francine: global equities rise as republican lawmakers plan to get their tax cut bill on the president's desk. voting for leaders to replace zuma. and transition friction. the ukip prime minister lays out her post-brexit plan, which could upset the eu in her own party. welcome to "bloomberg i'meillance," and francine lacqua in london.

we are seeing quite a lot of stocks rise on the back of hope that the tax plan will move through. we do need to break it down and look at sectors. the stoxx 600 gaining 3.3%. the euro-dollar, we are looking at that because the tax plan c ould affect the dollar. we are expecting a vote. we heard from the president earlier on, saying he has people he could call on two major the tax plan goes through. -- could call on to make sure the tax plan goes through. we talk brexit and the outlook for 2018 with vincent chaigneau . in the next hour, we break down withs.s. tax overhaul the global economic strategist from blackrock.

and later on, we speak with pierre moscovici. we have many questions for him, including the tax plan. here is sebastian salek. reporter: u.s. lawmakers are scrambling to lock up support for the tax bill. this would provide a multimillion dollar windfall for the real estate investors. tax experts say the change, which would allow real estate businesses to take advantage of a new tax break. and the president has said he is not considering firing robert mueller in response to a reporter's question. the comment came on the same day that the senate number two publican john cornyn said it would be a mistake to fire mueller. developmente prosecutors spoken to donald trump for the second time in

four days. thea tip off led to breakup thof a suspected militant cell. the u.k.'s her minister will set out her plan for how the proposed brexit transition period will work. she will addressed parliament around 3:30 u.k. time. she once written to leave the european union's single market and customs union, while pretending most of the benefits of membership. this is a potential new row with the eu, as she tries to keep conservative factions on her side. pinera has pledged to more than double economic growth, create 600,000 jobs, and narrow the budget deficit. his agenda helped push the ipsa stock index to a

made $220 million in the u.s. and canada. "rogue one" took $158 million. the movie traded well overseas. it releases in china next month. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: thank you. president trump says he expects ene u.s. economy to rock wh congress passes the tax plan. he suggested growth could hit 6%. with votes planned in the house and senate this week, trump is closing in on his first major policy victory. with more on this, we are joined by stephanie baker and vincent

chaigneau. aephanie, to us, what is realistic economic forecast of what this tax plan can deliver? veryanie: he's had a optimistic forecast. most economists say it will fall short of that. that the actual tax plan would 0.9% tax growth to 1.5%. i don't think -- most economists agree this will not generate the kind of growth they are projecting and therefore, it will not generate the kind of tax revenues they are projecting, and therefore, it will add to the deficit. his projection is the cut in corporate taxes will cause companies to hire and expand. and i think many people think that what would really happen

is companies would use the revenues from that to increase shares and buyback dividends. francine: stephanie, when you look at the final tax bill, it has changed quite a lot more we were talking about three or four weeks ago. stephanie: the corporate tax cut is down to 21%, as opposed to 20 %. they have reduced the top rate of tax for individuals down to 37%. increased some of the child tax credit, that deduction. but for the most part, i think the broad outlines of the tax plan remain similar, the vast majority of the cut goes to corporations and that -- although they are trying to sell this as a middle-class tax cut, the 2/3 of it at least go for corporations and cuts to the inheritance tax, which benefit

the wealthy. francine: stephanie baker, thank you. and vincent chaigneau is with us. what does this tell us about were equities can go? is it already priced in, or do they rally by early 2018? vincent: i don't think it was fully priced in the equity markets. again, the market -- this had n ot completely recovered. the top we had early inditex cut discussions. is not fully priced in. that was partially priced in, but not fully. i do understand that reaction. the bond market does not show much of a reaction and therefore

, the positive impact on growth and potentially on inflation in the late stage of the cycle really does not seem to be something that investors are really convinced about. francine: simon? terms ofok, in materiality, you look at the debt burden, up $1.5 trillion. consensus, as stephanie was saying, is slightly less than 1%. ettle is still a ready-s buyers. you have to look at the rest of the central banks and what they will do in 2018. that spread between treasuries and bonds, gilts, japanese government debt, remains the reason why there is very little response back in the yield curve

and on treasuries to this tax announcement. francine: first of all, stephanie, can they pass the tax bill and avert the government shutdown in a week? stephanie: they have a very past tax bill this week. -- they had a very packed week this week. they are trying to get this tax bill passed before christmas. and they have to agree to an interim spending bill by friday to avert the government shutdown by saturday morning. they need democratic support to get the spending bill passed. the noise you are hearing from the democrats is they have not gotten what they want on immigration, on things like children's health, to agree to a spending bill. francine: simon, on the bunds, are they the most distorted bonds out there? simon: it depends on whether you think the ecb is distortionary, or whether it is

a rational reaction. you know, i have a lot of sympathy for draghi. yes, he might have distorted the bond market, in terms of government and corporate debt, but he has got a mandate. so, whether it is or not is relevant from an international investor perspective. you are looking with the yield gap is and buying into the high-yielding assets, which remains of the treasury long end quite attractive. francine: what do you make of some of the market movements at times? does this tax plan hurt european equities and therefore, does it hamper growth at the margins in europe, or not? vincent: i am not too worried about that. eventually, european stocks will benefit. they have been lagging for quite some time against the u.s.

firingopean economy is on all cylinders right now. it is very strong. it is hard to see what could derail it. if you look at the ecb meeting anything, they are feeling slightly more confident that they will achieve their target. the strong rule we have now, probably about double the potential growth in europe, that should be enough to get inflation closer to target. i think the ecb is getting more confident. the market is pricing a very slow exit from all central banks. the market might be a little bit complacent. repeat think 2018 is a of the downward inflation pressure we had inn 2017, especially in the u.s. francine: we will be back with our guests.

plenty coming up. including, theresa may risks a fight against immigration. and the world's biggest exchange joins bitcoin's revolution. that's coming up later. this is bloomberg. ♪

francine: good morning, everyone. this is "bloomberg surveillance ," and i'm francine lacqua in london. here's sebastian salek. reporter: the french aerospace specialist has knocked off the unsolicited attempts to purchase to balto. they won the backing of a debt cybersecurity provider. the offer for 51 euros a share

comes less than a week after the bid by atos. to anilever has agreed giant of ones the of its worst performing units. is thevate equity firm biggest leverage buyout announced in europe this year. completion is expected by the middle of next year. that is the bloomberg business flash. francine: theresa may will address parliament later today to set out her plan for the brexit transition period. the prime minister wants britain to leave the single market and customs union, while retaining most of the benefits of membership. she will also propose a diverging course on trade and migration after march 2019. looked at brexit.

a lot of it has been discussed. the trend is the same. are you confident we will get something that won't be too ugly for the economy? >> you say a lot has been discussed. one of the surprises of this week is that theresa may will discuss with her cabinet for the first time what they actually say. and that is extraordinary, that we are almost 18 months on from the referendum and that discussion has not been had. havenk the last few weeks consumed my view, which is the u.k. will try to replicate as ofh as it can the system regulation with the european union. it will effectively be able take her in -- it will effectively be a rule taker in that regard.

the question is how much during that transition the u.k. will be able to benefit from a status quo and the businesses don't have to transition twice. francine: what about you? >> with the end of phase one, we see the end of the beginning. but now, it's aa long talk starting. europe is saying the final trade deal will be done after 2019. i agree, the u.k. government needs to get their act together and decide what exactly they are looking for. and then go discuss with europe. it's going to be a long process and a lot of uncertainty in the meantime. francine: what does that mean for the currency? vincent: it is already quite cheap from a duration point of view.

you are tempted to buy and play for the expected positive outcome. i think it's still a danger ous bet. that negotiation is going to be pretty long. we'll's not clear that quickly come up with something clear and strong. therefore, i'm tempted to sell any short-term rally that we might see in sterling. simon: there is a political schism at the heart of the cabinet, between those who want the u.k. to divert from the regulatory union. they don't want the u.k. to become an embattled state. will they resign, and will that lead to the falling of the current government? that will be very bearish for sterling. you want to sell on the back of

that tail risk scenario. the politicians that believe in a higher divergent brexit might have more cards to play. a lot of political turmoil here in the u.k. francine: what do you see for gilts? they have been largely immune to all of this. simon: it's at least a three month lo simon. simon: the great thing about this chart is, we have this big rally back here in the late summer when the bank of england surprised people, cutting towards higher into straitteress in the u.k. therefore, we retain our 1% target for 10 year gilts, which

remains down to that level, even during the decline of the last three months. vincent: it's hard to find that chart. eventually, we are looking at global bonds for next year. but, yes the bondotentially going negative impacts growth, the pick up in yields will be moderate. francine: was last week a breakthrough, or was the last 10 days a breakthrough? two weeks ago, we had nothing in the cards. and then we had a rapprochement. or was that smoke and mirrors? vincent: i would not call that a breakthrough. theresa may already spent a lot of political capital at home.

