tv Bloomberg Surveillance Bloomberg August 31, 2017 4:00am-7:00am EDT
francine: don't disappoint me. congress asing to he kicks off his tax reform tour of america. >> i'm fully committed to working with congress to get this job done and i don't want to be disappointed by congress. francine: meanwhile, u.s. economic growth hits 3%, but bank of america's boss says keeping it there could be a struggle. >> we've got a solid economy. without population growth at a faster rate, you are going to see this fight to get between 2% and 3%.
francine: warren buffett says equities are less attractive than they were but still beat bonds. and theresa may says she will lead the tories into the next election, but does anyone believe her? this is "bloomberg surveillance ." certainly a packed show, packed week actually for an end of august kind of feeling. it has been quite busy in terms of news. this is what i'm looking at in the markets. stocks advanced on a rosier picture for the growth outlook. we had pretty good economic figures out of america. the chinese economy seems to be holding steady. the u.s. administration sent different signals on north korea, which means that a little bit of the nervousness has been taken off. among all other asset classes, dollar seems to be studying. let's get straight to the
bloomberg first word news. here's nejra cehic. nejra: tropical storm harvey has closed down almost a quarter of u.s. oil refining capacity, flooding and power failures reduce america's feel making capacity by about 4.2 million barrels a day. gasoline futures rose to the highest in two years. warren buffett says the rally in markets over the last several years has made it harder to find bargains, but stocks remain his choice over bonds. the executive officer of berkshire hathaway spoke to bloomberg's david westin. warren: they are still very attractive compared to bonds. you are paying 45 times earnings when you buy that bond. if you put $100,000 in that bond, you are paying 45 times that rate for a form of investment. earnings can't go up. stocks still look attractive
compared to that. if interest rates go up, that comparison becomes far less dramatic. nejra: a part of french president emmanuel macron's political and economic strategy is due to be unveiled this afternoon. prime minister edward philippe will set out plans for major labor reforms. finance minister bruno lemaire told bloomberg the measures are needed to boost the economy. >> this is a clear sick of that we have to -- signal that we have to strengthen our economy. if we want to face this new appreciation of the euro, we need to have a stronger economy. that is the sense of the reforms we want to introduce. nejra: china's official factory gauge rebounded this month. the manufacturing purchasing managers index increased, beating forecasts.
the world's second-largest economy may remain robust enough to allow policymakers more room to curb financial risk. theresa may says she intends to lead her party into the next election. one newspaper claimed over the weekend to know the date in 2019 when she is planning to quit. may said there was no basis to speculation about her future. in june, snap elections, the andier blew a 20-point lead lost the majority in parliament. top football leagues have just hours left to secure signings. all see their summer transfer window's shot tonight. manchester city is expected to raise its bid for sanchez after having a 50 million bound offer rejected by arsenal. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i'm nejra cehic. this is bloomberg. francine: thank you so much.
getting some breaking news. from the boj, bank of japan saying they've reduced the size range of one of their five to 10-year jgb auction. i think that is for the month of september. they've reduced the range to 300 billion to ¥500 billion. i would note that earlier this morning, japan's two-year note option beat the cutoff price estimates. 4.97, the least since march 30. we will get back to this and some of the currency moves. u.s. president donald trump has warned congress not to fumble the chance to rewrite the u.s. tax code. his comments came as he kicked off his efforts to sell the american public on the tax plan in missouri. >> i am fully committed to
working with congress to get this job done and i don't want to be disappointed by congress. do you understand me? understand. francine: the ceo of bank of america says trump's tax reforms could help the u.s. economy achieve a sustained growth of 3%. yesterday's gdp figure hit that reading for the first time in more than two years. brian moynihan cautioned that it would still be a struggle to hit that target. >> if you think about the period of time in the 1990's and 2000's when you had economic growth, you had a population growing at 1.5% per year. it is now 0.75%. that difference is a lot of people and a lot of demand for houses, food, cars. we've got a solid economy. without population growth, you
are going to see this thing fight to get between 2% and 3%. francine: let's bring in stephen isaacs. both for joining us. stephen and vasileios. what can we learn from donald trump? what is priced into the market? are we going to get tax reform? stephen: i think it is very difficult that we get there. the bar has been raised very high if we judge from the prior experience. i think to a certain extent all the trump euphoria, at least as far as the dollar is concerned, and u.s. yields, has been priced out. the question that we will have to address going forward is the question about valuation relative to fundamentals in the dollar and in yields.
and of course, the question of what the fed is going to do. we should start looking into the inflation surprises. as far as the dollar, we may see some tactical rally. i think it is going to the very shallow if anything. i think the dollar remains overvalued. as far as yields, i think they are going to creep higher. francine: is any of that tied to tax reform? vaselios: as i said in the beginning, i think tax reform is very difficult to be implemented. if we get a complete collapse of that, we may see some further rapid downside in the dollar. francine: what is priced in in terms of tax reform? stephen: i think very little. this has to happen. trump is desperate. his whole presidency now faces failure.
