tv Bloomberg Surveillance Bloomberg December 1, 2016 4:00am-7:01am EST
francine: oil soars above $50 a barrel as opec agrees to its first production freezing eight years. putin and the president-elect. the russian leader holds his 13th annual state of the union address. will he announce a u.s.-russian relations reset? and ending with a bang. 30-year-old bond bull market runs out of steam. this is "bloomberg surveillance ." welcome to the program.
lineup today.t first, live pictures from moscow as president putin makes his annual presidential address. we will discuss whether russia, brexit, and a u.s. president could make 2017 the year of total reset for foreign policy. we have a little bit of manufacturing pmi. the italian data is significant because this gives us a glimpse in the state of the italian economy just three days before they vote. these are the figures crossing our bloomberg terminal. we are seeing the unemployment rate staying put for october at 11.6%. line withty much in what we're seeing in spain. three days until renzi's make or break referendum. votell discuss what a no could mean. let's get to the bloomberg first word news. here's sebastian salek. sebastian: glencore will reinstate its dividend policy
next year and plans to pay out the minimum annually. the world's biggest commodities trader has seen its shares trickle this year. the chairman of bloomberg lp and the parent of bloomberg news is a senior independent nonexecutive director at glencore. oil is holding gains at around $50 a barrel after opec agreed to its first production cut in eight years. saudi arabia, iran, and iraq bridged their differences. productions will cut by 1.2 million barrels a day while russell also changed it stands. -- its stance and will reduce output. >> during the meeting, when we were drawing up the accord, but we had difficult questions to resolve, the russian energy minister gave the information that he would reduce by 300,000 barrels a day. sebastian: china's factory gauge climbed to match a post 2012 high, thanks to a credit fueled
recovery. to 51.7.ring pmi rose input prices -- import prices jumped to their strongest reading since 2011. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm sebastian salek. francine: thank you so much. you are watching live pictures of president vladimir putin's annual address. it is quite a glamorous, opulent room. we are used to seeing these scenes. it is a similar room to where he takes questions from the nation. this time we are expecting him to address the nation but not take questions. it is quite a ceremonial thing. you have two guards opening those great doors and president vladimir putin coming to the stage. we are watching.
they want to know about his relationship with the u.s., oil, and we want to know a little about his stance on syria. he's on stage, talking and he's stting his address. we will keep on top of the news and bring you anything he says. let's have a listen to what vladimir putin has to say. economy, social issues -- [indiscernible] we have to deal with all these issues in quite difficult situations. we are capable of doing it. we are capable of defending national interests, sovereignty, and territorial integrity of our country. i would like to repeat, we see
it. let us say thank you to our citizens. they got united around patriotic values. francine: vladimir putin starting his state of the union address in moscow. we will get back to him and monitor any breaking news on the bloomberg terminal. we understand from insiders at the kremlin that putin may be offering a bridge in ties with some of his western allies. the election of donald trump changes quite a lot for putin. the u.s. economy has continued to expand, with rising activity and little inflation. mario draghi will be monitoring this week's economic data. it is seven days until the ecb makes its next policy decision. let's introduced my guest for the next hour, george magnus from oxford university. right to have you on the
program. while the world has significantly changed, we have donald trump reflecting with hopes of infrastructure spending. we have vladimir putin may be opening his arms a little more to the u.s. ,e have the italian referendum more political uncertainty. what will the ecb do? george: it is almost a little academic and a bit of a sideshow. i think the consensus for the ecb is -- there has been, as i'm sure you know, some talk about the draghi might announce kind of a tapering or a wind down of qe, but the most likely outcome i think is we will get an extension from march to september. there's also been some sort of speculation that the ecb might take a little bit of a leaf out of the bank of japan's playbook
and kind of move to yield targets rather than quantitative purchases for peripheral debt. this kind of falls within the tinkering around the edges about the central program of the ecb. think -- the kinds of things we are expecting to happen in 2017, the ecb is a bit of a sideshow. i think the most they can do with monetary policy in the euro area is keep the level of monetary accommodation. francine: what is the main show? is it foreign policy? we are looking at a speech by foreign policy. -- a speech by vladimir putin. is it foreign policy that you need to look at, or it is the fed, dollar strength? george: i think investors need to keep a wary eye on foreign policy.
the lurches in foreign policy, to the extent these may -- if it results in some kind of accommodation between the u.s. and russia and china in some we want toangle, know what the terms of that might be, but i think the most immediate things will be about onomics, america's policy for itself, and the threats that have been made to the world trading system. francine: we will talk about currency wars next. george magnus from oxford university. we are seeing more live pictures from vladimir putin, who started his speech about five minutes ago. we are expecting him to go on for at least an hour. he's just started talking about the need for developing direct democracy in russia. we are expecting him at some point to turn onto foreign affairs. see if be interesting to
his view of the world has changed. stay with "surveillance." plenty coming up including the return of opec. the organization agrees its first output cut in eight years. as vladimir putin makes his annual address, a new u.s. president, rebounding oil price, and political division in europe could spell opportunity for moscow. -- 2017teen be the year be the year of a total reset? this is bloomberg. ♪
francine: this is "bloomberg surveillance." here's sebastian salek. sebastian: shares in bank about ally español are trading higher after reports that it is exploring the possibility of merging with another bank. that is according to the newspaper which did not say where it got the information. citigroup is said to be considering moving some equity interest rate derivatives traders to frankfurt. according to people with knowledge of the matter, the firm is in discussions with the german financial regulator. said, weup spokeswoman are evaluating our options as negotiations continue. china is slapping a 10% tax on cars like the ferrari, bentley, and aston martin.
buyers of super luxury vehicles costing $189,000 or more will be hit with the tax from today. it is beijing's latest bid to combat suspicious consumption. francine: thank you so much. opec sent crude oil prices soaring by agreeing to the first supply cut in eight years. the deal was broader than many expected, extending beyond the cartel. opec and 600,000 from non-opec, so we have a total of 1.8. hopefully we will have a very high level of compliance. this gives a positive outlook for the market. oil industry has seen a high level of demand and i think it will continue over the coming years. it is important for the oil industry to have a healthy level of investment to balance supply
and demand. balance supply and demand. that is what drove saudi arabia to bridge differences with other producers inside and outside opec. francine: that was the saudi oil minister. will the agreement have the effect he outlined? let's continue the conversation with george magnus. the problem is that in one way you can say it will boost growth , but consumption is quite low across the world. as the oil price goes up, does it make people feel poorer? george: traditionally, we looked at the oil price volatility as a tax. if we get -- we went up three or four dollars yesterday, and if that were to continue in the context of some continuing concerns about the robustness of the global economy, that would be a bit of a problem. i happen to think that in the foreseeable future, this is a bit of a boon.
particularly since it resonates with what happened to other materials and industrial prices as well, this is a bit of a boon for emerging markets. i think they could do with a bit of a lift. francine: do you believe they do have control back? i know this is an agreement to cut production, but in the past, a lot of opec producers had said , sure, we will cut, and actually they pump a lot more. george: my sense is the fundamental position of supply and demand in the global economy really hasn't -- isn't going to be really chged for a much, unless there is absolutely rigid compliance, which has always been the problem. wash withit of a energy.