they wanted to deliver something positive. the irish question in particular was a fudge. discussed to be as the trade discussions go on. i would not call that a breakthrough. francine: thank you. and simonaigneau french stay with us. on to bitcoin. ago the cboe introduce similar derivatives. eric, this seems to have gotten a lot smoother than the first time we had bitcoin futures. what's the difference? >> i would say the difference is we are not seeing the same kind of price swings we saw the first day of trading for the cboe last week.

we are seeing the price premium at 2% between bitcoin futures and bitcoin itself. the cboe was a little more prepared for the debut. twoe also seeing the different structures. the cboe is based on pricing from four difference exchanges. also, the individual contract for cme bitcoin is based on five bitcoins, rather than one for a cboe. there are a few different distinctions. francine: what does that mean for the future? are we going to see more of these futures being offered? what are the differences between the exchanges? the: for one thing, cme is largest exchange operator in the world. when they first said they would be introducing a bitcoin futures

project, caught the interest of a lot of mainstream investors. productsthat these exist is another avenue for more mainstream investors to get into the bitcoin space. for instance, some institutional investors are not allowed to buy bitcoins themselves, but now as a regulated bitcoin exchange product, they are able to buy the product, rather than the actual bitcoin itself, which opens that more investors to the space, and furthers that yearlong legitimize asian of cryptocurrencies into the conversation with investors around the world, really. francine: eric, does it mean more wall street firms will look into it? eric: yeah, i think so. we are seeing a gradual process, even with cme, and some of the mainstream brokerages looking at how trading progresses before they allow their clients to invest. different brokerages have

different policies on whether they are offering this trade yet. i think the sense is -- basically, the more regular trading you see, the more investors will feel comfortable buying these products, and the longer they exist. in the weeks and months to come, we will see more products like this. inve already seen a growth cryptocurrency-derived products in the year. for example, bitcoin, and other cryptocurrencies. francine: eric lam, in thank you. still with us, vincent chaigneau and simon french. are you interested in bitcoin? vincent: we are definitely interested in the technology and we are working on that. now, on the asset itself -- because we can call it a new asset, you have electronic trading platforms setting up futures. it's becoming the new asset. there's a strong speculative

element to it right now. when you look at the price developments within the last two weeks, it's a little scary. that's an asset we don't know very well. volatility is extremely high. it's a bit too speculative for the long-term investor. the technology, though, yes. francine: does it change the in thetion of an economy longer-term? simon: only if it becomes a cryptocurrency. it is a cryptoasset at the moment. part of the trading in futures starts to validate one of the conditions of the currency, which is a medium of exchange. within is not embedded the institutional framework that is also a typical part of a

currency. it still fails on a number of tests. one i find interesting, whether the inclusion of this on the futures trading platforms will start to encourage a significant number of retail investors to play in this space. we've all heard of taxi drivers. like, a lot of people talking about it, but not a lot of people doing it. what you have got our cryptocurrencies where retailers are not playing. francine: up next, we talk more about emerging markets. this is bloomberg. ♪

francine: good morning, everyone. this is "bloomberg surveillance" and i am francine lacqua in london. reporter: lawmakers are scrambling to lock up republican

support for the tax bill. it's one that will provide a multimillion dollar windfall to retailer investors, such as donald trump. they say the change will allow businesses to take i advantage of a new tax break. donald trump has also said he is not considering firing special counsel robert mueller. in response to a reporter's question, he replied, no, i'm not. that came on the same day the john cornyn said it would be a mistake for trump to fire robert mueller. to donald trump for the second time in four days. the latest call was to t hank the president for a cia tip off that led to the breakup of a suspected militant cell. they targeted a group that was planning a series of explosions around thing peter's part.

-- explosions around st. petersburg. the u.k. prime will make the plan for how a proposed break the transition will work. shesays after march 2019 wants britain to leave the single market and customs union, while retaining the benefits. austria, the 14th postwar chancellor. this comes after his conservative people's party struck a deal on friday. the demonstration against the freedom party will take place this morning. but protests are suspected to reach the level of 2000. victory, pinera swept winning by a wider than expected margin. pinera has pledged to more than double economic growth, create

600,000 jobs, ease industry regulations and narrow the budget deficit. latest "star wars" film met the highest expectations. for the opening weekend, $220 million in the u.s. and canada put it ahead of "rogue one," which took $150 million in the opening weekend. it also did well overseas, reaping $230 million around the world. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. salek.astian this is bloomberg. francine: thank you. you saw that. no spoilers. it's allm "star wars," about leadership totals. that leads us to

emerging-markets. decideek is the vote to who will lead the anc in latin america. and of course, you have some local elections in india. vincent chaigneau and simon french are still with us. without looking at the individual day by day politics, emerging markets a lot of people are saying have been rising because of structural reforms, but if you look at it, it is really supported by technology stocks. how do you view the emerging-market technology space? vincent: it has been remarkable in the equity space. they favored a total return of more than 30%. i think the environment has been

absolutely great. the u.s. dollar has pulled back this year, which is usually quite good for em markets. central banks and the g10 market have been very cautious. the em market.in so, the environment has been really positive. it's going to become slightly more challenging next year, i think, especially as global bond fields rebound. also, as the u.s. dollar reb ounds, which i think is a possibility in the early stage

and create a little bit of volatility in the em state. francine: are you for casting a significant rally in the dollar? vincent: no, it is more of a rebound this year/ it is based off of the fact that we think the fed has mispriced. there's room for a rebound. idling that would be a strong reboudnd for the u.s. dollar. we are in the late stage of the u.s. cycle. the dollar has recovered since 2011. a bit of a pull back this year. it's a bit premature to say the dollar will fall. e bit, b closing a littl ebit of volatility, but that is not for the whoel yele year. we believe equities are still quite attractive for the whole year. francine: simon, your take on emerging markets? simon: i would add also that one of the reasons for that total which in em are trades were quite hawkish coming into

2017. withve had no tariffs china or mexico. yes, you had the pulling out of tpp and the renegotiation of nafta, but compared to what some people were pricing, it looks more attractive. you wonder at 2018, whether the white house will start to be more hawkish than they were during midterms. that will start today with donald trump talking about the national security strategy. will he start to talk about china in terms of an economic manipulator of trade, and start to follow that up with material actions? that i think is a crucial inflection point for emerging markets. francine: what happens with china and all of this? there are so many unknowns. have they managed it to a point where it should not be too risky. simon: the domestic economy in china benefits from this

coordinated stimulus in qe 2016. now we start to see some of the tightening come back. has benefited from the depreciation of the dollar. they are trying to use that to pull back some of the monetary stimulus. history is littered with examples where you have tried to deflate a monetary bubble and it has become disorderly. lags inere are no red falgs in terms of the monetary data. francine: are you pretty positive on china? vincent: i think china is a risk. they are going to outline their economic strategy for the year. we know where the focus is. pollution, the property markets. i think all of that becomes a

little more prominent. the growth targets will be less prominent. they will accept the idea of growth going below 6.5% this the growthyear. of course, they will manage that. we are not looking for a sharp slowdown. we treat that as a risk factor, huge leverage has built up in china. possibly, some negative surp[rise rise there, but i do't think it will affect the whole global economy. francine: can inflation in china be exported to the rest of the world, especially the u.s.? simon: well, it can be. the one area we perhaps differ is the expectation of a rebound in yields because of inflation.

inflation is very touchy. nobdoy's models are working. while that uncertainty remains on the transition between labor markets and strong economic growth and very little which inflation, we don't have a compelling case for any of the central banks to change thei policyr strategy of gradual normalization. for me, that remains the underpin for almost all asset classes going into 2016. francine: simon french and vincent chaigneau stay with us. we look ahead to next year. what risks could hit surging markets. we discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance" and i'm francine lacqua in london. thestoxx 600 should escape that has prevailed since the global financial crisis. headingillr emai remain into 2018. we are still joined by vincent chaigneau. great to have you on the program. we have really nice bloomberg intelligence outlook when you look at the stoxx 600 earnings per share. what is the biggest driver for 2018? >> it boils down to earnings, from our perspective. we have a good economic backdrop, regionally and globally.