i think the unfortunate charlottesville episode a couple weeks ago really gave the trump critics what they wanted and it kind of meant that he had to tie his presidency to the republican party, the departure of steve bannon, gorka, the old trump nationalist agenda. he now has to rely on the republican party to get anything done. the republican party is also facing serious challenges. they have a majority in both houses. both leaders in the senate and the house, their jobs are on the line. francine: let me bring you to our chart. this is an easy way of looking at effective personal income tax rate in the u.s. compared to the corporate tax rate. why does he not mention gary cohn? if he is serious about tax reform, are we reading too much
into it? stephen: i think gary cohn is going to the fed. the matter is very simple. it is all about, can you get the compromises on the deductions? no one has a problem reducing tax rates. republicans have been brought up on the reaganomics of supply-side economics and reducing taxes is the easy bit. can you align that with eliminating the current allowances and keeping some semblance of budgetary discipline? i think they will find a way forward here and it will surprise people. francine: we have a question from a viewer. if you are a viewer and you have a bloomberg terminal, keep these questions coming by going onto tv . i'm looking at cpi, the 10-year yield, and the breakeven.
this viewer is asking, how will a weaker dollar impact u.s. inflation? vaselios: it is definitely impacting through the import channel. we should not overstate the degree of openness of the u.s. economy. the u.s. economy is a massive economy. it is not that open when you look at the eurozone or japan. the passing through from the currency to the inflation is more modest. what really matters for inflation is, if we try and pin down that relationship in the phillips curve, and try to figure out how much of that output gap is actually pushing inflation higher, but i don't think -- the dollar is down 10% this year, but it was up 30% between 2014 and the end of 2016. we still have a lot of
offsetting forces, which i think are going to wash out and not leave any visible mark on inflation. francine: thank you both. in the meantime, let's get straight to the bloomberg business flash. nejra: car for shares have plunged in paris after it warned the second half of the year will be as tough as the first. france's biggest retailer said full-year operating profit will decline a similar amount as the first half. that gives the ceo an even bigger challenge to turn around the company. ubs is leaning towards frankfurt for its trading headquarters in the european union after brexit. according to people with knowledge of the matter, the bank could move 250 or more jobs out of london. they say ubs has notified the german regulator. the bank and regulator declined to comment. uber's incoming ceo is said to have told staff that an ipo
should happen in 18 to 36 months. that is according to people who listened to the meeting. expedia has named finance chief mark bacchus from as its new ceo. he has been at expedia since 2006 and cfo since 2011. don't miss our interview with him at 3:30 p.m. u.k. time. francine: thank you so much. billionaire investor warren buffett says the rally in markets has made it harder to find bargains, but stocks remain his choice over bonds. the ceo of berkshire hathaway spoke to david westin about the challenge of buying shares in the current environment. warren: it was shooting fish in a barrel in late 2008 and 2009, and stocks have been steadily
-- well, marchr of 2009 was the low, so it is eight plus years. stocks aren't going to earn much more just because you pay more for them. they've gotten less attractive. they are still attractive compared to bonds. if you look at the 10-year, you are paying 45 times earnings when you buy that bond, and the earnings aren't going to go up. earningsaying 45 times for a form of investment where the earnings can't go up. stocks look attractive compared to that. if interest rates go up, the comparison becomes far less dramatic. >> i wonder if there isn't a connection. how much of it is because the central banks have really
injected trillions of dollars and euros and yen into the system? warren: there's no question. they probably wanted to drive them up. the interest rates are to stock prices what gravity is to matter. if interest rates were nothing, and they were nothing forever, you would be buying stuff that would yield you 1% or 2%. if interest rates are on the short rate, you can look at a stock at six times earnings and say, that isn't that attractive. interest rates, that is what drives valuations. we've had very low interest rates for some time, a lot longer than i thought we would have them. francine: that was warren buffett speaking to bloomberg's david westin. still with us, stephen isaacs
and vasileios gkionakis. stephen, it seems that the old-school correlations don't really work anymore. what is going on and what does it mean for your investment strategy? impressed with warren buffett. he knows what is going on. his comment on interest rates was fascinating. on ae end of the day, yes, long-term view, then you have stocks as a large part of your portfolio. the question that investors want to know is, should we be adding or subtracting? the direction of interest rates is the key. we know the interest rates are relatively lower than they were in previous eras. what we want to know is, what is the direction of travel?
i think the market is underestimating the direction of travel is now higher across the board. francine: why are they underestimating it? inflation? stephen: one reason is inflation. that is a lagging indicator. i think it is more the political composition of central bank boards that investors have taken for granted that every fed chairman is going to have rose tinted spectacles and will bail out the market. i think we are moving into a different era and i think the reason for that is that janet yellen is thinking about her legacy. she's leaving in january. she's not going to get reappointed. trump is very political, as is the republican party. i think she will raise interest rates. we said there would be three interest rate hikes. it is going to happen. francine: two more this year?
that is bold. vasileios: i largely agree. i do have some reservations about two more rate hikes. we've penciled in one more rate hike. one thing we should bear in mind is that interest rates are going higher, but i'm not sure the market is underestimating as much as we think, because the metric that we are using has abnormality big between november and december of last year. yieldstalking about u.s. that are lower on a year-to-date basis, but higher compared to the average in 2016. euphoria thatump send yields surging, but right now we are probably moving to a more upward trend environment.
