>> global stocks rally after the u.s. and china agree on a cease-fire after president trump says beijing will reduce import duties. oil surges as saudi and russia extend their deals to manage the market. canada also cut output and qatar says is leading opec and 2019. am i know macron faces the biggest crisis of his presidency as violence continues to flare in france. what now for his reform plans? ♪ welcome to bloomberg surveillance. i'm francine lacqua. you see the stock since hundred data,g 2% and gaining it

manufacturing pmi 51.8 instead of 51.5 that we have seen previously. that are than expected, but it's all about trade and the fact the u.s. has basically convinced china to deescalate some of the tensions. that's why stocks are up 2%. that's why treasuries are staying put at 3:05 and crude we have news out of canada about qatar leaving opec. russian and saudi's are willing to cut production. let's take a look at automakers after the tweet by president trump. they are getting a nice boost as the specter of tariffs have gone away, volkswagen, bmw as a whole in the auto sector gaining between 4% and 7%. coming up, we speak to the vice chairman about the federal reserve. it's an exquisite interview that

we will be bringing for you -- exclusive interview that we will be bringing for you. let's get to bloomberg first word news with desley humphrey. desley: president trump and china have agreed to remove trua has agreed to remove tariffs from car importance from the -- from cars imported to the united states. they had been sets to raise duties on january 1, with the white house debating whether should tax all goods from china. canada's finance minister says his government is in negotiations with the u.s. on with the goal of eliminating steel and aluminum tariffs. speaking exclusively to bloomberg, he said the new north american trade deal brings confidence.d

>> i think what will have to happen is we will have to be sitting at the table to figure out how to get to the best answer. our view is that the these tariffs should not be there in that it would be much better for all of our businesses interests to get rid of them in their entirety. that continues to be our friend of you. will leave opec next month in a move that threatens to fracture the unity, as it tries to maintain a global coalition. g20, russia and saudi arabia said they would extend their oil deal in 2019, but are yet to officially confirm any new output cuts. alberta, canada's largest oil-producing province ordered an unprecedented output cut of almost 9%. the cut will take effect in january. theresa may faces another grueling battle this week as she faces demand from lawmakers to publish internal legal advice over her brexit deal. politicians from all sides of her government are calling for the guidance to be released in full. meanwhile, the opposition labor

party has signaled he will propose a motion to bring down theresa may's administration is her plan is rejected by parliament in a vote on december 11. the french president has had an emergency cabinet meeting after more than 400 people were arrested in paris as clashes continue for a third straight weekend. dubbed the yellow vest movement, and what began as a protest over fuel taxes, it has grown into general anger on higher living costs. there was also violence in other around france. south africa's finance minister says of the government is to revive itslans countries spend the economy. he said south africa is focused debt and showing restraint in fiscal support for state owned companies. we have to get out of the

status we are in, which i'm not even able to pronounce, back to a proper investment grade rating . we are working hard at this. the change will not happen to bee we simply want it the case. the change will happen because of the things that we need to do it we had >> israeli prime minister, benjamin netanyahu, is facing new corruption accusations, police recommending he stand trial for alleged robbery -- bribery in a third case. investigators say they have more evidence that he tried that she traded influence for favors -- they have more evidence of that he traded influence for favors, which he denies. spain's political establishment has suffered another significant crack as the far right group, vo x, won its first ever

representation in and in the cia -- in the country's southern province. right party took 12 seats, carving off voters targeted by the center-right people's party. 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 guessing humphreys. this is bloomberg. ♪ thank you so much. now let's get to our top story. president trump calls his truce with president xi jinping an incredible deal. but the u.s. has agreed to postpone increasing tariffs on chinese goods for 90 days. president trump. alsoed that china will remove duties on american cars. markets are seeing a huge rally on the back of this news across the globe, and automakers are

getting a particular boost. donovan,ned by paul from ubs wealth management. thank you for joining us, such an important day. posted g20, there is a truce. will it hold? i'll finish i think it will hold for the time being. it is a fairly limited and shaky deal, i think it underscores a lot of the insecurities the united states has come up perhaps a reaction on the european the -- insecurities the united states has. americans had been upset that there was no progress with europe, so i think it was issues.g a lot of these at the end of the day, the full cost of taxes on trade has not hit the u.s. economy yet. i think by having a truce, it gives time for the existing tax increases to start to be filed and that then perhaps trumps the u.s. administration into coming

up with a longer-term deal. francine: who has the most to gain from a truce? if to some extent, the united states has the most to gain. i think the main reason for the equity correction has been the position on traded taxation. markets don'tuity need them much on the chinese economy, the u.s. markets are little more significant and lyrically, they matter more to the u.s. president. like i said, -- and politically, they matter more to the u.s. .resident the political heat probably goes back on the as president because of that. francine: we have concerns about the chinese economy and the domestics during of demand, and we have concerns about the u.s. economy. does it help at the margins, or

significantly, it help policymakers can deal with the slowdown? all: what we have to remember is that china is growing too fast. it's long-term fundraising goal is 5%. basic demographics tells you tot the trend nice be lower. we should not be worried about the china slowdown, we went to manage it. if we avoid significant taxes, that helps with that. but traded taxes ago beyond china. china is to some extent, the postage and packaging department for many supply chains. you hit china, you hit other countries, because china -- because they have to manage their supply chains and move around. thecine: how long will

traded truce rally last? what is the answer? paul: it depends on the language. and what appears on the trumps twitter feed. if you can tell me what president trump will tweet out tomorrow morning, than i will have a better view of how long it will last. trade policy in the united states is the personal prerogative of the president, so that means the language that comes from the president over the course of the next couple of weeks will influence expectations. the handshake deal is a signal of a move in the right direction , but it is only a signal, and we need to build on that width of the rhetoric that comes out of the united states over the next 3, 4 months. francine: paul donovan, from ubs wealth management. we also speak to the vice chairman of the u.s. federal reserve, richard clarida

, the interview at 11:30 a.m. in london. this is bloomberg. ♪

♪ francine: economics, finance, politics. this is "bloomberg surveillance ." i am francine lacqua in london. that is get first to the world news. >> unilever has acquired this company for $3.8 billion in cash and shares, seeking to grow its presence in the world's fastest-growing economy. it will give access to india's beverage department, expected to be worth more than $1 billion a year. sap is said to be selling about 4 billion euros of bonds across

five tranches to help pay for its largest ever take over, the acquisition of a customer data company. according to a source, the data company will issue bonds in tonight for as long as years. first suits from the sale will finance parts of the 7 billion euro credit facility taken on in a recent acquisition. qualcomm has brought out, or returned to its abandoned bid for another company. despite a statement from the white house of that the chinese president would consider approving a possible deal. qualcomm says it consider the matter closed and is fully focused on continuing its 5g roadmap. the deutsche bank boss says he does not expect to be personally tied to the money laundering germany.n

police raided deutsche bank's headquarters in several offices next week in an investigation that touches the private wealth unit overseen by the ceo before he became ceo. space x intends to go ahead with its 18th launch of the year later today, having postpone the. lift off at the weekend it is not clear what force the delay, which was announced by a tweet just before midnight saturday. launch through satellites in orbit in a mission to scan the globe for pirates targeting shipping. that is your bloomberg business flash. francine: oil is surging higher after saudi arabia and russia said they would agree to extend their pact. canada's largest oil-producing province also ordered the largest output curbs. george us now is

wallace, executive editor of combined energy and commodities for bloomberg news. great to have you on the program. what matters the the most, is it opec ordeparture from the fact that russia and saudi arabia are together? >> in the short-term impact, it is canada first, because it is so unexpected, such a substantial cut. number two, the body language between putin and mbs at the g20 was much more friendly than people expected, and a strong signal that even though they would not announce if real number today, there was an intention to cut production and stabilize prices. number three, qatar. the future does not do much from that announcement. but what is this signal in terms of the unity of opec? is it finally that you are seeing, i guess, the most public face of this argument as an going on for sometime now within

the gcc? i think it is really important for the gcc and it is important for opec in the short-term. francine: thank you very much, stored. to keep the conversation on oil, paul donovan from ubs wealth management is here. first of all, are you sure this is a supply concern, when it comes to oil, not demand from emerging markets falling off a cliff? think it isw, i do demand from emerging markets falling off a cliff. i think there is moderator growth, but a gentle slow down going into next year. i think the global energy demand picture remains a relatively robust. because of that, we have always thought that this was a temporary issue, that would see a recovery in the oil price back up toward $80 or something like that. so i am not necessarily that surprised by the move.

