Skip to main content

tv   Bloomberg Surveillance  Bloomberg  November 15, 2016 4:00am-7:01am EST

4:00 am
francine: top picks. team -- trumption plus transition team top fundraiser. a transition to a capitalism that works for everyone? theresa may want -- might opt out. a politician is the subject of a criminal case. bloomberg surveillance.
4:01 am
i am francine lacqua in london. it has been a week since the u.s. elected donald trump. a former goldman sachs partner has been recommended by donald team to servetion as treasury secretary according to people familiar with the process. if confirmed, it would reaffirm a pattern of loyalty to trump's low -- loyal allies in early appointments. we look at what this tells us about the new white house. as trump's the ministration takes shape, what does it mean to the job? europe? 11 years in, german chancellor angela merkel is seen as a beacon of stability for the continent. we consider what might be on merkel's mind, should she run again. if she does not, where will that leave europe is to mark meanwhile, theresa may says u.k. companies have a responsibility to show how capitalism -- how capitalism can work for everyone and soften the troubles of those
4:02 am
left behind by globalization. how britain's will navigate the world as they exit the european union. investors see a 50/50 chance of the euro falling to parity with the u.s. dollar in the next year. we bring you an analysis of what donald trump means for the market. first, we have a great interview for you this morning with has a mental lavrov so -- with jose manuel barosso. he is with manus cranny. manus: you are right. i have a former president of the e.u. welcome to bloomberg. and he for taking the time. taking theu for time. populism is on the rise. trump is set for the white house. we have had brexit. how much of a risk is populism to europe right now? jose: it is a risk and the victory of mr. trunk has encouraged those forces.
4:03 am
for some time, we are seeing in europe and also the united states forces that are against civilization, basically, and they try to give simplistic answers to very complex matters, and they try to benefit from a distance, a growing distance, between the man or woman in the street and the so-called elites. so there is a risk of this populism. in europe, we have seen that this populism appears very often linked with chauvinism, nationalism, including xenophobic movements. france, germany, and the netherlands are going to the polls. any to close that gap. a piece of advice to those leaders today? speak to thed people, and be able to understand what the concerns of the people are. so far, the mainstream forces in europe, from centerleft to center right, have not been able to articulate answers to the concerns of the people in europe . namely, after the financial crisis, social concerns on one
4:04 am
side, and also concerns regarding refugees and illegal migrants on the right side. u.k., there was the obsession with the special relationship between the united kingdom and the new president-elect. europe needs its own new relationship with the united states of america. how much of a risk is that, given the rhetoric you have heard about stepping back from big trade agreements, the risk to europe? jose: some risk, but i believe we will adjust. the word's adjustment. the world has to adjust to president trump. but president trump will also adjust to the world and europe. in united states, this is the biggest relationship in the world, economically and politically. investment, it is by far the largest and with security we have nato, the strongest military alliance ever.
4:05 am
so i hope that people are able to recommit to this relationship. manus: let's pick up on the nato made, because trump has many statements in regard to people paying their way. what should nato do right now in this intervening period before the president-elect steps into the right house? :as a: a very -- has a call as quickly as possible a summit of nato. it is very important that the new american president, together with all these presidents, reaffirms the commitment of the transatlantic committee. there are some countries in europe, from poland to the baltic countries, that are extremely worried because they got the perception sometimes that the president-elect of the united states was closer to moscow then to the commitments taken inside nato. important it will be to reassure the -- to reaffirm those commitments. commitments are not necessarily against russia. on the contrary, i believe we
4:06 am
should keep dialogue with russia. but it is critically important for nato members and for the world to know that stability will prevail, and that the big alliance that has been led by the united states of america is not at risk. manus: brexit is the other huge issue at play. there is posturing on both sides, was a man well. -- jose manuel. how do you perceive the british decision as they go toward invoking article 60? jose: to be honest, i think the british government has not decided exactly what strategies follow. there are doves inside the , between ae party more tough position hard brexit those-- brexiteers and that want to remain in the single market. before you have the elections in france and germany, it will be difficult to articulate the position on the other side.
4:07 am
we are going to see for some time turbulence. it is going to be very complex, the banking negotiation. i hope in the end that cover my's will be found. the question is, what is the level of the compromise? athink it will probably be low common denominator, because there are many different positions among the different member states of the european union. manus: one or two different issues, just to finish. on brexit, do you think that europe has grasped the violence brexiteers? of the jose: i think europe could have done more to avoid a separation of britain. i believe that was not always the right signals that were coming from brussels. that, also, there are huge responsibilities in london, because, you know, when you are bashing the european union for more than 20 years, you cannot expect people to change their mind in two months,
4:08 am
and that is exactly what happened. manus: you said to be fair, europe possibly could and should have done more. jose: i think it is important to be constructive, you know? i think constructive people on -- weides -- not because are living in democracies. work for the best. there are opportunities. for instance, i believe it is important to continue the conversation with the united states, the transatlantic trade and investment ship partnership -- the trade agreement i had the honor to lunch with president obama. it is good for britain to be part of it. they could happen if there is sufficient intelligence and goodwill. there is a huge economic space including europe, the economics -- europe, the united states, and britain. i hope the policies will not close trade. closed economies will not prevail.
4:09 am
manus: was a monroe barroso, thank you for coming on bloomberg. how ironic, i come all the way to rio to see you. europe should possibly have done more to make sure brexit did not happen. but when you are something for 20 years, you see what happens. francine: hindsight is a great thing. thank you very much. manus cranny in rio. treasuries are rising, holding a on track ford them the worst month in 13 years. how should fixed income investors position for the trump white house? i am pleased to welcome pimco's managing director. mike, always a pleasure to speak to you. did me a sense of how you see what has happened in the last 10 days. if you look at the bond movement, i do not understand whether it is just on trump, or we were already in a trend. otherwise, it is a pretty brutal move. mike: i think the catalyst in the last few days has been the u.s. presidential election. that, you had
4:10 am
volatility around brexit. i think you have got the two effects. as you think about the last 10 days, i think the most important thing for us is this potential purely on focus monetary policy to potentially a better balance between fiscal and monetary policy. that is the early message we have got out of the u.s. in the last few days. and you can see that in market responses. the things that have moved -- obviously, you have seen emerging markets. but when you look at the bond markets of the u.s., you have things like inflation exportations -- expectations pursed up. the curve has deepened, seems rational given the information we have at the moment. the information set at the moment is clearly an imperfect one. francine: a rational response, but no one had predicted it. mike: no, no. so given what we knew -- given what we knew now -- i think you can look at where we are. our sense has been for a wild have you know, the markets
4:11 am
under price inflation expectations, especially the u.s. i think we're pretty comfortable with the fact that break evens one moved up toward 1.8190 the 10 year. the 30 year has been coming under some pressure in nominal. i do nothing many people expected the results, but given the information set we have gotten now, i think we can rationalize the moves. the question is, what is the dominant effect? at the moment, the markets have been focused on fiscal policy of fiscal policy. there has been volatility in emerging markets. the dollar has been on a tear. i do not think it is a one-way ticket. the things we are looking out on the one hand is, it is fiscal policy. and on the other, the response from the rest of the globe. it is very similar to some of the rhetoric we saw 12, 18 months ago, where the u.s. economy looked like it was doing very well. the rest of the world was under a bit more pressure.