i agree that we are moving into an environment where inflation is bound to rise. francine: do we not pay enough attention to financial conditions in the u.s.? this is a great chart. stephen: i think the fed is worried about asset prices. the last 30 years, the fed has been worried every time as it prices fell. they believed they would get bailed out. the fed is seeing asset prices everywhere and the fed sees that this is the time to keep pressure on the brakes. francine: should we ignore inflation? you were talking about the phillips curve. i have a great chart that hillary did. the phillips curve is dead. should we move on? vasileios: we should try and make an effort to understand what is going on. i'm not sure the phillips curve
is dead. it could be that relationship has changed. again, what is important, and you mentioned before, it is not just about the level, but the direction of travel. we may not have these relationships we had between wage growth and unemployment. this is what we need to try and pin down. this is where monetary policy is going to start getting fined tuned. we shouldn't lose sight of the picture. let's forget these downside surprises. from a trend perspective, inflation has been picking up. there is the case for a structural change. francine: we will get back to vasileios gkionakis and stephen isaacs. i need to show this chart.
it is the phillips curve. i do like it. it is one of the most complicated ways of looking at it, but quite fun. i also want to talk about gold. metals status as a haven being eroded? allianz chief economic advisor mohamed el-erian reckons it is. he says a portion of the traditional buyer interest has been diverted to the growing markets for cryptocurrencies. the returns, he argues, there have been significantly greater -- it is a pretty bold call. have they significantly changed? stephen: the korean story of the weekend, people have realized there's nothing to be done. i think steve bannon made this comment that you've got a city
of 10 million people 30 kilometers from the north korean border. any kind of military action against north korea is a nonstarter because 10 million people will be killed. francine: but for your portfolio, something can be done. stephen: gold, i'm pretty neutral. maybe it has a very small part in your portfolio, but doesn't yield anything. when you do get these flareups, it seems to subside fairly quickly. cryptocurrencies, this is a scam. this is bad news. this is really worrying me. this is another sign of bubbles. i really would caution investors. we don't know what it is. nobody understands it. stay away from it. francine: if at some point we could get a central bank backing one of these currencies -- stephen: why would they want to
support something -- francine: would it change your mind? stephen: they would be crazy to do it. nobody understands what is going on in cryptocurrencies. i think this is very worrying. vasileios: agree. if we start making unrealistic assumptions, we may start talking about cryptocurrencies being in the realm of actual money, but i think these are very far assumptions. francine: talk to me about euro-pound. is it far-fetched that it goes to parity? vasileios: i don't think it is. francine: less than cryptocurrencies. seriously, you are beingg about a currency driven by both sides of the equation. strong data in the eurozone and undervaluation of the euro.
think that is going to disappear as long as the u.k. government continues with that incoherent policy that leaves uncertainty out, and there's no conclusion. the question is, what will draghi do next week? to a large extent, it is a euro story. that draghi can actually afford to be dovish. to research and extent, the room for moving for the ecb is not the same as it was. i expect we're going to see some small tactical correction in the euro. down of the taming euro appreciation. the euro is going higher and euro sterling may gravitate
towards 95. do you think it goes to parity? we spent a lot of time looking at euro strength. this is above consensus. just come back from holiday in europe, it is a pretty painful subject. sterling is in trouble. it has been a bear market for 100 years. we have big trade deficits and budget deficits, neither of which show any sign of closing. ,hen the currency comes off manufacturing picks up and there's a little help to the exports, but it is such a small part of the economy that it doesn't make any difference. afraid i'm bearish on sterling. the politics is very
complicated. francine: it is almost as it was planned. we're going to take a short break, then come back and talk about brexit. i don't know if i'm looking forward to it or not. very quickly, what is your favorite play? euro-pound? stephen: sell cable. francine: stephen isaacs and vasileios gkionakis both stay with us. we talk brexit. why theresa may could be staying on for longer than many expected or even wanted. she is traveling to japan. we will discuss that next. this is bloomberg. ♪
not to fumble the chance to rewrite the tax code and reinvigorate the economy. the efforts came as he tried to sell america on a tax fan at a rally in springfield, missouri. president trump: i'm fully committed to working with congress to get this job done and i don't want to be disappointed by congress. do you understand me? [cheers and applause] president trump: understand. >> tropical storm harvey has closed down almost a 1/4 of u.s. oil refinery as it made landfall for the second time. flooding and power failures reduced america's fuel making capacity by 4.25 billion barrel as day, the lowest since 2010. gasoline futured rode to the highest and the crude is at a 17-month high. warren buffett says the rallying markets the last several years has made it harder to find bargains but stocks remain his choice over bonds. the billionaire chairman of
berkshire hathaway spoke to david westen. >> still very attractive compared to bonds. if you look at the 10-year of government at .215 means you're paying 45 times earnings when you buy the bonds and the earnings aren't going up. if you put $100,000 in a 10-year bond you're paying -- for a form of investment where the earnings can't go up. stocks still look attractive compared to that but not attractive nearly as much as they used to and if interest rates go up then the comparison becomes far less dramatic. >> a key part of french president political and economic strategy the next five years is due to be unveiled at a news conference this afternoon. edward philippe will set out the administration's plans for labor reform. the measures are needed to boost the economy. >> i think it's a very clear signal we have to strengthen