but while oil remains where it is today, this does change some of the global capital flows we see in the world economy. yourine: does it change inflation outlook? if you are looking at the lack of inflation, especially in europe, have prices at $85 a barrel actually help? paul: it changes the headline inflation outlook. underlying -- crude oil is actually part of core inflation, what we call embedded energy costs. central banks know. least, good central banks know that oil price changes are a temporary shift and it is sent in the should look through when they are setting policy. they are interested in the underlying trends, not the noise caused by the changes in petroleum. francine: the fact that an opec member is getting out of the cartel, what does it mean for the strength of opec in the future? do we care that it is it russia and saudi the kind of have everything in hand? paul: it is interesting, because

both iran and iraq were members of opec and carried on being there. so this dispute with saudi and ,.tar is unusual that it has provoked this reaction having said that, qatar is more about gas rather than oil, so we have to reflect about that does not perhaps change substantially the resolution on oil overall. i think that the russia-saudi agreement is something that we see persisting in the medium-term, it could more than offset any noise coming from the qatar situation. there is not much signal of anybody else in necessarily leaving. if iran and iraq can stick their through the war, i don't think iran is necessary going to rush for the exit now. francine: paul, thank you so much. he stays with us. up next, we talk a little bit about the fed ahead of our interview with richard clarida,

after a comments from jay powell last week. we look ahead to his testimony on wednesday. this is bloomberg. ♪

francine: this is "bloomberg surveillance," i am francine lacqua here in london.

last week, u.s. equity stocks had their best week in a while oyed byhat -- bu the fed chair, jay powell's speech. paul donovan from ubs with management to joins us. paul: i think most economies do not feel that he was being particularly dovish. he was stating what the fabled lot is facing, which is three or four rate hikes. a think the market perhaps got a little excited about a slight change in tone, and that is ok. i think we certainly see a december hike, and i would be looking for three hikes next year. , butnk that is justified of course, it is taking place alongside continued quantitative tightening. this is not just about monetary

policy, it is also quantitative. francine: how do they look at trade? this chart implies volatility, you can see it in the volatility how should the economy -- how does the u.s. economy look at trade? paul: you are right, it is focused on the u.s. economy. it is not worried about the. noise in the equity market or what is going on in the rest of the world of drop point -- up to a point. we are seeing negative consequences on the trade sector start to come through. companies perhaps deferring investments, we have even seen outsourcing. one of the ways to around the using disk you are drives for example, you do not import of them, you import them into canada, put them in an box and do not import

the metal box. view the tricks taxes as a negative thing for the economy. but the strength of the domestic labor market, the strength of domestic demand is offsetting the current negative impulse from president trump's tax increases. francine: thank you so much, paul. later on surveillance, we speak to the vice chairman of the federal reserve, richard clarida. interview athe 11:30 a.m. london time. he will be asked about general dynamics and of course, the dot plot. we are live in paris, next. ♪

francine: economics, finance, politics. but there's -- this is "bloomberg surveillance." nato has its first female army

chief. has appointed a woman to lead its army around 7500. -- a people who did not die during a medical vacation last year. u.s. financial markets will shut on wednesday for a national day of mourning to honor former president george w. bush. -- george h.w. bush. cuts and as canada saudi and russia reach an agreement. we are also getting breaking news out of the u.k.. manufacturing pmi rising to 53.1. let's see if it has an impact on pound. theresa may is again trying to spur up a lot as backup for her

vote in the house on december 11. that is the latest on the pmi manufacturing data. >> washington had been set to raise duties on $200 billion of imports from january 1 with the white house of debating on whether or not to tax all goods. look forward to the discussion. the relationship is very special, the relationship i have with president xi. i think that is going to be a very primary reason why we will probably end up getting something that will be good for china and good for the united states. qatar says it will leave opec

next month. at the g20, russia and saudi arabia said they has extended their oil deal in 2019. they have yet to officially confirm any output cuts. unprecedentedd an output cuts of almost 9%. it will take effect come january. theresa may faces another grueling battle as she faces lawmakers.m politicians from all sides of parliament calling for the guidance to be released in full, something the government is opposed to. hasopposition labor party signaled it will bring down may's administration if her plan is rejected by parliament on december 11.

a stronghold for the party of prime minister sanchez for the past 36 years, the socialist grip on the region was hanging by a thread. the far right party took a 12 states. 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. -- this ishumph bloomberg. francine: let's turn to europe where we are following two stories. more than 400 people were arrested in paris over gasoline prices and higher moving cost. italy's two deputy primaries are ready to practice dow -- back down.

let's bring in greg from our paris bureau and kevin costello. what is the government's next step to try and shut down these protests? question. is the big the immediate step is the prime minister meeting with all of the heads of the parties today. tomorrow, he is supposed to meet with representatives from the yellow vest movement. the problem is, there are no real representatives. it is not quite clear whether they will be able to meet with him. if it could roll back the even withines, and

his own party, people are saying they should delay it. to step back on that would be defeating the whole of his presidency. the popularity polls, he is at about 20%. his popularity is not going to recover anytime soon. he says it doesn't matter, he has his reforms he is pushing through. he doesn't face elections until 2022. immediateo real, effect from his decline and the approval ratings. much.ne: thank you so

is it that the prime minister is now negotiating with brussels and no longer the finance minister? could he be let go? right now, it is very important that the premier has taken over the negotiating role. must have been some frustration back here in rome as to how things were going. this could sideline the finance minister. exactly what will happen to him isn't clear but at least some reports say his position has been weekend within his role. that,ne: do you believe there are reports and rumors are happy to take it a step down and out to brussels pressure. is that right? kevin: they probably aren't really all that happy.

the reports are that they are willing to back down. exactly how that plays out remains to be seen. there is say that enough money within the budget for their populist programs, even if the deficit goes down. that would be there face-saving technique. francine: thank you both for some great reporting on the ground. still with us is paul donovan. how much do you worry about france? paul: i think the thing we have with france is that when you get ,hese single issue movements there is no obvious leadership to this. this signal of discontent creates a level of uncertainty about government policy. markets and businesses, as a general rule like certainty

because that gives you less risk in the future. you know where you are going, you can make longer-term projections. we get these very targeted it createsampaigns, isolated pockets of their he significant uncertainty. that is ultimately something, which i think is a potential negative for economic growth. uncertainty that has to be weighed in the balance. francine: we're looking at live pictures of some of the ambulance workers protesting today. does france want to be reformed? what happens after? paul: people don't like change. francine: some are better than others. the anglo-saxon world, in the past has dealt with a little bit more than the periphery

countries. as someone growing up in the 1980's here and remembering the miners strike, i'm very much aware that this was not something people enjoy going through. i think that is the point. we are going to get more of this in the future. this bigger picture of the central change in the economy is going to change the economy and society. that means that some people are going to be better and some are going to be worse. it is bad enough if you are worse off, but if you are worse off and your neighbor is better off, that is totally unacceptable. of change, fear of change is going to be recurring. francine: what you do with italy? do you assume the populist government backs down? paul: i think there will be some attempt to compromise.

