♪ >> fed up. president trump against the central bank again, saying he is not happy with jay powell. we hear from the fomc chair later today. prime minister may said to be backing down from her battle of parliament. is it a risk to her deal, or political calculation. and, the deutsche bank is said to be considering a management shakeup. ♪ francine: welcome to "bloomberg surveillance." i am francine lacqua in london.

this is how your markets are doing. the us futures are pointed to a higher start. investors are rekindling a bit of their risk aspect of it desk risk appetite. the dollar maintaining gains. treasuries are also pretty much study. brent at $60. coming up, we talk marcus with angie wilson, chief executive for goldman sachs asset management in europe. we also talked to william lauder of estee lauder companies. now let's get to the first word news with taylor riggs. theresa may's government had intended to prevent the parliament from trading the terms of the eu agreement, but lawmakers will not be free to vote on a series of changes to the motion. amendments could include calls for another referendum or a

different deal with the eu. the bank of england will publish a financial assessment of the brexit agreement at 4 p.m. today, u.k. time. governor mark carney will hold a press conference 15 minutes afterwards. bloomberg will bring a full coverage later today. former nissan chairman, carlos ghosn has denied the allegations against him. reported that he may have offloaded ¥4 billion in investment losses to nissan back 2008. the rebuttal by the chairman isn't the first attempt by him to redeem himself after the automaker said he misused company money for personal matters and understated income. agent will not ask for further funding from the international monetary fund, when it's $12 billion program expires next year. though, cover is open to maintaining a relationship with reassurer to

investors. the government is said to be making steps to become more attractive to institutional investors. >> we will go for the international markets this year, we have not decided yet about we are very much interested and we made it very clear. we want to diversify markets, we will diversify currencies, we will diversify products. taylor: president donald trump and president xi jinping are set to meet for dinner at the g20 meeting in buenos aires. the top economic adviser to president trump, larry kudlow, said that the president is hopeful that the talks will yield progress. global news, 24 hours a day, on air and at tic-toc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am taylor riggs.

this is bloomberg. francine? francine: think is so much, taylor. president trump has spoken about against the fed again. he told the washington post he is not happy with his choice to head the u.s. central bank. he complained at length about jay powell's interview, blaming his policies for recent stock market declines and for gm's announcement of this week that it would close five factories in north america. jay powell will speak later today in new york city at noon eastern time. what is next for the fed and u.s. markets? chief executive and global held head for fixed income markets at goldman sachs, angie wilson, joseph now. does this -- joins us now. does this mean that the fed will be more independent and wants to hike more, or should we just ignore it? >> i think we should ignore it.

i think they will block that out. it is interesting, markets normally do not react to these comments. , marketsal comments were surprised. i think they have just become accustomed to it, and i think jay powell and the fomc will stay the course? andrew: i have heard that we could see a slowdown. it which means a market is -- too manywo man hikes. >> baby we are in the middle of that. we have seen momentum slow -- maybe we are in the middle of a slowdown. but it is still growing at a small clip. thats reported unemployment is at a 50 year low just a couple of weeks ago. so i think the fed will look at that and say, yes, we need to keep on this path. the into thing development in the last couple of months has been the tightening of financial conditions. in the past, they were

and.ng financial rates tightening of financial conditions that has come through widening credit spreads and of a selloff in the equity market. when they talk about being data dependent, which we have seen and in numerous comments in the last few weeks, we think they are referring to watching those financial conditions. we don't think they are on a preordained course to hike two or three times next year, i think december is a done deal, but it will depend on financial conditions. our own case is three hikes next year. francine: do you worry about interest rate normalization in 2019, or geopolitics? what will be your biggest bet in portfolios? andrew: we worry about everything. know, i think the financial conditions tightening and the impact it has come a that is at the center of this. we know the ecb will have stopped buying bonds of next year. we have the runoff of fiscal u.s.. in the

that combination of tighter financial conditions and less of fiscal stimulus, conditions that are less accommodative, how much do things slow down? that is a hard work, calibrating that. francine: the you worry about something ugly happening such as the selloff contagion of the emerging markets, losing control? andrew: i think we worry more about an inflation surprise in the u.s.. the labor market is still very tight average. yearly earnings have been the highest they have been in years. so i think the surprise will come from u.s. inflation. of course, politics and trade tensions between china and the u.s. may play a role. we are having a dinner now between the two presidents, so maybe something will come out of that. i think it will be an ongoing saga, something live through all 2019.

francine: is there anything that could stop the ecb from saying what they would do? is it in the something that could put a spanner in the works, or brexit? andrew: probably not brexit. probably not big enough for europe. now let us hope you don't get a very rough outcome here. but i think the italian situation is concerning. obviously, the discussion between the commission and the each other in government will be an important part of that. the big issue for italy is the potential downgrade to below investment grade. it looks like we are over the hump in the short term the key rating agencies. , obviously stay put. on how the growth position develops next year, it would be something to watch for 2019 or 2020. rate hikes could come on the agenda for the ecb, but that would be in late 2019. francine: thank you very much, and are periodic coming up, we also speak to the executive

chairman of estee lauder companies, william lauder. in about 30 minutes. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." you're looking at live pictures of the president of china visiting for a couple of days in spain, just meeting with king felipe. i imagine the pompous mess and

pageantry will continue for the next couple of hours. interesting to see a president that in therriving middle of trade tensions between the u.s. and china. we have been looking at whether the margins could impact and you can see come up money flow from , and we willpe keep an eye on that, and it of investment flows to europe. but as you can see, president xi jinping there in spain. sterling remains under pressure as theresa may launches her brexit tour, on sans a will be difficult for the house of commons. lawmakers are not being allowed to change the terms of the brussels accord and even demand a second referendum. theresa may had wanted a straightforward take it or leave it debate. joining us now is our european and used, david merritt. it is more likely

that this vote gets passed on december 11, or not? david: there is no majority in the house of commons for many of these different amendments that will be tabled. however, some of them could be significant. imagine a motion tabled on a second referendum. if you will have to decide. it gains majority support across the commons? the government does not think it is likely at the moment, but it does open the door for something more dramatic to happen, in terms of the brexit outcome. the overall -- the big vote, the numbers are still looking pretty difficult. it is a massive mountain for theresa may to climb. whether she is going around the country to sell the deal to the public, we are not hearing that many mps are changing their minds, particularly on her own

side. , who have said they will block this deal. so there is huge uncertainty, still. . she has two weeks to change everyone's mind but there is little chance of that happening so far. francine: over all, is there anything she can actually offer the mps that could make the deal go through? the vote is in 13 days. she offered knighthoods, money, what can she do? david: well, they are working overnight. moving around the country, trying to change public opinion to persuade mps to change them land. she stood at the house of commons for nine hours trying to explain why this is the best deal on offer. we will have treasury forecasts today, bank of england minutes, but as i said, no one has seems to be -- no one seems to be changing their mind so far. forest up it is changed in the first best we saw

how fast things changed in the last election, and maybe they are hoping that they will swing and the other direction and just as fast this year. francine: thank you so much. let us get back to andrew wilson, goldman sachs as the and ceo of global fixed income. think it is dangerous the theresa may could pass this parliament? andrew:? andrew: and think it is dangerous. the range of outcomes is still so broad and polls could shift with two weeks to go. it is just very hard to discount that. and of course, even if the first vote does not go through, something could happen and there is a second vote. it is hard to discount of new phase it, if you say, let us assume the vote is not go through. it is not clear what the outcome is after that. very hard for the markets to discount that?

andrew: but how does the market provision itself if the other r.pe sounds like a t.a. scenario. if the market tanks, and have to vote a second time, maybe they are pricing that in? andrew: i was never a chief buyer of that scenario. you are right, if the market tanks, we would need to do something. this is a long-term situation, not about rescuing something. i wonder how many politicians will change their minds. if the sterling falls two percent or 3%, i wonder if that will change. but these are ideological positions that the mps are taking. i think it is interesting that theresa may is going to the people in riyadh and the politicians saying that they have to reflect their constituency. so it will be fascinating to see weeks.