4:12 am
that seems to be what we do at the moment. francine: i am looking at a chart that tracks 30 year, 10 year, and two-year treasury yields on the bloomberg. 30 year yields were surging past 3% on monday. i think we saw a technical indicator showing the 10 year treasuries were the most oversold since 1990. what are you buying at the moment? mike: yes, if you look at the 10 year, then clearly you are going to get a point at which you get some pullback. you are not going to go up in a straight line. i think for us, the things we have been looking at -- we were fortunate we came into this with a relatively defensive portfolio. so where we see dislocations, we are having -- we are happy to take advantage of those. he have one or two portfolios where we are happy to average in. i think our basic sense is that what we are getting is -- clearly, we have got a shift in policy coming down the tracks, but, you know, reducing underweight situation when we
4:13 am
have them seems like a reasonable thing to do or start to do, and keeps the powder dry. so far, credit markets have been pretty tame. if you get some volatility there, then that is something we would look at as well. francine: mike, tell me what your call on kilts is -- on gilts is. we are hearing from marconi in about 45 minutes. what you expect to hear him say on inflation and the path forward? mike: if you look at the u.k., you have a situation whereby we expect the inflation rate -- we get inflation numbers in a few moments -- we expect the inflation rate to get comfortably above the 2% target. our forecast is that we get to 3% by the end of 2017, beginning of 2018. it is a tricky message to put through. his message will be, i am reasonably comfortable looking through that, so no major problems there. i think it is not going to be a one-way ticket. he saw a quote a couple of weeks ago now on sterling and the bank not being "indifferent" to the level of sterling. i think what we should expect
4:14 am
is, our basic view is the bank would be pretty comfortable leaving all policy where it is for the time being, and seeing what the chancellor says. probably and the programs they have got going in q1 of next year, when they run through. and sit on the sidelines for a bit and see how the global economy performs. i think that is our basic expectation. obviously, the term premium has risen in the u.k., so we start to see more interesting levels. now, i think we would say we would look for a bigger backup for getting too enthusiastic. francine: hold that thought. i want to get back to you and also go back to italian yields. first, let's introduce our guest, richard jeffrey, charge litchfield at eurasia, and jim hertling, who covered most of the crises so far, including the greek crisis. off withlet me kick you. the markets seem to be thinking that fiscal spendings are great, he will get it through donald trump, and we will be able to
4:15 am
replay america. true or false. richard: i think the markets are wondering about that. a number of things are stacked on the list against bonds, reflation being one of them, higher trend inflation being another issue which is for a obvious, and of course rising interest rates. what i think is going to be interesting in the u.s. a here is that it may be a model for other western authorities in if the federal reserve starts a sequence of interest rate increases in december, and we start to see interest rates rise maybe by a quarter percent every two or the months, and if that is accompanied by rising growth rather than depressed growth, then i think other central banks are going to look at that, and maybe come to the conclusion that perhaps it is low interest rates that in some way have a causal relationship with the very low growth rates which we have been reporting in the west. i think that is true, by the way. mike, that is
4:16 am
something we have been expiring in the past. he goes to the theory of this. talk to me about italian yields. the believe a donald trump presidency means we can see more extreme politicians coming into italy when the referendum happens on december 4, if matteo renzi steps down, and the same for france? what does that do for the risk to bond yields? mike: are cents for the italian situation is that the referendum looks -- again -- a pretty close call. we have heard that one before. the italian situation, the applications that has -- they are scheduled to have elections in 2018. renzi has said he would step down. we think it is possible there would be a caretaker government. it seems possible he would run the caretaker government through until 2017. -- through 2017. i do not think we would necessarily expect the transition to a populist party on the back of the referendum in a few weeks time. have seen a lot of pressure on italian yields, as you know, and the spread is backed up to 1.75, 1.80 against wounds -- against
4:17 am
bunds. we would not expect the referendum to be the catalyst for a major, major reversal of the political situation in italy, in large part because of the -- if the referendum failed, you continue with the current political gridlock, which is part of the problem. are not particularly surprised by the backup, but we do not think this is a game changer for the italians. francine: quickly, charles, do you think the markets will price in more extreme politicians? you think people will freak out and say the polls were wrong for brexit and donald trump, and i'm going to automatically assume that a populist politician gets in? charles: certainly, i think they ascribe complacency to the sharks that took place with the brexit vote and donald trump's election. therefore they will, perhaps in a slightly lazy way, assume that is coming in other countries,
4:18 am
ignoring some of the specific factors that make it different. for instance, in france and germany, it is different to donald trump's election. marine le pen does not have the endorsement of one of the mainstream parties. i think it is going to be quite hard for her to get past the second round of a two run system. same for germany. it is a proportional system. domination of parliament will still not be a government. francine: what are you looking for? been flat to underweight induration. our plan is to reduce that underway. in terms of spread products, we have generally been focused on asset-backed securities, which have helped very well in this volatility. we still like that. ways youa variety of can do that, nonequity mortgages being a classic example. within the credit, we like u.s. banks. u.s. banks benefited quite a lot from what has happened in the u.s. in the last few days.
4:19 am
we think they are well capitalized. a decent spread. 125, 150 over. we like that market. a reasonably safe spread is the word for us, key positive carry, and give yourself some flex ability. francine: do you worry about the european banks and some of the spillover effects? i'm thinking about something that could be ugly on the markets -- italian banks, some of the german banks. there is clearly a few of the european banks who have some challenges ahead in the next few months. i think our basic expectation is -- we see this already, actually. it is quite interesting. if you look at italy, the thing that has got the btp market going has not been the italian banking system. as we see it, there will be a bubble through in italy. that is our expectation. you may get some volatility around the individual institutions, and on those particular days. we do not think that is going to be a big issue for the market,
4:20 am
because it has been there for a while, you know? there are various bubble-through options, even with the italians or the germans. bankingve been two weak systems for a while. they have muddled through for a while and will continue to. volatility in those institutions, but we do not think it will feed through to the broader markets. francine: thank you for your time. mike amey at pimco. we are back with our three guests through the rest of the hour. jim, charles, and of course our -- one of our editors in charge of crises has not slept in about 15 years. stay with us. plenty coming up, including how will america's shock election result on angela merkel's decision whether to stand again as german chancellor. we talked trump and foreign policy. as inflation numbers break, we focus on theresa may's big speech last night and what it means for brexit. and we get the latest on an
4:21 am
economy minister detained for allegedly taking a bribe. ♪
4:22 am
4:23 am
4:24 am
francine: i am francine lacqua here in london. 's presidency -- what does it mean for europe? richard jeffrey is a chief executive. charge lichfield is an associate at eurasia group. jim lichfield is with bloomberg. you have covered many european crises. does this feel different?
4:25 am
is it more existential? me -- it seemso like the building blocks, the foundations of -- of postwar europe are under the spotlight in a way that they have not been since the reagan administration, --uppose, since the, um since he had his nuclear program, the missiles to germany. au have a president -- president who raised questions about nato, who wants to, you know, make friends with -- with putin. and putin obviously has -- and trump bills himself as a master negotiator. and putin has found interests in abroad. yes. francine: does this mean may need to redefine capitalism? does this mean we need a firm society, or does this mean something else? are think a lot of leaders
4:26 am
taking note of the surprising results over the last few months and have correctly deduced that there is something wrong with the way people perceive how they are doing, how governments are delivering a just society for them. , after thees when diagnostic, the leaders do not necessarily have solutions that are particularly convincing. theresa may on the steps of downing street had a correct diagnostic, but we have not seen how she plans to change the rules of the game or make it seem fairer since the election. or donald trump, we really don't know what his policy is. the diagnostic is correct, but we do not know what the policy will be. francine: i want to ask everybody, is a donald trump presidency the same as brexit? that is what we will explore next. ♪
4:27 am
4:28 am
4:29 am
francine: are getting some breaking news in just a couple of seconds.
4:30 am
growth slowed to the weakest pace in your last quarter. gdp rose to 0.2% through september. this can be seen as a reminder of the fragility of the euro recovery in rising uncertainty. if former goldman sachs banker has been recommended to service treasury secretary. be theice is said to final decision. the national finance chairman has been considered the leading candidate for the job. russia has opened a criminal case against the economy minister. a $2 million bribe to approve the sale of the government's stake in a state run oil producer. he was detained yesterday in the act of receiving money.
4:31 am
notstry spokeswoman did respond for comment. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. upncine: let's get the pound or you. we have inflation data and we have it slow for the month of october. this is driven by the price of clothing. we understand that university tuition freeze -- these are coming down a touch. mark carney is talking about this with the donald trump residency. this montharlier dropped plans to cut interest rates again and the switch to more neutral policy. inflation was as low as 0.3% in may. now it is coming in at 0.9%. pound i imagine, this is the
4:32 am
break even rate you this is the pound currently at 12416. may says british companies have a responsibility to soften the resentment of those who feel left behind by globalization. she spoke yesterday in london. do that believe as i liberalism and globalization continue to offer the best future for our world, we have to deal with the downside it show the we can make these twin forces work for everyone. francine: let's bring in our brings it at her. simon, when you look at the prime minister and how she positioned herself, is it different than when she was addressing the tory party conference.
4:33 am
she is talking about the case for capitalism. simon: this is a tact toward is miss. -- she wasme people talking about capitalism and sharing the wealth of capitalism. that's going to be a big theme for theresa may as it relates to brexit. i think you're going to see this effort the globalization and the stakes have driven british policy, she wants to see them the summit more to the roots. francine: you can be very business friendly and still want a fair world. is this her kind to prove she was business friendly? she is still very pro-business. simon: the next test will be what we see in the new year when she triggers article 50.