if economists get a number of the left-hand side right, we think we have hit targets. you are seeing the commission and italian government trade these forecasts. everybody knows these forecasts are never going to be hit. i think they need to find a face-saving way of spending the deal. francine: thank you so much. paulist is with us. up next, we will talk about brexit. the prime minister faces a challenge from lawmakers. later, scandal hits deutsche. headquarters were searched by police. what can they do to turn around the institution? this is bloomberg. ♪

francine: this is "bloomberg surveillance." let's take a look at what your stocks are doing with particular attention to some of the automakers. there is a lot of green on the screen. what i am looking at is stocks gaining. dollar dipping on the trade truce. autos definitely getting a leg up. theresa may faces another grueling brexit battle this

week. politicians are calling on the prime minister to justify the divorce terms she has agreed with the eu. they are demanding the release -- still with us is paul donavan. do people care about brexit? if there was a second referendum, would we even get a different vote? paul: according to the opinion polls, no. they are exactly where they were before the last vote. what we have to bear in mind is that with a second vote, there's quite a lot of apathy on the remain side. on the leave aside, i think you get a lot more pressure because, how do you ask the question again. this is in france. you don't keep asking the question until you get the answer you want. from a legal point of view, it takes about six months to do this. parliament would first have to stop process. the u.k., by law must exit with

a hard exit on the 29th of march. that is the u.k. law as it stands today. parliament has got to change that before anything else can happen. francine: would it be difficult to change that? we understand that a lot of leaders would before that. paul: you have to try and get a majority in the u.k. parliament, and it isn't a majority for anything. as a country at large, there is not a majority. francine: but if you have one for a hard brexit, do you have one for an extension? paul: not necessarily. what? it to do we are going to have another two years of negotiations after this. the withdrawal agreement is not the final deal. innocently what we do while we are trying to debate the final deal. francine: if this doesn't get

passed on december 11, what happens to stock markets december 12? paul: the risk is not enough. that therehopes is will be a two-stage process. that you reject the first seal, by mr. may goes to brussels -- prime minister may goes to brussels to renegotiate. throughmic it a vote any get it through because the market reaction convinces policymakers they need to change. if you don't get the reaction, the momentum isn't necessarily there. that is the risk. it depends on the size of the vote. if you get a very large majority against the deal, it depends on how many conservatives defect. i think the expectation is that those who don't want a hard exit

on the opposition side will shift in favor of a deal on the second vote. how many of the prime minister's own party abandoned the government position is going to be quite critical to the market reaction. francine: thank you so much. later, we speak with the vice chairman of the federal reserve. london.at 11:30 a.m. in this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." south africa's rand posted its best monthly performance against to november this year thanks a rate increase by the south african reserve bank. country's finance minister says he is paired has a better credit rating as part of its lands -- his plans to revive the economy. he weighed in on the future of the trade war. we have to get out of the

structures we are in. back to a proper investment grading. we are working hard at this. the change will not happen because we simply wanted to be the case. the change will happen because of the things of that we need to do. what do you need to do to recover that investment credit rating? tito: when he to establish credibility. secondly, demonstrate action around state owned enterprises. thirdly, demonstrate actions around the fiscal stance. the budget standpoint. we need to show action, that we are taking steps to reduce the debt that is accumulating. with me to take similar steps to assure that we are moving to structuring the economy and igniting growth.

when we do this practical that will look at us and say, these folks are back in business. me, what werel the stumbling blocks? i think one of the interesting areas for accommodation has been the trading. all of us want to reinforce of the multilateral system of trade. .ules-based think the communique captures the essence of the communication very well. is age of protectionism really over. open ands now have integrated economies and like

the spirit of openness to go through the g20 system and the global trading system. francine: that was the south african finance minister speaking to bloomberg and buenos aires. sebastian: as we got that true's over weekend between the u.s. and china, you see it playing across the board as it did in asia. the carmakers and miners, particularly strong performing. the dots having its best session since april. still down some 10%. that. to go to recoup outside of that story, we are seeing the euro move higher. italy may be accepting a weaker deficit. the european commission speaking earlier to us today saying italy is seeing the willingness.

this is the mining still producer there. still up by some 8%. daimler, representing the carmakers. francine: sebastian there with your markets. such of a c-shares fall after the frankfurt headquarters were -- deutschepolice fall after the fray for headquarters were searched by police. patrick, what did we are from deutsche bank over the weekend? patrick: we learned a couple of things. recently this morning, we learned that prosecutors have not conducted any more riads over the weekend -- raids over the weekend.

deutsche bank put out a fact sheet mentioning some stuff that we knew already, like the two people working in the wealth management unit and anti-units are involved in the investigation.they also said nobody on the board was formally interrogated. the company was allegedly involved in the money laundering was sold earlier this year. we also have an interview from the ceo. he said that he does not expect to be personally involved in the issue. that the bankned look to depend on papers when they were published in 2016 and considered the matter closed. he also emphasized that he believes the share price should rise in the medium-term given that the bank is going to post its first profit in four years. francine: what happens next? ?ohn

joh jan-patrick: there might be some changes on a management level. francine: thank you so much. surveillance" continues in the next hour. this is bloomberg. ♪

francine: traded truce. global stocks rally after the

u.s. and china rally. oil surges as saudi arabia and russia extend their deal to manage the markets. canada also cuts outputs. with the federal reserve chairman. this is "bloomberg surveillance." i'm francine lacqua in london, tom keene in new york. we look at china with of the g20, but it is your interview with richard that everyone wants to know about. mckee,talked to michael craig and gene. explain for our global audience right now the riots in the streets of paris? paris. into the poorer

am i right that these are right in the heart of forest paris -- tourist paris? it couldn't be more right in the middle of paris. this is the third weekend. we have just heard from the paris mayor saying the situation is in tenable. it goes into whether france is really reform of all. macron's approval rating at a record low. i am also looking at trade of the g20. eric will be speaking to the president of argentina. we will play that out at 3:00 p.m. new york time. let's get straight to the bloomberg first word news. sebastian: president weekend calls his weekend truce an incredible deal.

president trump tweeted that china has a great to reduce and remove duties on american-made cars. differences remain on intellectual property. the price of oil jumped after saudi arabia and russia extended their agreement to manage the market. canada's largest oil-producing province ordered unprecedented cuts in output. november was the worst month for oil prices and a decade. qatar says it will leave opec next month. the energy minister says it was to focus on its natural gas production. saudi arabia has cut ties of trade in qatar. italy has said it is willing to change its budget. the tone of discussion has changed.

the authorities signal they are ready to make adjustments to their 2019 budget. substantially deviating from the environment. sebastian: 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. salek.astian this is bloomberg. going to a data check. dow futures right now near highs of for the day up 516 points. we get some curve flattening, but not all that much. rates moving in tandem. on to the next screen width of the vix showing that move.