francine: in the markets, has it been played out in equities? do you look at what mark carney says? andrew: mark carney has a tough job of trying to navigate this. having to say what things we expect to happen and how to react. the equity market is specifically difficult. ftse 100 companies, it'd percent of their revenue comes from outside the u.k., so a weaker pound is generally better for those companies. so they got come on the equity market is pretty hard to determine -- the outcome on the equity market is pretty hard to determine. outcome, we get uncertainty and then you will see further weakness in the sterling. of course, the opposite could apply. they could go through, and advancing the markets price to that in either. it is a hard thing for us to take a view on as this is a political outcome that i am much are we have any insight on, not sure anyone does?

andrew: does this and gender contagion across other markets in this crash is ours, or is it self-contained? andrew: i think it is self-contained. a pretty idiosyncratic situation to the u.k.. what does it mean for trading relationships, companies based their that do a lot of business in the u.k., i think there will be impact in europe iliad but clearly, the major impact will be here in a u.k.. alright, andrew wilson from goldman sachs asset management stays with us. up next, why germany's struggling lender could see more top executive department the company as regulators circle. this is bloomberg. ♪ that is next. this is bloomberg. ♪

♪ francine: this is "bloomberg surveillance." i am francine lacqua, in london. stocks in europe are on the up. you as futures are pointing higher and investors over all art rekindling a little bit of the risk appetite before the speech by fed chair, jay powell. the dollar over all as you can see on your screen, maintaining gains. treasuries are oh pretty much study. pound, prime minister theresa may is appearing to back down in a key brexit battle with parliament, saying that they can actually vote and put attachments to their votes. deutsche bank is said to

be mulling a shakeup as regulators express frustrations with the banks efforts to prevent financial crime. the bank's chief regulatory officer and tom patrick, who runs u.s. operations, maybe the company. the final decision yet to be made. the stock has hit record lows in the past week, as investors are worried about the multimillion dollar money-laundering scandal. i am joined by my guest, congratulations, louisa. on writing for bloomberg opinion. but, how do you take this? is this an introspection by deutsche bank saying that they need to do more when it comes to regulators? >> thank you. i haven't started the job yet, but i will be soon. but i think it is a reflection of continued concern among regulators about how aggressive they are being in cleaning up

the institution, putting in place controls and procedures. deutsche bank does not pride itself on allegations of scandals and wrongdoing as a have in the past. bank,ularly with danske its role as a correspondent bank, unclear yet if there was any wrongdoing. there is a worry that procedures and controls in the bank have remained insufficient to prevent a type of behavior, such as money-laundering. regulators are the hardest on deutsche bank? is it german regulators or others? >> historically, it has been the u.s.. deutsche bank has a very large u.s. business and that is rather need to work harder to regain the confidence, because it affects the backing they have for their trading business, a global business.

to be a global banks, you have to be in the u.s., so they have to get that right. francine: thank you so much. we are back with andrew wilson from goldman sachs asset management. the linkage between the banks and the european economy, and then you look at some of the problematic countries and you focus on a daily their banks are linked to btp's. how much do you worry about the italy?issue in andrew: if you see it only getting downgraded or even the threat of a downgrade, that will have implications for credit ratings of the banks as well. i think that is a bigger threat. of course, they said, we don't think it is growing that much at all. so the growth challenge, the broader ecb monetary policy, negative rates, they look like they will persist for another year or so. combined with the risk of a downgrade, that makes you cautious about their sector? does the ecb offer a

value? it could be attractive if the kind of fight with brussels died down. if it is resolved, there is an upside. what is unusual about this discussion is that it is a little more out in the public more acrimonious than we are used to seeing between countries and the european commission. francine: andrew, thank you. up next, as car sales slow in says they are doing just fine. we will go to end her and talk about trade wars and also been -- and also bring you an interview with the chief executive of porsche. this is bloomberg. ♪ ♪

francine: economics, finance, politics. this is "bloomberg surveillance." let's check in on what is trending across the bloomberg universe. in the market for a yacht?

today is the last day to bid for a financier's yacht. tictoc, they will give you the price. company backseing off plans. trump is says he is not even a little bit happy with said chair powell. deutsche bank is said to weigh a management shakeup. the latest in brexit ahead at the december 11 vote in parliament. prime minister theresa may is set to back down over voting plans in the u.k. parliament's brexit debate. to government had planned change the terms of the eu agreement. lawmakers want happy free to vote on a series of potential changes to the motion.

amendments could include calls for another referendum over a different deal with the eu. the bank of england will publish its financial assessment of the brexit withdrawal agreement at 4:30 today with governor mark carney holding a press conference 15 minutes afterwards. chairman has denied reports that he passed trading losses onto his former employer. the rebuttal by the embattled former chairman is the first attempt to defend himself after the automaker says he misused company money for personal matters and understated income. egypt will not ask for further funding when it's $12 billion program expires next year.

speaking exclusively to bloomberg, the finance minister said the government is taking steps to becoming more attractive to institutional investors. we are going into the international market this year. we haven't decided yet about the amount. we are very much interested. taylor: global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. francine: thank you so much. it has been a tough year for autos. with anad to contend uncertain trade landscape, growing restrictions on emissions in a push toward electric vehicles. how can the car industry actually recover?

porsche chief the executive and started by asking if they would pass tariff costs on to consumers. >> we have to think about what we will do. today, we haven't decided yet. i think always we will find a good solution for our customers and our brands. manus: would you consider opening a production plant in the united states of america? iver: up till now, we haven't becauseabout it production in the u.s. depends on the volume. ing around sell about 60,000 units a year in the u.s.. you neede production,

it normally around about 50,000 units. is difficult to talk about production in the u.s. bigger volume of manufacturers, it is much better to do that. manus: can i ask you about china? drop foreen auto sales five months in a row in china. what can you tell me about porsche sales in china? are you feeling a slowdown in your sales there? ver: we did not have a very good year in china. our veryy in motorsport like cars, very big increase and especially, we have good success with the new car.

we're looking forward to the next year with another record year in china as well. anus: we have just written a story that you aim to improve your operating profit by 6 billion euros over the next eight years. the question that springs to mind, you talk about efficiency and cutting costs to boost your profitability. tell me how that transf ormation process might take place.how are you going to achieve this type of boost? r: the title of this program is result improving program. on theconcentrating process. we start with engineering and go over to production. our idea is up to 2025 to

and build upesults to 6 billion euros to support the level margin. electro-mobility have higher cost around about 6000-10,000. we thought to start the program now when we are in a very good position. we want to remain our profit margin of 50% for future. therefore, we went into this program. francine: that was the porsche chief executive. let's keep the conversation on trade. andrew is still with us. you either have a trade weather escalates, one that the escalates, or you stay in the status quo.

how do you decide? obviously, trump has been very aggressive around the tariffs and putting those on. we have still got the remaining $200 billion. i think we get resolution one way or another as to what happens with the terrorists. tariffs. if you look at the pmi's and new export orders, plummeted. i think it is starting to have an impact on business. i think hopefully that causes some cost report and more negotiation. tariffs across all of those goods it really does slow down gdp.