4:34 am
whether they escape the regulations of europe, that is something she will want to achieve as well. it's a balancing act for the theresa may administration. write theyou can read rules. is there an idea that we are seeing a new phase? charles: we just don't know yet. president trump has made some statements during his campaign which would make you think countries and have considered themselves close i lies to the u.s. have to rethink their system. how that operate in their economy, there is a resentment of some of the harsher aspects of capitalization and globalization that politicians are starting to understand. concerned,olicy is but still quite fit in the u.k.. toi think it comes down
4:35 am
delivering the growth to a wider group of people and it seems in the postrecession environment, that's true in the united states and the united kingdom. in the united states, unit have a new president-elect who is promising to deliver wealth to a wider group of people. , people.k. of course are wondering if this very successful economy could stop the g7 growth league is going to be held back i brags it -- brexit. the problem for europe is it's not delivering growth to people. the whole core concept of europe as a single market going back to the currency system is to generate growth within europe so more trade among countries is still generated. it's not happening. it is not generating growth. the eu is not delivering and that's why it's under such a spotlight. francine: is it really a less
4:36 am
fair society than it was in the past? is it because of central banks and money making the rich richer? think there are some cyclical factors that have not helped with the distribution of wealth. we have been able to see in a very low-inflation environment and environment in which productivity growth is very low and the benefits are not being disseminated widely. it's absolutely key. countries are not investing in they are allowing their employees and they cannot increase wages and allow them to enjoy growth as they have in the past. it's a real challenge to our system at the moment. yesterday, the prime minister indicated she was ready to forgo action in the market. would that be fair? simon: her emphasis today has
4:37 am
been on secure and control of the border and cracking down on immigration. that's a give and take with how much of europe will allow rather than a take. francine: does it work in these markets? the fact that people are expecting donald trump to spend spend spend and old highways and infrastructure, and the past, president obama had similar ideas and they were shut down for various reasons. >> that is one of the key points is he has delivered a majority in both houses. who wereublicans fiscal hawks are slightly more willing to consider investments and i think there is a trillion dollar package coming. even if that is combined with tax cuts, they are going to be willing to consider it. that will deliver more growth to
4:38 am
the united states. what does that do to the debt burden of the united states? francine: is this just in anti-austerity movement? i think there is a perception that the benefits of growth of been captured by a very small portion of the population. when you look at the diversions between top managers pay and the normal workers pay, there is a feeling that there is less social mobility within western society than there was 30 years ago. i think this is a challenge to the system. some of it is deeper than that. francine: thank you so much. we have brexit coverage. stay with surveillance. plenty is still coming up. why president trump could be opec's new best friend. russia detains its economy minister over bribes.
4:39 am
are we seeing the return of the divergent trade? this is bloomberg. ♪ francine: this is bloomberg
4:40 am
4:41 am
surveillance right here in london. in russia, the economy minister has been detained for allegedly taking a $2 million drive to approve a privatization deal. this is the highest profile detention ever. we are joined by henry meyer in moscow. was this expected? what is the reaction?
4:42 am
henry: totally unexpected. this news came in the early hours of the morning. the sense of shock is palpable in the business community and political circles. it's quite unprecedented to have a minister of this rank have handcuffs slapped on him. people are trying to come to grips with this news. francine: what does it mean for russia's economy and investment climate? henry: the theory some people have advanced as this is a wider campaign, this has nothing to do with the economy minister himself. it's an assault on the liberal part of the government which is been responsible for steering russia through its longest recession in two decades, keeping policy tight and if that's the case, that is very worrying to the investment climate and economy. francine: give me a sense, is
4:43 am
vitaminen as a crackdown? henry: it's impossible to say whether these accusations are founded or not. the president's spokesman has said they are serious accusations and they have to be proven in a court of law. what is clear there is skepticism about whether this is a real fight against corruption. businessof the main lobbying group was one of the people today who expressed that skepticism. francine: what are we looking for next? is there a timeline it? where is he being detained? is there a trial? will that happen in six months? henry: they are expecting the case to be in court. he has to have his detention approved. that may happen late today.
4:44 am
the question is whether he will be in pretrial detention or if he will stay under house arrest. the case will probably take a few months before it starts. these proceedings are going to take some time. ,rancine: thank you so much henry meyer there from bloomberg and moscow. let's talk about what a donald trump white house will mean to the energy market. about talking deregulation of u.s. fracking. what would that mean for the price of oil? let's talk to tracy in abu dhabi. opec's newt trump best friend? certainly the non-consensus view. there is some speculation that if he actually starts to deal, thathe iran could take a chunk of supply out of the market and that would help boost oil prices at a time
4:45 am
when opec is desperately trying to do so. the consensus at this moment in time is that trumps overriding policy, which is this america first idea, is not going to be good for oil prices. lessuld lead to regulation. that could put downward pressure on oil prices at a time when opec is struggling to remain relevant. francine: what are they looking at? the opec meeting is just two weeks away. the posturing is heating up as we get closer to this highly anticipated meeting in vienna at the end of the month. in particular, we are seeing one delegate familiar with the talks talking about what the saudi's want. they are the de facto leader of the opec group.
4:46 am
it looks like the burden of the majority of the production cuts will fall to them. they are talking about things like equal share of the cuts. in particular, one thing is emerging as a very strong sticking point and that is the idea of what production levels you freeze at. do you use opec estimates or do you use the production estimates of the own country. in the case of iran, they are pumping about 4 million barrels a day. to 3.7ys it's closer million. ironing the kinks out is going to be important for opec. we are seeing analysts say that even if we do get a production deal, it might not have the same impact given that donald trump has just got into the white house and the expectation is the u.s. is going to start pumping once again. francine: thank you so much. some more
4:47 am
we need to talk oil. we need to talk about foreign policy. do you have any looks into what a donald trump presidency means in the middle east? richard: the assumption is that because of donald trump's lack of experience he will fall back on republican advisers. you may see a similar policy to what was under george w. bush. the other view is since he is not particularly interested in foreign intervention, the u.s. footprint in the united states will retreat over the next four or eight years. francine: what is the thing to worry about? is it security? what does that mean for security in the middle east? >> security is the first worry.
4:48 am
as far as the russians are concerned, it's always good that the u.s. and russia have good relations. the relationship was going down a dangerous path under obama. the problem i think with mr. trump is he doesn't necessarily see the countries tween the u.s. and russia. he is very interested in esther britain's -- vladimir putin's personality. some countries are very close to russia and their own security is threatened i russia. francine: the market point of view, does this mean that russia becomes a better bet? it could go up because of iran. do we not know yet? richard: financial markets tend to not like extremes. one thing people would take
4:49 am
positively is that russia is less extreme. if donald trump is able to take some of the heat out of the situation, that will be regarded positively. ae issue is mr. putin is master politician and donald trump is a learning politician. naivete can cut through. maybe that will be to the benefit of the relationship between the two. there are still take issues between the west and russia and the suppose it russian aggression in various areas, which could reinvigorate that tension. i just heard that the view in moscow has changed since last week. there was some rejoicing in the kremlin at this surprise result. has had some involvement with the trump campaign. we know that in september they considered stopping this because
4:50 am
of the problems the donald trump campaign was having. they are coming back to the feeling that they are dealing with someone who is too unpredictable, though he is interested in dealing with them. he is too unpredictable for their liking. francine: thank you very much. stay with us. we will talk about dollar parity with the euro coming. up next, ken donald trump bring back the divergent trade. this is bloomberg. ♪
4:51 am
4:52 am
4:53 am
francine: this is bloomberg surveillance here in london. european stocks are slightly higher. in treasury is emerging. emerging markets are rebounding. the stoxx 600 is largely unchanged. utilities are gaining. japan's 10 year yield increased for -- to zero. the tenure going back to january 2 the dollar versus ae yen, they are facing
4:54 am
five-month high pushing the dollar into overboard territory. let's not forget the majority of the top 10 currency forecasts before the elections of the dollar would tumble through ¥100 within 24 hours. that did not happen. gold is rebounding from a five-month loss. this is the most in over a year. the metal may have fallen too far too fast. this is below the 13 mark. this suggests an over cell. more assets in a minute. francine: around the world in a 45 seconds. let's get some thoughts with our guests richard and charles. , is therehen you look a real possibility but that it never happens. richard: everything is possible in the currency market. it's hard to understand what
4:55 am
currencies have done after the event and its triply hard to predict where they are going to go. they work like shock absorbers in the economic system. they move in more extreme ways than you would expect them to. i think what is going on at the moment is europe is under a lot of economic pressure at the moment. it is a failing area. i think at the euro will tend to weaken across that. francine: that's good for exports. helprd: what it does not is the internal dynamics within the european economy, which do need to be healed. you look at sterling against the dollar, that is the shock absorber. sterling falls in that boosts growth prospects. francine: are you worried about angle of merkel not being here 18 months for that? charles: i don't think it's
4:56 am
likely. she has a sense of duty after last week's result which will mean she runs again. it doesn't help her politically in the domestic context. her party is the most popular and they take votes from her party. she will probably win the next election. francine: thank you so much. bloomberg surveillance continues in the next hour. tom keene joins me right here in london. meanwhile, mark carney is about to testify. we will follow everything. we are looking at yields. this is bloomberg. ♪
4:57 am
4:58 am
4:59 am
francine: tom -- donald trump's
5:00 am
transition team is looking at treasury secretary. brexit, soft capitalism. theresa may hints that britain might opt out of the customs union. finance minister is detained after receiving a $2 million bribe. this is numbered surveillance. i am francine lacqua right here with tom keene. we have a most interesting turn in the market. there are two significant things. route think the pond front and center, there is no doubt about that. 48 views, there are 12 opinions. it's interesting to see the different views and opinions. francine: the route is no longer in the last 24 hours.
