the u.k., want to maximize monetary policy space for the next downturn. if it gains fiscal raising rates, they build back at a low -- they have to resort to balance sheet expansion, qe. out,nk yes, they took it almost a symbolic gesture, because it turned out that it was unnecessary from the perspective of the real economy. tom: willem buiter with us from citigroup. this is bloomberg. ♪

tom: from london and new

>> getting -- getting ready for your weekend rating as well. nejra: area workers will help we've the block off of stimulus. sayingraghi this morning an issue keeping brexit down is e lack owage growth. a big change underway after funding the economy coming the stimulus that has brought down unemployment. we are well under inflation expectations. shouldect of inflation not be persistent. as the labor market tightens, the relationship between slack and rate -- wage growth should be read inserting itself. we have to remain patient. taylor: a panel of dealers and investors several but the debts payment delayed by venezuela and

a state owned oil company triggered a payout. there were billions of dollars in the credit derivatives, after a court ruled that they had to pay. association,an announced $1.3 billion tied to venezuela, and $250 million otherwise. there is pressure from a military generals for the highest figure to resign, according to figures close to mediation efforts, aimed at ending a political standoff in the southern african nation. on wednesday, the military detained a 93-year-old official, and had officials keep the officials wife. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs, this is bloomberg. network, tom? tom: thanks so much. it's about the conversation.

we need perspective about what's going on in washington. treasuredo more senatorial perspective than john lieber of pb wc. they're working for the center of kentucky. receive on -- pwc on this momentum. >> today is the day they are going home. have turkey back home in louisville. i think there are changes to the senate bill that need to happen before it passes through the senate floor and back over to the house. state local tax deduction, a big difference between the house and senate bill that could derail this whole effort. tom: if we assume its tax cuts and you get rid of the state and local tax average, which most people from high tax states think -- i'm one of them -- if , is at rid of that dog

clear sailing through them? >> almost. the houses on a pacifist. the senate has to worry a bit about some concerns for the individual mandate. for the most part, this is all things they wanted to do. it lowers the corporate tax rate and is probably the biggest piece of economic legislation they will vote for in their careers. >> let's go back to east troy, michigan, to milwaukee. speaker reince district. what is it take for the guy making $72,400 a year southwest of milwaukee? >> there's two big things of does. first, it cuts individual tax rates. the second thing is this theorate tax cut and international provisions to help make u.s. businesses more

competitive. investment ine the u.s., which hopefully will lead to higher wages and eventually more jobs. speak a pro ryan will make constituents -- speaker paul ryan will have constituents on this bill. >> the house moment has the implication of health care -- does that concern you at all? of theink that members house and senate, republican members, are generally unified in their opposition to the individual mandate. i don't think this is the thing that derails the bill. i think the dynamic is different than it was during the health care debate. , are were cuts to medicaid lot of health policy changes going on that hurt that bill's chances in the senate. when you look at just the individual mandate or tax in isolation, most members, senate republicans at least, will have trouble getting rid of that, and

will vote to toss it. nejra: what's the implication for u.s. businesses? do see the benefit for the long-term, and how long-term are we talking? >> a permanent rate cut from 35% to 20%, which would make the u.s. a more competitive place to have business, more attractive to house your ip -- these are permanent changes during those will all help growth. the key thing is that they are permanent. know their rates is going to be 20% for the foreseeable future. a think that's very positive and pro-growth. when we get this bill through, what does it mean for november of 2018? could there be a voter reaction to this bill, or are those two separate things? i look our year from now, and it was impossible -- >> i look out

a year from now, and it was impossible to verdict issues for any election. 12 months ago, we were talking about a different set of things. who knows what issues will happen in headlines between now and then. this will give them something to subjectut, republic of to campaign on. it's a major victory, but i'm not sure voters will rush out to the polls to support this thing. there till one's going up to midterm environment. >> thank you so much for the briefing. cuts, but right now i want to talk about the empty chair fed. this week, mohamed el-erian vetted for vice-chairman.

is he the kind of economist and financial leader you would be comfortable with is a vice-chairman? >> it would be outstanding. it would put a lot of my worries to rest. dudley also, economicleave -- issues have to be decided. there'd would have to be a good economist. tom: i would suggest what is so important about this is that the game. is different under three or four standard deviations. any understanding and the washington job -- dialogue that sometimes we have these conditions of three and four standard deviations? >> no.

when neglect with which the study mutation of the board has been treated over the years. people do not recognize that it may be another occasion. all hands need to be on deck. when we look ahead to policy for next year, i'm wondering how you think it's going to play out, versus the balance sheet normalization at the right hike -- rate hike path. >> they have set the balance sheet reductions on autopilot. buried in the first year. not terribly clever to not put in the firtash footnotes.

this active interest is going to be interest rates. forecast forn our growth of 2.7%, that's modest, very modest in fact, and consistent with the fed not adding risks to the markets. -- derail theould fed from that? from the u.s..e the most likely candidate is larger than expected. the economy would start overheating. -- we couldof debt really get treasury markets, the debt ceiling, or december this

year for u.s. solutions. this could all deter markets. global, geopolitical attempts, everything from korea, to iran-saudi, to skirmishes turning into trade wars, are all a risk that make life difficult for the fed. there are material risks. tom: thank you for the commentstom:. we will continue, maybe we will .how a smart chart here after our discussion on television, your morning briefing, captive in your car. bloomberg daybreak coast to coast. we say good morning -- eastern standard time daylight!new york ! ♪