there are the futures on the dow. half 1000 point move, there are the present futures. renminbi coming in at 6.89 on a monday. -- renminbi. francine: that is actually my chart of the day. treasuries are moving on the back of the g20, stocks really jumping, dollar dipping. oil surging on optimism that producers will cut output. we are really seeking the relief rally after the u.s. and china declared a truce in their trade war. u.s. futures pointing to a stronger open. john from now, .pmorgan economic strategy how long can this truce hold? john: i would measure it more in

terms of magnitude meaning that a lot of these markets enter the g20 to. -- cheap. you can have a reduced of the risk premium because growth and stabilize. -- can stabilize. francine: why was this truce put their? -- there. we are waiting to see the impact on the latest tariffs. we have seen that they have actually slowed down the u.s. economy. we have seen china's economy slowdown. this truce is beneficial for both sides. we have seen both countries a step away and say, let's take a truce here. define the you to silence from beijing off of all these festivities in regards to renminbi. chart.p a

i don't, have a banner for this but here is the trade weighted renminbi. doing their job weakening renminbi over the past two years. can the user monday as a constructive tool after this conference? john: i think they could because a weaker currency is in their interest to provide stimulus. the u.s. is only concerned about the bilateral exchange rate. with dollar china moving much less than china weakness versus some of these other trading partners. the chinese could effectively drive a bit of stimulus and this without antagonizing the u.s.. tom: what do you take away from the weekend? stephanie: i think this is not an end, this is just a temporary truce. the communiques we have seen demonstrate just how much open water exists between these two

countries. we saw them really disagree at aipac, although we have this temporary truce coming out, there is still a lot of this agreement between the two countries. francine: who needs this truce more? is a china? what ise: think interesting is that it shows that both sides need it. trump is very political. he is not going to offer this truce if he doesn't think there is a reason. farmers have been hit. we have seen the u.s. economy start to slow down a little bit. i think this shows that both sides are really hostage or captive to each other. actually how much has the u.s. economy changed because of the trade tariffs? do we see more outsourcing, components being built in canada that come from china? john: what we see in the data is a definite loss of momentum in aggregate. there is a definite hit to business confidence.

i don't think the structural changes from trade policy have been solved yet because it has only been since august or september, but the sentiment impacts are enough to weigh on the stock market. the vector over the last three or four years is to a weaker trade weighted yuan. what is the best outcome here for president xi? what kind of yuan does he want? john: i think he would prefer a weaker currency, but it has to be achieved in a trade weighted sense, not a bilateral cents. sense. i think of the chinese were able to manage the basket regime in a clever way, they could have exactly what they want without offending the u.s. francine: thank you so much.

are looking forward to your interview with richard. tom: that is good to be interesting. we will do that in the 6:00 hour. of "surveillance" is the guests. place stay with us worldwide. this is bloomberg. ♪

sebastian: this is "bloomberg surveillance." unilever is expanding its presence. it has agreed to combine with

indian consumer health units. the deal includes the hot drinks. nestle had also showed interest in acquiring the indo units. bloomberg has learned that next are has agreed to buy tribute media. the deal would create the country's largest owner of local tv stations. soaredralia, shares after a group offered $1.8 billion. -- five years ago, a jet was rejected by the crop can learn. best handl -- handler. francine: canada's largest producing province has ordered

unprecedented output curves. says it will qatar leave opec next month. is john.s now what do we care about today? >> the politics are a lot more interesting. qatar, within the walmart of oil realm of oil is not important. it is one of the smallest members. it is all about the politics. -- itabout what opec survived the gulf wars and the invasion of kuwait. now it feels like it is everything that's nothing to gain by saying in this group. yin and this group.

tom: stuart wallace has a tattoo that says "opec go" on it. it has this pie chart and qatar is this itty bitty one down here. what i really understand your is 1961. they have been doing this at 450 whatever years. how will a vienna be changed if

they are not there? stuart: i think in the short-term, not very much. you have these mounting tensions and a blockade on qatar because of its relationship with iran, it wasn't really being listened to. it was never a big player to start with. fundamentally, opec meetings of these days are decided between saudi arabia and russia. you saw that over the weekend. qatar from the next meeting really want change a great deal. tom: russia is not part of opec? stuart: but it is part of the opec plus group. they will be in vienna. the big meeting for them is december 7. we do get the feeling with putin's comments that they have cooked up a deal. we don't know the numbers yet,

but ultimately when putin came out and said, it is clear we are going to stay part of this group, that is a really strong for the market. it is reflecting that and canada. i don't think qatar is playing much into the market today at all. francine: what does it mean for inflation forecasts? john: i think it could easily go above 70 again for brent because of opec plus russia are removing 3.1 billion barrels of canada, you get the existing surplus and the market essentially evaporating within a couple of months. i think if we had a balanced market again, that prices higher. it is a decent move from the lows we were out last week or so. headline inflation numbers probably don't move that much because we just get back to the levels we were at. does it: oil at 70,

make it easier for the ecb to raise rates? john: i think the big ratio for the ecb is, its growth going to revive after nine months of disappointment? revive, there won't be normalizing rates next year. tom: thank you so much. we will be back with john normand of jpmorgan. coming up, we will speak with the president of argentina. this is bloomberg. ♪

tom: terrific news of flow this monday. michael would join us through surveillance this morning. john with us now from jpmorgan. i want to do a victory lap for your michael thoroughly. and with your world what it means for u.s. dollar. we have had the dollar rally off of march. conversation in the next hour, how does the dollar fold into the fed policy? is it for real?

always a component of how the fed thinks about .inancial divisions i don't think the dollar has been the primary drive. it is always something to watch. i don't think it is something decisive. tom: was that a change in tone because they need to worry about a global economy. the stability of the international economy. john: the u.s. economy has not been any and from that slow down. i think it is a confluence of the u.s. slowdown, the tightening of a financial conditions over the past few months. i think that is what is motivating the town. i don't think the broad strategy

on whether think they need to take rates over the next year or so has changed. francine: how do you think they should look at the trade concerns? is it a currency question? deflationary worldwide? john: i think they probably tend to see it as a supply shock. even know itgrowth gives an upside bias to inflation. shock,remove that supply there should be a bit more confidence on growth. i think if they have more confidence on growth into next year, you would see them affirming or delivering on these rate projections that have already been put into the market. i think this'll end up being a bearish force for bonds. francine: on the jay powell comments last week, did markets overreact? n: i think it is an overreaction. i think what he said is wrapping a narrative around what the

committee has already put in print. the money market is priced nowhere near 3%. i think he is just giving a bit more description. again.ing up the chart bbdxylier collier on showing a weaker dollar may be back to this trim line.if we get a dollars surge , how does that change how a policy? is a dollars if it surge but the stock market is still moving higher, this is kind of a wash. if there is a broad environment of market stress were equities are moving lower, credit spreads are widening and dollar is moving up in a surge fashion, which to me is another 5%, i think this is one you have to roll out hikes. i think what you are more likely to get is a piecemeal dollar rally from here where it might

go up versus europe and down versus latin america a down versus oil currencies and you get some rise in equity markets. is a big financials are going to change here in a way. tom: with that said, where is your opportunity, your speculation opportunity into early 2019? it is latink currencies and oil currencies because i think the risk premium is higher in latin america relative to other regions. to buy it is too early europe even now there is optimism about european stocks and autos. i think there is enough policy action going on between opec and russia that you will see the oil price up by 70. francine: coming up, we speak with the mayor o and the man appointed to oversee the reconstruction of the bridge.