5:01 am
we are forgetting gdp for the eurozone. watch out for inflation. mark carney is starting to testify in a couple of minutes. he will has to address the fact that inflation has not picked up as he forecast so far. let's get to the news. taylor: president obama's trip to greece may not have the results greece had hoped for. he landed today in athens, the last stop on his trip. they have put debt relief discussions at the top of the agenda. president obama may have a influenceility to greases creditors. vladimir putin spoke with trump and talked about improving relations. that is according to the kremlin. current relations are highly unsatisfactory. ony agreed to join efforts fighting terrorism and they discussed peacemaking in syria. economic growth in germany flowed to the weakest in years.
5:02 am
gdp rose 2/10 of 1%. by domesticn demand. exports fell and global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries, this is bloomberg. equipment declined. tom: thank you so much. let's check the market. we are very rowdy today. up, equity markets are still on a tear. bond yields are down. that is still an elevated yield over what we saw the second tuesday in november, i should say the second wednesday in november. oil gets a bid finally. onto the next screen if you would. mexican peso comes in stronger. the peso is taking a breather.
5:03 am
you see that through all asset classes. i also looked at the 30 year bond. euroted to show you the dollar. i don't look at this very often, but it's important because we see every 12 months a parity call. that is becoming stronger from the banking houses. this is my chart of the hour. actually, the 30 year, we have that huge inflection. the bond selloff has been snapping at the rally. tom: i don't like the word rout. this is way out. this is a 50 year france bond. i guess this is the definition of rout. price.16% decline in the election in the united states is the blue circle.
5:04 am
you are giving up nine years and three months of a coupon in a matter of weeks. nine years and three months if that operates. that is the definition of a bond rout. call it the fallout. tom: the fallout. this is very colorful. francine: i did it for you. when theked, this is governor says he is going to cap the 10 year yield. this is when we had the election. house, they single dollar will fall. you can see the strength there. that has huge implications. we had a lot of calls saying the u.s. dollar would tumble to ¥100. that would have been this way. but that's not so. do you like that? tom: i'm going to have some espresso while you rout.
5:05 am
francine: he is the chief investment officer for ultra high net worth individuals. thank you so much. what are your clients worried about? they say do i need to rotate out of my portfolio? simon: if you go back to the start of the year, i think the other point you mentioned is amazing, how consensual the view was that a donald trump victory was going to be terrible for markets and good for bonds. suddenly we have a bond selloff and markets rally? it happened so quickly. talking to arem asking what to buy and not what to sell. the rotation, the interest in energy as a sector, the interest in defense is interesting.
5:06 am
sectors interest in any that is going to win from lower regulation and from a steeper yield curve in the u.s. francine: what is your take on this? the price movements were so huge. a lot of people had modeled the trump presidency. where they re-shifting? robert: it's not that unusual. there is so much uncertainty. the markets will be extremely volatile. no one knows what direction we are going. there was a little change somewhere. in a way, i am not surprised. i am surprised about the detail. the nature of the uncertainty makes it quite reasonable to expect so much. from the history of karl there is think
5:07 am
something in simon's world called a jump condition. are we in the middle of a financial jump condition with this selection, with brags it -- brexit? are we having an economic philosophy route as well? paul: i hesitate using all these words, but i share your view that we are now in a situation in history where a particular paradigm we have in using about how markets should be organized nationally and internationally, that paradigm is being shaken mostly because we have not thought sufficiently what the political implications would be. to a different system. we've got a gentleman here
5:08 am
who is the world's expert on the clearing of had debt. yesterday in this chair we had had immense concern of italy as an emerging market. full that into market dynamics .ow around this odd word rout are you defensive because of the political economics? can you run a normal market desk in a normal investment desk into the end of the year? paul: i think we need to break up to separate elements. the political elements that led to brexit and donald trump and cause the rotation across sectors. i don't think it has anything to do with the change of paradigm or economic model. it's due to incredibly stretched positioning in terms of mindset and actual positioning. we'll are never going to get
5:09 am
policy. inflation break evens are very low. interest rates are in are below. we have a shift in expectation. maychance donald trump stimulate the world largest economy. you may have $1 trillion spent on infrastructure. there could be a selloff in bonds. francine: i just don't understand. there are hawks in the republican party. how is he going to fund all of this infrastructure. coming up, we speak to the economic advisor to the italian prime minister. we will talk about the referendum. this is bloomberg. ♪
5:10 am
5:11 am
5:12 am
francine: tom keene is joining us in london for the week. this is bloomberg surveillance. we are talking about the fallout. we are talking about the reorganization of the world order. let's go to the bloomberg business flash. taylor: easyjet will overhaul operations. the discount out airline will cost $200.5 million. that is more than twice what it was last year. has ordered a review to produce a more sufficient organization. an italian shoemaker has fallen.
5:13 am
there was an unexpected drop in third-quarter sales. to use discounts to clear inventory on the run up to question -- christmas. the economy has that is what we found out today. month'soost before next referendum. deutsche bank chief economist told us yesterday it's a deep rooted problem for italy. it won't go away anytime soon. we are joined by the economic advisor to the italian prime minister. thank you so much for joining us. you are very close to the prime minister. there is a lot of angst among international investors that he does not have enough reform. he could have gone a step further. there is concern about youth unemployment. is italy in better shape than or years ago? >> we have started
5:14 am
growing again. we are reducing unemployment, which is still too high. we are starting to reduce our debt. this is the result of a massive and comprehensive series of reforms. we are fighting bureaucracy. --have reduced tax per's taxes. we have constitutional reform which is an important part of reforming the country. francine: what about the banks? it would be a powerful investment -- announcement if you fixed banks that seemed frail. >> italy's banking system today is in better shape than it was two years ago, both in terms of health and performance. profitability is improving. loans are starting to stabilize. health is improving because we have reform the mutual bank
5:15 am
sector, which is a major part of the ranking system which is fragile. two thirds is made up of big international banks. that is rock solid. that third is now reformed. we saw the first merger between two of those banks and will continue. about they optimistic solidity of the italian banking system. we have a few problems we need to fix. are on the way to fixing our problems. tom: there are possible mergers that people discount the idea of. immediacy of the banks and the immediacy of the nation, do you hinge this referendum in early december on imf guidance or assistance to italy? it's almost unimaginable that
5:16 am
imf would start telling italy what to do. is the referendum and the outcome hinge on assistance to italy? >> no. the referendum and the constitutional reform, we need to make it faster and more modern. we of four major reforms have taken forward. they will need any assistance from anyone else. tom: i look at italy and the history and the most resilient political economy just keeps knowing over the decades. i look at a chart here. bring it up here. there is a four year moving average. how do you get that light wind back to the greatness of italy in the early european experiment? how you clear the market to get it back to a
5:17 am
debtor got it? >> let's look carefully at the numbers. if you look at the gap between growth gap, which you were from the beginning of europe from 2000 up to 2013, 1.3% year italy has taken growth less. this is going down now. be 0.7%., our cap will if you look at the last six quarters and you take out public expense contributions, we have grown faster than germany. we are actually picking up. we have reformed the labor market. we have reduced taxes both on labor costs and corporate taxes. fighting the rocker c, which is the big problem. those things take time.
5:18 am
decades fixing for worth of problems. it will take time. francine: doesn't donald trump presidency make your job more difficult? how can the european establishment, the italian establishment, show the people solid defenses against the populism we have seen it? >> what the donald trump it's a wake-upis call. it's the second one after brexit that fairness and inequality, the western world needs to deal with it. this is something we have been very mindful about. the first thing the renzi government did was a massive reduction in income tax for lower incomes. forward, i think
5:19 am
this is true for other markets, we need to do things. tom: you are the experts. you are telling governments what to do with their bad debt. if italy says we are not going , doo a cram down on retail you just assume that for italy to clear its market to get to do they have to do a cram down and merge in bond markets? the problem of that in italy can only be solved if italy starts growing again. rest is really working at the margins it seems to me. we cannot solve these problems except to create more rove and inflation. -- growth and inflation.