we business indicators that are at record levels. earnings should march higher into 2018 and 2019, where they have faltered the last five years because of sector-based issues. materials, energy, banks, banks again -- whatever the issue is. we don't see that this yaer. francine: are markets too expensive and are valuations too high? tim: that's interesting to contrast with earnings marching up. valuation is at lofty levels. we don't see that moving higher. we see earnings kicking in. on the valuation front, valuations are not that stretched. we don't see the opportunity for them to move higher. francine: overall, do you believe that a lot of the

market seems frothy, and if it does, does it correct in 2018, port of the go even higher? vincent: yes, equities look rich. however, when you compare them to bonds, they don't. clearly not. the main risk for me, as i said, is the central bank starts to sh ow their teeth and real rates increase. if you look at one year rates, two years and three years, markets and investors are extremely confident the central bank will continue to act very cautiously. s partk that confidence i of the low volatility we have across markets. and then we look at long-term

real yields. let's look at the bund, the bund 10 year protected against inflation. -.20% plus inflation, not very exciting. the big question is whether that starts to pick up. that will happen if central banks become less dovish. francine: do you believe they will start picking that up? or will we see a less negative driven bund? think it has been very gradual. rnings performance across all developed markets, equity markets, and we expect this to go on in 2018, there is no sign of that moving through to wages. the economic surplus is being captured by capital, rather than

labor. therefore, central banks will start to deliver financial condition tightening to workers. that will be politically not popular, more problematic than that. therefore, given the ultimate mandate of central banks delivered by government, it will not be a path that central banks are allowed to take. i think we need to get ahead of this issue that it is heavily indebted to the corporate and household sector. central banks will be having to toe the line as demanded by government, which will mean not an aggressive renormalization path. francine: we were talking about the tax cut in the u.s. will that make a massive difference between u.s. versus europe in 2018, or is it sector-based? >> my counterpart would argue that a lot of the moves in the market this year has been

anticipation of tax. we have seen very little earnings progression. 7%ish uptick in the u.s., which is a nice plus, but you could see valuations folder this idea that we have got 27 euros in earnings per share for the stoxx 600 next year could see another 2% maybe 3% boost from u.s. taxes that nobody has anticipated because of so much exposure. francine: do you worry about the level of the euro? at what point does this become uncomfortable?

>> we believe there is more in store for the euro. near-term, we are looking for a bit of a correction as the fed is repricing. i don't think that will be a major issue, at least for the first half of 2018. i don't think the euro gets much stronger from here. stayll, let me say, we do positive on risk. but we think it is becoming a bit more selective. inflation will not pick up. central banks will stay super cautious. i do agree the debt issue is significant and central banks don't want to upset the apple cart. isertheless, the market pretty much certain that if they the that cautious stance, markets will underestimate the cyclical major of inflation. -- cyclical nature of inflation. thank you so much.

now, coming th up, we will talka hammond about if philip has pushed for a british interest in china. is brexit overshadowing that relationship? we discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance" and i'm francine lacqua in london. the financial dialogue wrapped up this weekend. inch out for the pound push british interests. did the uncertainty over brexit overshadow relationships between the two countries? we spoke to a leading figure in the delegations, who is also the chairman of aberdeen. britainnk it has made

less of a partner. everybody is hoping it will turn out well. it could well turn out well, or very well. what its quite sure well or very well means. there is a lot of waiting and seeing. and in a political global economy, people don't sit and wait to see of opportunities are going to come up. we don't yet know the extent to which we are still the gateway to europe. we very much hope we are going to remain the gateway to europe , but that remains to be seen. reporter: where do you think the market will take us in 2018? still verymarket is positive. if you look at the way the market has been run, you would think people would be jumping for joy. but actually, turnout has been

subdued. it's a strange situation, driven partly by liquidity. we got used to massive liquidity being provided by central banks. people are not sure what it will be like when normalcy comes in. i'm quite often mistake about china and india. we are both ticking away at 6% to 7% growth. u.k. brexit, hard to predict. reporter: do you think equities have got further to run next year? sayrry: rationally, i would no, but optimistically i would say yes. francine: that was gerry grimstone speaking to tom mackenzie. aerospacefrench company has knocked out atos.

euros a share51 comes less than a week after the deal, which gemalto rejected. atos said it will the longer pursue gemalto. norway's biggest energy company says this was the largest discovery offshore of brazil in the 1990's and still holds more than one billion barrels. the companies have decreased those resources by more than 50%. bitcoin future started trading last night on cme. it comes one week after pboe global markets introduced similar derivatives. the cme got off to a fast start with the vision pricing. timesnged hands 251

during the first hour. that's the bloomberg business flash. francine: thank you. "bloomberg surveillance" continues in the next hour. tom keene jointly out of new york. the will be talking to isabelle mateos y lagos. yes, it has gone really fast. and then we have the shape of u.s. tax cuts. well, 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. republican lawmakers try to get their tax cut bill on the

president's desk before christmas? transition friction. the u.k. prime minister lays out her post-brexit plan. and we will be speaking to the eu commissioner for economic and financial affairs for his vison of the european union in 2018. this is "bloomberg surveillance" and i'm francine lacqua in london. the tax plan. on and what that means for equities going forward. tom: and dollar, mr. mueller has come up. the zeitgeist was very clear about things left unsaid about the russia uproar, if you will. francine: i will translate, tom. this is the president saying he will not fire the special counsel. let's get straight to the bloomberg first word news. reporter: putin thanked president trump for a cia

a serieshat thwarted of bombings around st. petersburg. sebastian kurz will be sworn in today. his party struck a deal with the national freedom party on friday. the coalition has come out with a program designed to preempt concerns that austria could crush the welfare state. in chile, billionaire sebastian pinera has been elected by a bigger than expected margin. he has pledge to reverse four years of sluggish economic growth. and in atlanta power has been restored it one of the busiest airports in the world after a blackout caused over 1000 flights to be canceled. thousands of passengers were stranded. georgia power says the fire caused extensive damage in a

underground facility. global news 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries around the world. this is bloomberg. francine: thank you. president trump will declared china a strategic competitor to the u.s. in a speech that lays out an official national security strategy. that is according to a senior administration official. i have not heard the term strategic competitor before. it could be a new way of slapping the

much, because the u.s. still need them on korea. tom: guy: equities, bonds, currencies and commodities. continued tax cut lift, helping futures 121 points. the euro, not really part of thatstory. next screen, showing the huge rally off the tax cut news. the vix, lower, lower, lower. i have two yields, francine. the 30 year bond has barely moved, up one basis point, 2.0 7%. meanwhile, the two year yield is up two basis points, 1.85%. the longer term yields stay stable. francine: i like that. we need to spend more time looking. that was a simple data check, tom. i want to show that stocks are seemingly ticking off the final week of the year in a positive note. i wanted to show you some of the currency moves. you can see the euro

-dollar, 1.7788. i am also looking at pound because of brexit. tom: just a chart over the weekend. this is bitcoin. we do not need to make a lot about it. here's this point, back through november 14. it is a long chart. the white line is the cash bitcoin, the red line is the futures. right here they have come together. this is right up next to 20,000. a ♪ stronger bitcoin -- a stronger bitcoin, naering 19,000. francine: i love your chart. mine is a simple but effective chart one week before christmas. that is what i'm focusing on. this is a simple gilt bloomberg terminal. year, and they

touched the lowest in three months. that has to do with resin negotiations and the pound taking a lot of the brunt. now, on to donald trump. he says he is not considering firing special counsel robert mueller. we had that news on china. comments come after a lawyer complained, describing the transition emails. the lawyer's office has been defending the way the emails were obtained. amidst the ongoing investigation, there could be a big win for the president before christmas. joining us now, stephanie us for the hour, isabel mateos y lagos. when you look at the latest news on donald trump and china.