it will definitely change have affect thinks about things. francine: is unclear to a lot of our economists that trade concerns are having an impact on the chinese economy. they already are dealing with a slowing economy. andrew: correct. interesting a lot of measures they have put in place. the economy was already slowing and this will just slow it down even further. i think there is an incentive for both sides to reach an agreement. if it doesn't, that remains a possibility. i think we see even slower chinese growth. maybe even below 6%. i think the chinese will do more to help stimulate the economy. we could see a few tenths off u.s. growth as well. there is a little more at play

here. francine: for the world economy, are you expecting a mild slowdown? what will it take to spiral downwards? andrew: i think if you end up tariffsror -- across all goods. think of all the supply chains that happen across the rest of asia the going to china as well. it does have a much broader reach than just the u.s. and china. there are going to be some countries that are winners, but i think it is a broad slowdown particularly focused on asia. keep away from asia. we are underweight and currencies across asia. we think that is where the risks are that this does carry on. japan, a bit less so. the countries we like our more latin america and some of the european currencies that we

think are going to be somewhat immune to those escalating trade tensions. francine: thank you so much for joining us. plenty coming up. we talk about diversity and sustainability with the executive chairman of estee lauder companies. we will talk to him next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's get straight to the bloomberg business flash in new york city. taylor: pimco is said to be the sale.uyer of the bond

it was taken up by prime institutional investor according to a statement by unicredit earlier today. italian funders are facing higher costs. deutsche bank is such a be considering replacing the senior executive to manage its relationship regulators. board are among the executives who might ultimately leave. this all as the german lender comes under pressure to prove its internal control. president trump warned he may terminate subsidies for general motors in retaliation for their decision to close factories and cut thousands of jobs. he tweeted his anger at the company, threatening that the u.s. had saved gm in the past

and is being repaid with job losses and closures. the president question why no plants were said to be shut down in china and mexico. francine: estee lauder was founded in the 1940's. since then, it has grown to a household name with territories around the world, boasting more than 25 different brands. this year, estee lauder has double down on diversity adding two more women to its board of directors. it was also included in bloomberg's gender equality index. tow i'm delighted welcome the executive chairman of estee lauder companies. thank you for giving us a little bit of your time. diversity.out

does it make business sense or is it the right thing to do? william: both. those are mutually supportive. francine: when did you start thinking about diversity? i imagine 85% of your sales are geared toward women. william: 95%. over 75% of our employees are women. an important -- women and what their mindset is is such an important part of what we do. to say, when do we start thinking about diversity? founded bympany a women in 1946. -- woman in 1946. dna. a natural part of our that doesn't mean we don't have to make a more consertive effort to create more diversity.

that diversity of experience and mindset is really truly what makes a diverse group more powerful than a mono group. francine: what has changed in the last year? when i last spoke to you, what does it mean being a leader in 2018 compared to 2017? william: the basic fundamentals of leadership hasn't really changed. most effective leaders are really good communicators. they understand how to take complex ideas and make them understandable for others, to set a vision and goal and to get everybody pulling in that same direction because you have clearly explained what is it that we do, how do we have to get there. everybody, this is our mission to help us get to the goal. great communication, support.

is not everyone who does everything in front and takes credit for everything they do. they give credit to those who actually do it every day. essentially, this is something i feel very strongly. about you complement in public, you criticize in private and you give credit to those who do the work. i feel like every day we talk about risks, things that could go wrong in the economy and elsewhere. do we look up to our business leaders to actually take more of an active role in the? william -- that? william: the ethical responsibilities have grown, standards have changed dramatically. what is considered acceptable behavior today and what was aligned for that versus what the acceptable behavior was 10 or 15 years ago, has changed dramatically. i can reference the metoo

movement that has heightened a level of sensitivity in certain areas that was muted. button.has an muted the nmuted thet -- u button. haveresult, we as leaders to enforce the standards. standardsset those that are reasonable and everyone follows in, it is the same as communicating your mission. let's make it a part of our dna. the value systems of any organization are more important than their strategies because if you don't have a great value system, the execution of the strategies will not be well done. if you can set a strong value ,ystem for your organization

those value systems help drive really great organizations because everyone buys into that, they embrace it and make it a part of their daily lives. francine: what about sustainability? does the generation z think more about sustainability than some of your mature customers. william: there is certainly a lot more interest for sustainability, clean, natural. that whole area has gained a lot of interest for consumers. fortunately, the technology is catching up to the desire. there used to be quite a gap between the desire of what is natural and how can we keep it versus what the technology allowed us to do. technology is catching up that will allow us to have much more effective natural ingredients that are safe. sustainability, you can get these ingredients other trigger

out of the ground -- to grow out of the ground, number two is it, will it be stable? you buy a product and you expect it is going to last you two or three months. the only way it is going to last two is if the product itself is stable, it still works my months later. it -- nine months later. most people don't have a refrigerator in the bathrooms, which is where they primarily are doing the routines for beauty products. this is where i say the technology is catching up. it is incremental. everything and science is an incremental improvement. francine: what about packaging? if you have an ideal customer, what does she want from you? the ideal customer is the consumer who gives this wonderful feedback and tells us

what else is she looking for. in packaging, there is an interesting conundrum pulling in both directions. less packaging versus more. the regulatory environment is changing where there is greater disclosures required for your products so you have ingredient listings and safety warnings and how to use. that requires packaging. there is this interesting dichotomy where we are trying to use less of it, we are being required and have to have enough to disclose what the consumer is putting on their skin and how to use it. francine: thank you so much for coming on "bloomberg surveillance." next, we will take a look at some of the markets moving in today's trading session. we will also go back to brexit and we look at the fed. this is bloomberg.

♪

francine: economics, finance, politics.

this is "bloomberg surveillance." ie: a bit of a muted day here in europe. put a little bit of pressure on italian equities, down 40%. technology, oil and gas leading the way. politics are dominating anything. we hear anything on trade wars, brexit, italy, that could potentially move the dial in either direction. let's look at individual movers. pier, they aret of higher from 1%. .3% as well as ericsson after new zealand is banning telecom operators from buying equipment from laway

due to security concerns. -- down 8% as they have been indicted in argentina. thank you so much. hour.tinue in the next tom keene joins me out of new york. governor carney holding a press conference today. we will bring you full coverage of that and we also look at jay powell and the fed. this is bloomberg. ♪

francine: fed up.

president trump saying he is not even a little bit happy with jay powell. , the prime minister is said to be backing down from a key agreement with parliament. deutsche bank is said to be considering a management shakeup as regulators express frustration with the firm. good morning and good afternoon. this is "bloomberg surveillance." i'm francine lacqua in london, tom keene is in new york. quite a lot going on. we look at jay powell and governor carney talking about brexit. we look at oil, brent around $60 a barrel. tom: the powell speech was big. and othershere assembled from bloomberg. it is going to be an important speech. what i noticed overnight was the shift for prime minister may. illance"l deserve "surve

translation. francine: let's get straight to the bloomberg first word news. president trump has renewed his attack on federal reserve chairman jerome powell. he told the washington post that he is not even a little bit happy with his choice to head the central bank. hikes forrecent recent stock market declines. to the postested that you may cancel his planned meeting with russia's president over that confrontation with ukraine. the president said he is waiting for a full report from his national security team on what happened. the two leaders planned to meet argentina.summit in the european union has unveiled its long-term vision for fighting climate change. it out its plan for a carbon neutral society. this comes after president trump rejected his own governments

warning. acknowledgeddy that federal company -- it is true that there is a problem of money in politics. i think we just have to address it some other way. ones that see the money coming in from all sorts that should be disclosed. they can vote against the candidate if they don't like it. taylor: you can watch that whole interview tonight on bloomberg tv. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. riggs, this is bloomberg. can't say enough about the

work david rubenstein has done peer" this year. euro under 113, that is a big deal. stronger dollar, weaker euro. equities do better, 18.81. there is the yield. oil again, i don't know why i did it twice. bitcoin with a bid. francine: wow. was that like cfa level three? tom: yeah. i flunked it. francine: am looking at some of the stocks edging up. it is all about a little more risk on.