r economy if we want to face this new appreciation of the euro we need to have a stronger economy and that's exactly the reform we want to introduce with the prime minister and the president. >> three of europe's top football leagues have hours left to seal key players signings. he premiere league, bundesliga will see their window shut tonight. manchester city is expected to raise the bid for sanchez after having a offer rejected by arsenal. news powered by 2,700 journalist and analysts, i'm nejra. francine: teresa may will try to convince the public and her own party she's a lame duck. the u.k. prime minister tried to end rumors about her future after the newspaper claimed to know the date in 2019 she was
planning to quit after she lost her conservative party majority in the election. during her visit to japan may insisted she was in it for the long term. one member of the prime minister's delegation in japan is the director general of busch industry carolyn fairburn and the chief economist joins us and steven isaac with us. first of all, how are the negotiations going? it's unclear if they're making progress behind the scenes. certainly there's nothing outright the media can see. did we actually negotiate something so huge and stay in the talks? >> everyone knew the negotiations would be complex and take time. i think we've had welcome clarity and we've had the government publish a paper around what they're hoping to get out of it and importantly it implies they want to stay within the e.u. during a transition period but there's still a lot to be set out. we've had a bit more clarity on
what the government is hoping to achieve around northern ireland which is a very critical issue but clearly more to be done around the exit bill and importantly around agreeing a transition period. francine: what do you worry the most, are we going to crash out because it seems like the time line is against the u.k. government and in the meantime the government is slowly getting worse. rain: i think on the economy we definitely see mixed picture so we see that manufacturing is benefiting a bit from some of the weaker pound in terms of export orders but we are seeing the slowdown in consumption which is driven by higher inflation and the weaker sterling. but i think the bigger issue is really about securing a transitional arrangement and what will give businesses confidence that they know the rules under which we'll be operating with our trades with the e.u. that's what the business community wants to see sorted out first is an agreement on a transition period, you know, that could last two or three
years to give us a bridge to that final deal. francine: i imagine they're worried about the time line. we triggered article 56 months ago and they need to make rules or decisions before they have he regulatory framework. rain: for a lot of businesses it can take 18 months to prepare for it and it's why having a bit more clarity on a transition arrangement in place will allow businesses to know which rules they're operating under. i think the concern is it we don't agree to a transitional arrangement we could be in a scenario we're facing the cliff, where we're falling under w.t.o. rules and those could be the rules under which businesses are trading and would not be good for the economy. francine: let me bring you to my favorite u.k. chart which i'm sure which governor childreny looks at which is inflation and in blue you have basic wage growth and you see this means that actually not
good news for the u.k. onsumer. >> definitely not and why the bank of england is in a bit of a rock and hard place. on one hand you have higher inflation that's almost entirely treated by the fact we're talking about a lower exchange rate and on the other hand you have an economy benefiting somewhat from the global growth upswing but the adds to gative and the bad mix of high inflation and compressed real incomes. in this environment i don't see the bank of england hiking rates any time soon and think they'll stay back for the entirety of the brexit egotiations. francine: do you see brexit happening? >> the announcement by teresa may she'll tough it out and lead the conservatives in the
next election shows how weak and divided the conservative party is. even she having failed disastrously not just in the election but mishandling the campaign, you name it, even she has authority in the kevintive party because they're so terrified of tearing themselves apart. the conservative party is divided on europe and has been so the last 50 years, isn't about to come together with a strategy. and that leaves a big void. who is going to fill that void? francine: are you expecting a second election and jeremy core bit to -- jeremy core bit to water it down we don't get brexit or ask for a second referendum or go in election 18 months >> no election for five years. the conservatives have seen the folly of that and we have the fixed parliament act and can be stopped by either major party. what i'm saying is the kevintive party can't -- when these negotiations fail, which they have to for the simple reason that the brexit bill, and no one actually is talking about, is going to come back
and be a very large number and be a hundred billion, 90 billion, 110, you can't get that through parliament, simple as that. what happens after that? francine: if you look at the negotiations and you certainly look at what we've heard so far, the commissioner is leading up to point but then the mid october important summit with the politicians and they'll look at the u.k. economy and their own economies and maybe reach a compromise. ain: yeah, obviously michele barnier has a mission. the autumn is critical with the fourth and fifth rounds approaching this autumn and it's really important we make a sort of progress on that and really that needs to be -- we'd like to then see the next phase focus on that transition arrangement rather than the final deal, the e.u. had said quite clearly they want to focus on the final deal before agreeing transition and in my mind is the biggest sticking
point where hopefully we'll see progress on both sides as we head through the autumn. francine: i have time for 20 seconds each. what will move the pound from now on, brexit negotiation blow by blow or time line middle october and then december? >> i think it will be blow by blow. and i think it's euro sterling is one you need to look at from now and it will go higher from here. >> it's a cyclical economy and the cycle is turning down and will unfortunately drive sterling lower. francine: thanks for joining us. our guest phen and from capital. manuel macron tries to reclaim his political momentum. this is bloomberg.