g the mayor ofen -- of the mayor of genoa, coming up. this is bloomberg. ♪

tom: bloomberg surveillance. it is a busy monday, a busy week. francine in london, i'm tom keene in new york. themotion of what we see --

emotion of what we see in paris with what we see of the death of president george h w bush. looking forward to wednesday where there will be a service in washington at the cathedral. i would also mention the conversations we have today with mr. clarida. we will do that in about one hour and mr. macri with erik schatzker. toncine: i'm looking forward the conversation with mr. clarida. i'm also looking to the conversation with president macri. president trump jolted by jolted bybout tweeting about this with -- truce with china. let us get straight to first word news. sebastian: that trade truce

between the u.s. and china it was both countries breathing space. president trump has agreed to postpone a planned terror for three months. president xi jinping promised to buy more products. president trump says china has duties onremove american cars. differences remained on intellectual property. oil prices jump. saudi arabia and russia agreed to extend their agreement to maintain the market. cleanup crews were at work across hurray's -- across paris after riots. more than 400 were arrested. a spokesman for the president said the government will not alter its budget policies. the protest began over higher prices.

they were mormons -- the remains of a president george h.w. bush will be flown today to washington. he will lie in state before being returned to texas. he died friday night. he was 94. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian salek. this is "bloomberg." thanks.francine: italy's lower house is expected to start debate on the budget. that the prime minister will take over as the main negotiator with the european union. we are pleased to be joined on set by marco bucci, the mayor of genoa. mayor was appointed special commissioner to oversee the reconstruction of the bridge which collapsed killing 43. thank you for joining us.

this was a catastrophe. it touched everyone hard. the reconstruction may take a long time. in the meantime, jenna what will resume business. the: yes -- mayor bucci: collapse of the bridge has been an issue. we create the new system for mobility inside the city and outside and we have all the companies working together to understand the common way of doing things. we are going to work together as a team. francine: how long will it take? five years? mayor bucci: the best projection is talking about from 12 months to 15 months and we are committed to making sure it is

going to happen. the departure of the chief executive of auto straddle, will it allow the company to be more involved in the reconstruction? mayor bucci: the government has rad will not be part of the construction. we have the best companies in the world, even chinese companies, participating in the market we set up to understand the best offer. we will have the best in the world. francine: based on your dealing with the government, how would you describe the coalition? those parties are not always seeing eye to eye. five-star saying we should not pay too much. mayor bucci: i have never had anybody telling me we should not build the bridge. the bridge is a must. i do not think there is any discussion about the need.

we go straight to the point that we have got to make it and we are going to make it well. francine: when you look at the impact that the bridge collapse gdp, hown jenngenoa's big is it? is goingci: november to be better than november of the previous year. we are on track and we will demonstrate that italy is a place where we can do good things in a short time and we , allnd an administration the citizens participate and we are going to set a record for the world. tom: wonderful to speak to you. tom keene in new york. e's family coming over. i know it is sitting in the old

harbor. what do you need from rome? we report on the chaos of federal politics within italy. what do you need from rome? mayor bucci: we had a special is bringing 1 billion for the construction of the bridge and to set up for the issues that happen created by the collapse. somethingough to do that is good, is good for the city, for the area, for the north of italy. genoa is an important harbor for the north of italy and for the swiss and south of germany. tom: what do you need on tourism? you have got the harbor, what do you need for tourism in the northwest of italy? mayor bucci: the most important things we need is to re-create the confidence we had before.

been growing 7% every year for the last five years and we need people to think genoa can be reached and -- mobility is not an issue and everybody can enjoy the city as before, better than before. you need more politics that are stable and do you believe that matteo salvini will break away from five-star? mayor bucci: i do not know. that is a politician issue. i am an administrator pruitt i need to think about -- i am an administrator. i need to think about the area. francine: we talk about the trade war. have you been affected by some of these trade tensions? mayor bucci: we are growing commerce right now. we are growing shipments.

genoa is an entrance area for europe and the poor. , the most important corridor in europe is managing 55% of total growth in europe. we are in a growing mode. ,here are a lot of goods coming five days lower than going to amsterdam from asia and because the channel opened up to big ships, this is important. genoa has become strategic and this is why. infrastructure, will you build more? a lot ofci: we have

infrastructure that needs to be built in the next three to five years. it will allow us to have trains up to 750 meters long and that will allow us to double the number of containers that will move inland. francine: thank you so much for joining us. genoa and weor of will be back with john normand. coming up, the former u.s. commerce secretary, about trade and the g20. that is at 3:30. this is bloomberg. ♪

francine: this is bloomberg surveillance. tom and francine from london and new york. it has been a strong session for ae south african rand after dinner between the u.s. and chinese leaders giving it a boost. finance minister says the government is prioritizing regaining an investment grade rating on its debt. >> it is priority number one. we have to get out of the status we are in which i am not able to pronounce. back to a proper investment grade rating. we are working hard at this. the change will not happen because we simply want it to be the case. the change will happen because of the things that we need to do . francine: that was the south

african finance minister. let us get back to john normand. when you look at emerging markets, we had such a volatile environment in the summer. what happens next? john: it is region specific. allywill have a ro because there is a risk premium. 2% to get an additional 5% gains and the differences will matter. into 2019 is a reluctance of investors to take exposure to asia because issues are likely to resurface. i think the fed story is underpriced. rates are going to be on hold for the next year. there will become for with latin america because the risk premium of the levelecause

of the currency. everything is correlated. i think we start to see more differentiation. francine: are there deals to be done? is there a market that is more stable than others? to make aou have list, mexico is interesting because of the cheapness. russia is interesting because of the level of oil price. within asia, any of these could round a couple of percent because of diminished trade tensions. i would focus outside asia now. tom: you mentioned the mexican peso. brazilian real, a huge opportunity. does it strengthen back to what we saw earlier, back to that three level? john: i think three is far. i would not be surprised if it rallied another 5%.

this does not have as high an interest rate as it used to have. it is moving in a healthy direction. there is a fiscal challenge ahead but the risk premium is high enough and there is an orthodox set of policies that seem to be in focus. tom: as you remind me daily in our emails, no one got lulu wrong more than me. are we going to do that again? you mean are people too optimistic? and they aremistic not on board what could be a resurgent economy? john: investors have a balanced l where theyi see a balanced market that could be helpful to markets. they see a market which is not cheap. is not as cheap as it

was after the election. people are missing a value opportunity. improvingarming to an story where the risk premium is high. francine: what does the dollar do? john: it is down a couple of percent over the next couple of months. it is within a range -- tom: bit too -- francine: between? john: plus or -3% of where we are now. is where gains are not going up in the next six months. may be even higher versus sterling, lower versus the oil currencies, canada, and latin america. francine: john normand, thank you so much. up, paul krugman, city

university of new york and nobel prize winner. he has interesting thoughts on austerity. we will ask him about the periphery countries in europe. that is up for clock p.m. in new p.m. in newcloc york. this is "bloomberg." ♪