moment, i think these prices will stick. i think they will have some impact on consumer prices and we've already seen examples in the media about petrol prices or gas prices in this country going up. these are not all bad things. we have to watch them quite carefully. francine: thank you so much. george magnus stays with us. as vladimir putin makes his annual address, how a u.s. president and rebound oil price could spell opportunity for moscow. you are still looking at live pictures. some members of the audience there as vladimir putin addresses his nation. this is bloomberg. ♪
francine: this is "bloomberg surveillance." president vladimir putin is making his annual presidential address in moscow. with the election of a u.s. president who has spoken warmly about the kremlin, an oil price rebounding, and continued divisions in europe, president putin certainly has plenty to be optimistic about. he has pretty dire economy back home. let's get some more analysis with john fryer and george magnus from oxford university. john, great to have you on the program. we hear putin. this is not the five-hour affair
where he takes questions from the public. this is going to be short and sweet. what do we want to know about, from, syria, and oil? john: let's start with trump. there's a lot of talk about the sort of bromance between trump and putin. i would urge some caution. if you look at what trump has done so far, he's behaved in a way you wouldn't have expected. listening to his campaign rhetoric, you would never have thought this is a future president who's going to pack his cabinet with former employees of goldman sachs. we shouldn't assume he's going to cozy up to russia. it will be interesting to hear what he says about the u.s. relationship. there in mind, putin looks at the world solely through the lens of russia's self-interest. any warm words should be taken with a pinch of salt. francine: is it a reset for foreign policy? even if donald trump doesn't end
up being that warm, as long as he's not antagonizing putin, can the world be a little safer? john: i think there's nothing that can be said with any certainty about a trump presidency. looking at the evidence we have, it would suggest that trump is putin aperhaps to give broader sphere of influence then perhaps barack obama or hillary clinton would have done. putin is as unpredictable an actor as trump is. we could see more cyber hacks from russia on the u.s. government agencies. francine: module versus macho. john: exactly. extremelying at two unpredictable actors. francine: george, when you look at the russian economy, with this agreement to freeze production, and you were saying the price of oil could go up,
does it make putin more unpredictable? does he focus less on scaremongering in the world? george: not in my view. it is clearly helpful for russia, simply because of the role that oil revenues and hydrocarbon revenues play in terms of the fiscal balance in exports and so on. it is helpful for prices to be higher than it is lower. i don't think it really makes much effect or has much impact on russia's engagement with the united states or china. picking up on john's point, my sense is that we've got, in the united states, and russia, and china, we have to think of it as a trio. i think we basically going back to spheres of influence and national interest. major powersof the
of the world clearly do have, or look like they are wanting to emphasize, very significant geographic interests that are very important to the national self-determination. the noninterference bit, i think, is going to go. john: i was in beijing last week. one of the things i took away from it, would you also agree with the idea that china is much more willing to sign up to the rules of the global game than the russians are? therere a difference between russia and china? francine: maybe more than donald trump? george: i think the chinese position is quite interesting. on climate change and on trade, they can say, we are -- we embody what international cooperation should be about.
there is truth in that. i think in terms of regional influence in asia, i think china will not -- they are not going to compromise on that. they have an agenda which is regional hague m&a. -- regional hegemony. francine: will they be antagonized by anything trump says? he's said that any nation that has a surplus is cheating america. he mentioned china and germany. do you look beyond that? john: china's officials expect him to be pragmatic. they look at trump and they don't necessarily see a maverick. they see a deal maker. china looks at the world through the lens of self-interest. china more so than others. they say it is not in america's interest to start a trade war. also there's an edge to that.
they say, if trump does want to have a trade war, have a go. francine: do we need to spend more time thinking about the middle east? john: it is a horrific humanitarian situation. it is only getting worse in aleppo. we look at it from the perspective of geopolitics and risk. it does look like this is all playing into vladimir putin's hands. francine: thank you so much, john fryer, and george magnus from oxford university. we will be talking the italian referendum next. could donald trump and brexit mean 2017 is a total reset for foreign policy? this is bloomberg. ♪ ways wins.
reinstate its dividend next year and plans to pay out a minimum of $1 billion annually. the world's biggest commodity trader has seen its share price triple this year. the chairman of bloomberg lp, the parent of bloomberg news, is a director at glencore. oil is holding gains as opec agrees to its first production cut in eight years. saudi arabia, iraq, and iran bridged their differences. opec members will cut production by 1.2 million barrels a day while russia also changed its stance and will reduce output. >> during the meeting when we were drawing up the accord, but we still had some difficult questions to solve, which are essential, the russian energy minister gave the information that he would reduce by 300 barrels a day --300,000 barrels a day.
sebastian: china's official factory gauge climbs to a high. the manufacturing pmi rose to 51.7 in november. import prices dropped to the strongest reading since march 2011, signaling that inflationary pressures may be building. that is your bloomberg first word news. francine: thank you so much. we are getting some breaking news out of the u.k. this is significant, as every piece of news is poured over to understand what mark carney will do and what brexit means for the u.k. economy. we have manufacturing u.k. pmi for the month of november. it is one of the freshest data sorry,ming in at 43 -- 53.4. economists we had spoken to were expecting 54.4. it is below what economists expected.
pound pretty much unchanged. donaldes brexit and trump mean for foreign policy around the world? will 2017 be the year of a total reset? with me now is john fryer and george magnus from oxford university. george, we keep saying it is a reset, the end of the world. we had the greek crisis. we had what happened in the middle east. how significant is what we're seeing? are we jumping at shadows when you look at the italian referendum or can you say we are being taken over by populism? george: i think it leans in that direction. i think the significance of what happened this year -- and this may be only the hors d'oeuvre for things that lie ahead -- is unpredictability. the kind of world where we can actually -- where people make risk assessments, particularly
in financial markets. people know the future is uncertain. there's a risk that it could go this way in this way. whenroblem is that outcomes are actually unpredictable, and we don't know what a trump presidency is going to look like, we have no idea. the british government has no idea itself what brexit is going to look like. we're all making guesses about how economic and political outcomes, social outcomes, what they might look like. but without any templates. i think this is kind of what makes it interesting for analysts and also rather spooky. francine: how unpredictable is the italian referendum? we've gone through scenarios. the markets certain days takes a view. how ugly can it turn? john: first, will it be a yes or a no? it feels a little bit like a
coin toss may be leaning towards the rejection. the other even bigger feel is what happens afterwards. could you see the italian establishments ganging up to protect renzi or to protect the country against a five-star government, and to head off the threat of a euro referendum? there's also the sort of statistic that people keep on forgetting. i was looking at numbers recently. i think italian support for the euro is 60%, 70%. holding a referendum would be a dislocating event. but if you look at the numbers, it is hard to see them actually rejecting. and before that, you would have to change the law. at the moment, there's no law in italy to put that vote directly to the people. john: the flip side of that,
there's that old quote -- i can remember who said it -- but the markets can stay irrational longer than you can stay solvent. the bigger concern, i guess, is what sort of market fallout we see on the morning following that. what will the ecb do? will they come out in support? that is probably the most interesting thing. what support will we see from the authorities? francine: you have two monte dei , monte deiwo banks paschi, and they are going for capital increases. how frail is the system? are italian banks systemic, george? george: i think the problem is a systemic problem. the last numbers i checked, the estimates of nonperforming loans, 18%, 19% of total lending something like 85% of
capital, this is a problem that has gone begging. the banking union provisions and legislations actually prevent the italian government from taking the kind of attitude to their own banking system that the irish and the spanish had prevusly done. -- the votee vote in italy -- it is important because of what it portends for the political outcome in italy, whether it is for three months, six months, a year, whatever. that everndum, if happened, and it was called on the basis that whoever called it thought they could win it, that is curtains. that is the end. even absent that, what it means is that whatever way the vote goes, it basically extends a
period of uncertainty. the lack of willingness to reform or the lack of ability to change the problem in the banking system means that drift -- francine: you also have the french elections. are we looking at six months of complete uncertainty? john: yes. trump and brexit grooved that "add things happen" or surprises can happen and we do not fully understand the world we live in. it is hard to say with 100% confidence marine le pen will never be president of france. anymore. that every piece of political uncertainty is much more magnified than it would have been. francine: what is the biggest risk? is it italy or is it france or are they both equally burdensome to the system? george: i think, at the moment, italy is the bigger risk. francine: because it is sooner? george: because it is sooner. the consensus--
seems to be that fillon will make it through the second round , and consensus views for what they're worth -- i don't think that necessarily solves france's problems either. there is a bit of a schism. in that sense, i think italy is the weakest link. john: even more broadly, i think the biggest risk is a breakdown in support by the political elites for the euro. right now that support is rock solid. if you've got a government anywhere in the continent that broke down, that broke that france,s in italy or in that is the bigger long-term risk. that is pretty much unshakable faith in the euro as the pillar of the european economy. someone gets elected and that starts to break down.