i mean, he is labeling them. is this a flat oslap on the wri? stephanie: to the layperson, strategic competitor seems failrrly obvious they are in competition with the u.s. it is a step back from being an economic aggressor, which would have been a tougher stance. it reflects the obvious fact that the u.s. needs china to deal with the emerging and strengthening threat. i think, this is to be expected. i think the other significant change as part of that, he will not be including climate change as a security threat. so, it is much more of a geopolitical threats, rather than anything to do with the environment, which had dominated under obama. francine: on the tax cuts,

because i know we will have a a lot of of time to look at the equities, but if you look at the text plan -- put it over the government shutdown and -- could it avert the government shutdown? stephanie: the gop wants to send this tax bill to trump for signing, so he can claim his victory,or legislative but they also have to pass a spending bill to avert a government shutdown by friday. whether or not they were able to do a short-term extension or a longer-term bill remains to be s een. the differences are great on issues, particularly defense spending. and immigration. the democrats want to have any defense spending to be matched by nondefense spending, and they want an agreement on daca. tom: alex, remind me of the

video of the president alone on friday. stephanie, we carried this nonstop. i thought this was extraordinary, with the president going along the wire, question by question. he cap circling back to collusion. -- he kept circling back to collusion. what does he mean when he says there was no collusion? stephanie: he is saying his campaign did not coordinate with russia to undermine the u.s. election. the backdrop to this is there has been a rumor circulating in washington that he might fire special counsel robert mueller this week. he denied that. he cannot do that himself in any case. only the deputy attorney general can fire robert mueller. not detract from the fact that there has been a concerted effort to undermine robert mueller's investigation

and the fbi more broadly, saying they are partisan and biased. tom: stephanie, i was informed by extremely informed sources that it is seven days until christmas -- i was told that last night about three times. is everybody on christmas mode in washington? we got the tax bill passed. is it now a -- to the holidays? -- is it now a dash to the holi days? stephanie: they have to make sure the government stays open, and they don't have this massive standoff before christmas. it is in no one's interest to shut the government down. it is a disaster for both the republicans and democrats. they should be able to reach some sort of agreement to get them through the holiday period. francine: isabel what does t abelle, what does this mean?

how does this unfold in your world? isabelle: there is a lot of noise. then you have things like the tax cut, which impacts corporate earnings, which potentially through the growth deficit spending. that is meaningful. all the rest is just uncertainty and noise. we tend to look through it. this lasts. is if you will have an extra incentive to get policy worked on and that has been a helpful motivation for the tax bill. the question is, what's next? one thing we are looking closely at is the issue of the relationship with china. these are the two largest economies in the world. if something were to go wrong, this could be impactful for markets. francine: on the tax plan, what is priced in?

were last-minute changes for real estate investors. do you need to look at it, sector by sector? isabelle: there is a need to look at it sector by sector and we probably won't know the answers this week because fine-tuning remains. if you look at the ramp up, it is clear a lot has been priced in already. francine: thank you to stephanie baker and isabelle mateos y lagos. now, coming up, a conversation with the eu commissioner, pierre moscovici. we will ask him about the tax bill in the u.s. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get the bloomberg business flash. thales has made a surprise bid for dutch cybersecurity provider gemalto. thales has agreed to pay $5.6 billion in cash, knocking out a smaller bid by atos. twona is in talks with private equity firms. according to wall street journal, a deal would value them at $4 million. and norway oil is moving to triple its production in brazil.

and that's the bloomberg business flash. tom: thank you. with us right now is isabelle mateos y lagos. she is from blackrock. isabelle, let me talk about equities and volatility as well. the blackrock collies lower for longer on volatility. let's look at the chart. here is the dow chart showing t he lack of exuberance we have got. we have shown this chart many times. here's the boom of 2000. we are nowhere near that. is the blackrock resumption that we just make up more of this exuberance way up here? isabelle: well, first of all, we don't see exuberance in stock markets right now. we see very strong earnings growth in 2017, which we think

will continue in 2018, and a global environment that generally is still very favorable to taking risks, and particularly taking risks in equities. interest rates stay lower for longer. we are seeing synchronized expansion, which also provides a stable macroeconomic backdrop. historically, what our research shows that in this environment, the stock market volatility tends to remain low for longer. the recent levels of volatility have been ultra-low. we will stay at that will he stay at these -- will we stay at these ultra-lows? i don't know. tom: simply within fixed income markets, is the general blackrock call of a bond bear market, a clip to coupon, and take the yield, or can i garner total return out of bonds?

the interest coupon, and a little capital gain? isabelle: interest rates stay low, that we are seeing them rise. and spreads have compressed massively. if you are looking to take risks, our preference is to do so in equities. as far as bonds are concerned, be on the short side of duration. areng said that, we still reasonably constructive on em debt and u.s. credit. but again, when talking about risk taking in your portfolio, we think equities have more upsides. francine: even if currency moves can be unpredictable, if you look at the european equity calls, if the euro is too

share? isabelle: it is a significant damper on earnings per share. as markets refocus on this divergence in monetary policy between a fed set on continuing with normalization and an ecb with at least its president and the majority of the governing council set on doing nothing, and continuing to provide extensive accommodations. francine: what part of the market looks too extensive? when you talk about frothiness, is it in german bunds? seeing parts of the credit market, which are very liquid, and have attracted a lot of funds in a search for yield kind of fashion, and that could correct quite quickly. in terms of general bond

markets, we are seeing elevated valuations that will make it harder for returns to keep accruing as beautifully as they did this year. we are not thinking of this in of, there has to be a correction. we are seeing slower return growth. tom: within that is the basic idea of the value of cash. 2018, isash, or in cash an asset? isabelle: i could not quite here the question. cash a strategic deployment? isabelle: if anything, there is far too much global savings sitting in cash. as i said earlier, 2018 looks

great, maybe not as great as 2017, but this is a year when you want to take a risk in your portfolio. where the different parameters around the economy and financial markets are looking very supportive and keeping your money in cash would be a missed opportunity. to: i will come back isabelle mateos y lagos this hour. odming up,a really go conversation on mergers and acquisitions, transactions for 2018. also, we look at washington with our kevin cirilli. this is bloomberg. ♪

tom: "bloomberg surveillance" monday morning with francine lacqua and tom keene. isabelle mateos y lagos is with us and she knows there is a new chairman at the federal reserve, mr. powell. just to get the conversation started, is jerome powell going to be the central banker to the world? isabelle: no, of course not. he is the central banker for the united states. they look at the development in the economy and the rest of the world to make monetary policy for the united states. no reason to expect that to change. tom: what do central bankers do with a divergence in yield? these spreads, these gaps, are

titanic. how do they manage within those differentials of yields that we see? isabelle: so, i don't think that is one of their variables they are trying to control. where it is important as if it starts to impact the exchange rate. if the dollar were to strengthen massively, that would be a headwind for u.s. inflation and potentially for the u.s. economy and that is something the fed would look at and say, maybe we need to take it slower in terms of normalization. that has not been the case at all in 2017. we will have to see in 2018 how that happens, but that would be the only channel through which they would want to keep an eye on this. francine: what is the chance of inflation shooting up 2.5%?ctedly to 2.% to isabelle: that, we don't expect.

our analysts expect we will see inflation move that generally to the fed's target. if there is microscopic overshooting, then so what. all the deflationary pressure is coming from technology and the changing nature of labor market relationships. that's still around. so, the risk of an inflation overshoot we don't really see. francine: thank you, isabelle mateos y lagos. she stays with us. lun weinberg.l this is bloomberg. ♪

tom: good morning, everyone, "bloomberg surveillance." let's get to your monday briefing. . rst word news,

>> president trump got a last-minute multimillion dollar perk in the tax cut bill. lawmakers were trying to lock up republican support but they added. >> a provision from the process t. allows real estate companies to take advantage of a new tax break for so-called businesses. meanwhile, president trump has indicated he's not considering firing robert mueller. the president said no, i'm not, when asked whether he intends to dismiss mueller. a handful of congressional republicans have called for his firing. and british prime minister theresa may is starting a new battle with the e.u. over brexit. she'll outline her plan for how a transition period will work. she'll say that after march 201, she wants the u.k. to leave the single market and customs union while retaining most of the benefits of membership. that may cause a fight with the e.u. over migration and trade. and the owner of the nfl's carolina panthers is caught up in a harassment investigation, and now he's looking to set team. jerry richardson says it's time

to turn the team over to new ownership. he's 81. according to "sports illustrated," at least four former team employees have received settlements stemming from accusations of racist comments or sexual harassment by richardson. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries, this is bloomberg. tom, fran seen? francine: thank you so much. now let's imagine this -- fake news wipes out big tank. the 2018 u.s. elections are mired by misinformation, silicon valley comes up with an .i. that makes things worse. now, these are some of the shock events from bloomberg news' latest pessimist guide, events that theoretically unfold by 2028. this is not meant as forecast, but thought provoking much let's get straight to the man behind the report, bloomberg's senior executive editor, and also with us, isabelle from

blackrock, and charles. john, i love these, because they always make you can. some of them are improbable, but the improbable in certain cases have happened. you have eight scenarios. bitcoin replaces banks. north korea launches an attack. generational warfare destroys europe. what's the one that's least likely or more likely? >> well, as i said, the disclaimer is very strong in this, since they're not necessarily forecasts of the future. the idea behind this is to force readers to think outside the box a little bit. it's very easy in our day-to-day lives to sort of analyze world events and financial markets to get tied into consensus thinking and group think about how a certain story, how a certain scenario is going play out, but the purpose of this is to shake the reader a little bet out of that group thinking and encourage the reader to think about the unintended -- a, unexpected shocks, which we've seen with brexit and with trump over the last few years, and then think through the unintended consequences of those events.