francine: this is "bloomberg surveillance." i'm francine lacqua. let's get to the markets with mark. mark: the longest run of 2013. 23% of u.s. refining capacity remains shut off to tropical storm harvey made landfall a second time dumping heavy rain across louisiana. most fuel prices climbing as much as 6.6% in new york advancing for an eighth second. oil dropping as u.s. oil inventories fell for a ninth consecutive week. gas contracts for october are trading at a much richer level for gas contracts for november which is what this chart shows us. on monday the euro crossed 120, the highest since 2015, bank of
america and merrill lynch said the euro overshot the positive economic data out of the region, and disappointing inflation surprises pointed down risks and bank of america and merrill lynch worries there's a risk, fed is more hawkish and the e.c.b. more dovish and pricing into the currency strategy gists revising their euro forecast higher, below current levels and now see europe's currency rising to 119 by the end of next year. morgan stanley is the most bullish for the end of the year, 122 forecast but the median estimate, the blue line, 117, 117.86 is where we are. london time, big inflation data out of the euro zone. prices have been particularly unresponsive to the area's economic recovery. the output gap has narrowed to .9% potential g.d.p. from 2.7% in early 2013. supercore inflation excluding package holiday which is is a
measure that includes the category of prices most closely related to the amount of spare capacity in the economy has shown few signs of life. that's the yellow line that remains confined to that range they've bounced around the last few years and quickly, francine, this is a great chart showing the ratio of outstanding cores of s&p rising to levels last seen in 20156789 the rates here for german stocks also has risen. the move to the downside protection or move to protect the move to boost protection, should i say, shows investors getting that little bit more nervous. francine: thanks so much, mark barton. a key part of french president emanuel macron's political and economic strategy the next five years is due to be unveiled at a news conference this afternoon. the prime minister philippe will set out the administration's plan for major labor reforms. the finance minister said the
measures are needed to boost the economy. >> i think this is a very clear signal we have to win force and strengthen our economy if we want to face this new value and new appreciation of the euro, we have and we need to have a stronger economy and that's exactly the sense of reform we want to introduce with the prime minister and with the president. francine: with us is the co-head of credit. are we expecting too much or too little out of france? >> if you look at basically how asset prices have actually moved since macron's election, i don't think the market is really expecting a lot and i think that the recent room for surprise, don't misunderstood e. and the labor market is in need
of becoming conforming so it's much less more friction. when you look at french equities, there is an underperformance, vis-a-vis the euro zone equities. i don't get the sense the market is really putting a lot of expectations in macron but at the same time it's not expecting disaster. francine: i want to move on to the phillips curve because this is something you're very keen to actually show. we earlier showed this chart and i guess among bankers and economists and research is whether you still look at the phillips curve and this is what the chart is the best we could do today. >> that is fair enough and shows 10 years of data or something like that. the issue i have with such a long term chart or even 20 or 30 years of observations is the phillips curve is a relationship that links wage growth or inflation, if you
like, to the unemployment level. but it's taking all else and making the assumption that everything else is equal. if you get structural differences, even if they are in ones you get shifts the curve and is moving all over the place. what you're showing is the point of one curve and equally could be points of various different curve which is makes inference about the negative relationship very difficult plus the fact the last five or six years we've been operating in a very unprecedented environment. francine: you're telling me you need to look at the phillips curve but maybe in a different way than we have in the past. vasileios: we need to look at it with coming out of it five year horizons but would caution making a lot of interference for the last five years largely because of the fact we've been operating in an environment that we have still yet to
uncover the sexent of the structural change in the economy. francine: what's your favorite play? we went around the world in 47 minutes. if you had to look at something either the markets are not focusing on or i don't know if it's a cross to deal with geopolitics, what would it be? vasileios: geopolitical risk is one thing we can't forecast right now so we should put it aside. in rates, i still think euro scone rates and yields are headed higher, potentially the extent in basis points is bigger than compared in the u.s. so i would tend to favor that. in effects land in g-10 we're bound to see rebounding in commodity effects largely because commodity prices have been strengthened quite a lot and at the same time we are getting very poisonous signals out of china. i think the yen will surprise people and will appreciate from here.