5:20 am
it's not a technical issue of doing this or that. it's really about putting the euro zone economy back on the growth path. italy do it alone? francine: this brings the main difference between the u.k. in italy, italy manufactures and still has a great companies. are they competitive enough? how do you foster that growth? does it have to be from euro devaluation or leaving the eurozone altogether? simon: it may end up going in that direction. seems to me we should do what donald trump is doing. he understood that. monetarynt to row, policy will not do the trick. you need to stimulate public investment. in italy, despite the large
5:21 am
debt, sometimes people say these countries like italy with a large government debt, they cannot do it. of course they can do it. you are creating assets and that doesn't increase. we should take the opportunity. this is a signal coming from america. that is the way forward. with is so much tied up rules. i am afraid we won't do it. tom: we are going to come back with our two wonderful guests on europe. francine and tom in london this week. we have much to talk about. ♪ good morning. ♪
5:22 am
5:23 am
5:24 am
5:25 am
francine: we are in london for the week. we were talking about the referendums. we are talking about how italy can jumpstart growth. is it better to stay in the eurozone? is it more competitive to get out? is that crazy. the euro gave italy a huge advantage. it allows us to reduce interest rates on debt. a currencyat having we could not do valuate, we needed to do the structural reforms to make the country more competitive.
5:26 am
we are making up for the lost time now. francine: if there is one thing the referendum will ring, will it be unity? >> it will definitely bring unity. it is part of the vast performed program that the country needs to be able to come back to what it used to be in the 1950's and 1960's. francine: thank you so much. mark carney is about to testify. it's an interesting day for him. , inflation slowed in october. he will weigh in on this. this is bloomberg. ♪ seeing is believing, and that's why
5:27 am
5:28 am
we're opening more xfinity stores closer to you. visit us today and learn how to get the most out of all your services, like xfinity x1. we'll put the power in your hands, so you can see how x1 is changing the way you experience tv with features like voice remote, making it easier and more fun than ever. there's more in store than you imagine.
5:29 am
visit an xfinity store today and see for yourself. xfinity, the future of awesome. speed always wins. especially in my business. with slow internet from the phone company, you can't keep up. you're stuck, watching spinning wheels and progress bars until someone else scoops your story. switch to comcast business. with high-speed internet up to 10 gigabits per second. you wouldn't pick a slow race car. then why settle for slow internet? comcast business. built for speed. built for business. francine: mark carney is testifying on the inflation report. he just said his personal
5:30 am
circumstances means he will be separated from his family. projections were not what they had given. he is talking about his personal situation because he cut his term a little short. tom: they blamed him for sterling week this. now do they blame them for sterling strength? francine: they say that because of him the economy doesn't do so well. onto another story, russia's economy minister has been retained for allegedly taking a $2 million prize -- bribe. this is the highest profile official to be detained under vladimir putin. it's the highest profile detainee since 1991. let's get to our moscow. chief. give us a sense of how important and how out of the blue this is. really surprised
5:31 am
moscow. people have woken up this morning and it's what people are talking about. he is the highest ranking official who has been detained. is this aon is crackdown on corruption? could it be politically motivated? francine: talk to us about him. he is an economic liberal. theecame deputy chairman of central bank in 2004. is this a crackdown against corruption? >> that is the question. he was highly ranked. vladimir putin said he was one of the best specialists in the field of economics. whatone wants to know really is behind this. the head of the big business lobby here in moscow said he
5:32 am
rubberstamped his privatization deal. this is the purchase of 50% of a regional oil -- oil reducer. he has opposed the deal. high ranking officials said this should not go to a state run company. this changed after vladimir putin indicated he allowed the deal to go forward. that, everyone lined up and approved the deal. question does remain. the question does remain, how is this going to play out? the market is keeping eye on that. francine: we have seen a little bit of market reaction. now let's get straight to some corporate news and two more
5:33 am
politics. let's get to the first word news. taylor: donald trump's transition team is recommended the former goldman sachs partner be named treasury secretary. that's according to people familiar with the matter. he signed on to the campaign at a time when many from wall street stayed away. president obama predicted donald trump will not drop the nuclear deal with iran. he said the main argument against the agreement has been that iran would not abide it. there is more than a year of evidence that they are living up to the terms. donald trump said he would renegotiate the deal. police in germany have rated more than 200 offices and mosques. banned theent has organization. theynterior ministry says recruited people to travel to syria to take part in the civil war. global news 24 hours a day powered by more than 2600
5:34 am
journalists and analysts in more than 120 countries, this is bloomberg. i am taylor riggs. tom: thank you so much. this is the third tuesday of november, which is the different. michael mckee has been keeping track of each and every november day. what is different today for the president-elect from yesterday? michael: he has the responsibility of governing. you have to have people in place. he is starting to make those decisions. they are meeting today to make smart cabinet choices. that he is the likely choice for treasury secretary. that is a fascinating thing. donald trump campaigned against wall street. he picks a guy from yale and goldman sachs. wall street is still in charge
5:35 am
it appears. he is a very wealthy wall street are. he came to the campaign by accident. there is a great story profiling him. guy that embraced the ideaump so much as of getting the job of treasury secretary. is: former mayor giuliani being that in for a number of positions, including secretary of state. what have you observed in the last seven days about the old guard republican foreign-policy industry and this new president? are they even having a conversation? michael: so far, not really. most of the old guard said they would never work for donald trump. there has been a discussion about whether it is the duty of
5:36 am
people who know what they are doing to help a president who does not in foreign policy. no decisions have been made in terms of staffing. when you talk about really gene otani as secretary of state. he has no foreign-policy experience. donald has no foreign-policy experience. donald trump is prizing loyalty above experience. he may not be concerned that the old guard don't want to serve. tom: it is absolutely extraordinary. we will have more reports here throughout the day. bring in our two guests here on whether we are in the european take of what we are. for an american it, it is bizarre. fit inare peg doesn't the round hole. giuliani has no foreign-policy experience. apart from brexit, you
5:37 am
have held this region together for the last 11 years. on sometwo take policies that are seen as more populist to appease her own voters. can she stay strong in the face of brexit and donald trump? that is a very interesting question. the sameto me that social and political dynamics that we have seen in the u.s. and we have seen in the u.k. play a big role in europe. we see the same problems of adjusting to globalization. also, the fear of many people that they are not recognized.
5:38 am
that creates a necessity to change things. to create an environment in which governments give clear signals to those people who were on the losing side. that they are part of this. this will require changing the system. as a result of globalization and reducedadigm, we have the role of government in redistribution. tom: this is well said. i think this is great. you've got your phd in economics. professor perfectly grasped the new populism. what is the new globalism?
5:39 am
i will do the new populism first. people feel left behind. our the new report on kenzie are going to be way behind. the u.s. household is not seen a rise in median income in the last 30 years. they have gone backwards. we have had huge increases in the wealth of the wealthy. jobs is another part of this. i think that's a difference in your. there is huge unemployment. theead of talking about redistribution of wealth, if we can stimulate growth in europe, you will alleviate some of these problems. francine: what kind of capitalism are we looking at? are we reinventing capitalism
5:40 am
and what does it mean for equities and bonds? this feels like a huge theoretical shift area at the experience of the eurozone over the last five years. they have been trying to reduce debt. this is the first time we have had expansive fiscal policy. if you are facing unemployment, stimulate the economy and you reduce taxation. don't worry about that allen's. that's not with the political elites in europe did. tom: i know you want to jump in here. paul: we are far from mass unemployment. unemployment, especially young people. is --many, unemployment we do have a strategy where we lower taxation of the top incomes. we are creating the perception
5:41 am
that the system is mainly for the very rich. we have to turn that around. samennot have the government that creates even more benefits. simon: i simply don't buy that. if you look at the insatisfaction in europe particular, it's not about the rich and poor. i think it's about the political elite, brussels being out of touch. iconic work, this is critical. you did original work on greece and portugal and the need for clear markets. the elite did not clear those markets. is that the necessary condition to get on from this populism? simon: europe has been identified as the instrument of globalization. structuralgenda was
5:42 am
reform and flexibility which means we will lower unemployment and if it's. the trend has been to lower taxation on the high income people and to -- people have this perception from brussels that it's an unfair system. tom: within the system, bring up the chart. this is what we were talking about yesterday. this is an original chart off the bloomberg. this is the long-term depreciation of the italian lira. there is the blue circle. italian lirathe ought to be if it was able to depreciate. it was linked at the hip to germany. francine: globalization is leaving some people behind. if you speak in plain terms, china is manufacturing things for less. arein italy is -- they
5:43 am
producing enterprises that have had to close down. what i am confused about is who is the elite we are talking about? andre putting academics thinkers and anybody with a phd into this elite. we need to define this. paul: that's a very interesting question. difficultthing very to define. obviously, it is politicians. academic people who develop ideas that are used by as narrative, justification for what they are doing. this is now all crumbling. we see that it is crumbling because too many people perceive the system is unfair, whether
5:44 am
this is correct or not. it doesn't matter. the perception is reality. tom: we've got a lot to talk about here. we're going to talk about this. up, worldwide, the most -- interesting former president. stay with us. this is bloomberg. ♪
5:45 am
5:46 am
tom: it sounds like tom and jerry. we are here. it is a bond rout day. rout. bring in the bond this is everybody adjusting.