francine: this is basically a possible scenario. they're not forecast, but possible scenarios to get people thinking. the foundation that would lead to these in some cases certain extraordinary events be laid down in 2018? >> yes, for example being bitcoin and banks. this sort of sfrems a conversation that we had with a regulator a couple of months ago who explained that one of the things that keeps banking regulators awake at night these days is the threat that a bank could come out one morning and say all of our deposits have been stolen in a cyberattack. that is something that regulators think a lot about. and if about you think how that could play out in terms of confidence in the financial system, you could theoretically see a run on banks, certainly a

huge drop in confidence in the banking system, and then things that bitcoin or block chain come into play, and they could become sort of possible future inheriters of the financial system. if you look at what's happening in china, some companies are way ahead of their western lives rivals in these areas. tom: john, what does the pessimist guide say about equities? the pessimist streaming full tilt in this bull market. basically it's a generalization, but wrong for a decade. what do the pessimists want to know about the next decade of equity performance? >> one of the scenarios plays into the idea of trump winning a second term. one of the things is this tax code goes through and keeps the bull rally going in the equities market. but then that does raise the risk then of a equities taking place in a hypothetical second term. so, you know, these scenarios, these are ran come -- random by analysts, but that was one of the most things that bull rally could continue well into trump's term, including housing prospects closer to the next

election. tom: let's bounce off your expertise in government, and in particular european government. i believe we have the year really without a german government. how does germany do over the next 10 years for the pessimists? do they stay together, or is there a resurgence of the new right? >> well, that's one of the scenarios we look at, this idea that the generational gap in europe gets worse, and that sort of compounds the very divisive die natural that i can we're seeing in european politics at the moment, but indeed, we do see angela merkel continuing into a fourth term, but obviously much weaker, and given the fact that you have a much weaker pro-european government in the heart of europe, that does potentially at least open up the way for these populist on the left and right to sort of stoke these intergenerational tension that is we've been seeing over the last few years, potentially, you know, making the ties that bind europe together much weaker.

francine: what you were talking about, john, this scenario, which is generational warfare, but makes socialism great again, so there are two big scenarios for europe. first of all, do you feel that markets are too complacent? we look at the pessimist guide. john is not a pessimist, but actually he wants his readers to be thoughtful. think the unthinkable. do markets need to start thinking like that? >> well, i think markets need to start thinking longer term than they have been, and i think that the value of the side, you know, if you're thinking of a potential for technology like block chain to disrupt the financial sector as we know it in a very fundamental manner, over the next six months, probably not very high. over the next 10 years, i would say extremely high. as an investor, you want to position to have that in mind. similarly, in terms of -- i mean, one thing that you haven't mentioned, but, you know, there's been so much emphasis recently on get olingt

right side of climate change. i would think potential for electric vehicle option to disrupt a whole range of sectors way beyond energy -- francine: not even eight. electric cars and the end of the oil era. >> there you go. but it's not just oil, it's the whole metals that are used differently. the insurance sector is different, all the supply chains are different, so this is a big story. and again, not happening over the next six months, but you need to be prepared for that. so i think for me, the main thing that markets need to do more is to have a longer term view of things. and with the boost to u.s. growth, again, is it a high? is it something that's going to lead to a crash three years from now, or is it something more sustain snabble it's too soon to tell, but you want to have this scenario and be prepared for both basically. francine: let me bring you to scenario five and six, which you tell me which one you spend more time looking at. socialism is great again. generational warfare destroys europe. >> well, i'm not sure about making it great again, but

trying to push through the policy is certainly possible in the u.k. the majority he would have wouldn't necessarily agree with everything he wants to do. you just have to look at the people he has around him, and the fact that clearly he's not a great fan of the european union, you can guess that probably he wants to go slightly further than his manifesto in 2017 suggested, and it's certainly conceivable he becomes prime minister in the near future. you saw the conservative government lost a vote on thursday. if they lose a vote on legislation, then they could fall, and you could have an election. now, he's not doing as well in the polls as he was in previous months, but i think, yes, that scenario is one we should definitely be looking at and thinking about. on the generational warfare, it's a very interesting scenario. unfortunately, i haven't read the report yet. francine: you'll get a card. >> i look forward to reading it over the christmas break. but on generational warfare, it depends on the country in europe, so it's doyle generalize really the different markets i look gnat france.

in germany, they're pretty terrible. tom: one telling question here, and i hope you're holding francine's hand and you're properly medicated. do we get the optimist guide tomorrow? are we going to get the optimist guide to 2028, or are we doing that tomorrow? >> i think you'll have to wait until next year. [laughter] tom: very good. francine: if you survive 2018, we'll be opt moise particular. i like his thinking. tom: john on the edge of optimism for next year. let me tell about you a briefing that you need today, and that will be in your car on bloomberg radio. lots to talk about, really, we'll do this coast to coast as well. bob moon, karen, bloomberg daybreak. new york, boston, san francisco, washington, this is bloomberg.

francine: good morning, everyone. this is "bloomberg surveillance." tom, let's talk about brexit and theresa may will address parliament later today to set out her plan for the brexit transition period. this, of course, is crucial, because the u.k. prime minister wants britain to leave the singe market and customs union while retaining most of the benefits of the membership. she will also propose a diverging course on trade and migration after march 2019. et's get back to isabelle. and charles, an associate for europe. thank you both. charles, i am perplexed as to where there's a lot of media reports saying this is the first time that theresa may will sit down down with her cabinet and actually, you know, have a bigger vision of what happens after brexit and kind of the plan from now until march 2019. it can't be so. charles: no, i think you're

right to be perplexed, and she had to avoid the issue because of divisions within her party and her cabinet. but you're right, this is the first time that not the full cabinet, but the brexit war room cabinet, the few ministers that are able to talk about this are meeting to try and battle on what their vision for brexit is. i think they all pretty much agree on the notion of a transition. there are differences in the implementation that have transition, but they agree we need to remain close to the e.u. until 2021. but for the first time in a sort of official context today, they'll be discussing their vision for what comes after that, and i don't think they'll manage to come to any sort of consensus today. they'll realize, i think, the extent of their disagreements and push them off into 2018. francine: but this could be a rowe over migration. it could be a row over trading during the transition period. what does it mean for leadership? are these people going to turn around and try to challenge her again? charles: it's always possible, and she is still a weak prime minister, given the majority that she lost in june. she's actually in a bit of an upward swing at the moment

following her success in achieving sufficient progress in phase one, the fact that she managed to recover from the lost vote pretty much unscathed suggests to me that leadership is going to happen very soon. but our call is it's just a 55% chance that she survives 2018. so we think she does survive, but it's really quite a close call. as far as the divisions are concerned, yes, they disagree on the implementation of the transition, but i think the e.u. will just brush this away. some ministers suggest we should have an emergency break for new legislation or we should leave the policy. the e.u. will just say no time. if you want the transition and you want it by march so we can start talking about trade, you have to accept the trance oigs our terms. tom: i love the phrase "the brexit war room." i wrote it down here, charles, the brexit war room. it sounds churchillian. you got to have a war against somebody else. who's on the other side in the brexit war room? who's the enemy?