it's a two-way play, a negative play on the dollar and at the same time a positive play on japan largely because data has been improving in japan. i think emerging markets will fare well. we should not be obsessed about overvaluation in emerging markets largely because we have a global growth upswing in place that corroborate as good story for emerging markets. slotti i think the has a strong fundamental and is due for a rebound and potentially the ruble. francine: interesting, co-head of unicredit. tropical storm harvey is lumbering on to louisiana and u.s. oil refineries may be shut and we'll bring you the latest with our own mike mickey. this is bloomberg. ♪
second part of the year will be as rough. the profit will decline after a 12% drop in the first half and gives the new c.e.o. a bigger challenge to turn around the company as it's kreised by competitors. uber's c.e.o. is said to tell staff an i.p.o. will probably happen 18-36 months according to two people who listen to the meeting and is arranged to introduce the c.e.o. before he takes on his new role september 5. expedia has named the finance chief as its new c.e.o. and fills the job left open. he has been at expedia since 2006 and c.p.o. since 2011 and don't business our interview. that's the bloomberg flash. francine: as tropical storm harvey pushes into louisiana the number of oil refineries to close has expanded. the flooding has reduced the
fuel making capacity by 4.25 million to the lowest levels since 2010. bloomberg's international policy editor michael mckey joins us from new york. this is probably the only story in town especially when it comes to north america. how will this affect american oil prices and of course prices for other countries? >> usually a hurricane would shut off the offshore oil production but so much production has moved offshore with american tracking we don't expect a major disruption to oil supplies in the united states, what you'll see is a disruption to gasoline because of the refineries along the coast because they produce 27% of america's gasoline and seeing prices rise a bit. ironically we're seeing oil prices in north america dropping somewhat because there's reduced demand for the refineries. the people who will feel it are the europeans, asians and south americans in particular who get
oil exports to the united states because the ports of houston and corpus christi are closed right now. francine: houston is a major port. what other commodities are being affected? michael: the biggest one that will affect the united states and rest of the world is petro chemals. 40% comes out of the houston area and with the ports closed and refineries down, that will be a real problem. these are useded in just about everything, the plastic in your iphones and tires in your cars are used in production of almost every consumer product and will have an impact around the world for supply chain. francine: will have an impact on american spending especially imports? michael: that will depend how long it takes for gasoline prices to level off and come down. if americans feel like they have to spend a lot on gasoline for an extended period they are likely to cut back spending in other areas and have an impact on imports particularly consumer products, if gasoline prices come down quickly you
probably won't see much impact at all except in the south exas area you've been affects. francine: michael mckey joins us the top of next hour. bloomberg surveillance continues and tom kean joins us and talk to oliver adler and timothy mcgraff of state street. we want to focus on the euro moves and seven days until the e.c.b. meets. overall i think we're a little bit more risk on mood. european stocks are trading sideways and the dollar steady and this is bloomberg. ♪
the g.d.p. boosts the dollar. gasoline extends its longest rally since 2013 and tropical storm harvey close as major u.s..line. the grand unveiling, french president manuel macron's labor reports are announced the last hour. live in paris. good morning, everyone, this is "bloomberg surveillance." francine lacqua in london and tom kean in new york. we have a busy day and i need to mention ennation because it's the one thing mario draghi will look out for, three cheers, accelerating inflation, we haven't seen in a while 1.5%. the euro is cheering it on. tom: splitting hairs but the idea of disinflation has been big over the summer and in 60 days the data will be critical to giving mr. draghi and yellen confidence. francine: i don't think it's splitting hairs but is the backbone of what mario draghi needs to see to go through what he wants by the end of the year. let's get to the first review with taylor rigs.
taylor: tropical storm harvey knocked out one-fourth of capacity. the fuel making capacity is at a seven-year low and harvey's move to louisiana made it worse. corpus christi, texas are hoping to restart the facilities soon. the authorities blame the storm for 31 deaths. they fear they'll find more victims as floodwaters recede. president trump is warning congress not to blow a chance to overhaul the nation's tax system. the president kicked off his campaign for tax reform in springfield, missouri. president trump: i am fully committed to working with congress to get this job done. and i don't want to be disappointed by congress, do you understand in? -- understand me? taylor: the president said cutting the corporate tax rate to 15% will help workers but he was light on details because he's counting on congress to come up with the plan. over in japan, the central bank is expected to buy fewer bonds for a second month in a row
according to a survey of money managers and analysts. the bank of japan comes out with the september buying plan later today. it was able to cut bond buying this month as the benchmark yield split towards 0%. a revolutionary therapy offers new hope for leukemia patients and comes with a strat feerick cost. the f.d.a. has approved a eatment from novartis to extract cells. and will charge $475,000 and the company gets paid only if the patient responsibilities to the treatment. global news 24 hours a day powered from 2,700 journalists and analysts in more than 120 countries. i'm taylor riggs. tom: equities commodities, two days in a row quiet markets. future with a lift and little curve steepening. euro well under 120 and at 118 and handled, earlier oil
churns. my only screen, francine. what do you have? francine: a similar screen to yours and want to put it differently european shares are gaining a touch and the data underscoring the resilience of the american economy yesterday and the chinese economy today and we're seeing a little bit less of a risk off mood because of the administration sending different signals to new york. the dollar steady and yen and gold declining, tom. so this is what i'm looking at actually for my -- this threw me off, tom. i get to look at my bloomberg before you and christmas comes early sometimes in august, late august. this is what i'm looking at and it's the euro forecast. this is the euro-dollar spot and you see the dollar year end forecast. this is a simple chart to show your euro is trading above the u.n. forecast which means it could accelerate further once you break out. tom: goes to the miscall over the summer we spoke with an expert earlier. here's my chart.