>> he was a fine man. i met him on numerous occasions. he loved his family. andas proud of his family loved his family. he was a terrific guy and he led an exemplarynd life. his family, our country, and he served america with distinction all his life. has madeent trump clear, we will be keeping the family in our prayers and we will be remembering the life and service of president george h.w. bush. of the fathers of the german reunification and we will never forget that. >> president bush was a great

friend of australia and democracy and freedom and he fought for these things all his life. tom: there will be services wednesday at the national cathedral before the remains are removed to texas. our service is michael mckee. someone who covered george herbert walker bush. -- that single sentence. the berlin wall fell. did it fall because of ronald reagan or because of some other reason? michael: it fell because of some other reason. the model was unsustainable economically. as communications improve, the people could see what was going on in the west and it put pressure on the soviets. it was not the fact that they wall fell, it was what happened

afterwards that distinguished george bush. it successfully by keeping the united states behind not the soled superpower of the time, taking a lead role that would have made it difficult for those countries to emerge. them forward to how he managed the gulf war. it was the way it was before in that he always wanted grace, he wanted to take the high road. michael: the thing he did was put together the multilateral coalition and with u.n. backing so he was not a rogue actor. the victory was so quick and devastating that he decided he did not want to push on to baghdad but his argument was we do not want to continue the

slaughter and we need stability and if we eliminate saddam, after him, whom and that became the problem that his son faced and never saw. tom: the washington post, i thought he captured it, the kind of conservative that the president was. shrewder bush was a politician than we remember. sawas a conservative who tonge and reform necessary the work of conserving what he believed to be a good society. hoped for ao say, i time when we did not have to become angry. that was the weekend broadcast. what was interesting how we all got wrong the magnitude of the conservative movement that bush the younger represented.

no one saw that coming. michael: we saw that coming with ronald reagan ascending to office and george h.w. bush adopted positions that were not his own. along the fact that he was the last world war ii veteran to serve, he was the last of the werehower republicans who more liberal than counterparts in the conservative movement out of the west. he adopted many of those programs to get elected but did not govern that way. tom: we have to leave it there. much more to talk about, as the nation remembers george herbert walker bush. we remember the conversation on bloomberg surveillance. not only do we have richard clarida, the vice chairman of the fed. we have got michael mckee afterwards to distill comments. you cannot do better than that. coming up, richard clarida, after the powell speech.

we will look back at the profound research of richard clarida at columbia university. do not forget the markets with a lift. the dow up 500 points. and off the trump tweet silence from beijing. kevin cirilli is in washington and will give us perspective on the life of george herbert walker bush. richard clarida in the next hour. president macri of argentina this afternoon. this is "bloomberg." ♪

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trump-xi meeting. silence from beijing. there is great uncertainty over the timing of the trade war. useful?ot plot we consider the science of monetary policy. a conversation with richard preparesnd washington for a wednesday service in remembrance of president bush. this is bloomberg surveillance, live from new york, i'm tom keene. with me, francine lacqua. with all of this, i believe we are going to december 11th, a critical vote for prime minister may. is that on? francine: it is. a lot are talking about nothing else. it was interesting to catch up with paul donovan. even if there is a second referendum, people have brexit fatigue.

the day is your interview with richard clarida. speech, the powell gives us great hindsight to look forward into 2019. we will do that with the vice chairman in about 29 minutes. , aer today, erik schatzker conversation with the president of argentina. look for that in the 3:00 p.m. hour. your first word news, here is sebastian salek. sebastian: president trump calls his weekend trade truce a deal. has agreed to postpone a planned tariff increase on chinese goods for three months. president trump tweeted china duties on to remove american-made cars. they still have difficulties on intellectual properties. saudi arabia and russia extended

their agreement to manage their market. it leaves the door open for a meeting in vienna. november was the worst month for oil prices in a decade. qatar says it will leave opec. it wants to focus on national gas production and it has cut -- saudi arabia has cut trade and ties in the last 18 months. italy appears to be willing to change his budget that has been rejected by the commission. the commission has said the deficit is too high. the tone of the discussion has changed. the italian authorities signaled their willing to make adjustments to their 2019 budget. it is worth noting that the current requirement is deviating from the requirement.

it will require correction of the plan. sebastian: global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm sebastian salek. this is "bloomberg." tom: thank you so much. let me get to the data, a wonderful set of guests. futures up, s&p futures up 48. dow futures up 490. the euro with strength. almost 16.24. stronger remnimbi to 6.89. looking at am treasuries, you are right to look at treasuries. in theket is pricing trade truce we saw between the u.s. and china. see bond yields gaining, stocks gaining, and i am looking 6 as we hear from

canada, russia, saudi that they are willing to cut output. tom: let us get to the conversation. william priest with us. his book is iconic. we will talk to him about the use of cash and the value and the new trend to emerging markets and we are thrilled to bring you on short notice, jonathan fenby of ts lombard. his definitive volume on china. got to rip up the script after your wonderful volume on france. i must get your opinion of the character of these protests against mr. micron in paris. in paris.ron john: they are disorganized but widespread.

those make it difficult for him to know how to respond. he has gone on television and saying i understand your pain but it is not having an effect. of 1968?t a redux do you buy it? john: not in some ways. cron is pretty solitary. the people heve can talk to, the social dialogue going on that could reach protesters. limbnk he is caught on a at this point and this is going to be a big test. tom: let us name another book for you "the history of modern silence." what is the character of president xi's silence? are: i think china and xi

trying to formulate a strategy now. they have been caught by trump for most of this year. they did not take him seriously enough, his threats seriously enough. they have got breathing space and they have got to use this to decide how they are going to approach what is going to be a long-term confrontation with the united states. francine: why is there a truce? is it because china is suffering or they want to see the tariffs -- see the effects of the tariffs in june? john: they want to see the effects. some kind wanting of deal to come back with. he is going to say the threat of tariffs coming in after 90 days will act as a lever on the chinese. francine: will it stay?

do you see this staying? john: let us see how this plays out. it is difficult to predict anything with trump. china is what they are going to have to do. fit china'sing to response to this period of cooling off, into the broader economic program. francine: who needs this more? the fed may be dealing with a downturn and that may be impacted by trade. we are hearing about this slowdown domestically in china. john: china, this will be welcome to china. what they have found is if had the tariff offensive coinciding with a slowdown, with this quandary of how to keep up growth well deleveraging which

is the main concern at the moret and the slow down is the effect of deleveraging than the tariffs. you do not need problems at the moment. tom: jonathan fenby with us. richard clarida will join us. also with us william priest. your book is definitive on shareholder value. this is the bill priest chart. this is the chart. a proxy, the as depression on the left and the challenges on the right. how do you take the distraction of john fenby's world and study it but ignore it in your pursuit of shareholder value? william: shareholder value is driven by free cash flow. it drives every business. accounting does not capture all the elements of cash flow.

there are assumptions in deriving earnings but you cannot hide cash. allocation of cash, you can pay a dividend, paydown debt. tom: i'm going to give you a sixth thing and that is collapse. they were there and had free cash flow. william: when you look at a accounting and the massive nations employed at ge, i have never thought that balance sheet was in as good a shape as it was purported to be. what we are witnessing now, a question of solvency in accounting. there is a lot of debt that needs to be taking care of in ge today. it is not a name we own. francine: how do see the american companies changing their supply chains? this goes back with the trade war.

are we going to see more assemblies in canada, chinese components, to get away from the trade war? john: we are seeing planning for that. one of the difficulties is to know how heavy the tariffs will be. change will not need to supply chains. they are thinking of that. the other will be for the south , the extent toan which there is relocation there, staying within the region but making the stuff somewhere else. tom: jonathan fenby and bill priest. i want to quiz him on shareholder value into 2019. in moments, a conversation with a vice chairman of the u.s. federal system.