the open in the u.s. is pointing to a higher open. that is based on the speech from the federal reserve. i'm looking at dollar. also pound. the u.k. prime minister now appears to be backing down in a keep brexit battle with parliament. what we are trying to figure out is whether it hurts to do more or whether it is political calculations. tom: let's go to the powell speech. let's look at a chart which a little bit explains the pressure he is under. the real inflation-adjusted 10 year yield. i've taken cleveland cpi, here is so-called normal precrisis up near 2%. we are nowhere back anywhere near that. we are a little bit back is what i would say. francine: this is what i have.

i'm looking at the fed in the dollar having a strong 2018 amid some of the rate hikes. we are looking and tracing some of the fed funds's trading rates. attack on the's fed could be used as evidence of disunity between the administration and central-bank. that will hasten the dollar's demise. we will continue focusing on the dollar. brexit. onto theresa may has backed down in a key brexit battle with parliament. writes, the government had intended to prevent the house of commons from changing the terms of may's agreement before politicians finally vote on it. according to one official, the team has now dropped this tactic in the face of protest from politicians.

aren't you chief brexit negotiator? on a serious note, what does it all mean? does it mean they could attach saying, we will pass this through as long as we get a second referendum? >> yeah. it is not a can propose amendments to the withdrawal agreement. without that yesterday that the 11th of december will be the date for the parliamentary vote. almost significant is the council on the 13th or 14th. well the government establish that smaller amendments, although the european union has said no armaments will be made, there will be frantic diplomatic activity to try and understand whether small moves to try and amenablevotes will be so we don't have a situation

where parliament amends it and then it gets thrown out in the council and mayor left in inertia -- we are left in inertia. i think it is likely that softenent will try and their version of brexit. i think it will be difficult because there are so many interdependencies here. a softening it, you potentially harden the objection of other parts of parliament. the u.k. parliament really is a polarized body at the moment. you cannot pull the legislation in one direction without really losing votes on the other side of the house. tom: how should the european union respond to this? i'm baffled by the idea that they come up with a negotiation, parliament is going to change it and the eu is going to respond to that. if the leaders have been smart, they will have held

something back because they must have anticipated this. anybody who has not anticipated that an agreement will be made has not been watching things the last 2.5 years. i think it is inconceivable that europeans haven't held that something, even though their stated position is, we're not going to change the agreement. tom: is there is speculation opportunity within all of this? david: i do think there are some opportunities and those revolve around sterling. before the recent rise in been lookinge have to hedge some of our sterling exposure in some of our portfolios by taking short positions on sterling. i still think that these tail are being underestimated

by market participants. i was a little bit surprised. i think the consensus is still that a deal will be done at some point. it might be on a second vote after we have had -- what would have to be pretty minor amendments. i think that is too much complacency. francine: where is the complacency? in pound, gilts, european equities? david: clearly, the u.k. is going to be hurt much more than the european union by a hard brexit. nonetheless, it is a meaningful negative shock at a time when the european economy isn't looking that great at this

particular juncture. i think across the board, a range of assets, one could argue there is still not enough risk being priced in arising from brexit. in terms of guilt in the short-term, i think you get some flight safety. medium-term, or longer term for guilt is quite bearish. this will be quite a negative shock for the u.k. i think maybe the inflation indexed gilts might be one way in which you can hedge some of that hard brexit type exposure as well. we're going to get a big inflation shock from low sterling if there is a hard brexit. francine: we are getting a question from a viewer. a reminder to everyone to keep emailing us. questions to the guest on our behalf. this person asks, why would the

eu except any amendments? out, the david pointed damage is not solely to the u.k. economy in the case of a hard brexit. sterling andter vulnerable, the let's not avoid the european fixed income story here. locking out of financial access to the city of london, which is a key underpin for a lot of european fixed in markets, willie to a spike in yields. -- will lead to a spike in yields. it is not a base case. why itt reason, that is is and the case now europeans can say just take it or leave it without any economic damage. david: my only question there is, when you look at this process, there are some

parallels with the process that took on then greece eurozone and thought they could get a better deal and challenge the framework of the eurozone. not only were they forced to ultimately reversed the decision they made in terms of the referendum, but ended up with a deal that was less good than the original offered. i think some european capitals are still looking to play with respect to the u.k. tom: we will continue. we will come back and really dive into the amazing conversation was saw in the u.s. yesterday afternoon off of the trump washington post interview. report.ws of the to whatmes to speak jonathan gray in the 1:00 p.m.

our. this is bloomberg. ♪

taylor: this is "bloomberg surveillance." former nissan chairman carlos ghosn deny that he passed on personal trading losses to the automaker. he was jailed last week on allegations of financial misconduct. deutsche bank is considering a management shakeup over regulatory frustrations. the chiefhas learned regulatory officer and head of operations for north america may leave. authorities have expressed frustration with deutsche bank's effort to prevent financial

crime. auto sales in china fell for the fifth straight month. bloomberg spoke to the ceo of the german sports car maker at the los angeles auto show. >> we will have a very good year in china with increase over 10%. we mentioned in china, especially in our very motorsport like cars, a very big increase. taylor: that is your bloomberg business flash. tom: thank you so much. with us is david riley and simon french. i want to go to a little history here as we await chairman powell. this article is so strong, i'm going to repeat it in the next hour with kevin cirilli. granville, a while back in

the new york times with an absolute tour de force on the history of said independence. this is johnson and mcchesney martin in the heart of m the amount. takes office. president johnson act as attorney general to determine if a president could legally remove a fed board member from office. he said no. here's a quote which really drags in the politics of the moment. martin, my boys are dying in vietnam and he won't print the money i need. there it is. everybody knows this history in economics. how independent are central banks? kevin: at the moment, they have enjoyed independence.

i do think we are getting to the growing pains stage of independent central banks and looking at the wider implications. in your chart of the day that you put up around the failure to return real yields back to positive territory 10 years after the crisis, has had .istortion there he impact that will help clip the wings of independent central banks. it will be revisiting a set of mandates across the developed world that have been broadly unchanged for two decades. tom: in the interview the president's last my with the washington post, he really took a shot at janet yellen. compare and contrast for our global audience the fed 10 year of chair yellen with chairman

powell. simon: a surprising amount of continuity. when chair yellen left of the federal reserve on a glide path of 25 basis points per quarter in terms of fed funds. chair powell has enjoyed the first year of his tenure cap to that course. -- kept to that course. i think there is an awful lot of continuity. what is clear is jay powell have to deal with a very different white house in terms of the pressure that is coming on him and his committee to try and effectively allow the u.s. economy to run hot, contrary to their mandate. tom: it will be interesting to see at the economic club of new york. simon friends with us in a

patient david riley of asset management. coming up, this is always a joy. we will speak with david rubenstein of the carlyle group. an extraordinary set of interviews this year for david rubenstein. this week, timely, justice kennedy. this is bloomberg. ♪

francine: this is "bloomberg surveillance." this is francine and tom from york. and new

deutsche bank is said to be considering a major shakeup as regulators are expressing frustrations with of the firm's efforts to prevent financial crime. bloomberg has learned that the mayfs regulatory officer leave the company. will serve as another blow to the credibility of the lender. problem?ctly is the is it regulators that just feel like deutsche bank is not on top of some of the issues? >> i think so. ceo to the second succeed management with legacy issues. it still seems to have struggled to regain the confidence of regulators and is still not showing to be making significant progress in tackling the prevention of crime. it has been reprimanded for its

failings and preventing money laundering both by u.s. regulators and german regulators. francine: how much of a problem is the u.s. and some of the risk management in the u.s. operations of deutsche bank? elisa: a lot of the regulatory issues have involved u.s. enforcers and authorities. they really need to be regaining that confidence. the u.s. operations are key, so they want to maintain and potentially grow again there. they will have to regain the backing and do that soon. francine: thank you so much. we will be back with simon french and david riley. in the meantime, we are getting some breaking news out of the italian finance minister. he is talking about the budget, saying they are seeking space for financial equilibrium. he is saying he is also seeking

a solution on the budget without dramatization. he was saying some of the top political figures were denying -- he is saying they cannot deny bond your spreads with german bunds. later onave a wrapup whether they are still holding some italian bonds. tom: let me see if i can get this chart up. this is the italian-german spread with the elevation. nothing like what we saw four years ago, but nevertheless, that spread has widened. this is bloomberg. ♪