i stole it from francine lacqua, she showed it yesterday. this is supercycle, supercore inflation in europe thanks to maxine's buy for helping out with this. this is a calculation from the e.c.b. of where inflation used to be 20 years ago for a decade and where it's been for the last decade and it's a lower regime which moved down and francine mentioned the hope and prayer of getting this important supercore inflation back somewhere in the vicinity of normal. francine, that's really the great, great challenge for central bankers today. francine: it really is the great challenge and from what we saw from the euro zone very shortly a couple minutes ago, tom, was crucial because as soon as inflation edges up it gives the central bank the impetus to start normalizing. tom: and sets us up for our theme that september started early and is it for michael
mckee and hurricane correspondent. we have to talk about jackson hole. i haven't talked to you from jackson hole. what did you learn from jackson hole or is that ancient history? >> what but will be cheered by inflation news out of europe and we get news at 8:30 wall street time and if it also matches the rise the central bankers will feel much more on the right track. tom: is it important for chair yellen as the inflation date francine just showed and important for mr. draghi? michael: less so because draghi needs a predicate to end their q.e. and yellen is already on track and more support they could do another rate move this year. tom: great historical perspective on the disaster in texas. what have you learned? michael: the overall idea which we talked about many times is a natural disaster doesn't really subtract from gpped and is a terrible human tragedy and for a localized area it is a disaster but the overall nation we see the rebuilding efforts wash it out to use a bad
metaphor and you don't really see it in the data and we saw it with katrina. for houston it will be a disaster. we have a chart of what happened to new orleans when new orleans experienced hurricane katrina in 2005, you see g.d.p. dropped and a further drop in the recession and took until 2010 until g.d.p. exceeded what it was before katrina. as you see it flat lined since then. so many businesses moved away, it's been hard for new orleans to recovery. houston a bigger, more dynamic economy and may recover more quickly but will take a long time. francine: we had a major shut 10 hours ago and how is it affecting oil prices? michael: the irony used to be when you had a hurricane it would shut down production especially in the gulf of mexico and so much moved onshore with tracking and the oil prices are going down because oil has not been interrupted so much as gasoline production and the refineries
don't need the oil at this point. it's gasoline that will affect the u.s. economy depending on how long the oil refiners are out of business. out of the area produces 27% of merican oil consumption. 60% of jet fuel and could see airline prices go up if it's a long disruption and if it's sustained america could cut back on spending areas and the national effect to look for. francine: what about other commodities? michael: houston is one of the nation's biggest ports and a lot of commodities around the world are imported and that will slow down industrial production in the united states and we'll see an effect on the u.s. and the world from petrochemicals. it's 40% of the petrochemicals produced in the united states and there's a chart that shows what happened after katrina and ike in that area. big dropoffs in those -- in the production of those chemicals and they're using everything from your iphone to tires and
toys. everything that you buy has something in there from that and will have an impact. in those cases it washed out quickly and we'll see how quickly they come back. tom: i want to go micro. you and i have teenagers and understand mold. it's not a joke. every single house will be inundated with mold. that's a housing disaster, no other way to put it. michael: we saw people from fema and other responders beginning to talk about this and the fact it will take a very long time to get a contractor to come to your house and it was suggested people may want to start ripping out some of their walls and carpets and things like that on their own to prevent mold because obviously it can bring disease to a lot of people and making it hard to breathe, either. this is a concern for people in houston. francine: michael mckee on hurricane harvey. we talk to the head of global
markets research strategy. congratulations. talk to me a little bit about what hurricane harvey means for the main concerns out there. there's a debt ceiling implication and of course a possible g.d.p. implication and therefore fed implication. >> the g.d.p. implication, it's hard to know if there is any and will probably be modest at least in the short run. the debt ceiling implication is interesting because as cynical as this sounds, it might alleviateed by harvey in that there will be funding for relief and attaching that to some piece of debt ceiling legislation might remove it as a risk. the market has acknowledged that in not sort of worrying about the debt ceiling it seems as much in price this is week whether it's the dollar or u.s. rates. tom: jim, your inflation is a lead sentence that we're likely to surprise. is mr. draghi going to be caught in an inflation surprise
>> i don't know it will be at the core level. at the headline level gasoline prices have risen over the course of the summer and goosed some of these headline inflation figures you've seen to a degree in the u.s. as well. the rolloff of base effects could be responsible for some degree of surprise. this is again probably more in the u.s. where the base effects were quite depressing. for the euro zone, it's humming along and not exactly where they want inflation to be at a core level but at the same time, core p.c.e. was not a million miles away from where core p.c.i. is when the fed started tapering. numbers like this morning, as you mentioned it gives draghi some leeway and impetus to start maybe talking with the reality of tapering. tom: we'll continue on this economics on investment and mr. graf from state street global markets. the american red cross is asking for your help with the continued disaster in texas.
the organization have dozens of shelters up and running but expects the crisis to grow exponentially. thousands of texans will end up relying on the red cross for food, water and a place to stay. your donations will help. here's where you can go. go to www.redcross.org for further details. from new york, from london, we continue. stay with us. this is bloomberg.