francine: i remember being briefed by jean-claude juncker, saying he's never seen so little commonality among nations. that should make investors worry a touch. thank you so much, john and george. bloomberg's execute of editor for international government and george magnus. stay with "surveillance." plenty coming up. opec agreeing to its first production cut in eight years. renzi -- report card. italian gdp at 10:00. and are we seeing the end of the bull run? global bonds see the worst slump ever. we break down the market news to watch. this is bloomberg. and we are watching some live pictures of president vladimir putin in moscow. believe he is inside the kremlin, one of the houses to the left of the kubla, as he's giving his state of the union address. ♪
francine: you are looking at live pictures of the kremlin. this is the audience listening to vladimir putin. so far he has covered the domestic economy. he's said that inflation will be below 6% for 2014 and then he said he believes russia will achieve 4% in 2017. russia has had a huge inflation problem, especially when it comes to domestic food products. that has not led to social unrest, but i imagine this is one of the things putin is worrying about the most. he's focused a lot on what he sees as the main cause for
economic recession. we hope he will also talk about foreign policy and maybe a comment or two on president-elect donald trump. crude oil prices have soared after opec agreed to its first production cut in eight years. many non-opec producers including russia pledged cuts of their own. oxford university's george magnus is back with us. gelder,ning us is alan head of oil markets and wood mackenzie. how much of ae of surprise opec was and whether they can go through the cuts and not oversupply the markets. opec, quite a of surprise. we didn't expect them to reach an agreement of this scale, which they did yesterday. we think that is quite material in terms of its stock draws in q1, q2, which will be supported for prices. we think the key countries to watch really are saudi, iran,
iraq, kuwait. francine: iran is significant because donald trump gets inaugurated january 20. how will he deal with iran? alan: very good question. it will be interesting to see if the words he mentioned during the campaign, will he go forward on those? we've seen a lot of backtracking. that is something we are very keen to watch around iranian sanctions. anything that makes iranian exports more difficult would have a very strong impact on the crude market. george, this is something we were discussing with john fryer, our head of government. the problem is we don't know what donald trump will do. how much do we understand about his policies? we don't know deregulation. the shale fracking industry in the u.s., how far will he go on that? george: i say to people that you could listen to trump's rhetoric
on the campaign, and even subsequently, and take everything at face value, and nothing at face value, and you would be half right. think, a lotsh, i of people have this, whether it is some conscious or otherwise, that in power, he will become more pragmatic. -- if draining the swamp means putting wall street into your government, then what does that actually mean? not as much as we thought it might mean. i think this is -- i suppose it is kind of part of what we think trump's character is like. it is unpredictable. it is volatile. he could surprise us with some things where we think, didn't think he would do that. he could also surprise us the other way. i think he is volatile and
temperamental so i don't know whether his foreign policy actions or the way that he approaches iran and other countries will be true to what he said. francine: we just don't know. we need more details. allen, did me a sense where you see the oil price going. we were stuck in the $45 to $55 range for quite some time. will we break out of it? alan: we think $55, $60, probably at the end of 2017. many factors could impact this. what happens to libya and nigeria in the first quarter of next year? do they recover? that could eliminate some of the stock draws. this agreement is only for six months. a key aspect is whether that agreement will be extended. how quickly does that grow? we think we need something that is mid 50's and higher for u.s. times oil to be economic.
to pricewe will get levels that could be quite attractive. the other is really what happens with the non-opec agreement in early december in delhi. oha.n d francine: thank you so much, alan gelder and george magnus. let's talk a little bit about brexit. let's go over to our brexit minister, david davis, taking questions in parliament. i think we can have a listen. this is a q&a session. >> we are undertaking a wide ranging engagement undertaken by the prime minister. i have met with european parliament as well as ministers and other officials from other european member states. >> thank you, mr. speaker. how thatntirely sure
answer related to the question i asked. it was certainly full of quite a lot of flannel. [laughter] >> it seems to me that we are no further forward with a plan to leave the e.u. then we were five months ago. can the secretary of state tell me when the government is going to drop the pretense that brexit can mean continued tariff-free access to the single market and an end to freedom of movement? don't the british public deserve better than this embarrassing charade? [jeers] to give anterested supplementary she obviously prepared earlier. [laughter] [jeers] >> this has been the labor line for some time. they can't even agree among themselves. will they agree with their own spokesman on this, or with their shadow chancellor?
[jeers] >> we are four to five months from the triggering of article 50. that will be the point at which we will be very clear where we are going. >> thank you, mr. speaker. what my right honorable friend agree that between the phrase, >> means brexit, and a full negotiation, there's quite a bit of room? would he note that more than one witness to the committee as well as members of parliament believe that in order to provide some clarity and deal with some of the uncertainty, there is room for the government to publish some of its high-level objectives, which will be known to the eq and all of us the moment article 50 is triggered? will he consider that with great urgency? >> of course i'll consider anything that my right honorable friend comes forward with.
i know it is a matter of great importance to him. brexit means brexit, which was an interesting phrase, is a long way short of what we've already said, which is that we are aiming to achieve the maximum possible free access to the market. we need to respect all the implications of the referendum. and in between those, an area which no one seems to talk about, is the whole issue of justice and home affairs. we want to as far as possible replicate what we already have. francine: that is brexit minister david davis. we will have plenty more if we get any breaking news. pivots tolencore dividends. we will bring you the market news to watch this morning. this is bloomberg. ♪
52 point and as you can see there. there is downward pressure on equities today. red across the board. ftse lower, dax lower, euro stoxx 50 lower. in the fx space, that other retreating from a nine-month high. the euro up 0.3%. sterling, 1.2537. severing yields rising in europe. tracking what is happening with treasuries, better data yesterday. jobs data tomorrow. signs of economic strength. expectations of that ratesigns . expectations of that rate hike from the fed. the trump trade off eating into treasuries, having the worst month since 2009 in november. the 10-year treasury yield up three basis points after its highest close in's july last year yesterday, surging nine basis points. what is also feeding into this is the rebounding oil providing, some are saying, further support
for that reflation trade. reding at stocks in europe, pretty much across the board. the one outlier is energy stocks, up 1.1%. still tracking that higher crude price today. finally, just wanted to show you euro-dollar volatility. week volatility jumping to its highest since brexit. francine: thank you so much. let's get final thoughts with george magnus. we talk about china, but overall, what do you think the markets will be most worried about the next six months? is it going to be emerging markets? george: i don't think it will be emerging markets specifically. people have gotten used to the idea that china looks pretty stable. commodity prices rebounded this year. i think the big thing that people will be looking to check boxes, is really, what is
hisident trump, what is economic policy and his budget? we will find a pretty early in 2017. there's a huge amount of stuff being written and talked about, infrastructure, this great thing. but if the infrastructure programs are tax giveaways to construction companies, not quite the same thing. francine: i agree. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we will be talking italy, the referendum, and gdp. just three days before the country's crucial referendum. this is bloomberg. ♪
opec agrees to the first price cut in eight years. 13thussian later holds his annual state of the union. will he take the opportunity to announce a u.s.-russian relations reset? the bull market runs out of steam after 1.7 billion dollars are lost in a month. this is bloomberg "surveillance." i am francine lacqua in london, tom keene in new york. we are looking to your president elect, and we need to talk about oil. tom: also, markets on the move. yields, antioned the extraordinary 24 hours for higher yields and that it x everyone worldwide desperate fax everyone worldwide. followingunemployment -- falling. we have some manufacturing in
the last hour which is pretty much in line with expectations. i am looking at euro, there is not that much impact on the currencies. let's get to the bloomberg first word news. government-sponsored hackers have launched attacks on saudi arabia. the attacks wreaked havoc on computers at the saudi agency in charge of their air force. evidence suggested attacks came .rom iran the plane carrying a brazilian soccer team ran out of fuel before crashing in colombia. an air traffic controller made the plane search for -- circle for seven minutes. risen to toll has seven from those wildfires that devastated a resort town in eastern tennessee, destroying
more than 300 homes in gatlinburg. more than 14,000 people were evacuated. resident elect donald is declaring victory as he travels to indiana. spare u.s. agreed to jobs. hundreds at the factory will still be laid off. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. salek.astian this is bloomberg. tom: right to the data now, orchids continue to move. maybe not equities, but everything goes. 2.41%, thehe yield, euro -- oil churns -- the euro churns. you can see the vix, 15.43.