charles: well, the chancellor, supposed to be one of the more pros, called them the enemy recently and was criticized by all sides. but certainly there is a degree of sort of one up manship, and it helps boost morale on the british side so suggest there's an enemy on the other side. the e.u. 27 have been fairly united. they managed to push through their demands for phase one without really budging on much. the u.k. had to accept all of their terms. they hope they managed to stay united on phase two, so on trade. there are some signs that this will be a bit more difficult, given that some countries have an interest perhaps in blurring the lines between the different models of relationships with the e.u., but i think the institutions in brussels and the capitals who really are this, paris and berlin, have anticipated it, and

they've been talking to their friends in the netherlands and ireland and spain who want a more blurred model with the thi u.k. tom: isabelle, what does it mean for the choice between e.u. and u.k. investment? you're multiasset. there's a war going on. we don't who know wins, the brexit war room. in the blackrock war room, how do you choose between europe and u.k. investment? isabelle: first of i'm, you don't have to choose completely. i think the one question is what's already priced in. we're quite bullish on european quit. but we do think the pessimism around the u.k. has been somewhat overtime, and probably is going to continue to be a little bit overdone, because there's a lot of drama and name calling, etc., but the reality is what we saw last week, it's that there was overwhelming political will on both sides to come to an agreement to end phase one and to use clever words missing to get that when things weren't completely there in substance, and i think we're going to continue to see that

with the discussions around the transition phase and basically the risks are really ugly outcomes in the u.k. have receded dramatically. we expect that in market terms, probably the pessimism around u.k. assets has been overdone, and so we're not as negative as one might think, even though the longer term growth outlook is looking more challenged, obviously because of these uncertainties and brexit itself. tom: charles, i got to begin my christmas shopping this week. what are you focused on this week, in terms of brexit? what's the thick you're going to be focused on? charles: i also have to get any christmas shopping, but at work i'm focused on the brexit, the fallout of this first attempt to negotiate among the cabinet what they see as the u.k.'s future post-brexit, post-transition. i think there will be attempts by different ministers to form the debate, to shape the debate

outside the cabinet, so that the prime minister is forced to move in their direction. something that theresa may has done quite often is go to brussels and really do a lot to move towards the u.e.'s way of seeing things. but then she spoke in a rather different way in london. so this week i'll be looking at the sort of messages she tries to send to the pro-brexit ministers. and then also i'm still looking at germany. they don't have a government yet. this week they'll have their final meeting between christmas,

the phase at which the jamaica coalition collapsed. it's actually become a rather important part of the negotiations before they even move on to technical talks, they have to work out the general direction of where they're going, and there isn't really much consensus on which direction to go to, other than a vaguely pro-european direction, but even that is somewhat difficult to do. francine: i'm looking at cable. if you want to do your chims shopping, come to london, do it here, and fly back, in all two days. a good christmas top. charles, isabelle stays with us, and charles, thank you so much. in the meantime, you can also look at tom and i using tv go, so just log on to tv go and then ask isabelle some currency questions or christmas shopping. tom is pretty good on christmas shopping, especially when it comes to european brands. log on to tv go. this is bloomberg. ♪

>> this is "bloomberg surveillance." let's get the bloomberg business flash. one of the largest railroads in the u.s. was caught in the midst of a revolution by the death of its c.e.o. hunter harrison died on saturday. in less than a year, he added almost $17 billion in value with cost cuts and scheduling changes. he'll be replaced on an interim basis by jim foot, who arrived less than two months ago. in toronto, the police homicide unit has taken over the investigation into the death of a pharmaceutical billionaire and his wife. authorities say the deaths were caused by ligature neck

compression. they say the deaths occurred under suspicious circumstances, but they've indicated they're not looking for any suspects. and the latest "star wars" movie didn't disappoint. disney's "star wars" took $220 million in north american box offices in its opening weekend. the film met the high expectations of both movie fans and analysts. it was well ahead of the opening of last year's "star wars" spinoff. that's your bloomberg business flash. tom: really extraordinary. the reviews for this, folks, for all of you worldwide, the reviews are really extraordinary, rave reviews, not in all instances, but in some instances to the latest "star wars" franchise. right now, with us in london, isabelle with blackrock. charles is from you're asia agroup. one of the things i want to talk on here is the great unspeakable, germany. it's a caretaker chancellor i believe right now. what does merkel need to get

done before year end to actually get a german government? charles: it won't be possible before year end. what we have this week is still the beginnings of a sort of founding phase among the parties that may go into government together, reluctantly, i mind you, because initially the left said they wouldn't negotiate. they left it to the other smaller parties to negotiate with her. that failed. and then they reluctantly reversed their position. it's going take much more time. we go into january, where they try to hammer out some kind of direction for their government, some kind of compromise between pro-business competitiveness reforms and also some social reforms, which the left will demand. they also need to work out what the compromise is on europe. one of the things they will require i think is an open hand held out to macron's offer of reform in france, but this is difficult for their party, so moral of the story, it's going to take a lot of time, and

every step of the way there will be a vote, including by the membership at the end. so that introduces some risk as well. francine: speaking of risk, if you look at spreads, we'll push it out on social media, this is basically showing spreads in europe tightening. so in white, you have the portugal, and then we have the italy germany yield. what does that tell you? isabelle: it's telling us that the outlook in europe and the fundamentals are improving. growth is stronger everywhere, even italy has been outperforming, so that means the sustainability of all this is improving. and then we have a central bank, which is determined to remain in very accommodative mode through 2018. so it's no surprise i would say that spreads are compressing. i think the question is for how long are they going to remain at that low level. and from that standpoint, the outcome of the elections in italy will be important. francine: is that the biggest

risk right now, europe? charles: i suppose so, yes. we could talk about this sort of long-term risk of missed opportunity. the beginning of 2018 was until the mess started in germany seen as a great opportunity to get some reform done, and now it's looking like we may miss this opportunity. i'm not entirely dismissing that it's still there, but it looks like the opportunity may be missed. i think in the longer term, that's the bigger risk. but, of course, the markets in the short term, by march, we have an election where there may or may not be an anti-e.u. majority. i don't think there will be, but it's a possibility. that's the flash point for the first half of 2018. francine: charles and isabelle, thank you. ♪ cannot live without it.

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the dow 5000. bitcoin as well. inirman powell, the dollar 2018. andhis hour, carl weinberg general lay only certain coming to the rescue. jedi innsiders the last the disney fox merger. good morning, everyone. this is whom serve -- "bloomberg surveillance." did you go to the last jedi? on wednesday. tom: i have never seen constructive and brave reviews. i cannot wait to see it.

is, thinkthe same about the timing. you arere disney and looking at this and you need it to go off. tom: i think so. i can't believe how you got older. how did that happen? first work -- here is first word news. >> vladimir putin have thanked president trump for a warning that supported and islamic state bomb plot. the two leaders spoke for the second time. threat forped for a a series of bombings around st. petersburg. chancellor's one and. they struck a deal with the national freedom party. came out to design preempt concerns constraints or crush the welfare state.

a president elected by a bigger than expected margin in chile. -- press power has been restored at one of the world busiest airport after a blackout that caused over one thousand flights to be canceled. thousands were stranded. georgia power says a fire caused extensive damage in an underground facility. operate your will full schedule today. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. you.caroline, thank please bonds, currencies, not much going on. lift in the market. dell futures up 120 with a curb

stability. point 35 showing good equity markets down 25,000. ok, i exaggerate. thee are the yields on screen. the curve is flattening. francine: this is what i am looking at. i wanted to show you the vix. we will see a rally in equities on the back of the tax cut. i am also looking at european gaining on the back of it. it seems there is a positive note on a republican agreement on the u.s. tax cuts that may even get a lift to grow

meeting with cabinet members today and speaking later. we must look at around. tom: let's look at bitcoin. over the weekend, a real movement and bitcoin stability at the end of november. of we go, again stability. as of about the 14th, the cone was. -- bitcoin 20,000. here are futures coming in at 19,000. the cme opens today. francine: i am looking at 10 year yield the lowest in months. negotiations like we do, a lot has impacted brexit -- brexit pound. you can see what has happened in the last three months. give you a morning must-read. let's go to kevin cirilli. nailed york times really

, not the income tax burden but the overall burden. the middle class and the poor meanwhile have suffered from slow-growing incomes and from overall tax rates that are higher today than in the time of lyndon johnson. the quiet giant of the federal tax policy is the payroll tax. we call this fica if you want in the united states. it is now the largest tax -- i didn't know this, 62 percent of american households pay larger than the income tax. they now face higher total tax a half-century ago. we go to kevin cirilli on the amount of the tax cuts. kevin, help us be a we assume a tax cut is going to occur, right? kevin: senator john mccain and our thoughts and prayers are with him. it looks like he will not build to make it to the vote. over the weekend, senator bob corker is a yes or a likely yes.