5:47 am
yesterday, they adjusted. he will join us tomorrow. this is the call. help me with this. longer, moonshot yields. everybody has to adjust. up we go to 2.5%. this is the critical distinction. major assumes that after the , we go backumpism to lower longer. do you go along with the dampening function? do we go on to a new regime? simon: i am trying not to use rout anymore. -- it wasn'telloff
5:48 am
so long ago that the stagnation camp was fully in sweep. we started the inflation taking up. we did not think it would pick up enough. in, donald trump coming there is the possibility you get a trillion dollars spent on infrastructure. you do get tax cuts. in estimates are a 1% cut corporate taxes. the outlook for risk asset is very different. i think all of these things are flying out. the actual ability to execute on this is clearly difficult. oftalked about the lack experience and some of his appointees. 1950 was the last time a presidential candidate did not hold office before. andbring in protectionism
5:49 am
other issues, the current excitement that growth can come back, it's unlikely. it's going to be very tough. tom: we must attend to the brexit in england. mark carney is speaking. francine: he is talking about inflation. he is stepping down two years earlier. he said that's not the time. we have live pictures of him testifying. tom: we're going to come back. he is the mechanic of economics. he is the former ecb president. at good morning. ♪
5:50 am
5:51 am
5:52 am
tom: bloomberg surveillance. on riot andote rout.
5:53 am
bill shakespeare. he was a great guest. he was good on radio, but he wasn't good on tv. simon: it's not a rout. we just need to take the charts act. tom: three months, six months. francine: i am late for chart cap. there you go. tom: we are just back to here. simon: it's all about context. tom: can i go back to new york now? i quoted shakespeare. francine: i'm not sure bill will be happy about that. .et us switch to brexit a guest, were here as it's a brutal move. it was so fast so quickly, doesn't it anticipate something
5:54 am
oddly? simon: go back to wednesday. wasmovement in the s&p 500 an 8% swing between financials and utilities. that's the biggest since 1990. there have been many rural swings. are gettings smoked. tom: how much do you assume the street has been hammered on this? has the alpha eval paraded? simon: i think it's very light positioning in terms of equity business going into this. when people -- on the equity side there been beneficiaries. francine: we are talking about the composition of brexit with donald trump. does this make brexit easier? theresa may and her government
5:55 am
will become that much more powerful. paul: i don't think we'll have much bearing on brexit. let's face it. government may have donald trumps with it's going to be different. it will not be different. it will be very difficult. it will be very difficult for theresa may to get a trade deal with the u.s. i don't think it changes fundamentally. this government is not knowing what to do. creates all the wishful thinking that things are changing. tom: the final question we have for you with your historic research on the clearing of markets and the responsibility of the elites, when you look in germany and their financial system, can they withstand negative interest rates? the german banks?
5:56 am
can they withstand negative interest rates? paul: if it goes on for too long it, it's going to be a problem. thanks at some point will be bleeding too much and then there is potential difficulty. today, there is still no problem. the banking sector is not making losses. if it continues like that, then it continues. tom: thank you so much. next hour, hisr thoughts on the revolution in the united states. stay with us in london. this is bloomberg. ♪
5:57 am
5:58 am
5:59 am
tom: after four days of brutal market moves, call her out.
6:00 am
the third tuesday of november brings a less rowdy tom. the bond managers' attempt to pick up the post-election pieces. the president-elect chooses a cabinet. we are shocked. rumor has it he will choose a former employee of goldman sachs. and, slouching towards truck. hour, eswar prasad and robert skidelsky. we are live from london. i am tom keene. with me, francine lacqua. it has been an extraordinary week here in london. you think of the gloom of london that was there two months ago. i do not feel it. what am i missing? francine: a lot of the attention is on the u.s. right now, so let's not forget that. carney,stening to mark looking at the headlines crossing the bloomberg terminal. one thing that stuck out, mark
6:01 am
carney blaming monetary policy is a deflection. we will deflect on that. of: there is the governor the bank of england, mark carney, speaking. right now on earnings and on an american barometer, home depot, here is taylor riggs. taylor: it looks like a small beat here. $1.60,s coming in at versus $1.58 estimated. at comparablek sales, quarter over quarter. 5.5% versus estimates of 4.4%. now let's quickly get to the first word news update here. may not have the results that greece hoped for. he landed in athens, the first stop on his final overseas trip in office. election,d trump's
6:02 am
president obama may have limited ability to influence talks with greece's creditors. vladimir putin spoke with trump and spoke about possibilities to improve relations. current relations are highly unsatisfactory. russian officials say peden and trump agreed on efforts to fight terrorism and they discussed peacemaking in syria. russia's economy minister has been detained over accusations that he took a $2 million bribe involving the state-run oil company. the cabinet member was allegedly caught in the act of receiving money. global news 24 hours a day, powered by more than 2600 journalists and analysts in more i am taylorntries, riggs. this is bloomberg. francine? tom? tom: home depot, they reaffirm
6:03 am
and boost guidance. there is no other way to put it. maybe not like the previous quarter, but nevertheless, good news from home depot with some guidance improvement. let's guide to a data check. equities, bonds, currencies, commodities. less rowdy today. i have had a problem with this word "route." euro churning. onto the next screen. francine's screen is smarter than mine. there is the 30 having your bond, 3%, and under that, 2.96%. you can see treasuries, emerging-market assets rebounding. the dollar rally ending. this is what i wanted to show you. parity, 1.0778. tom: robert skidelsky is the economist, conservatives love to
6:04 am
hate. he is the arch liberal from england, the great canes -- the great keynes biographer. first we have to go to michael mccain in new york. give us an update on the president elect's efforts on this tuesday. mike: the president-elect is continuing to fill out his cabinet. -- he isiniature and in line to become the secretary of the treasury. he made his money on wall street, working for goldman sachs. he then went into the movie business, producing a number of hit films before taking the role as finance director, which according to max abelson, was really a calculation on mnuchin's part that he could
6:05 am
become secretary come even if he does not always believe in everything donald trump does. the other interesting note is a report that rudy giuliani, the former mayor of new york, is in line to become secretary of state. he does not really have any foreign-policy experience, and donald trump does not really have any foreign-policy experience. it has people scratching their heads in new york and in washington, over why he may want to do that. loyalty may be playing a bigger role than policy experience, as donald trump fills out his team. am: michael mckee, give us protest update. are the streets still full in new york and other cities? mike: it was a little acquired or last night. .e have seen the protests grow i do not know if it is related to the fact that the bond markets have slowed. we have seen fewer people out.
6:06 am
but the security is extraordinarily strong, especially on fifth avenue in the vicinity of trump tower. it has been one of the smartest essays of this historic election, and it came from robert skidelsky, the great keynes biographer. ethos.eves in a liberal robert skidelsky, wonderful to have you with us today. yourve two quotes from wonderful project syndicate essay, and this one is on a gentleman named hitler's. hitler. the new globalization. how will presidential deal with it? in favore has come out
6:07 am
of protectionism, and that is a very old american tradition really. i think in what he has been saying, he believes globalization has been responsible for the loss of lots of jobs and the feeling of insecurity. not only in the united states but elsewhere. i think there was the feeling of that kind in britain as well, behind the brexit. too many casualties is the problem. francine: you see the rise of power in china. can we go back on this in any way, shape, or form? robert: it is a question of speed and the deals you make. asre is no such thing unfettered free trade in the world. all trade is subject to agreements, and the whole art is getske an agreement that
6:08 am
the benefit of liberal trade and avoids its casualties. and there have been casualties. francine: there have been casualties. i do not know how you protect them. if there is a way that the whole world and the global economy is going to, if you look inwards and you become populist, it is a race to the bottom. i don't agree. if by protectionist measures you can increase real incomes in countries, then you can have more trade as well. caused tradet has to suffer in the last 10 years is very poor growth and most of the world. by internalies measures can make themselves grow faster, and that will increase the volume of trade, even though it may not be such a high percentage of total output. francine: donald trump -- will his reflationary measures help? will it work? robert: like all measures, this
6:09 am
will work if it is well done. of course there are ways that you can say it will not work, but in general, to boost output by running a larger deficit -- and that is an indication of what he wants to do, by having a trillion-billion-dollar infrastructure, that should boost the american economy. tom: we spoke with the great biography of de gaulle. let me ask what john maynard keynes would do. we talk of the neo-rockefeller age for republicans. what would john maynard keynes do, given the popular backlash, -- the populist backlash, given the test for austerity. robert: austerity has failed to generate a good and robust recovery from the crash of 2008.