one thing we will look at is the idea of the press conferences into 2019, chairman powell's communication with the public. richard clarida at 6:30. this is "bloomberg." ♪

sebastian: let us get the business flash. unilever is expanding its presence in the world's fastest-growing economy. it has agreed to combine with glaxo india, for $3.8 billion in

stock. nestle had showed interest in acquiring glaxo india before. there was a big takeover in the u.s. industry. nexstar has agreed to buy tribune. the deal would create the largest owner of local tv stations. they next iphone will not be able to connect to networks. untilplans to hold off 2020 two injured his phones that can use five g networks. it may make it easier for rivals to win over customers. apple did the same thing with 3g and 4g, waiting until problems were resolved. francine: thank you so much. jonathan fenby and bill priest back with us. jonathan, you are an expert on china. you know firms like not many people do. vest protests are challenging president macron and

have exposed this rift. how does this end? can the president control these? john: it is difficult. what you have got is a broad search of unhappiness -- surge of unhappiness. on top of it, a small group of violent protesters who you can see in paris were ransacking shops and running wild. francine: if you are an investor, why would you invest in france now? unreformable? john: this makes it more difficult. he was on the path to reform. he is going to have to do reforms which hit the welfare system and that is going to arouse of unhappiness which i referred to a moment ago.

has established a direct relationship between himself and the french people. there were few intermediate bodies he can deal with. francine: were the attacks -- was the tax on fuel a mistake? john: i do nothing to was a mistake. francine: why not offer incentives? john: the way it was done was badly handled and that has been one of the hallmarks of his administration which leads to the feeling here is this president ruling from on high and expecting everybody to do what they're told. tom: we will bring in headlines that have just come out. help me with that. headlines,hinese downward pressure on china economy is rising.

, downward pressure on china economy is rising. it is confusing. with us is william priest. this goes to your major concerns which is reverse globalism that we could see. 2019 and withinto the domestic pressures china faces. william: with regard to globalization, what we have seen is the law of comparative advantage is one of the basic laws of economics and it is irrefutable. 1950's to 19 89, profit margins of manufacturing in the united states were flat. from 1989 to last year, margins double. in 1989, we had the fall of the berlin wall and a bunch of people who were not part of our world came in. the chinese entered, they brought people, they brought no

money and no technology. the labor force available double in that. . -- doubled in that period. arbitrage,jor labor the development of sophisticated supply chains, we had lower taxes and interest rates. months, twot 12 will be going forward and to will reverse. rates are likely to be hi gher, the labor arbitrage is gone and tariffs are causing a nightmare. you up withto say our remembrance of president bush with what we see now with president bush. we will mention this with richard clarida between an america looking out and looking in. what is the price given your dynamic of a zero-sum america? william: one of the benefits of

globalization is no one wins in a trade war. the key to a trade is the realization that even if i am a then youducer of goods are, the difference is the relative failure on my part, as long as there is a difference, it pays to trade. take the lawt to of comparative advantage and run that backwards, it is lose-lose. we will see that played out. perhaps we get a change in tariffs. we are going to have a stall in global growth in my view. francine: thank you so much to bill priest and jonathan fenby. coming up, we speak to the president of argentina, the host of the g20 meeting. do not miss that interview with erik schatzker. this is "bloomberg." ♪

surveillance. good morning. francine lacqua in london, i'm tom keene in new york. andge herbert walker bush kevin cirilli joins us. he is our chief washington correspondent. i want to touch on a delicacy which is the feud between president trump and the bush family. what would you expect to see wednesday at the of the drill?

how will this play out -- at the cathedral? how will this play out? kevin: it will appear the trump's are going to participate hashat the president labeled a national day of mourning, the funeral set to be wednesday at the national cathedral. hisformer president bush, casket is set to arrive here in washington today. it will be on display at the capital on thursday. after the funeral in washington, it will return to texas for a second funeral. there is no question there has been a tense relationship between the bushes and the trump's. president suggesting he would be open to a short-term fix to keep the government-funded for a few more weeks.

onis scheduled to shut down december 7 at midnight. the nation can mourn the loss of the former president bush. of thethin the mourning president, all of elite washington will lineup. tell us how the new conservatives of the gop, how they will treat this remembrance of another time? kevin: the condolences have been fast and i think you touched on something. we saw this with the late funeraljohn mccain's and it is not just republicans who are mourning the loss of what they perceived to be a bygone era in politics, one a bit more cordial and perhaps more temperament. that said, this is president trump's republican party now. --will still be witnessing

what we will be witnessing is a bit different in that he will be participating. cirilli, a cease-fire in the politics of washington as the nation remembers george herbert walker bush. we will continue. coming up, a conversation with richard clarida. he has been a wonderful friend with bloomberg surveillance and over the years at columbia, now as vice-chairman of the federal reserve system. huge responsibilities to advise the chairman. this is bloomberg. ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience.

my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. ♪ there's no place likargh!e ♪ i'm trying... ♪ yippiekiyay. ♪ mom. ♪ tom: bloomberg surveillance worldwide. francine lacqua in london. i'm tom keene in new york. silencetrump tweet, xi

data check. i look for that to come in a bit. upures are up, dow futures 500 something a bit ago and they come in a little with the curve flattening. against showing strong a weaker dollar. willrely mentioned qatar leave opec and you see some of the dynamics, up $2 on west texas intermediate oil. a churn of the market, a lot of things going on with what we saw at the g20 meetings. we welcome bloomberg television and all of you listening worldwide on bloomberg radio for a timely conversation with richard clarida. say he is vice chairman of the federal reserve barely

describes his academics, of columbia university. we welcome you. richard clarida: glad to be here. tom: a lot to talk about, your speech and chairman powell's speech. i want to go to a quote from the president george herbert walker bush. this sums up trade. " we do not want an america that is close to trade. identify the to risk of a zero-sum tone. if we diminish trade, what is the price? richard clarida: in terms of the outlook for the u.s. economy, trade is an important part. i do not think we are going there. trade is an important part of the global economy. the u.s. economy is in good shape and we can talk about scenarios but the outline is solid. is thethin the trade

idea of exports and imports within america. how does fed policy linking to these political debates or do you feel it will be more removed to monetary policy? richard clarida: i'm not going to get into politics. to policy is important making sure the u.s. economy achieves maximum employment and that is the mandate given to the fed by the congress. we are focusing on what we need to do to achieve that. tom: chairman powell focused on financial stability. should that be a mandate? richard clarida: the way i think about financial stability is it is important and the fed has an important role. , as we are, price stability and full employment, that will contribute. that is an appropriate balance. tom: on friday, john williams of

san francisco and of the new york fed with what i thought a sharp speech. i want to pierce some quotes we have. -- i want to hear some quotes we have. price level targeting including its offshoots such as nominal gdp targeting promises to overshoot the target inflation up for inflation under shoe. do we need a new regime at the fed that looks at the combination of real economic growth and price change? richard clarida: i think now the fed has a framework in place since 2012. it is serving well. a lot has changed. john williams emphasizes is we are in a world risklessuilibrium

rates. in a future downturn, there is less room for conventional monetary policy and central banks need to be as worried about keeping inflation as target as going above the target. that said, next year, the federal reserve system will be doing an assessment and review of our existing framework, seeking input from a range of experts and stakeholders and we are going to get a sense of ways we can refine our framework. tom: so much of that comes from domestic analysis. every conversation i see is on the global economy. is there a disinflationary impulse out there separate from the fed, separate from america that you have to consider? richard clarida: those have been at work since i first started doing your's show, 20 years ago.