3.07% is a new level for the 30 year yield. ever weaker yen, stronger euro. statistic,mazing overall financial markets are starting the month -- it is the first of december and we are almost in the holiday season. uncertain footing. i wanted to show you dollar retreating from a nine-month igh and treasuries falling, oil near $50 a barrel. tom: let's go over to the bloomberg, and francine on her way to italy tomorrow. we will try to give you a lot and be balanced without hysteria. it is a huge deal. we will try to put it into context for you. this is the italian-spanish spread. it really shows the deterioration of italy and the
success of the spanish experiment. a sickly, any of our guests -- basically many of our guests wish italy would be like spain. francine: this is the one thing we need to watch out for. i wanted to give something concrete that would point to the fact that certain household in italy do not feel as comfortable as they should. i will bring you to my bloomberg terminal. in red is the italian public debt back to 2014. it has just been going higher. it has not been a clear trend. and this is household income, but say they do not meet their their expenses. they are spending more but a lot of this is not on
infrastructure. households feel, i do not know if it is cheated but they do not feel that they benefited from the slight recovery we are seeing in italian gdp, so this is one of my favorite charts. looking at the markets, let's , hsbc'sames pomeroy globally economist. when you look at the economy and europe, what is the one thing that you are worried about? does oil hurt consumer spending? james: it probably will. consumer spending has done pretty well considering the various challenges. low oil prices helped put some real income boost to the european consumer, and that has helped consumption. a higher oil price will probably take away some of that benefit which means we will need to be slightly more pessimistic about growth over the longer term. francine: it helps a lot of the emerging markets that are commodity producers. does that outweigh the pressure households will feel and it is a net positive? james: it is hard to tell
because where we are today in terms of $50 and 55 bit -- -- it is better but it is not enough. it is a most like the worst-case scenario. it is not great for the western consumer or emerging mile -- emerging market oil prices. asset love that you have allocation experience and you full that into economics. help me with the market ramifications for gdp. year.10 kenneth rogoff with us in the next hour. james pomeroy, when does this market gyration again to affect gdp in various countries? james: with the u.s., we have stronger growth and that is clearly a good thing for the
u.s. economy. see thensumer, we still u.s. consumer relatively strong and that is good news. for other countries, and if we think about the emerging markets, we have to think about the risks. commodities.tile volatility creates uncertainty and uncertainty is not great for future growth or investment or confidence into investment into the emerging markets. the real benefit of the last few , and of steady low rates what has been happening with the dollar, that has gone away so we have to be slightly more concerned into next year for the emerging markets. of: emerge -- news out vienna. are we going to see the same junk condition out of mario
draghi? i look at the research on italy and they say it is all about mario draghi and what the ecb will do. will the ecb do a vienna? james: i think they will extend their qe program simple because they have to. isis still very weak, it picking up but a long way below their target. some of the data is fairly good. some of the pmi's from short-term data are relatively good. in terms of missing inflation targets intermediate-term -- the medium-term, i still feel the ecb needs to do more so we expect more from them next week. francine: they need to start talking about tapering at some point. this cannot go into infinity and beyond. james: it becomes more difficult for them. inflationnge is now, is starting to pick up but how confident would we be that inflation in the eurozone will be close to target in 2018? we
do not think that will happen so they have to keep monetary policy loose. francine: is the problem that if mario draghi says they discuss anering, does that have impact on the markets or on the psychology of people in the markets? what kind of indications can he says we are thinking about normalizing but not yet? james: a lot of central banks of the last few years are very much in discontinuous easing. no one is really prepared if that is not the next thing. what if we start talking about tightening? that would be a shock to the market because no one is talking about tightening policies or what is the next easing move. tom: james pomeroy with us, with hsbc. in the next hour, kenneth rogoff 's to takend on modi
talking: vladimir putin , and a lot of people, you can see the audience standing up. he spent a lot of time talking about the domestic economy. it seems like the president of russia has just finished his state of the union address. i imagine that foreign policy watchers will have been a little bit disappointed that he did not mention your president elect. he did not mention china either. this was a very domestic focused speech, talking about the need for russia to come together and
unite around patriotic values. he also talked about inflation. russia has the opposite problem of the rest of the world, they had huge inflation when it comes to food prices and were concerned about social unrest. vladimir putin has a pretty strong handle on that and there has been none. tom: that speaks to the ruble dynamics. he briefly mentioned oil but not nearly as much were expecting. let's get some of the corporate nose -- news. here is sebastian salek. sebastian: china's production matched a 2012 high last month. cheap credit is gaining momentum . large companies which tend to be owned by the government are doing better than the small ones. glencore will reinstate its dividend next year and will pay
out. just over a year ago a rout in commodities forced a drastic debt reduction plan. makeis figuring out how to their oil cut next year. prices are less than half were they were two years ago. saudi arabia and iraq have been seen as roadblocks but both agreed to the cutback. that is the bloomberg business flash. opecine: we have more on and the two people to talk about it. stewart wallace and james pomeroy. it. did eight years and they finally said they will cut production. will they follow through and actually cut production? >> i think they will end when you think about who will take the all caps the cuts, it is the gulf allies.
i think it is very much in their interest to show the world over the next several months that they can cut supply and do it convincingly. where i think we might have a problem is that nigeria and libya are coming back. that might be a bit of a problem. francine: how do you view iran? when donald trump gets inaugurated do he have any insight on how he will deal with iran? stuart: pre-election he was talking about it being a bad deal and suggested he wanted to pull out of it. since he was elected i do not think we have heard much about it and second, how does this asians ornnot see the europeans wanting to go along with the reversal and it is bad news for them. tom: a number of charts in the media showing extraordinary anding to the united states
saudi arabia production. help me with the cartel cents after this announcement. his -- is the cartel stronger? is it bipolar? stuart: it is definitely bipolar but it is stronger. what we have seen since the free market attempts two years ago is that did not work for them. we went down to $20 a barrel and we all felt the pain. they all realized this is important in their best interest to reform the cartel. iran came out a winner, saudi arabia did in that opec six together and they are trying to do a ramco. ramco.dy got -- a tom: what does it mean for riyadh and their domestic fiscal policy? stuart: it gives them a little
bit of breathing space. we think nowr them is something around $80 barrel so even with the prices we are seeing, even with this 10% jump we saw in the u.s. benchmark yesterday, they are still $20 to $40 away from where they want to be. highrice can they -- how can they push the price before shale comes back in a big way? they really have to start being worried about the permian and the bakken and so on. what you think about glencore? we could call it an inflection point or a much better vision for glencore. is this the commodity cycle or is this them doing the right steps, disposals, asking for cash at the right time? stuart: it is all of the above.
they have been incredibly disciplined in their asset disposals. they have been very disciplined about closing minds and getting the right amount of money. and itup more than 200% is a phenomenal result in a difficult environment. they got lucky that china shut down some coal mines and that got them out of the hole as well . you cannot take away any credit from the company itself. they have handled this incredibly well. chairman bloomberg lp ata member of the board glencore. james, how do you view the cycle? it should be a big boost to emerging markets that require -- rely on commodities at the same time the fed is about to hike? james: it gives them some respite, and if we are looking at countries like chile, they
are getting some respite as rates are starting to go up. .t is some good news we are not back at levels that will fix everything for the emerging world but a step in the right direction. tuart wallace, we appreciate you. james pomeroy staying with us. ihs, look for of him in the 7:00 hour, on a historic opec decision. ♪
tom: bloomberg "surveillance." good morning in asia. ken rogoff on india coming up. our morning must-read, there is lots of great stuff out of italy. i know you are jetting their tonight. "italy is in a sense of the trumpet effect and the tornado of imported monetary tightening. we forget that italy used to run a big trade surplus with germany in the old days of the lira. it's real growth rate tracked german growth almost exactly with the help of devaluations." if i've learned one thing is nobody believes they can go back to the lira. francine: exactly, not at this
point anyway. that would be like a million steps from now until that would happen. we have to the trouble italy is in, and they are in trouble. heart of what ambrose was saying is partly because they are self competitive and partly to do with china. james, how do you fix italy? james: i think italy has the fundamental problem of an enormous demographic challenge and that will inhibit your growth rate. if you have a shrinking working various ratios within your population deteriorating it puts pressure on workers and fiscal balances, and these are things you cannot fix easily. tightening monetary policy is not necessarily the solution. francine: the structural problems are reforms need to push through. how do you fix the italian banks? james: that is an entirely
different story. it cannot be fixed in the short-term. you have to take the pain at some point that italy needs whole scale reform, a whole new way of approaching itself to improve its productivity and potential, and that will help the banking system if we can do that. reading,in all of my you are 100% correct. it is a mess. what do the institutions and elites of europe need to do to clear italian political economics? what is the action plan in the next 90 days? james: the next 90 days is extremely difficult because the referendum over the weekend is likely to create market is notity and that exactly ideal for any country trying to go through a reform process. because of what happened with the ecb and the pull down on yields, it has--
not pulled through. tom: how removed is italy from being greece? italy is not germany, i get that . how close is it to being greece? .ames: it is not quite the same we are not talking about the same level of collapse. we are talking about 0% trend growth and high levels of debt, low productivity growth. there is a slow trend pace of growth but it is not something we expect to collapse anytime soon. francine: italy is still part of the g7 and greece was nowhere anywhere near part of the g7. this is bloomberg. ♪
where the action will be this weekend is in rome because of that all-important referendum the markets are taking this referendum as a constitutional reform which will give more power to the prime minister, on possibly a vote from the government. you can see a lot of different options of what could happen and weaken possibly wake up to messy markets on monday. tomorrow we speak with the former prime minister of italy, mario monti. most business people want a yes vote just to keep renzi in government. mario monti disagrees. were going tou meet gregory pack and have a roman holiday. it is going to be the banks. bring up the chart. this is unicredit, which i believe is a dominant italian bank. this is one of the ugliest charts on the bloomberg.