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leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. ♪ there's no place likargh!e ♪ i'm trying... ♪ yippiekiyay. ♪ mom. ♪ ♪ tom: "bloomberg surveillance." francine lacqua in london and prime minister may's brexit london. it is chairman health new york owell's-- chairman p

speech this afternoon. >> cindy highsmith won -- beat outnd b my kospi -- mike espy. her victory gives the republicans 853-47 edge in the senate. the eu's commissioner for competition says everyone loses in a trade dispute between the u.s. and china. she spoke to bloomberg. >> the thing about a trade is that nobody wins. in the long-term, we all lose out. it is important for us to solve our conflict. we have been proposing reforms to the wto system, because we share the view that it is not working well enough. >> egypt is preparing to issue debt tied to

environmental projects. bloomberg spoke to egypt's finance minister. >> going to go to go to the national market this financial year. we have not decided yet about the amount, the currency, and the timing. we are very much interested and it is very clear, we will diversify markets, we will diversify currencies, we would diversify -- will diversify products. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom, francine? francine: u.s. president donald trump and china's president xi jinping will meet over dinner at the g20 meeting. trump is hopeful for a breakthrough with xi but is ready to impose more terrorists -- more tariffs if the talks do not make progress.

that is according to larry kudlow. met inain -- have to be terms of fairness and reciprocity, for example issues of intellectual property theft must be solved. forced technology transfers must be solved. significant tariffs and non- tariff barriers must be solved. is in -- addressing the summit. thank you for joining us. in spain --resident what is president xi in spain for? busy looking to some bilateral deals -- is he looking at bilateral deals? >> china has been much more

friendly to countries, the european countries. if you look at things like the and settingllianz up for enterprises. xi is delivering the message that we are going to open up china to everybody else, and if the u.s. wants to be part of that, when he to come to an agreement at the g20 -- we need to come to an agreement at the g20. francine: you have these trade tensions on top of it. miranda: you are seeing the deleveraging campaign. you are seeing a bit of a bottoming out in the economy overall. we are expecting money supply to again.rrogant -- the real concern is that the u.s. has shifted from trade tariffs into basically china is a national security risk across the board. it's not just defense, soybeans, and the machinery that gets hit.

the entire 5g raising china as a threat across the entire supply chain. this takes it into very different territory than just what the trade tariffs are about. francine: are you expecting the chinese to italian it -- to retaliate? miranda: there is -- it is very limited without dismantling the entire state owned let technology development, without dismantling that entire structure, there is very limited action they can do. if you look at japan, these arguments rumbles on in the 1980's and 1990's four years -- for years. they were not solved at one some -- one summit. it was an ongoing. this is not just easily solved. miranda,nda, how --

how do you feel that europe, spain will do a marginally increased business with china? what actually gets done five and 10 years from now with a resurgent china from europe? what are -- what do they actually do? you are getting china opening up. european companies going into china has been a key theme in the last few months. europe, tries to get get eurasian landmass joined up and isolate the u.s., that is a potentially 5-10 year view. europe has very similar complaints to the u.s., in terms of the technology, so they are going to have to address that. is not just -- europe has been resisting but not quite as noisily as trump.

tom: it might not be as noisy but that's right where i want to go. europe has the same complaints, headaches, and fears that the u.s. has on china, right? miranda: yes. we areeresting thing is in a bit of an impasse at the moment. as we come into december in china you have the 40th anniversary of the border opening up and a big december celebration, if you like. the interesting thing is whether china actually than most to throw open some more of the -- actually decides to throw open some of the barriers. that is the potential. tom: i would be remiss if i did not bring up the taiwanese election over the weekend. it was a stunning result, as reported by our team out of

taiwan. reviewed this liberal regime, sort of anti-china, i guess, got pounded. are they the same party we remember? miranda: [laughter] party.s a very different it looks on the surface like the china and taiwanese ties would be better. i do not think you should read too much into the local election. it is more what happens in the presidential election later. francine: what happens, i don't know if it's an if or when it, renminbi is at seven? miranda: we are getting very close to that note. barring a dramatic reversal in the fortunes of the u.s. dollar, you are already getting to spread in the tenure spread and

the u.s. dollar shrinking to levels you have not seen for the last 10 years. with a weakening economy, potential for not necessarily industry cuts, but also potentially outflows. january you always get outflows and pressure on the c&y in january. january looking a very stressful time for the cny. they will have to take quite strong measures to avoid volatility. francine: what is your take on china? when you look at your portfolio and credit, how much of your assumptions are based on a smooth chinese economy in the next 18 months? jon: i think china is at the heart of much of the volatility that we see in financial markets at the moment and particularly some of the concerns about commodity prices and the oil price. theink it is around both

sort of the deleveraging driven slowdown in the economy and how china can respond to that, and then greatly complicated by the sort of trade tensions. and almost certainly we are going to get on additional 25% tariff. under the legislation it's actually very hard for trump to roll back on that. cmyave a bias to be short long dollar. is a hedge and some of the portfolios where we have exposure to some of the emerging asia risk as well. though,more generally, china is absolutely essential, because it's the delta for global growth. if we were to have, which we don't think, but have a hard landing in china, that's bad news for europe. that's that is for the global it's best for china.

tom: how much is trade a big deal for europe? germany with a large amount of trade etc., but how big a deal is china trade at the margin? >> if you look, trade as a proportion of gdp, the eurozone stands out even if you exclude intra-eurozone traded as the most dominant path in terms of g7 economies. it will be perhaps the unintended victim if the impact is a slowdown in global trade growth. my personal view is that this is not economic cold war territory. we have to recognize what it is. this is the battle for economic hegemony for the next 30, 4 years. u.s. has been -- 40 years. u.s. has been unchallenged in that role for half a century. it's been uncomfortable. they are still going to have this challenge that they are going to need to address head-on

if they want to retain, which they do, their global economic status -- had genomic -- hegemonic status. francine: we were listening to president xi addressing the spanish senate. that was the voice. if you are on radio, that was the voice talking on top of our guest. we are also listening to mr. schulz talking about brexit. he is the german finance f schultz saying brexit will make the euro more lz saintve -- scho brexit will make the euro more attractive. we will bring -- saying that brexit will make the euro more attractive. we will bring you all the updates with that. this is bloomberg. ♪

♪ this is "bloomberg surveillance." i'm francine lacqua here in london. tom keene in new york. let's go back to what we heard from the italian finance minister, tria. nation's to contrast the economic slowdown right away but he sees the need for more importantly,d more that he does not seek a fight ofh the eu over the exiting the euro. is not exactly the man in charge are now. simon french and david riley are both still with us. ivid, you are one of the guess international investors with a biggest position on italian debt. are you continuing down that road or do you kind of have to cut some of that exposure

because you are worried about what happens next in the fight over the budget with brussels? >> i'm not sure i would give it the moniker of the biggest, but we do have an active investment petition in btp's. with the more recent rally we took some of that down. broadly speaking, the playbook is turning out more or less as expected, which is we are now seeing language coming out of the italian government saying that we are listening, we are going to look for ways in which we can stave off a confrontation. they are listening to the gentleman of the spread, as prime minister salvinni described. i do think there is still values in btp's. i think there is an overpricing of italian exit risk.