globalization can have a .isinflationary impact we are in a world where central banks are focused on keeping inflation away from disinflation. tom: let us go to columbia. 101.re in econ ?hat is a powell put michael mckee says powell put is media language. what does it mean? richard clarida: mike got that right. i do not think of it as a useful way to describe what the current federal reserve is doing. i think the term came about 20 years ago. 3.7%we are focused on is unemployment is pursuing a policy that make sure the economy can sustain this. it is not a useful concept. useful? the dots

you never taught that at columbia. there has been experience with ford guidance. the idea of le boom cristal. can we lessen them? fedard clarida: i think the is looking at ways we can refine and improve our communication. the projections have been in place since 2012. they are not going anywhere but they may evolve. tom: defined data dependency. isn't part of the literature or wasn't invented for the moment? it goes back 25 years to the work of john taylor and it has evolved.

the main point is you need to be studying monetary policy based on the economy. booming economies require different policy than depressed economies. there is a second point is that that argues arld second form of data dependence. it is selling us about the ultimate estimation -- ultimate estimation -- where is the level of full employment? those are key inputs we have to infer from data. overshoot, the fed reacts and the parlor game we talk about, what are the risks of an overshoot of too much inflation? torres.to craig what is the risk of an overshoot? richard clarida: right now,

inflation, depending how it is measured is at our target. we have as said symmetric objective around 2%. it is not meant to be a ceiling. we have operated below 2% and we can operate above. we want to run policy that gets inflation back. tom: this is critical. you say you have a symmetric projection. tric world.ymme this is too important. it is. clarida: getting back to your question, in recent decades, the asymmetry has been towards disinflationary forces. the policies have to offset that. tom: here is 1989. bring up that equation.

this is blind are talking about the dark arts. i have got to spell this out for radio. it equals the summation of a big beta. this is the world you guys worked in in 1989. does that math work anymore? richard clarida: it is a starting point. any model is a starting point but it is not the destination. tom: what is? richard clarida: the right policy that understands the economy as it is not how it might be approximated in a model. i have never thought of being handcuffed to a model. it is a good place to start. tom: those models and intuition, you are going to have to advise chairman powell. princetonian from with one of our theories, how do

you work with the chairman? you are not giving him equations. richard clarida: we sometimes talk about equations. that is a small part of it. i have been working with him for several months. we have a great relationship. our backgrounds complement one another and he has more experience as an official than i do. when i attended my first board meeting, that was his 50th. there is a range of perspectives that the fed. is a productive environment. tom: what do hear from the reserve bank presidents now? richard clarida: i am not going to discuss any conversation. tom: i have got to make news. richard clarida: i am not going to be making news today. with havingfited the 12 reserve banks which

represent their geographies. theg part of the book is granular access to information they have in their districts. it is an important part of our process. tom: richard clarida with us. this will be on all our digital products. coming up, the laureate from the krugman,ersity, paul much to talk about on international economics. on richardomments clarida. this is "bloomberg." ♪

sebastian: this is bloomberg surveillance. i'm sebastian salek.

out any has ruled chance it will return to its abandon bit for nxp semiconductors. present xi jinping said he would consider proving the deal if it is brought to him again. qualcomm scratched its bid after waiting almost two years for approval. australia, shares of graincorps soared after a goldman sachs group offered $1.8 billion. it represents a 43% premium to the last closing price. andbidders are australian five years ago, the australian government rejected a foreign bid for the handler. a billionaire has died. family's chain business into an empire. he was 92. that is the business flash. tom: thank you.

after a conversation with richard clarida, headlines around the world. we advance the analysis with michael mckee, our international economics and policy correspondent. what did we learn? michael: steady as she goes. he did not change any fed positions. they're looking at inflation, reacting to inflation and the idea you want to keep it there. an indicatione us of where they are going with interest rates but that they are going to be watching the data. tom: i want to understand why he will not answer the question which john williams brought up -- why do they not target nominal gdp? larry kudlow brought this up. real gdp to a analysis. should we get back to what williams was suggesting? michael: i am not an expert to tell you which is going to be better.

there is a movement towards changing the way they look at it. the point is, there is a review underway and they are going to get to the point where they make decisions and they may move toward targeting. rich noted the fed is in a world where inflation does not work the way it used to. phillips curve -- they are not ready to abandon the phillips curve but they keep adjusting it. it is flat and it is not telling us what it used to so they are looking for ways to explain the economy which is one of the strengths he brings to the fed, to update the models they use. francine: you have just come back from the g20. talking about monetary policy and if not, should they have been? michael: there was general talk in the sense of the g20 trying

to keep the economy growing. we are falling out of expansion and some countries are starting to slow down. most of the talk was fiscal and trade related and could not get away from that down there. francine: there must be a link. how should the fed look at trade tensions? michael: the fed is looking at the impact of tensions on growth. the theory tells you inflation is going to rise if you have a trade war because consumers are paying higher prices. it has not shown up that way so far in the united states. is it coming? we do not know. it should crimp growth. substitutionimport in the united states, that is a longer range project. tom: thank you so much. let me bring up the dot plot.

in any given moment, there are different opinions on dots and up we go. that will be part of this conference questioning into the year. got more coming up across bloomberg surveillance. stay with us. this is "bloomberg." ♪

tom: bloomberg surveillance. francine lacqua in london. i'm tom keene in new york. bill priest with us. what were your thoughts as you heard from vice-chairman clarida? what does it mean to you to hear the mysteries that are out there. i think the fed is charged with doing two things, making sure we get growth and keeping inflation ago. this mandate has been around. things have shifted. things thatly two drive gdp, growth in the workforce and productivity. of demographyre

today, it is a struggle to get beyond 2%. tom: what is so fascinating about what mr. priest mentioned is applying it to mr. carney and to england as they go to this vote. it is remarkable. whatine: you cannot ignore is happening in oil and politics , whether it be brexit or italy or france. how much do you think about global matters? william: we think about the global macro a lot. on a quarterly basis, we put out a piece on that. one of the biggest affects, the world is moving from a world of atoms to a world of bits. water, you cannot have that water and drink it. that is not true when you move to the digital economy. the economy is measured in bits.

they are free, perfect, and instant. it is changing the return on equity formula. if i can substitute technology for labor and hold revenues caused in, margins go up. francine: does that mean the fed needs to look at the economy differently and is that how you explain lower inflation? william: i think it will be appropriate and i think the database perspective is correct. francine: is that a technology concern? william: technology is going to be good for us. there is a transition and we read about the number of jobs displaced by technology. history has a way of showing that what is displaced may be replaced. that invented this phrase, shareholder value. how do you respond to the gloom

that happened to come out on any given friday? william: i would not say there has been so much gloom. corporations, when they look at cash flow, there are only five things they can do. a dividend, buy back stock, or reinvest and acquire. as long as you focus on that and make sure there is a differential the between your expected return and your cost of capital, you can win. qt has been a problem. tom: next time, we will have you on. william priest. there is news flow and we have a wonderful news in flick did upon all in washington. p.m., listen for

kevin cirilli, a new radio program in washington, looking forward to this. kevin has all sorts of relationship in washington that will add value in the 5:00 hour. this is in washington. congratulations to kevin and his team on that project. on foreign exchange, we see the up 42.xi, futures please stay with us through the day. this is "bloomberg." ♪

♪ >> we have a objective around two percent. be aercent is not meant to

ceiling. we could operate somewhat above percent. of clarida.c putinn president vladimir paved the way for production cuts. win.'s g20 president trump tweets china will reduce and remove car import tariffs. stays mute. market goes full risk on. welcome to "bloomberg daybreak: alix field.m preparingapital is for a presidential funeral on wednesday. passedh. w. bush