♪ taylor: this is "bloomberg: surveillance." i'm taylor riggs, let's get the bloomberg business flash. u.k. building has plummeted this morning, after promised that it debt covenants next month. the construction company is in discussion with lenders, after profit returns by profit -- project delays. transcanada has its keystone oil pipeline, after a spill in south dakota. their role in thousand barrels of crude a day. this spilled approximately 5000 barrels in marshall county, days before nebraska will regulator all decide whether transcanada pipeline can proceed. comcast trying to acquire parts of 21st century fox.

according to people familiar with the matter, comcast approached the rupert murdoch controlled media group about the assets. two people also said verizon, the biggest u.s. weiler -- wireless carrier, has interest in the same collection. that's your bloomberg business flash. and tom werew you talking about the u.s. media landscape. what's also interesting as we have seen sky rising in the european session after those reports about comcast and verizon expressed interest in 21st century -- in the state. really a global impact here, tom. tom: it is. there's a soap opera of it, the people involved, the media ballet, the frenzy of new york, washington, and particularly los angeles. the whole backdrop. it is just one word: concentration, of content and media.

i have no idea where this is headed, other than good entertainment in december. neighbor, what on to get started with professor bauder on china. nejra: we are keeping a global, tom. citigroup expects china's growth to moderate in the remaining months of 2017. last week they lifted limits on for assetnership management and security firms, a big step in opening up a $40 trillion financial sector. let's get back to a citigroup -- a economist, moderating moderating chinese economy. ?s that a cause for concern it's clearly going to happen i think. the full control they have been -- the debtyears overhang, bad assets are up on the banks, excess capacity.

the greener production sites will lead to a slowdown. if the head of central-bank falls, there's going to be a slowdown. there is material risk in the coming years. this will go close to 5-6%. that's not the central forecast, but given the desire to get a growth,unsustainable that's quite likely. , as not a cause of concern the rest of the world is plodding along. it will be negative for commodity prices. the rest of the world keeps up its current trajectory, then this will not be a drama. nejra: one slight drama, a cause for concern, is the issue of leveraging. that havearound pushed china's bond 10 year yield higher. are we going to see inflation

exported from site -- china to the rest of the world? >> if china continues to manage thectively, fixed status on dollar, it does export inflation is.iflation, whatever it inflation of china -- in china is picking up, tecause potential uoutpu growth is going to more, there would be an impact on the rest of the world. you are talking minor stuff. cpi inflation in china is not with the semi-fixed exchange of the dollar, going to drive up inflation. and china, at this and think for most of our viewers and listeners, it comes back to the input and impulse of china's finance upon america. is much of our 10 year yield

a lower yield because of china's demand? 3/4 of ao be what, percent? >> possibly. it depends on who else will take issue, feel the chinese has to reduce this. -- have to reduce this. the risk of china, the official chinese u.s. treasury holders, moving out in a significant way and into debt again, i don't see it happening, except as part of wider economic warfare. in that case, a 10 year u.s. will be the least of our worries. t to president trump, on his trip to asia, reaffirm a zero sum of trade policy? did he reaffirm our can to listen that you study years ago? >> i think that's the way he sees trade.

it's not necessarily the way it's going to work out, right?by putting these bilateral table, he may end up improving market access for u.s. corporate, askeds to do significant damage -- out to do significant damage to foreign market access. , traderisk, since output deficits are bad, and a reflection of predatory trade practices by our partners. it's all economic nonsense, but it is deeply believed and could be dangerous. so far, so good. the rhetoric has been much more damaging than the reality. tom: thank you so much. we have gotten important chart to show, we will come back. trading desk,ur get brilliant by 10:00 a.m.-12:00 noon, whatever your next important meeting, listen to professor bauder. if you come here and pick up a

previous black inflicted a great chart, service sector and inflation. traders thatthat to your bloomberg terminal -- it is on your bloomberg terminal. this is bloomberg. ♪

♪ nejra: this is "bloomberg: surveillance." coming up shortly, is bloomberg daybreak: america's. jonathan carroll and alix steel posted. alex is with us. alix it's great: to talk about everything in the market. we will see flat yield curve at zero in the next few months. we are also talking about emerging markets as well as oil, with a tory, chairman and founder of union group. we get his take on venezuela after this was triggered yesterday, and what it means for investors. chart,essor bauder this this is a long-term inflation of commodities. , the cciautiful chart

index. there's no sign of a recovery yet, is there? >> even this global growth, 3.1% this year, this is enough to stabilize commodity prices. >> tom, i think you have to open up -- head off to open up radio now. goodbye to tom and professor boucher. you about this, we saw a credit rating. some people saying perhaps it's oddly timed. >> as a result of the goods and services tax, both the moves are

from a longer perspective. this is moving in the right direction. this is a country of demographics. women can be the china of the next 20-30 years. i think they are behind the curve. he was under must -- underestimating some underlying strengths. nejra: you literally anticipated my question, i was going to ask you as you see china as growth moderating, but it looks like you think that could be india. thank you so much.

professor about are heading to surveillance radio with tom. you can hear more from him there. let's take a look at markets before we had out. have haltedities the rally we saw in asia. pretty flat now. it sterling was bit earlier at 13999 below the 32 level, and the 10-year bund yields their of chant -- unchanged. this is bloomberg. ♪

♪ >> republicans set up a fight with republicans.

senators push their bill through the finance committee after the house passes a bill earlier. financial markets, global entities recover. the nasdaq pushes a record. bitcoin flirts with an all-time high. the cryptocurrency caps off a resurgent week by inching closer to $8,000. from new york city, happy friday, good morning good morning. this is "bloomberg: daybreak." i'm jonathan firtash an jonathan ferro, along with david westin and alix steel. around about two months. the fx market, that resumes him as the fed curve is flattening. on a 10 year, we come in at about a basis point. alix: take a look at what's happening in europe. you see european equities kicking off, now inching higher. recoverts stocks