this is get it done. ?om: when do we get a score not only for the viewers, but when do we get a score on what it means for the deficit? going to waite and see. ideally, it would be this week. democrats and some republicans it.ticizing the mortgage industry actually made out pretty well, as did big banks. folks are still sifting through to see what it won't mean for folks like states in california and new jersey with a state and local tax deduction. all systems are go. of: i sat with a beverage choice in my hand and watched the steelers go down. blew it wasally doing the tax analysis. i did a quick back in the envelope myself speared i am

getting crushed. are there a lot of others in the blue states and do they understand this? kevin: the republicans do. that is why you have seen tepid at lawmakers. they are seeing the parallels of the affordable care act. is they will now have to go home and sell it in states like new york and new jersey and california. when we talk about momentum, we looked at the alabama and the impact on midterms, i think this will have more. a lot are saying if one or three or a couple of districts go that are red and they go to blue in these states, that is momentum for democrats going into midterms. francine: kevin, broader question is will they be able to get the tax down in a week? a star warsw you're

fan and i am too. there have been moments on the government shut down front. it looks like the house version my sources are telling me it is a nonstarter in the senate. likely what will happen is they will kick it and do another one month extension. they are so good at kicking the can down the road to january. tom: kevin cirilli, thank you so much. carl weinberg with us this morning. wonderful to speak to dr. frequencyn high economics on his perspective on national economics. i want to go right to wear your colleague would be, which is the discussion of 4% gdp. is it possible? carl: we do not think it is so. due to the democratic scum we are stuck where we are at the two to 3% range. we don't see the windfall to productivity coming out of the tax cut.

tom: what does it do for the deficit? some said it means a $1.5 trillion deficit. i did the math and thought maybe not. can we get to a $2 trillion and i'm? carl: we don't have a hard number yet. a 1.5ks as if we have trillion moving forward. then will have to explain to future generations. tom: what is that? .arl: that is the question tom: what is the research on this? are we seeing a temporary shot? carl: and we haven't seen it yet. it didn't work for reagan or bush. we will see if it works for trump. howdy measure success? and -- how dos you measure success? carl: on the basis of stocks

going up, we are seeing a confidence burst in the market. in the longer term, we get more out what? will we get more investment and more of the kinds of spending and things that make us richer, and more productive? that will take a wild to play itself out. in the meantime, it will be mixed results on the demand side. we will see in the high tax states higher income. we will see and if it's in the middle class -- benefits in the middle class. we are waiting to see how this plays out. looking for balance supply cuts. francine: if you break it down, will it he sector by sector are? i know the doubles are in the details, but how much is priced in? carl: that is speculation. we haven't seen anything like this in a long time.

i don't know how much further the market can go. are gettinged week the strong reaction we are seeing this morning because the shape of this has been known for a long time. abouthas been skepticism whether it gets through. that has been resolved. now we get a bump and then we have to wait and see what happens. francine: thank you so much. .arl weinberg of high-frequency coming up on bloomberg surveillance, we have a conversation with the e.u. commissioner. will talk about the tax plan and about european growth. this is bloomberg. ♪

♪ from brexit negotiations to deepening economic concerns. this is "bloomberg surveillance." let's talk about the financial programt -- assistance for 2018 with a host of challenges for the e.u.. the --ill be a speak at speech later today. it will be my vision for the eu in 2018. he joins us now. paris, butou were in you are in london already. to the moreet optimistic versions and vision you have for the e.u. i must ask you about the tax reform in the u.s.. you sense a letter to the u.s. secretary treasury against the gop tax overhaul. what are your concerns?

we are not disputing the fact that the united states of america are free to fix tax rates and to reform their own tax but the question is does it have consequences that on the asian or -- on the international level? is this compatible with the rules of wto. ? there is another issue is if the gigantic deficit and debt burden, will that have consequences for the world and the e.u.? francine: what will they do if they don't address your concerns? pierre: it is not a protest, it

is a worry. we want to enter into dialogue with the united states and we want to have clarification about that. not clear.ent, it is i understand there is an of agreement between the house and senate. we are in the dialogue process. we will work together at the summit in g20. we will talk to steven mnuchin. i imagine this is a technicality, but what happens if they pass a lot without queries?g your core --

if they don't respond, do bring them to court or do leave it? there no, we will not get : we will -- pierre consider what will be differences be and can be here or there. .e will have to examine that would be thation they address our concerns. thati would assume basically to brussels and europe is do no harm. how long do you wait and wait for the united kingdom to get their act together? can you wait well into 2018? here -- pierre: as far as brexit

progressned, there is that has been made at first on the negotiations. now we can move forward towards the transition. and the relationship between the u.k. and the e.u., which needs to be close. for our own work there is a window of opportunity that now has opened. junest take decisions into 2018 for the european union. up thewant to rip script. you have an interesting history in socialism and the domestic politics of france and international work. what do you make of germany that can't make a government together within this autumn winter of

2017? thatis an heightened issue we have a caretaker interesting about the election. you cannot have huge success. people are wondering about growth and coming in parliament which is the first sign since world war ii. that proves that the feeling of the voters. there is a government. there is a strong leader who is angela merkel the best not underestimate her as a caretaker government it means we cannot importanceons on ahead of us. eurozone. deepen the

there have been very interesting proposals for the eurozone to eurozone andr the -- and nba commissioner to be a commissioner. the economy.ming problems. solve our we cannot rely on that forever. in the future, we need to have our own tools. these are ambitious proposals and that is what i hope we will be a government as soon as possible in germany. i hope my social democratic friends will be on board because they have a responsibility for their own country. it needs to be governed. but also for europe as a whole.

francine: commissioner, are you looking at bitcoin at all and is the e.u. planning on taking action to regulate it? are you talking about bitcoin? francine: yes, correct. me, at this stage we aren't considering that as an alternative currency. if you look at the euro and we see there is speculation about that. alan greenspan said that sometimes speculation is overactive or exuberant. that, we don'tt think we have at this stage to react. francine: are regulators looking into it? do you have conversations with regulators looking at bitcoin?

conversations with regulators looking at bitcoin? pierre: know, we are not having conversations right now. --no, we are not having conversations right now. francine: you recently have tax hagans including south korea and the arab emirates. what are the implications of being included on the blacklist? pierre: first, there is an affected that is called name and shame. i think you should take commitment to respect international governments in order to get out of it. i think that the e.u. countries sanctions decide on that can dissuade countries to act in a certain way. there is a great list of countries which have made commitments.

either there out of the listing or they come into the blacklist. the idea is lifting countries to help them get out of it and to respect to global standards that have been set any framework of the g20. , westandards of the union have voted to directives against tax avoidance. we will be very strict and firm on that. we know public opinion cannot stand tax fraud and tax avoidance or two aggressive tax planning. francine: does it mean that banks should be wary of doing business with these countries? example, if one of is involved ins

financial markets or banks in those countries, it is not possible. we must not punish the people --l of those countries people of those countries who are sometimes poor. much.hank you very the eu commissioner with us. carl weinberg of high-frequency economic. ist to go to where the eu more than europe. 2018,a new europe into and into the next decade? car a: i am feeling more optimistic about europe in 2018 then 2017. carl: i am feeling more optimistic about europe in 2018 then 2017. i am thinking that trade with

the push that europe needs to really pull ahead of the united states. a halfow it is two and percent. it is a horse race as to who is performing more sluggishly. tom: is it about euro -- europe doing better trade or taking advantage of what the trump administration is doing? karl: it is toward asia and away from the united states. states ast the united a trade partner. they are still your biggest partner but that is changing. the growth is happening in asia and china. tom: so they get the flow of money, but they -- but do they need a 110 to get this done? do they need weaker euro? carl: any company in europe with anything to sell now has to

increase the size of its market by tenfold simply by putting goods on a train and sending them in that direction. this has nothing to do with exchange rate policies. the new trade is on and it is a free trade. europe is at one end of it. tom: we need to brush up quickly. car weinberg. he is not and the last jedi, he was considered. maybe he will be in there. we will talk about disney and fox for next year. 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. tom: "bloomberg surveillance" in london. i am tom keene. >> trump and other investors got a last-minute multi-dollar per

can the tax cut bill. lawmakers were trying to lock up republican support for the measure, so they added a complicated measure late in the process. it allows real estate companies so-calledvantage of pass through businesses. mr. trump: he is not considering firing robert mueller. russianvestigating interference in the presidential election. a handful of republicans have called for his firing. starting a newks battle with the eu over brexit. she will say that after a march 2019, she wants the u.k. to leave the single market and customs union. that may cause a fight over migration and trade. the latest star wars movie did not disappoint. in $220 million in the

north american box offices. high expectations above movie fans and analysts. global news, 24 hours a day, 120 -- time more than more than 2700 journalists and analysts in more than 120 countries. whenremember the day everyone thought bob iger was out of his mind? it is 2017. bob iger is still out of his mind. buying parts of fox. now, a gentleman i assume bills by the lightsaber swing. are you representing disney fox or both? >> i am in the deal. be a fun deal. there is nothing more fun than winning an m&a.