6:10 am
otherity policies -- the set of policies, which are the only thing left once fiscal austerity became -- were monetary policies. quantitative easing. tom: has the trump campaign called you for a position? robert: i have not had a telephone call. tom: you are waiting by the phone. robert: by the way, there are lots of things about trump i do not like. with the economic team of trump. how can they have stimulus, robert skidelsky stimulus, within the conservative mill you lieu ofconservative mi america? robert: well he has got a mandate. he is not going to be chained up like congress in the way that some people are expecting. he has the mandate.
6:11 am
and a key plan of his program was stimulus. tom: we will come back. robert skidelsky with us. formost controversial essay conservatives and liberals alike. we will have a wonderful discussion in the 8:00 hour. gary stern is the former president of the minneapolis system, gary stern on bloomberg television and bloomberg radio. from london, this is bloomberg. ♪
6:12 am
6:13 am
francine: live pictures of some of the mp's asking questions of mark carney.
6:14 am
the pound falling for a second day versus the dollar, as the report early on, a half-hour before he started speaking, that inflation unexpectedly slowed in october. he is fielding questions about why he is cutting the mandate short, to inflation, to how he deals with populism. i thought was interesting is that he said it is not monetary policy making our societies unequal. tom: the great thing is the unknowns. people do not know. francine: we are in really a sphere of uncertainty that we could not see maybe it months ago. let's pull up the chart very quickly. down below, the blue line, is what i needed to have an empty suitcase on my flight over. then we have the strong sterling here. francine: sterling we can -- sterling weakened.
6:15 am
if you expect inflation to go up and you base your monetary policy on that, you will see how mark carney feels a lot of those questions. let's get to the "bloomberg business flash" with taylor riggs. according to a delicate talks,yer with oil cuts they're making the effort to overcome the divide. saudi arabia is willing to cut oil out, but it wants iraq to cut production, too, and says iran must freeze up the levels. an italian shoemaker fell the most in five months, an unexpected drop in third-quarter sales. it will have to offer discounts in the run-up to christmas. ferragamo.nts at that is a shame. the only thing good about
6:16 am
ferragamo is that it is further then -- thanenue trump. francine: these results that taylor was talking about do not bode well for the holidays. tom: help me here. i was on a plane reading about this. burberry got crushed, right? it is said that it is because they are cracking down in china. but at the end of the day, gucci is doing well. on two by minister theresa may time for the "morning must-read." the u.k. prime minister spoke last night and she said that capitalism can work for everyone. may: show the world that we can be the strongest global advocate for free market and free trade because we believe they are the best way to lift people out of poverty.
6:17 am
but we can also do much more to ensure the prosperity they provide be shared by all. francine: a little over a month -- anderesa may international company that refuses to work with the authorities, even to fight terrorism. francine: we are back with house of lords member robert skidelsky. when you look at theresa may, is she trying to redefine capitalism? hertel has shifted in the last two months. i do not know if she is trying to find a place for this new capitalism without being like donald trump. robert: first she said something that is a matter of common sense. austerity is not good for free trade. it is so obvious, and yet she said it.
6:18 am
and the record bears her out. depress individual economies, it is going to be bad for free trade. they will not want to trade with each other as much. they will want to protect their jobs. austerity has a strangle -- has strangled the recovery from the crash. i think it has in england, and in america the recovery has been mediocre. i think she is saying something common sense. she has also said that quantitative easing is not good as a recovery because it increases inequality. i think that is also true. the money goes to people who , and a lot already of other people are damaged. francine: we are talking about a movement to populism, right? is this just a movement of anti-austerity measures? robert: it has been more than that. austerity has been the heart of
6:19 am
it. or rather the feeling that liberal elites are not interested in guaranteeing people secure and good jobs. i think there is also a culture war element. of course there is. because on the whole, liberal elites have views on social issues which are different from the majority. the two together and you get -- tom: there is a photo of you in the national portrait gallery in london, when your sideburns were thicker and darker. it was from the 1960's, way back. we do not have the photo. but there is a photo from the national portrait gallery that would suggest the conservative critics of robert skidelsky 30 or 40 years ago are the same as conservative critics today. which, you are right, we should ban austerity but we do not trust the government to make the right decision. how can we have the present
6:20 am
governments make the right decision if they allow them to spend, spend, spend? robert: we do not trust the government's to make the right decisions, but should we trust the markets to make the right decisions? tom: we learned about that. is likely, in given circumstances, to do better? after years of expelling governments and leaving economic life dominantly to markets and to the financial system, you have a great big crash, which is the second-largest collapse in the world economy. obviously, gathering from his statements, he is all mixed up. you could also say the same about keynes.
6:21 am
was he for the market or for the government? he said you need enough government to make markets work in an acceptable way. francine: we will be back with robert skidelsky, house of lords member. and coming up on bloomberg daybreak americas -- this is bloomberg. ♪
6:22 am
6:23 am
6:24 am
6:25 am
tom: mr. trump and republicans confront a liberal in conservative america. robert skidelsky, slouching toward the president-elect. tom: what should speaker pelosi do? what should secretary clinton do? how do they recoup? robert: they are not in the game and at the moment. , andame is the trump game he will set the agenda. but liberals who want to preserve a liberal system have
6:26 am
got to say, look, we accept these bits, and we want to improve that bit, we reject this bit. in other words, they have to engage with him. they cannot just say this is someone who is completely mad, and by some process we do not understand has taken control of our great system and we have no response. there has got to be a positive response. back ands come continue with robert skidelsky. i thought that quote was most important. francine lacqua and tom keene. we are in london. we will continue with the professor, as warp assad. -- eswar prasad. ♪
6:27 am
6:28 am
6:29 am
francine: pictures of athens, of all places. this is because president obama is going there. with bond risk
6:30 am
yields, 14 months ago we were in the depth of the crisis. tom: and you wonder if it comes back as well. francine: it comes back or spreads or goes elsewhere. is that the presidential car? tom: it is the very presidential car. the president here for the first time since 1999. a larger entourage. the greeting begins at the presidential palace in athens. let's watch this for a moment. francine: it is amazing. in london and the u.k., there is all the ceremonial process.
6:31 am
the -- you have also the deviation to make sure the president is safe. do we see him yet? tom: this is something that is routine as the president travels around the world. he does not get one flyer miles. he goes with an entourage. this is a normal procedure. here is the president of the united states in athens, with all sorts of history here, including the sacrifice of americans in world war ii, and on to the tumult and turmoil of greece across what i would say is 30 years, and to the relative calm of the european experiment and to the financial crisis of 2000. -- of 2008. tom: it brings me back to when the president was at downing street, the motorcade, the car
6:32 am
that he just got out of his the pump presidential limousine. proof --at is the bomb is the bump of presidential limousine. it has eight inch thick armor. here.obert skidelsky is robert: especially with the declining greece's national income since 2008. tom: greece has been the epitome of the european crisis, right? it is the one that first sent the alarm signals. robert: it obviously called into savage doubt the future of the single currency europe. tom: joining us now, christopher davidson in support of his new book "shadow wars." it it visits athens,
6:33 am
really speaks to the mediterranean region. when you look at greece, and then over to turkey, the challenges of nato. how does the middle east fit into the western mediterranean? : all of the mediterranean region is in crisis at the moment, whether talking about the ongoing conflict in libya or the war in syria, which as far as we can see is just going from bad to worse. really trying to bring that out to show that they are being targeted in the wake of the arab spring. tom: you speak wonderfully in your book about the british caliphate. about the legacy of the british caliphate to the united emirates, and the mess that we have in the middle east now.