what is the likelihood, given the vote sets that you were talking about, that unicredit could break even lower? francine: let's talk about steps . this is a speculation, but let's say the italians decide to vote no on the referendum. what could happen is matteo renzi decides to step down so he goes to see the president, and says i want to step down because i have lost. what happens next? we could have early elections or a technocratic government. this uncertainty, there are two problems with the banks, the big banks. then you have medium banks, they are looking for rescue plans. i am thinking of the genoese banks. you do not know what happens to their rescue plan. tom: i like how you partition between the two big italian popularis the more
banks. who writes the check? lombard street research can write up all of this analysis, i love it. but who writes the check to bail out the italian banks? francine: there are two things, and let's call them systemic. it's also put monte paschi in there because they are going through a capital raising program. it is investors that decide what they do. the other one is basically an entity formed by the government. you have these bail in rules by the e.u. which makes it very difficult. it is difficult for the u.k. the italian banks hold a lot of italian debt. you can see the problem. you were trying to square a circle. tom: i just want you to run through one of those fountains
in rome when you are down there like in the movies. francine: i will for the open of the show tomorrow. let's get to the bloomberg first word is. sebastian: in columbia, congress approved a revised peace treaty that ends more than half a century of war with marxist rebels. they rejected the original agreement meaning that rebels will move through a so-called transitional zone and hand over their weapons. those who confessed to serious crimes will not go to jail. a new report says russia did not informationd leak around the u.s. election, it also used social media. it was promoted by numerous fake accounts. donald trump is claiming victory as he travels to indiana. carrier has agreed to spare about 800 union workers whose
jobs were headed to mexico. no one is saying what workers might have to give up and what caused carrier to change its mind. psychedelicies, -- for cancer patients. the studies are in the journal of psychic pharmacology. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am sebastian salek and this is bloomberg. francine: thank you so much. our next guest says europe's banking system is broken. peter hahn joins us now. we were just talking -- thank you for joining us. we were talking about the banks. they are broken because we are over bank or because we do not understand their business model? peter: you are correct, the
business model has changed. higher capital banks need to make more money to justify it so put that aside. it is a slightly different story in each country. in italy the hardest part to understand is if you were a retail customer of an italian bank, you walked in and they say you get so much for deposit but extra interest if you buy shares. we might even lend you money to buy the shares. so rather than raising equity and institutional markets, so these are banks that are largely mutual, they raised equity from their depositors. suffering in that restructuring is individuals, and those are vulnerable. francine: it is also the economy . we have a million charts looking at gdp. it is not institutional investors. if there were to be some kind of bail in rule, what exactly -- how much loss to the families
will there be? it will hurt, but i think it is also a critical part of the vote. uncertainty is these losses will be spread very much to individuals rather than institutions and pension funds. you see someone losing what might be a good chunk of their life savings and a lot of their capital, and that creates a lot of political uncertainty. tom: i look at the phrases bail , andramdown, adjustment clear markets. help me with how italy gets through this. cyprusve obviously like and ireland and greece, got to make some tough decisions. will that happen anytime soon? peter: in a way it has to happen soon. is it really because as a result of the referendum, which way does it go? the germans, the
e.u. have really authorize the italian government to buy into these banks. be way it is done is yet to decided but the italian government will end up putting in some money. tom: they're going to put money in to fix it and a lot of people say they can do it. ec a catalyst and will that come for mario draghi? well, i think the catalyst is probably do you have a referendum result that results in a resignation in government, a waffling of who is in charge, is a technocratic government, in, and is it easier for them to make decisions that hurt voters because they do not see themselves as appealing to voters? that could happen. francine: let's say renzi loses.
the only good thing is we have been through this a million times. we have a president in place, largely a ceremonial role, but he chooses the government. would it really be the end of the world? for italy it is going to be some big challenges, yes. the question you are asking when you say the end of the world is how much does it spread to the rest of europe? i do not think there is a lot of contagion risk for the bank. the southern european banks, particularly a few in spain that have the same funding structure with a relied on retail for equity. francine: we are putting a lot of focus and doom and gloom on italian banks, a lot of german banks are not in any better position. peter: the rest of europe is in a profitability crisis. italian banks have stockpiles of
bad loans, lots of old risk. they kept it going. it is like japan after its crisis. they do not want to face reality and they cannot afford to face reality. or the rest of europe it is about low profitability, adjusting a model. the only way that is visible to adjust the model is cost cuts. it is unpalatable particularly in germany has of the way their banks are largely tied to government. problem,urope's profitability in banking. francine: thank you so much, peter on, dean of the london institute of banking and finance. .il was above $50 a barrel on bloomberg tv we speak exclusively with the venezuelan oil minister live from vienna, a day after opec cuts output. this is bloomberg. ♪
francine: this is bloomberg "surveillance." i am francine lacqua in london, tom keene in new york. we look at the houses of parliament and those colorful green benches that we saw every week when there is prime minister questions. today parliamentarians are asking questions to david davis, the brexit minister who is talking a little bit about how he sees brexit going forward. he says it might or might not include single market membership . he is asking and answering some questions on the need for a transitional deal. the thinking is that when article 50 is triggered you need something right away to give
certainty to ceos and businesses doing a lot of their trade with the e.u. i think you can see a friend of the show on the third row. let's get to the bloomberg business flash. sebastian: the largest single-family land order in the u.s. is going public. that is according to a person familiar with the matter. they plenty sell about one and a half billion dollars of stock with a market value of about seven and a half alien dollars. they bought houses at depressed prices after the financial crisis. the firm will pay $155 million to a lamb corporate investors. they say they lost money because of trading in shares and a judge has to sign off on the settlement.
china is taking aim at conspicuous consumption and gas guzzling vehicles, imposing a 10% tax. it is their latest move to tone down spending by wealthy consumers. that is the bloomberg business flash. francine: emerging-market stocks have resumed to the highest level in three weeks as surging commodities and chinese data show the world's second-largest economy stabilizing. it's get more with brian coulton , chief economist at fits ratings. we have not really worried about china for a while. the last time was january. are you concerned that volatility and angst will come back to want chinese markets? -- too hot chinese markets -- haunt chinese markets? brian: i think the key point is that now the policy is on the turn a little bit again.
we are seeing on the housing market because they are worried about prices growing to rapidly. mortgage lending is getting robust. they are starting to tap the brakes slightly on the housing side. when they did the easing in 2015 it was housing they started with . it is important for the cyclical and industrial sector in china so the fact that they are changing their approach on policy, we think the economy will slow a little bit from here and that does not tend to bode well for market concerns. tom: we have had two days of yield jumps. the 30 year u.s. bond up another 30 basis points. i understand these are gentle glide paths and at some point a bond reset clicks in with a vengeance. how close are we to higher yields beginning to affect the complexities of the global economy? brian: this has been something we have been concerned about for a while.
dip, we yield in 2016 did not feel was justified. we never bought into this secular stagnation story. if you look at the term premium, that was negative, suggesting there was a little bit of a bubble mentality in the bond market. everyone was expecting qe would not work but the central banks be doing it forever and the fed might come back with a dose more . this has changed a lot post trump. oil prices are going up year on year. prettyk the opec deal is positive for the outlook for oil prices. we think reflation is coming back, certainly in the u.s. i think the story has got legs. tom: you talk about a reset of reflation. i look at the dollar this morning not moving. what are the correlations like in the market, and what does
that signal about gdp growth? -- a almost a just joint disjoint market, x days out from the trump selection. brian: global monetary policy was a big theme in 2013 when the u.s. economy emerged from the crave -- global crisis. that is getting another injection from the likelihood of more fiscal easing in the u.s. the u.s. economy coming back from some of the headwinds affected from the energy sector adjustments in 2015 and 2016, those are now fading. what we do not see is those improvements in the eurozone. we think they would ease back a little bit in 2017 as the benefits of oil prices on the consumer side start to weigh in. an issuetary policy is and it is finding its way through to the dollar but i do
not think that will crimp u.s. growth much or that they will change their attitude. francine: what will be the donald trump-china relationship? the million-dollar question. aian: i think it is difference between if he is aggressive toward mexico and for thosefortunately economies they do not sell to anyone else. china is much more diversified. it is a much bigger economy and there is a strong man in charge. that will not look good for him to be seen to be believed by donald trump. i think -- bullied by donald trump. i think there will be an gasquet reaction. -- a reaction. it is absolutely crucial for production. it could get quite nasty. tom: brian coulton with us with fitch. markets on the move.
tom: good morning, everyone. bloomberg "surveillance." the president elect's new york. we welcome all of you worldwide. kenneth rogoff coming up. we will spend an entire block on the huge controversy of india and cash. rogoff, bill nye will be with us, the science guy. right now brian coulton of fitch, the economics guy. december 1, that there is a jobs report in the united states. we can barely keep up with it. i guess it speaks to the market reset we are seeing right now. how far can the unemployment rate come down in the united states? it is a source of great debate.