>> i think it is about netflix. us perspective on netflix and how your world of m&a respond to the digital threat of netflix. it is the convergence of everything. -- onstephen hawking on a to think about this instead of a lawyer like me. technology is changing. people are moving. as as might be thought

step out, where people are going into other businesses. tom: this is valuable, to have with decadesrt's of history here. you said -- i don't know. who generates these deals? goes -- let's merge. i don't buy it. does that conversation begin? guys like you get it going? >> it is a combination of things. strategy do with the of the company. companies are thinking about where they are going all the time. where are we going, what is happening to us. what are the big forces affecting us today? every thing. it affects almost every industry. on with oil? that is a technology story, not anything else. people think about this all the time.

me, i am noto going to use something about real age, but all of a sudden, this idea of doing something vertical rather than by more for that we have, increasing profit. that is here. francine: going back to something you said about disney, if this is a play against netflix, will disney struggle to build large audience? if it is going to be a struggle, why pay so much in such a big amount? >> it be -- it remains to be seen if it is a big amount. if you are going to deal with this, everything affecting the we areusiness, what watching on our phones, this is disney, after all. it is a lot of content.

it goes back -- i think mickey mouse is 80 years old, something like that. they need more, otherwise they are renters and they will not make as much money. the thought a company with as , tellsntent as they do you about how brutally competitive it is. mean for what is it netflix? they are trying to build their own studio. >> they are trying to build their own studio, amazon, they are making movies. amazon. how does that happen? everybody is competing for eyeballs. is the tax code driving this deal? >> this deal, probably not much. something in be it. >> a lot of stuff came together that benefited companies. , two weeks ago

they were not deductible. .ow, it is a ratio for a company like them, it will be deductible. tom: the feeling of the public is guys like you are doing financial engineering to advantage corporations, where the synergies of 2 billion or is a labormber reduction. who are you working for? the shareholders, the ceos taking the bonuses? you ared this out, billable at 180 dollars an hour, who are you working for? >> fundamentally for the companies. the tax change matters. not this deal so much. to be a not going territorial system and a border adjustment tax, the market has taken off.

concern there of was going to be something do that came out of this. is not that there is something great, it is that there is not something bad. tom: forget about rey and kylo what's-his-name. car and try to explain the advice. what does it mean for boring companies, this legislation? once you do a tax thing like this, nothing is happening soon, don't worry about something fundamental changing. don't worry about a territorial system. you will have lots of money you did not have before.

that is a short-term phenomenon, but it is going to stimulate. right now, transaction markets are on fire. france's do you think it will be affected, m&a will be affected by the tax plan? >> i don't know. i was trying to ask of the question to find out what it means. behear how this is going to good for business. i am curious to see what happens. tom: i look up two industrial companies. one has traded 18 times for word earnings and another at 23 times forward earnings. the frenzy get going and everyone starts deluding transactions? -- diluting transactions?

>> if it makes sense and you can -- a path to accretion tom: i love that. that was such a good book. to accretion. have you ever said that in a meeting? >> i don't think so. but if you can show a path, short-term is not bad. back into modality like 2016, if you announce a deal and it makes sense, you on your stock. most of this year, you got a dip. tom: you have to pay up on amazon and get the hardcover copy of a path to accretion. it is a timeless book. francine: only if it is signed. tom: true, first edition, signed.

your briefing on radio, bloomberg daybreak. robert moon, coast-to-coast across canada. serious xm channel 119 across this nation. this is bloomberg. ♪

>> this is "bloomberg surveillance.". -- was caughtgest in the midst of a revolution by the death of its ceo. onter harrison died saturday.

he added almost $17 billion in value with cost cuts and schedule changes. in toronto, police homicide unit has taken over the investigation into deaths of the shermans. the deaths occurred under suspicious circumstances, but they are not looking for suspects. aerospace company has made a bid for a dutch cybersecurity firm. that knocks out a smaller bid by another company. the officer -- the office -- the offer significantly undervalued the company. francine: a lot of m&a news in europe. you can look at unilever with their spreads business. when itrine is laggard

comes to m&a terms, but it turns out to be the hot spot this year. talk to me about m&a in europe. is it going to accelerate? is there a trend for growth? do other things drive this consolidation in europe? >> europe and the united states are not dissimilar. , right now, market gdp rates are better in europe. about as too worried financial failure. there was a monkey wrench thrown into things with brexit. people have gotten used to it. notassumption is that will do anything significant. interest rates are low. activity. even though the gdp rate is higher, you might say what has that got to do with it?

stimulative of mn day. higher is not. there is not a big enough difference. there is a lot of looking within europe for other deals rather they are normal, which is come over to north america. how active will private equities be? itsever agreed to sell margarine and spreads business. this is the single biggest leverage buyout this year. will we see more into 2018? private equity. it was held back. a lot of this stuff in the u.s. was affecting things. doing something in europe. the private equity firms have an astonishing amount of capital. funds and theye are $18 billion. tom: that goes to a huge point.

whether it is a lien on a leonardo painting or on a bitcoin. how awash are we right now? i had a question. and --?on't want a wash >> banks in europe are capital constrained. credit for seeing 2% europe, lending to small businesses. is bank lending a constraint on m&a activity? lending may be constrained, particularly in china, but m&a lending is fabulous now. it is the place where you make the most money if you are a bank. the fees in m&a are terrific.

it is a double-header. >> even with european banks? robert: absolutely. used towe need to get more $50 billion transactions? s-aetna robert:. cvs-aetna. robert: industry is not going to move. you ought to think about industries under pressure because of technology. it is the pressure that makes you do something. if you invent something doing well, you don't have to do anything. if you are under pressure, you have to think. is it right to merge

to counter smaller, more nimble, more technologically advanced arrivals, or are these big m&a's things that don't make sense? ofert: there are a number instances where things have not made sense. there were plenty of factories built that did not make sense. m&a guy, i am biased. this capital spending, when they do these big deals, the synergies available are big. disney.ed talking about at fox, there are lots of cost synergies in that deal. i think it is about content. cvs-aetna is not just a synergy

play. that is a big, vertical deal. nutty, going to sound but it is no different than whole foods. it is a move down into the chain kind of movement. the bananas are not as good as they used to be at whole foods. we are going to be back with carl weinberg. robert perfused sack -- robert profusek. you can knew bet -- can do no better than tv . the side. segment to you can bring up a bitcoins and futures chart. this is bloomberg. ♪

tom: good morning. francine in london. i am in new york. right now, the single best

chart. add hyman wrote this up. this is compensation wages and benefits back to the white david eisenhower. here is theea voelker inflation. down we go. 4% compensation growth. are at a level just above 0%. retail is booming. compensation is not there. the big thing. that is what is driving politics. we are not participating in the explosive economy. it is being concentrated. i have not seen this chart before. it is tough to react to it. this is spilling out over americans. illusion, the idea of the time we are living in versus real analysis.

is there a wage illusion? are we affected by the minimal wage increases people are seeing? living in the 1970's remember bigger pay increases and not feeling very good about them. we get smaller pay increases and we don't feel as bad about them as we did back then. francine: what does that mean -- this is one of the key points that a bank of japan have been trying to make. the tools ofn monetary policy are restricted? >> his analysis of what is wrong in japan, wages are delusional. prices are falling. wages are falling.

there is nothing he can do about it. attention fromg his core issue. it is bad and it is going to get worse as long as the population shrinks. does that mean you right off the fact he may succeed? what does that mean to the world economy? >> at some point, we have to care about the endgame. in japan, it will not be pretty. arencial enterprises rendered insolvent by this negative interest rate and the drop in interest rate. have saved for their retirement will not be able to get their money. japan is a big country and a big part of the world. in the short term, this is a story with a long fuse.

>> this was fun. thank you for coming in with jones day. really different trends and currents going into 2018. not forget, "bloomberg surveillance," radio, moving you through the morning. else to talk about. a good amount of news flow through this week. hour, tick and one tock. for puttingons together our new television effort with twitter. this is bloomberg. ♪ retail.

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the middle class, that is what trump calls the tax overhaul bill. does anyone know what is in it? theresa may moves forward the trade deals and an arrangement from brexit. her cabinet heads in different directions. bitcoin hits the big time. the price keeps going up. welcome to bloomberg daybreak. i am david westin. alix steel is off today. we want to check into the markets. jedi market is going strong today. green across the screen. nasdaq and s&p futures up. six tenths ofst 1%. up in paris as well as germany. get you caught up on other things happening around the world in markets.