6:34 am
christopher: what the book tries to show is that early on in the 20th century, britain passed the baton onto the united states, recognized the strategic should -- the strategic usefulness of a caliphate in the ottoman empire. in this perspective, we have a conservative force in the region which we -- which can be corralled against progressive secular and nationalist forces. the danger for the british empire and the resource hungry united states is that these nationalist states, whether it was democratically elected in iran, or syria, iraq -- they would try to nationalize their assets, including the suez canal, oil, gas, etc., were they would graduate -- or they would gravitate toward the soviet union. how would that be
6:35 am
rattled by a donald trump win? christopher: they do not have much to show for their investment now. they are troubled by this development. on the one hand we have got trump and his administration criticizing the iran deal, so powers like saudi and kuwait feel comfort by that. but i do not think they should because trump is a businessman who will -- i feel he was attacking a foreign-policy legacy by obama here. foreign: will he scrap policy? he needs to focus on domestic policy first. christopher: we need to be dropping the "nuclear" from the title of this deal. get iran to settle on
6:36 am
international markets once more. some of the deals being signed at the moment in iran with boeing, with oil concessions, etc., are bigger relatively than the deals in the latter days of -- tom: christopher davidson is with us. his acclaimed book on dubai years ago was a book written with much courage, very controversial, about the united emirates. he followed up with a book on abu dhabi. as we look at the end of shadow wars, christopher davidson, if you were to write an individual book now on iran, what would you take? arend deal: the could be in the context of a wildcard that has come up for u.s. policy, and the u.s. policy on the entire region for that matter. deal was long in the works in the obama administration, but i don't think any officials could be
6:37 am
certain he would come to pass. come -- thel has iran deal has come to fruition parallel to the revolution. respond to the , theirsm of riyadh criticism of the uae and the middle east? christopher: criticizing the long-standing relations with riyadh and the gulf states -- they have very good reason to. the united states essentially has been dealing with some of the most repressive and misogynistic states in the world, which does not sit well with the u.s.'s suppose it ideals. but this relationship, the pragmatists, until recently in the oil-era dynamic, has been essential for the supremacy of the united states. selling oil in petrodollars,
6:38 am
selling as proxy to the americas . a oil4, when we have prices beginning to sink and the centrality of countries like saudi arabia, u.s. policies declining, this was a relationship that any u.s. president was more or less stuck with. foreign-policy worldwide really change under a donald trump and brexit? robert: one thing he has rejected with the middle east is the whole thing with russia. that could because all for the evolution of -- at the moment, the u.s. -- at the moment, the west has no policy with syria. other than bringing in end to the savage civil war. president-elect trump and for that matter put mr. may, they need to deal with a new caliphate, isis.
6:39 am
there is a lot of talk. you are the expert. how should president trump deal with isis? christopher: i think trump knows the score about what is going on in syria and iraq. he is aware that the two-year-long process that was supposed to destroy isis -- red lines have been drawn when the caliphate tries to stretch into turkey. very little is being done about it. trump is very much a pragmatist here. is trying to extricate the united states from this region. obama's policy was very much one of shadow wars, backing groups in syria. tom: it is a long way from our in the british caliphate.
6:40 am
"shadow wars" is the primer on the path of the arab spring forward. francine: we go back to the president who will only be president for another couple of months. this is president obama in greece, in athens. we speak a lot about greece when it comes to the stability that they need. we understand from politicians on the ground that they were pretty rattled by the donald trump win. we will follow the news conference that the president of greece will give with the president of the united states. this is bloomberg. ♪
6:41 am
6:42 am
6:43 am
francine: this is "bloomberg surveillance." i am francine lacqua with tom keene in london. let's get straight to the "bloomberg business flash." depot posted earnings that beat estimates. they will keep spending on renovation projects. the company raised its forecast for the year. malaysia airlines may order as many as 25 wide-body aircraft. the airline is recovering from two fatal air crashes in 2014 and wants to meet growing demand. arline is looking at combination of planes from boeing and airbus. that is your "bloomberg business flash." tom: taylor, thank you so much. , asrt skidelsky is with us we look at liberal and conservative thought. he joins us in london. prasad ofk is eswar
6:44 am
cornell university. with professor pras ad and professor scannell ski. sky.nd professor skidel how will there be an adjustment in china to donald trump? the risk i sense is that that --e might hope the difficulty is that many of the things that trump needs to do in order to provide jobs in america are going to be very difficult to implement. they will take a lot of time, building up infrastructure, improving american productivity. so getting tough on china could be an easy win. in the short-term it may not be good for china, but in the long run, i think any potential with
6:45 am
china or u.s. disengagement from the rest of the world could help china in the long run. in the long run it is potentially good. long-term,n the good, because it means the u.s. becomes more protectionist? viewers, -- does it feel -- itt will will fuel international use? eswar: the notion of the u.s. pulling back from trade deals it has signed with many of its very close trading partners, trump has even talked about tearing up nafta and other deals that have been in place for a long time. even if he does not do any of this, the sense that the u.s. may not go forward with new trade deals may put china in a
6:46 am
very strong position. china has been positioning to bring otherl countries much closer into its embrace. china is a serious rival. francine: i did a huge panel in davos last year on china and was told repeatedly that the chinese government, chinese officials one respect. what would be worse for this relationship if donald trump were to label china a currency manipulator, or if he were to impose tariffs? remember, china is coming up on its own political transition a year ahead. but there is already a lot of political jockeying going on, so china cannot afford to be seen as weak when it comes to relationships with its international rivals. even a small move could quickly spiral into rising trade sanctions.
6:47 am
tom: robert skidelsky is squirming here. .rofessor prasad let's bring him in here. help us here with how a society or a nation disengages from a confident? robert: i do not claim to understand chinese mentality or anything like that. my birth as aaim quickly -- as a qualification of where i am. but in a way, the two countries are on a complementary course, not a conflictual course. china recognizes its export model is broken. that is why -- it has to turn much more to internal development, raise its own consumption, find internal outlets for its investment,
6:48 am
state losing industries. hence the slow growth and all that. they are both tending toward more regional arrangement. tom: i want to rip up the script, if i may. this is important. you were released by the family whath your was that like? robert: i don't remember because i was three years old. we were treated rather well and civilly. tom: francine, pick it up, please. francine: i wanted to go back to china. what i am struggling to understand is what it means for interest rates. c, and you have a huge amount of debt that you are sitting on. you are trying to keep your
6:49 am
economy growing, at least 6.5%. then you have donald trump in the white house. interest ratesat and stimulus will have to increase? as marco china's -- eswar: the landscape is going to get a lot tougher because there will be trade tensions with the u.s., meaning it cannot count on much export growth to the u.s. although i do not think it will quite come to that. but the rest of the world will not be able to get the chinese to export any more. what has happened in the u.s. has led to the dollar strengthening somewhat. if the fed does move in december, the dollar goes up somewhat more, and then the -- they would have to let it shape by 6%. that leads to a destabilizing capital outflow currency destabilization problem like
6:50 am
last year. so far it is manageable, but that could make it difficult to manage domestic policy, especially letting interest rates fall in china in order to support the domestic economy without creating that additional risk. thank you so much. these are live pictures of mark carney testifying in parliament. mr. reeves is one of the mp's here are the key question is, will it tolerate? there is no precise number on why inflation is moving. we will cover that and much more. this is bloomberg. ♪
6:51 am
6:52 am
6:53 am
is off. rout i look at the mexican peso coming in stronger. peso-dollar-yen, 1.0824. is: coming up shortly, it bloomberg daybreak: americas. i am looking forward to your conversation with sean claude
6:54 am
tree shea. trichet.ean-claude as well as gary stern. kelly,we will have david was jpmorgan. the rush to enthusiasm is underestimated the enthusiasm coming from the trump residency. a lot more coming up, but that is a little taste. tom: robert skidelsky is with us. eswar prasad from cornell joins us this morning. us withld have you help the institution known as the imf, you have recently worked at the imf. can they come to the rescue, and currently, can they come to the rescue of non-emerging markets like italy? are they prepared italy -- are they prepared mentally to do that? eswar: the more fundamental question is the imf coming into
6:55 am
the country. and what can the imf do during a moment of crisis and force a good foro do what is the long-term? the most fun about the question is, why aren't these countries like italy undertaking the bonds? it is good for them in the long run. it goes to the heart of what we are seeing around the world, the fact that globalization, many of the forces of disruption -- technological changes and so forth -- are not working for the common people. there is a sense of the benefits of globalization, both trade and financial, all going to the political and economic elite. with that notion among the middle class, it is difficult to put in place -- getting the imf in is not a solution. the fundamental institutions need to be reformed. francine: the problem is also one of timeline. an economic adviser to
6:56 am
matteo renzi saying they are doing the reforms, but investors want them faster. robert: the special factor that professor prasad did not mention is that the single currency in the is dysfunctional. -- as toolsp that that the conventional government would use. it did not set up substitute , like aich could work proper central bank, a treasury, a common government. all those things that -- tom: we are going to continue with robert skidelsky. eswar prasad, thank you so much. -- rrow, ♪
6:57 am
6:58 am
6:59 am
jonathan: warm welcome to "bloomberg daybreak."
7:00 am
i jonathan ferro with david westin. alix steel is on assignment. points on stable, 13 the dow, positive three on the s&p 500. switching up the board, outperformance and commodity 3.5%. 44.84, up by the dollar weaker against every currency except the pound. carol: the -- david: the market taking a breather after the russia. here's what you need to know, terms treasury am a former goldman sachs partner, is said to be the pick of donald trump's advisers to service advisory. they are waiting on a decision from the president-elect. markets taking a breather in their reaction to u.s. elections in the dollar rally ends. meanwhile, emerging-market stocks and currencies gaining for the first time in one week.


info Stream Only

Uploaded by TV Archive on