italy is not leaving the euro,. full stock. francine: do you -- stop. francine: do you go full duration? where do you invest in it yield curve? >> we have taking positions on an outright cash basis and also on a spread basis as well. spreads tended to be at the longer end of the yield curve, where we have been doing it on an outright cash basis have tended to be on the shorter end of the curve. it depends a lot on the strategy and the risk profile of that strategy. francine: simon, how do you see this ending up? we could have fresh elections. this could come before or after the parliamentary elections of the eu. >> i think brussels should give more room to maneuver.

francine: but will they? >> if you look at the history of italy and the euro, they have run an average budget deficit of 3% of gdp. what they are asking for is less than the 20 your average. over that time they have generated average real growth of .9% year-over-year. that's a pretty terrible performance. you try the same thing over and over again, you expect a different outcome, you are a fool. i think what needs to change in a viewpoint on how they are going to spend this ,dditional fiscal stimulus because at the moment they are losing the argument on a rules basis in brussels. they need to make the case that actually does has a growth multiplier, this changes the dynamics, because ultimately that is where you actually see

the much more sustainable ,ooting of the italian economy if they can convince the rest of the eurozone economies that they can spend smart, ultimately. francine: thank you both. of course talking about some of the risks in europe and italy in particular. simon french and david riley both stay with us. the bank of england will publish its final assessment of the brexit withdrawal agreement at 4:30 p.m. today in the u.k. will be speaking -- listening to -- we will be listening to governor mark carney listening to a news conference. we will look at pound reaction and talk more about politics and parliamentary arithmetic. this is bloomberg. ♪

♪ this is -- like -- >> this is "bloomberg surveillance." president trump threat will not keep bmw from investing.

ceo harold kruger spoke exclusively to bloomberg at the los angeles auto show. >> we are producing the products in the main markets and the main world is thes the u.s. market. we will -- a majority of those cars will go to the united states for the united states. we will continue to invest. >> that is your bloomberg business flash. tom: thanks so much. jon cox joins us now, head of swiss equities at kepler cheuvreux. give us the day of luxury retailing right now -- luxury retail -- the state of luxury retail right now. some of thelook at stock price performance over the last few months, the market things to think actually things are going to deteriorate pretty

rapidly over the coming quarters. for the time being, business remains robust. tom: remains robust, but we look at the gucci affect as well. 49% sales growth as well. give us the do cheat affect -- gucci affect across all of luxury. , it was a specialist new designer coming in, capturing the imagination of the overall luxury buying public. at the same time, i would argue that across this is consumers remain relatively buoyant. we are assuming somewhere around 10% growth for the luxury goods sector in 2018. the question on everyone's mind is, what happens next? francine: what happens next? the million dollar question, or the trillion dollar question probably would be chinese consumers in the luxury space wants to buy. what is it? jon: i think that is the big

k and clearly consumer confidence in chinese luxury by is probably under some -- buys is probably under some pressure. on going daily reports about u.s.-china trade wars does not help sentiment. with the weakness of the local currency, that means chinese travel trends are probably under a little bit of pressure as well. most of the luxury goods buying by chinese is inside of mainland china. that is going to be a slowdown. chinese obviously key to the overall luxury goods space, contributing much of the growth we have seen over the last 18 months or so. they continue to buy for the time being, but it's at a slower pace. you have seen little scares, september in hong kong, retail sales under pressure, indicating taurus from mainland china may be stand wait -- maybe stained

staying away. it september more realistic or is it october? we see a slowdown but we do not see a meltdown. we do not believe the chinese are going to all of a sudden give up on buying luxury products, and as a result we remain positive on the space. francine: thank you so much cheuvreux. ,-- they do so much, jon cox, head of swiss equities at kepler cheuvreux. we talk about credit, trade, and the trade concerns between the u.s. and china. this is bloomberg. ♪

♪ tom: this morning, anticipation, chairman powell speaks. there will be questions, careful

answers. there is anticipation. nothing else matters except is anxi, and the cash asset. morning, everyone. this is "bloomberg surveillance." we are live in new york. i am tom keene. with me, francine lacqua. we need a reg said update. prime minister -- a brexit update. prime minister may is not being transparent. francine: prime minister may would say you need to vote for the deal. tom: ok. you know. francine: vote for me or against me. now, every member of parliament i get this, i could

have a second referendum on the backstop. orcould be political suicide a way of getting to something, get a vote through with amendments she tries to negotiate. tom: sounds like a surveillance 405 meeting. let us get started. here is taylor riggs. president trump has renewed his attack on jerome powell. a littlee is not even bit happy with his choice to head the central bank. president trump blamed rate hikes for recent stock market declines. also suggested he may cancel his meeting with president putin over the confrontation with ukraine. the president is waiting for a full report on what happened. the two leaders plan to meet at the summit in argentina.

the eu has unveiled its vision for fighting climate change, a carbon-neutral society by 2050. that comes days after president trump rejected his own governments warning on the costs of global warming. acknowledgesdy political campaign fund-raising is a problem. saiditizens united case companies are unions cannot be kept from spending money for candidates. true there is the problem of money and politics, but we have to address it some other way. voters, if they see money coming in from a wrong source, they can vote against a candidate if they don't like it to taylor: you can watch -- like it. thatr: you can watch

interview tonight on david rubenstein peer-to-peer conversations. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. thank you so much. equities, bonds, currencies, commodities, right to it, right now. the curve going nowhere. strength,r, dollar below 1.13 on your weaker euro. .8.65 on the vix we will be watching the yields yields onyou and a -- the back of that q&a. francine: i'm looking at markets moving sideways. european equities on the higher side. dollar, treasuries steady.

pound is trimming losses has prime minister may seems to be backing down in a key brexit battle with parliament. tom: it seems to be a little bit of this, a little bit of that, and kevin cirilli will join us to translate. kevin come up one the day before -- kevin, one the day before come up one yesterday. kevin: this is what we have come , a president who has attacked institutions, international trade agreements or the federal reserve. this is par for the course. tom: i featured this earlier. lbjnew york times writing and martin on fed independence during vietnam.

office, aident takes federal reserve chief sees an economy starting to overheat and begins warning of the need for higher interest rates. president johnson asked his attorney general to determine if a president could legally remove a fed board member from office. "martin, my boys are dying in vietnam, and you won't print the money i need." can the president jettisoned jerome powell? kevin cirilli he -- kevin: he is doing it. you are seeing a president with the 2020 election and the economic forecast, which could lead to a recession. it is almost a catch 22. the president looks at an economy doing well, and a fed

chair who wants to raise interest rates. republicans and democrats would like to see this attack stopped. in know the chums comparison. i'm looking at the teddy roosevelt comparison because of gm. the presidents attacks are somewhat reminiscent of the coal strike of 1902. francine: that is a good point. when you look at the g20 and some people going and coming, are we expecting extra tariffs on carmakers worldwide if g20 does not go well? kevin: the presidents threat on card tariffs are something that should be taken seriously. i spoke with several prominent republican lawmakers, mike lee and others, who told me point blank they are not sure these tariffs are what they would like

to see, including tim scott. there is skepticism about putting these tariffs on. in terms of attention on the meeting between president trump and president xi jinping of , the expectations are there will be some type of framework. now the president is threatening not to meet with russian president vladimir putin. you have ukraine, central america, so a lot at stake for the president at this g20. tom: thank you so much. speak toerfect day to tony. he is with,". he co-authored a classic book on short-term money market rates. right now we must talk the speech of chairman powell. what does he not want to say or

do the economic club of new york? >> give any meaningful guidance. the fed is moving away from giving forward guidance, shifting from asset purchases to forward guidance communication. the words of ben bernanke who said monetary policy is 2% action and 98% communication, so words matter, but the fed does not know where it is heading next. tom: you got that in there, did you? continue. fed is walking in a darkroom and trying to feel its way through it. they don't know where the right neutral policy rate is whether it is neither pressing on the gas or breaks. at the 98%look communications chart. tony wrote the book on this chart, short-term interest