brian: my view is that the u.s. market is probably quite tight. we are seeing nominal wage growth. it has picked up to 2.8%. byviously it was kept down the strengthening of the dollar from 2014 and the collapse in oil prices. i think that took some of the pressure off and allowed real wage growth to pick up. those benefits are now fading so i think the underlying market is coming through in nominal wage inflation and i think we will see more of that. there is not much of an output gap in the u.s. and i think we will see more tightening. tom: this chart is unemployment back to world war ii. we forget when unemployment comes down, it comes down with a vengeance. brian coulton, help us with economics 101.
why does unemployment drive lower? why can't we have a fully employed society? brian: there is a way to turn over, people changing jobs. you will get an element there. historically there's a point where it just becomes hard for firms to carry on doing the hiring they want at existing wages. you can physically push the unemployment rate lower but whether you have to do that to bid wages higher and higher. you are seeing some of the other u.s. labor market indicators, the quick rate, people willing people willing to leave their job to find another one is going up. more likely to leave a job they do not like well. now you have got options. a better american job
economy jump over to the united kingdom and other g-7 societies? .rian: definitely one of the features of the u.s. recovery the last few years has been the lack of wage growth. helped u.s. domestic demand a little bit, and u.s. import growth has not been that strong. if we get a pickup in wage growth, if more of the income flows in the economy go to households and people with jobs as opposed to going back to the corporate sector, i think we could get a benefit to demand. i think we are at a point in the cycle where the labor share will go back up again. that may be bad for margins but in terms of demand and growth, it is probably a good transition that will help the world economy. francine: if you look at donald
trump and how much he wants to spend on infrastructure, is it 50/50 that he gets away with that much or is it 70/30? huge. the tax cut is inis talking 1.8% of gdp 2017 alone so i cannot see that republicans signing up for a deficit increase on that scale. infrastructure, i am less condensed by. tom: brian coulton is with fitch. i am reading my book of the year next hour,r kenneth rogoff on the uproar of cash in india. ♪ generosity is its own form of power.
you can handle being a mom for half an hour. i'm in all the way. is that understood? i don't know what she's up to, but it's not good. can't the world be my noodles and butter? get your mind out of the gutter. mornings are for coffee and contemplation. that was a really profound observation. you got a mean case of the detox blues.
don't start a war you know you're going to lose. finally you can now find all of netflix in the same place as all your other entertainment. on xfinity x1. 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. visit an xfinity store today and see for yourself. xfinity, the future of awesome. tom: this morning, a repricing of global markets. trump's stimulus will affect
indianapolis, italy, and indonesia. sunday's italian referendum may be a sideshow. how will mario draghi adapt and adjust to his italy's vote. it is a curse of india. the coverage of the prime minister. india leads the battle overcast corruption in the underworld. good morning, everyone. this is "bloomberg surveillance" live from our world headquarters. i am talking. -- tom king. italy is now front and center. francine: i would say italy is front and center. what we are seeing in bond and treasuries and so is oil. we have a trifecta of news. tom: we would get to the market impact here and a data check in a bit. first word news in london, here is sebastian.
saystian: vladimir putin he is ready to work with the trump administration. he made his speech to the assembly. to carry on vital relations based on mutually advantageous basis. russia and the u.s. we are interested in resolving the global national problems and ensuring global and national independent security. he said russia was to build its own future. donald trump claiming victory as he travels to indiana today. carrier has agreed to spare 800 union workers at the indianapolis factory jobs were headed to mexico. they are not saying what workers may have to give up. hundreds of workers will still
be laid off. a plane carrying the brazilian soccer team ran out of fuel before crashing in columbia. according to a recording of the final minutes of the point, the plane circled seven minutes because of fuel problems. 71 of the 77 on board were killed. the death toll has risen to seven from the wildfires in eastern tennessee. is estimated the fires destroyed more than 300 homes in gatlinburg. more than 14,000 people were evacuated. global news 24 hours a day powered by more than 2600 journalists in more than 120 countries. this is bloomberg. tom: thanks so much. let's get to the data before we get to the professor on the markets we are seeing. equity futures take a po ause. nowhere near the parity dash. that is american oil.
thanks to our commodities team for wonderful opec coverage. 30 year bond, 3.07%. two days in a row. what is a concern is everybody is telling me it is no big deal. francine: i don't know if it is a big deal or not, but something to keep an eye on because it goes to how donald trump funds it. treasuries are related to how much you can spend on infrastructure -- he can spend on infrastructure. markets starting the month uncertain. we had a pretty dramatic november. european stocks snapping today. crude because of opec. tom: thank you so much. nye the science guy will join us.
kenneth is at harvard university. that bailey describes his a congressman's with economics and accomplishments with economics and policy. this is the most hated book on amazon. no question about that. it is a courageous book. we will get to this in the next half hour. we welcome everyone from our indian and asian obvious this morning. we will get to this raging debate over cash later on. right now, kenneth on this historic time. things.a momentum in are we at a point where there is a change and the vectors change and there is a new momentum? kenneth: in the economy? tom: at the markets. kenneth: there is no question about it that trump has introduced a lot more uncertainty. a certain feeling that maybe in the u.s. might grow again at
least for a few years whether we get skin cancer 30 years earlier, i don't know, but there is a lot of optimism about growth. tom: within the optimism is romance and nostalgia. abouted to your colleague the romance of reaganomics. this is a different world than the world of president reagan. kenneth: ronald reagan had a very clear vision of what he wanted to do, executed it in a and ively coherent way, think was very successful in a lot of dimensions. donald trump has a less coherent view. the republican party is very scattered. it is not so clear what they are doing. we already had reaganomics. what do you do now? tom: you were kind of to help me with a book. i stole the phrase from ken rogo ff. the royalty checking is enormous. europe in think
many ways is trailing the united states if they don't vote their expansion out of office through populism. emerging markets are doing better. it is hard not to be doing better. i predict this will be the first time in eight or nine years where the imf upgrades their global forecast. tom: there you go. there is the news we need. francine: is there a second engine that suddenly started running yesterday? opec's seeming to have control back of the price of oil. the price goes up. kenneth: it certainly is. the relationship between oil and growth is a very complicated one. having oil prices go up is not good for japan, europe, but it provides more stability. we have had a big change in how markets react oil prices.
oil prices going up makes the market go up. it is surprising to an old-time are like me, but indeed there is more stability. francine: if you are such a believer that america will be much better than what we are seeing now, does it bring the rest of the world up with it? or do you think because of differentials, it will make the rest of the world look very bad if the u.s. retrenches on itself. kenneth: i did not say i was a believer. tom asked about the markets. tom: she does that. she is known to do that. kenneth: it is in the realm of possibility that growth could be eye-popping. it may have happened under hillary clinton, too. we had a long recession. we are coming out of it in many ways. yes, there are a couple of reasons why when the u.s. does well, the rest of the world does. it is a leading indicator.
we have better data. when we are doing well, it means other countries are doing better than they think. are verydemands important to asia and there could be a confidence boost. on the other hand, a lot of uncertainty around foreign policy and other things with the new administration. francine: do you think we are in a better place than we were six months ago? the fed is about to hike. that was be a good thing. kenneth: we are certainly in a better place and would have been no matter who is taking over. part of why things are better recessionsuse w slowly and deleveraging. tom mentioned italy. china still has issues. world,ot that the whole but the u.s. clearly is in a better place. i hope we do not boughtch it. tom: you wrote about 14 flavors
of floating. it is a new currency world right now. is there such a thing as constructive depreciation? do you look at currency depreciation as a good tool, a good policy tool for various nations? kenneth: for a lot of countries, the currency depreciation is a reflection of other policy. tom: a follow-up. kenneth: the u.s. looks like interest rates are going up maybe much more than it seems like a year ago. that is rising the dollar up. that provides a cushion for europe, japan. there are some countries like china, which do not allow a lot of movement like that. francine: thank you so much. aboutl talk to ken rogoff italy, india, china, and other emerging markets. stay with "bloomberg surveillance." you speak with the former prime minister of italy tomorrow at 10 a.m. in london. this is bloomberg. ♪
francine: this is "bloomberg surveillance." tom king is in new york. we are looking at live pictures. tom: there is like 12 people here. francine: there were a lot more people. we call him the brexit minister. this is not him of course. the minister for leaving the eu. we do not know much more from david davis. he says he has the industry interests at heart. we had an interview at imf, and
he really has his eye and ear to the ground. -- this is the latest news. a little more optimistic. there is the brexit minister. tom: very cool. standing up, screaming. seniorhanker is our executive editor. he is in washington this morning. willhanker, mr. trump wander to indiana. there seems to be a little bit of controversy about saving jobs so they do not go to mexico or wherever. how will he be greeted in indianapolis this morning? i think he will be greeted quite warmly. the optics of saving 1000 people are losing their jobs is quite positive, so there's no denying it is a retreat for him. tom: is he going to do this in other states?