rates. the fed funds target rate adjusted for inflation, here is fisher, cultural accommodative. here is powell. we have miles to go to some form of normal. how ultra accommodative are we? >> one could look at the five transmissions of monetary policy, stock prices wobbling, credit spreads a little wide, yields are higher, and the value of the dollar rising, which means it is more difficult for the u.s. to sell products, and finally bank lending standards are still a little loose. we see leveraged loans expanding. conditions financial , they have tightened, but not tight. becauseeed type policy the economy is running in the high 1% range above where its

potential is. would be the, 2.5% pimco view. francine: what is the counter argument? what if inflation shoots up significantly? >> the bond market is saying the chances low. the treasury inflation protected securities, there has been a plummet in expectations, the gauge of expectations, longer-term, medium-term expectations are probably still in tact. the 10 year has gone to 190. 25 basis points lower than the market previously thought, so inflation expectations are important. janet yellen yellen wrote a speech called inflation dynamics that concluded that inflation expectations of the driver of inflation. the odds are low for a major

pickup in inflation next year because people don't believe there will be a pickup. if there was one, the fed would react to it. where do you see the most value in bonds outside treasuries? europe? further afield? this year many asset classes fell and returns were low or negative. next year could be different. 3.5% of the bonds yielding . that could be the return next year. next year could be a coupon clipping year. the expansions will be ongoing and interest rates will be topping out. that, soo believe yields returns decent across the fixed income spectrum, but up in capital cash, and structure, the final word would theontinue to expect

liquidity premium. focus on risk factors, not simply data. that game is over. tom: we will talk to tony and look at cash later. he is with pimco. coming up, a congressman from flint, michigan. that is all you need to know. we talk about the automaking heritage within his horizon. we will speak of gm and president trump. worldwide, stay with us, this is bloomberg. ♪

francine: -- taylor: let's get your bloomberg business flash.

the publicn denied trading losses were tied to the automaker. it is his first comments since allegations of financial misconduct. one newspaper said he passed on $15 million in losses. deutsche bank is considering a management shakeup over regulatory frustration. andchief regulatory officer head of operations for north america may leave. they expressed frustration with deutsche bank's efforts to prevent financial crimes. the country's love for fast cars is helping porsche with unprecedented demand. atomberg spoke with the ceo the los angeles auto show. >> we will have a good year in china with an increase of over 10%. we mentioned in china, cars like theour

increase -- a big 911 or 718, a big increase. us, focused onth chairman powell's speech. we have to dovetail into fed policy. short-term interest rates. he is one of the nations experts. your world didn't exist, then short-term paper exists now. how does chairman powell look at the market? libor, thet and two-year yield? >> financial conditions on the whole, the way policies are transmitting through other prices. it is not yields per se and real

yields by themselves. support orat much not the economy. tom: everyone is focused on leveraged loans. it is up farther, right? how does someone like chairman powell today begin to look at those excesses within the present system? it, it ise looks at probably not much in the way of systemic issues related to the .oan market today as in 2008 it does suggest some froth and credit conditions. the recent senior loan officer survey one could say standards are loose, especially with a 3.7% jobless rate and the feds view that full employment is 4.5%, so the broader message in the lending story is that it is

still too quick relative to where we are in the cycle. worry about the housing market in the u.s.? >> housing and automobiles seem to have peaked. these are late-cycle phenomenal -- phenomenon. the demographics produce 1.1 million new households per year, plus 300,000 homes per year are demolished. need for new shelter of 1.4 million. builders have been building less than that. the supply story for housing looks very good. even if there is weakening in demand, the tightening of credit conditions are some change in income growth or consumer confidence, the story should be pretty good because of the supply side of the equation. francine: thank you so much.

tony stays with us. coming up, blackstone group resident and chief operating officer. we will talk to him about the markets. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

the u.k. prime minister theresa may has backed down in a key battle with parliament. our u.k. government reporter writes "the government intended to prevent the house of commons from changing the terms of may's agreement with the eu before politicians find the vote on it." said this tactic has been dropped in the face of protest from politicians. our u.k. government reporter. is this a good thing or bad thing. if you add amendments, is it more likely to go through? >> it is not likely to go through. not likely to go through. originally, the government thought it would go through and were worried it would get amended that it would go through

but the legally questionable whether it passed. they have dropped that concern because it is not going to go through. doing the amendments this way around, it is more likely to show their isn't a majority for anything, and that helps to make the case that it is the only deal. -- is it the only deal? , if she are amendments has to go back to the eu and renegotiate, would she get it? if theould be surprising something you could offer to make the deal sweeter, but not of the scale that mp's are asking for.

lots of mp's don't like the irish backstop. the eu is going to insist on that. i think what you will see in the next week or so is lots of eu leaders saying we don't like the backstop either, so don't worry we are trying to trick you two going into it, because we don't want to do that. maybe that will help. able't think the e.u. is to offer the kind of change that tory mp's want. you had one saying i want single market access and to do trade deals with the u.s. you cap have both of those. you have to pick one. lots of mp's don't appear to have gotten to that point yet. tom: thank you.

brexitton, an expert on dynamics. we continue with tony from pimco. the heritage of flint, michigan and gm on the saginaw river. we bring you the congressman from the third district in michigan. coming up, on a changing general motors. please stay with us from london and new york. this is bloomberg. ♪

on thebeautiful new york

beginning. , of better and nicer first word news. taylor: starting in mississippi, cindy highsmith won one reelection. won by an unusually small margin in the republican state. she triggered uproar with remarks that some few has racist. edge now in53-47 the senate. president trump will bring a rare commodity to his trade show down this weekend, allies. the u.s. is in a fragile coalition over china's policy. larry kudlow says the white house is hopeful of a breakthrough, but willing to impose more tariffs if talks don't yield progress. egypt is preparing to issue its

first green bonds. bloomberg spoke to the egyptian financial minister. >> we go to the international markets this year. we have not decided the currency and the time. however, we are interested and deliver. taylor: global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. tom: thank you so much. it is the nostalgia of the president. another time and place, 28,000 employees in flint, michigan. i observed it. to see them come out of the factory and come across industrial avenue to the bars after the shift as they built

you ask for america. dan kildee is a congressman from the fifth congressional district. it is all fancy him all the style should. you live reality. what do you in michigan need from mary barra this morning? >> i would like a reverse course. the american workers for general motors can build anything. as they think about how they will redistribute the manufacturing capacities, they ought to lean towards rebuilding in the country that stepped up when the american auto industry and general motors was in deep trouble. steppedican government up and made sure that industry stayed solvent. i think there is a special obligation that company has to this country. it is a global company, but these are human decisions.

in my hometown were general motors was founded, we would like to see more focused on developing capacity in america. there has been no wage-labor arbitrage within the auto industry. maintain automobile labor is not competitive with global labor? ,> it is quite competitive now much to the chagrin of a lot of workers, but that is a reality. there is a two-tiered wage schedule, benefits, so it is more competitive. the certainty of production here brings real value. you mentioned that you ask city that buick city site. that's what brought my grandfather and family to flint, michigan in the first place.

back hard for me to stand when general motors was literally founded in flint, 1908 and we went from 79,000 jobs to 10,000 or less. the companyo see make decisions that we think in the long-term don't benefit the american economy or american worker. tom: your district elected donald trump, the swing from mr. clinton was. radical within your fifth congressional district. what do you need to see from the president right now? you put him in office. >> i was encouraged by the president's willingness to renegotiate nafta. i am awaiting the details before we make a decision, but that was a step that was long overdue. i would like to see him drafts -- him address the steel and

aluminum tariffs. that is bad for american manufacturing. greaterlike to see a focus from the federal government on skill and apprenticeships. we need to have a manufacturing policy in this country that is not based on the latest tweet. this is an area of some sensitivity, the president needs to stop making promises that are falsehoods. one of the reasons he succeeded, the weakness of hillary clinton was one, but people were looking for hope, and he came to michigan in the election, to warren, michigan, where one of those factories is closing, and said you will not lose your factory. i promise you, you will not lose your factory. that is almost a direct quote. people are looking for someone to give them comfort. discern that folks

that was just rhetoric. the president needs to level with the american people and do the chopper being the president of the united states, tell them set auth, instead -- and path forward, not just false hope. ,hat is how he won the election the notion he would bring these jobs back. he has been made a fool by his own words. motors, and general we are on to our capitalism that clears the economy. i want you to speak to everybody who wants their suv built in , in the maybe texas carolinas. why can't we build these cars in america? >> i think we can. the real question is whether or not the companies will be

incentivized or led in a way that allows them to reward the country that has stood for them. i have great faith in the american worker. with the advance of technology, there is a new challenge in the workplace and manufacturing, but if we provide them with the skills they need, we can build anything. tom: what do you want from speaker pelosi? there is a vote today. how does she fit into the new democratic party? >> it's going to be less about personality. i am a supporter of speaker pelosi. it has to be about our agenda. i am looking for a bold agenda on infrastructure, rebuilding ,older industrial cities focusing on skills and fixing the broken government we have. anyone,democrats, or

will be judged on what we do, not just who we are. tom: dan kildee, thank you. anthony listening to all of this. it is something you look at at pimco every day, a technology overlay across our capital and labor. >> creative destruction is the essence of progress, so how do we make policy decisions based on the needs by companies to make changes to adapt to the changes in consumer behavior? many individuals and households are purchasing electric vehicles. they are said to have under 100 moving parts. combustible engines are over 1000. think of all the things you have purchased to fix your car, an oil change. they will be going out of business or having a smaller business. how can we prevent that? we can't.

policymakers should let this creative destruction happen. they need to ease the pain and make sure policy is strengthening overall economic activity. to be guarding against policies that harm productivity in the end. that is the essence of change. policye: as we see arealization in the u.s., we going to see that badly-funded or weaker companies go bust? , it is inevitable. the u.s. is in its 10th year of economic expansion. int june will be the longest recorded history since the late 1800s. it is getting longer and longer in the cycle. toy should be moving up and credit quality, cash, and thinking about risk factors, but at some point the economy will wobble.

will we become like australia? expansion an economic since 1991. so it is a question and pimco will be facing this next week, whether or not the expansion has duration from here. should we be measuring expansions by duration or depth? we have not seen and norman's expansion in terms of depth -- seen enormous expansion in terms of death. that means we have a ways to go. tom: francine? francine: where do you see the biggest shifts on the markets and where you see the biggest value. does that change to pending on what the federal reserve does? >> some of the key things

worrying investors now could be resolved, mitigated, or turn worse. markets are worried about trade, brexit, italy. each item is on the checklist for the next few weeks. it andets get through policymakers do the right thing in terms of providing for a good basis for economic growth, then we could see the expansion and profit growth in the u.s. of 10% could mean equity price gains around there. clipping coupons is probably the order of the day for next year. corporate bonds, high yield bonds, core bonds near 4%, and , so that ishigh 2% the return profile in a story where the expansion is ongoing globally. you so much.

we will return. worldwide. this is bloomberg. ♪

tom: good morning. tom keene in new york. francine lacqua in london. given the fed and all that is going on in the market, put three smart people on the desk. we had tony from pimco on the short-term space expertise. bloomberg intelligence joins us, fixed income. the bonds, reactions from chairman powell. , idrag in somebody who said

am not going to cash. hsbc securities, head of research and global equity. you are not going to cash. gloom, ais doom and pure market, get hsbc has an outlier view. >> the risk-rewards improve. expectations have been solid food valuations have come down a lot. -- have been solid. valuations have come down a lot. tom: revenues are going to come in as well. how do you read but? >> the cycle is moderating slowly. 13%, 14% profit growth this year . moderate slowdown comes still growing above trend. revenues superstrong. bleed into next year. you have a lot of visibility. tom: what makes you know -- francine: what makes you nervous

about the fed rate path? >> the fed could go faster than the dots suggested. that is the risk to asset markets. the fed making their classic policy mistake. i don't think they will do that. the fed speak has suggested that maybe they will be more cautious this time than they have been over past cycles. eithere: i keep hearing the u.s. economy is overheating or data will slow down, meaning the fed cannot hike as much as is priced in. is it a binary outcome or in the middle? >> if you look at i sm new orders -- ism new orders are starting to moderate, not signaling recession, but slowing down. that 2019 slow down could be enough for the fed to go one

hike this year. they will hike in december. on the one or two hikes next year. that is a situation where risk assets could do very well if the fed will not burst the bubble. tom: way out front on this has been hsbc, eight rate increases. nominal and ang rasterization of real rates, wait a minute were going to the lower rate regime. how should equity participants adapt and adjust to a steve major view? >> yields will be lower than the market things. the way to play that is to own more defensives. these are long-equity duration. their sensitivity is low come utilities, telecoms, staples.

these are the most out-of-favor sectors in the market. they are quite defensive. tom: you are in the mail room like bill gross was at,". is that a total return or a coupon clipping environment for your on world? >> next year could be a pause. many believe there will be a pause in the rate hike regime. next year could be a good year for bonds. it could be an excellent time to be investing in core bonds. not this year, interest rates rising hurts prices. next year, one can click coupons. is has to worry it investment greater are yield that the market entertains the idea of a 2020 or 2021 recession. the base case should be continued economic expansion. the possibility of clipping

coupons, especially with changes in valuations. francine: we have amongst her -- our top the fact stories that pimco is the buyer of the $3.5 billion bond. i don't know if you can confirm or deny that. would it be a vote of confidence in the resolution of the standoff between italy and brussels? >> i can't confirm or deny it. for those that have italy in their index, we would want to be underweight. a broader theme would be looking at investments from the bottom up. this is not bader to credit and beta to equities, so individual opportunities we find our from doing a lot of homework. we have on 100 credit analyst that does work that enables me and other portfolio managers to say yes or no to particular

investments. this is time for bottom-up work. the data story is over. francine: thank you so much to all three guests in new york. we will get back to your market calls. this is bloomberg. ♪ ♪

hour.busy an we are back with three smart guests. what we you listen for from chairman powell when he is off script? , whetherlance sheet they had change their thinking. hopefully no news is what i would look for. it would be nice to talk about something other than trade. tom: meanwhile, there are eight topics to talk about. does he have the courage to talk about fed independence. >> what i want to see is the fed demonstrating its independence. i would expect that. where --n institution

tom: is he going to move the dots, the markets? do i stay for dessert? >> if he and the committee want to be dovish, now is the time. tom: do it today. >> he talked about inflation breakeven, the fact that inflation is lower, the survey data is down on inflation. atbe they can be more dovish this next meeting, and today might be the opportunity to prepare the market for that. francine: what does dollar do from here? >> that would be bad for the dollar, at least incrementally. tom: we greatly appreciate it. thank you so much. him back on once we

get to a clue me bear market. get atinue -- when we clue me bear market. i want to tell you about an important interview, david rubenstein with justice kennedy, a terrific year of great interviews. david rubenstein, a conversation with justice kennedy across all our bloomberg platforms in the coming days. there is no other story, chairman powell at lunch, his speech at the economic club of new york. please stay with us. this is bloomberg. ♪

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blaming jerome powell for the selloff. factory closures. ,nd trumps dinner date president trump and xi jinping meat. meet.kudlow -- larry kudlow there is a good chance of the deal. >> welcome to bloomberg daybreak. tiffany is out. .t was ok on the earnings alix: it was ugly. japan comparable sales were up .ust 2%, versus 9% the u.s. coming in at 5%. >>