is this a bone to the vice president or a pattern of dashing around saving 800 jobs here, 2000 jobs there? marty: it is quite possible. obviously because it is carrier, that is where he is going. vice president-elect pence is going there. from there, he will go to ohio on his victory tour. he will go to a number of these up to his inauguration. if he has the opportunity to save jobs, he will do it. francine: the most significant thing we found out so far in the last week, this news conference december 15, where we are expecting him to say exactly what he is completely stepping away from. his business or will it be much more nuanced? marty: we had everybody else are trying to get the details. do notersonal view we know what he will say on december 15 because his legal team is working on it. tim o'brien, our bloomberg
colleague, this morning has a piece that says his business is not at all to be to sell -- too big to sell. it is a handful of properties and licensing deals. he may wind up doing that. francine: who is up for secretary of state? i know there is mitt romney and other generals that donald trump has criticized in the past. marty: the secretary of state pick is the most important one. as i said a couple of times, i think he would love to pick mitt romney, but the people around him are very concerned about that pick. it is clear he has not made up his mind yet. tom: thank you so much. greatly appreciate it. , with anygoff respect, you will be on any shortlist of discussion so you can choose your words here carefully.
a lot of vacancies at the fed and janet yellen will be maybe moving on in one year or two years, whatever it is. what would you like to see president trump do with the federal reserve system? kenneth: number one, i would like to see it preserved its independence. tom: is it at risk now? kenneth: it has been at risk the last eight years, ever since the financial crisis, they had to completely change. you can buy all of that stuff? we did not know that. in europe, they are buying 20% of corporate bonds, the ecb. person. a very powerful he has been in the construction industry his whole life and does not like high interest rates. on the other hand, there are parts of the republican party that one the going standard, super hard money. a reasonable compromise would be to bring in john taylor, who has a silver balanced view.
tom: john taylor of stanford university. francine: to that point, my question is, what have we learned about the way the president-elect operates? his latest appointments, dinners , is there a pattern? tom: this is a critical question. have you played chess with trump ? kenneth: no. i don't know how much i would be willing to, but happy to play with him. i think the federal reserve appointment is absolutely the most quick low point that president from -- most critical appointment that president trump will make. in the long run, that has been a very successful vehicle, and we need to maintain it. tom: this is a wonderful photograph of a moment of professor rogoff, truly one of america's giants in chess.
we see a new grand master in norway, new champion excuse me. tell me about this magnificent photo as you drive chest forward -- chess forward. kenneth: this is the championship between magnus carlsen, who could be the greatest player of all-time, and sergei, the russian challenger. followed this closely because the russians did not compete in the olympics. a fantasticeen player. tom: nothing has changed from when you were at the top of your game. kenneth: except everything. they have a little of technique and skill that was unimaginable. tom: really? we digress. later today, the president-elect and the vice president-elect will travel to governor pence's
highlights ofe these 28 pages. kenneth rogoff with us on italy's economics. how did they finally clear this massive screwup? kenneth: that is a tough question. italy has been very hurt by china and asia. they produce like manufacturers, clothing, and some of the elite italian companies have been able to shift their production. over the large part, it has been difficult for italy. it is not an easy country to govern. the south is very different than the north. there have been transfers for 90
years. it is a very tough situation. they seem to be entering a banking crisis again. francine: let's remember, tom has been calling them a basket case. that the economy is not growing, but there are companies that are. manufacturing for the ones that been not close down is still priced up. kenneth: absolutely. northern italy, there are parts of it that can fit into switzerland or germany easily, but they are funding massive transfers, huge corruption, they have difficulty collecting taxes. it is an exaggeration to call it a failed state, but a very difficult country to govern. they are trying to fix that. the referendum was aimed at that but it looks i get will get beaten down. tom: this is something you would
remember the idea of the depreciation of italian lira versus deutsche mark. over we go. not a single guest we have had said they can manage a depreciation with independent italian lira. if they are between that rock and a hard place, what do they do if they cannot use currency depreciation? kenneth: in italy, it is not just currency depreciation. wages were going up at the same rate. they were still not having productivity. it has been a long difficult time for italy. francine: this is sign a section is the moment -- this science fiction find moment that they would go back to the lira. kenneth: that would be blowing up the euro and a whole crisis. i think we are far from that although with the populism, it is hard to know anything is
certain these days. tom: very quickly, you mentioned the banking crisis to come. ben bernanke would say get out in front of that right now. is that the urgency? mr. draghi has to get out of it? kenneth: the number one mistake the europeans have made in this whole thing is not to aggressively recapitalized the banks. that would be the best and most effective form of stimulus. the whole business of germany can pull everyone as a locomotive. put money in the bank's.take care of problems. tom: coming up on india. later on, bill nye the science guy. lots of talk about the climate. this is bloomberg. stay with us. ♪ ways wins.
says russia is willing to work with the incoming president on equal footing. some of it sounded like u.s. president-elect donald trump. he set a chance to disrupt the strategic balance is dangerous. he said russia will not allow its interests to be infringed upon. trump is claiming victory as he travels to indiana today. carrier has agreed to spare 800 union workers at the indianapolis factory whose jobs were headed to mexico. no word on what the workers will have to give up or what made carrier change its mind. suggestsit minister they were considering the eu to get the best access for british businesses. expect freeill also movement of highly talented labor. he said businesses should know this is not shutting the door. this is taking back control. global news 24 hours a day powered by more than 2600 journalists in more than 120
countries. this is bloomberg. tom: thank you so much. with us now, kenneth rogoff of harvard university. we will get to a discussion on india, but right now, arguably a more important discussion. let researchas on science for many decades as we now look at new trump science and economics. the president-elect has been more than vocal about climate change and such. the bill nye book is unstoppable. you have one of my heroes, that would be michael faraday. somebody first had to turn the switch on. the one thaty was took to copper wires and made electricity happen. bill: copper and zinc. the thing i love about him, we did careful research.
a woman came up to him. thes brought up that it was queen of england, but he said madame, of what use is a newborn babe? everything. bill: everything you can ceos its existence. list for is your to do those screaming about the president's science program? bill: here is what we want to do. what do we have in common, everybody? jobs, jobs, jobs. there is an analysis. this is not my idea. check out these solutions project.org. civil engineers have done an analysis that we can power the entire u.s., over 100 countries around the world right now with
no extra ordinary new electricity energy technology right now if he decided to do it. do not only we cannot do it. both of my parents are veterans of world war ii. they did not choose to be part of the greatest generation. they got out of college, the world is ending, we have to solve this problem, so let's go. tom: this goes deeper than this. ken rogoff and i up in new york. the comment feature of the three of us is that not come science, and basic schooling of science works. president-elect agrees with the upgrading the three of us had? bill: i don't know. when mr. trump talks, i am not sure he sticks with things he has said. is that accurate? he pulls back, changes his point of view. that's all good. the thing we are concerned about is who he hires to be around him. francine: right.
bill: science and technology keeps the u.s. in the game. francine: good morning. what do we know about his commitment to innovation? this is the basis of the u.s. will you stick to it? -- will he stick to it? bill: i hope so because this is what use the u.s. in the game, our innovations, our ideas. you do not manufacture the iphone when you write the software. i am hopeful we will find a common ground economically, but what we really want in the science community is to start addressing climate change. climate change and energy policy and energy technology are intimately related. everybody really, this is not that complicated. the world's climate is changing. there is 7.5 billion people breathing this thin atmosphere. francine: i get, what do we know about -- again, what do we know
about the president-elect? he said one thing in the campaign and in the "new york times" interview last week, he suggests another. bill: we are hoping cooler heads prevail. what he said to be elected will hopefully be set aside when confronted with the overwhelming facts. the big source of energy on the east coast of the u.s., by the way which is analogous to the west coast of the u.k., is wind, wind, wind. tom: bill nye, ken rogoff mentioned someone taking over at the fed from stanford university who would be a middle ground. who would you have as a candidate to assist mr. trump in science? is there a name out there you think he can appoint given his views that can work with a science community -- the science community.
tyson pridesgrasse himself that he was on the nasa council during the very conservative george bush administrations. he has worked with conservatives very well for years. neil is aare asking, big proponent of science at large. istead of believe, his thing question. tom: jump in ken with a question. kenneth: i am concerned about the role of science and whether they will be taken seriously. i share your concerns, absolutely. me, you cann hate hate everything, you can be a miserable hader person, but what if the u.s. in the game is our technology, our innovation. i have hoping we can find common
ground on this. invest in basic research. if we had better batteries, we would change the world. if we invested in renewable energy technologies, we could be having jobs right here in the u.s. you cannot outsource the direction of wind turbines. they have to be done here by u.s. workers. if wes your business, but just invest in the military and cut taxes, we will run out of money, and it will be inflation. it will not be trickle-down, it will be sponge up at all this stuff. there is an opportunity for us to change the world. iowa, very conservative state, gets 25% of its electricity from the wind. i have been in stanton, texas, where there are wind turbines casting shadows on oil pumps. there is opportunities. kenneth: you cannot turn technology backwards, and some
of this talk about bringing back manufacturing jobs, i think we will be back jobs for robots maybe if we try to put a lot of protectionism in. we have to be innovative, educate people. bill: and we can export this technology, right? we can improve our balance of trade. yes? i have here for you, man. francine: how much technology or science is actually talking entrées this the u.s. share with the world? bill: this is another thing. i took the job as the head of the planetary society because space exploration is where people work together. people all over the world get together and share technologies. you would not have these extraordinary rovers on mars without japanese exploration and
european space agency and the cosmos. this is where everybody works together. as i like to say, space exploration brings out the best in us. it is inherently optimistic. we share technologies in space. there are people in the u.s. who are very concerned about sharing technologies with the chinese space administration, but that is slowly changing as everybody realizes it is one big planet and a small world. tom: thank you so much. the book is "unstoppable." i cannot say enough about it. francine: thank you. coming up later today on bloomberg tv, we speak exclusively with the venezuelan oil minister live from vie nna. this is bloomberg. ♪
francine: this is "bloomberg surveillance." looking at gorgeous pictures of hong kong, getting ready to go home from work. there is a little bit of news from china waving its -- we had some pmi figures. not bad at all for china. growth is stabilizing. more on have plenty china, hong kong, and emerging markets, but first, let's get straight to the business flash. sebastian: billionaire steve cohen has closed the book. he and the firm will pay $135 million to a group of corporation investors.
shareholders claim they lost money because of insider trading. a federal judge still has to sign off on the settlement. unofficial gauge of factory production matched a high last month post-2012. large companies are doing better than small ones. the world's biggest commodity trader reinstated dividends next year and pay out at least $1 billion a year. shares have triple this year thanks in part to a rallying coal prices. they launched a drastic debt reduction plan. that is the bloomberg business flash. tom: thank you so much. we know so much of asia and particularly the people of india. wrote a book a year or so ago about cash, corruption, the underworld,
suitcases of cash going to no good. it is my book of the year. it is without question the most controversial book of economics in decades. professor rogoff joins us now on india. wt's start with what mr. odi is trying to do. kenneth: on the same day we were electing trump, the prime minister went on the air and said the two largest notes in india four hours from now will no longer be useful. boom. you have 50 days to turn it in for other cash. that is radically different than the policy have proposed, which is doing it over five or seven years trying to avoid collateral damage. tom: within the collateral damage, what would be your advice to the minister to move forward after this announcement? away from the debate about cash, what is ken rogoff's to do list for india this morning? kenneth: that is a tough
question. the prime minister cites all the reasons i given the book about why cash is pernicious, corruption, crime, tax evasion, terrorism. on the other hand, i mentioned different. are very my book states again and again very carefully if you are a developing economy, don't try this at home. you need financial inclusion. he has done a lot of things. india reached a point where implementation is very important. there could be long one beneficial effects, but it really involves doing things to assure people that the long run we are fighting crime, corruption, which is a huge problem in india in many ways. tom: i have learned, and this goes back to one of my great always inhat india is domestic politics. what would the central bank do, and could their former leader at stoppedral bank have
this bad policy? kenneth: i suspect they were overridden. initially when i heard about this, it seemed the r.b.i. was behind it in a joint push. as time went on, we did not see the governor speak for a couple weeks, which made it clear they weren't. it does not mean they do not agree with the right idea, but they may not have agreed with the tactics. have done ited to slowly and gradually as others like myself suggest. note does not have a large to introduce a bigger one than this to replace the old one, which is 180 degrees opposite to what i would advise for an advanced economy. francine: we focus on the news that we have had over the last two weeks. extreme volatility, will discontinue? isneth: i think the thinking
we do not know all of the considerations why this was so sudden. leaked theyord were going to do it. surprising how many indian economists and people think in the long run making this statement against corruption, which of course is india's number one problem, will have good effect, but they have to get their. -- there. there have been a lot of problems, poor planning, implementation. it'll probably sort out, but it is not done yet. francine: i know it put some limits on withdrawals from no throwback accounts -- no frill bank accounts. is it a good idea to limit withdrawals? kenneth: it is not that easy to print currency. it could take a year. i wonder why they did not maneuver like the greeks considered stamping the old currency to create the new currency temporarily. i just do not know what the planning was.
they have not described it. it is clear what the goals were, but the implementation and execution, they have not explained why they did it this way. there are people who recommended setting currency moves. there was an economist in the mid-1970's who said let's do a sneak attack on the criminal and drug dealers. i think collateral damage is too great. in the case of the u.s., it looks too much like a default. francine: what is the lessons learned? we have seen panic or volatility or whatever you want to call it in other countries. as long as there are one or two lessons you do not repeat, the country will be ok. kenneth: it is a implementation and planning. developing economies, the issue of financial inclusion is huge. in the u.s., it is very easy to cover that. my book explains how to do that. in india, the prime minister modi has taken a lot of steps.
he has taken biometric data for almost one million indians. they are way away from doing that. this was a very radical step to take. tom: one of the streths of your book is you point out your critics. page seven, your colleague at harvard at page 122, they push back against ken rogoff. describe their caution against the curse of cash and your formula. kenneth: limit some is has come around to be a big champion of getting rid of $150 bills. that is fantastic. says money is coined freedom. i think there is a big difference from getting rid of big notes and all cash. i am for less cash, not no cash. tom: is money representative of freedom in mr. modi's india?
kenneth: i think he would like -- and officials are so corrupt. i had a colleague who told her father sold an apartment recently in rural india. he gets back to the that lists have to price he paid because the official was paid off. this is routine in india. tom: ken rogoff on india. i will put this out on social. francine: we will talk about china. these are your financial markets starting the month on very uncertain footing. stocks in europe party which unchanged. the dollar retreating from a nine-month high. this is bloomberg. ♪
is "bloomberg surveillance." alix steel, what do you have on the show today? alix: we will be talking about oil. we are taking many different angles. there are still a lot of questions about a potential deal, especially compliance. we will be digging deeper into that as well as talking about investment opportunities.
after the rally, the distress energy game is pretty much over, so where are the opportunities? we will be speaking to david foley. if you are an energy company and you need money, you call david foley. he is the man on the ground to understand implications of investing as well as opec. tom: thank you so much. quick report before we get to ken rogoff's thoughts on china. yen weaker. euro yen away from the dollar. stronger euro and yen. ken rogoff with us. bring up the chart of the chinese. do? does china need to do they need to stay in the currency? in the beginning -- can they begin to think about a float? kenneth: i think they need it soon to get more flexibility and risk have a deeper crisis.
if they don't, often countries hang on too long. they have a ton of reserves but also a ton of problems. francine: are you talking about the debt or something else? kenneth: they have a big overhang of debt. they depend on growth. there is a lot of things going on in china. just you cannot grow at 10% forever. a radical political change going on in china. decentralized economy much more harder to have a dynamic economy where decisions have to be made so centrally. in the not distant future, i think we will see a significant slowdown in china even beyond what we have seen. tom: give us a gdp figure on the. kenneth: they make up the number at some level. we don't know. they have only been growing at 3% or 4% now, and i can imagine that slowing down further.
not necessarily a crash, but slower. tom: professor, thank you so much. we will continue this discussion on bloomberg radio. tomorrow, francine, to italy. if it is friday, it must be rome. francine: days before the referendum. tom: absolutely. google we speak to tomorrow? francine: we have a former prime minister, the one person among the elites campaigning for no votes but a lot of businessmen so an interesting conversation. tom: coming up, bloomberg daybreak. we continue on bloomberg radio. stay with us. from a cloudy and stormy new york, this is bloomberg. ♪
i'm david westin, here with alix steel. jonathan ferro is off today. we are getting started with the markets printed alix: the rally we saw overseas in asia -- the s&p and dow futures on the first day of december relatively flat. you have the stronger pound commanded you sector is the only sector higher. we have global bmis coming in better than estimated -- pmi's coming in better than estimated. the global bonds a lot continuing. the 10 year yield backing up by three basis points. the dollar takes a pause, retreating to a nine-month high versus the end. -- versus the yen. david: after weeks of tense negotiations, opec agrees to its first oil production cuts in eight years. put aside their differences and russia agre