price war and operating margin sales by .7%. the new c.e.o. of uber has a time line for uber going public. he was introduced to employees yesterday. there could be an i.p.o. within 18-36 months. one of his first jobs will be to rewrite uber's ethical code following multiple scandals. that's your bloomberg business flash. tom and francine? francine: thank so you much. euro zone c.p.i. accelerated to -- 1.5% in august, more than economists expected. this is what we look at in inflation. mario draghi will take cues to this data as it comes to next week's decision but is it enough for him to announce a end to asset purchases? with us from our bureau is oliver adler, the chief economist of credit swiss. when you look, first of all, at how we know from inflation
much will mario draghi be releashed. the inflation is going up a tad, does it validate his policies? >> obviously isn't a total game changer but i think overall it certainly confirms what he detailed us earlier in the summer namely that inflation -- or deflation risks are behind us and inflation was ticking up and the e.c.b. was more or less on target and he'll be pretty relieved by it. francine: all right. but you know, one reading doesn't make a trend, oliver. how do you make sure this is a trend that inflation as mario draghi was saying the labor market is getting tighter and we'll see wage growth actually coming through? oliver: the trend has been in place for quite a while. if you look at the data in almost all countries in europe in the euro zone, actually, they've been creeping up quite a while. looks like a trend and doesn't mean you can't slow down again
but overall there is a trend in the headline and obviously core is low, wages obviously very different from country to country. some countries like germany have significant wage pressures in some areas with a lot of unemployment. the overall picture is one of a gradual pickup in trend and we shouldn't forget the e.c.b.'s target is not really as aggressive as the fed's. so somewhere below 2% or close to 2% and not actual 2%. so i think the e.c.b. is getting much closer to its target. tom: your colleague provided global leadership of this debate from inflation and the selectors of the new inflation, is this disinflation or inflation we just have to get used to? oliver: obviously when i was young, inflation was a really bad thing now.
i think overall the trend inflation is low is the first thing and secondly, inflation is a very late cycle phenomenon , and one tend to forget that. and trend pick up late in the recycle even into recessions and within expansion periods innation tends to be moderate. i think we should not expect any major move upward in inflation because obviously global factors keeping inflation down and many cyclical factors in europe so i wouldn't expect a big rise but stability is probably what one is looking for and obviously the end of deflation. tom: do you buy a sustainability of g.d.p. in europe so much in america as a e off 3%, 2%, 3%, again, can you say the economy of europe has a run rate that is
sustainable? oliver: the run rate at the moment is probably actually a little bit above trend. it's somewhere around 1.2%. we have so much slack in the economy that we should be able to stay above that rate for a while. unless the euro gets unbelieveably strong. and with current level and global growth pretty steady and a lot of slack in europe. i think we should be able to stay above trend which is probably below 2%. francine: the euro is trading above the median forecast. will mario draghi address it when the e.c.b. meets next week? oliver: that's hard to tell. in the minutes of the e.c.b., they did address it. i think it's a little hard to kind of make too much out of it
because, you know, in absolute terms, relative to where the euro has been in the past it's really not that strong so i think they will not make too much out of it. it's one of the components in assessing the outlook but if growth is good and inflation picks up a bit, they will not make too much out of this still moderate rise in the euro. francine: thanks so much, oliver adler of credit swiss. tim graf of global markets. you were shaking your head talking about euro level. you don't think it's too strong? tim: year to date the affected euro is up 6.7% and hardly the stuff of nightmares and reflects the policy's success if anything. if you were to double that gain then you might start to have some questions asked. but ugochi: own trade figures from what is suggested is far from
overvalued and would take a short sharp move to get them really concerned but as lodge as we're seeing a steady growth in reflection of improving fundamentals it's hard to push back against them too much. tom: very good. thanks so much. we'll continue. this is important news from the texas and houston region. two explosions have been reported at a chemical peroxide plant outside of houston in texas. this from the texas abc 13 news. unidentified officials of the company. organic peroxide with the building heat can lead to explosions, two explosions reported. this is bloomberg. ♪
francine: it's happened. we were warned in the last 15 hours that they couldn't prevent a chemical explosion and it's been confirmed, it's appened. it was a plant that manufactured certain chemicals in six feet of water. tom: owned by arkema of france. the difference is it's organic peroxide and goes into a lot of plastics and involves traditional organic and inorganic chemistry and with that, francine, it's always
about heat. they don't have the heat treatment right now to keep the temperature down in the organic peroxides involved throughout their process elevate in heat and that leads to combustibility. this is not something significant or unique to this plant, it is about simply the organic chemistry involved in any one of these vinyl plants, as you put it. francine: right. as you say, it's basically once the chemicals start to degrade, you're looking at a fire and explosion. however, what we can't -- well, what we don't know yet is the site or chemicals on how big the block can be. they evacuated people in the area and we don't know if there are more explosions on the chambers. tom: evacuations reported around houston. the circles i've seen out the charts don't know how much they've moved out and we
certainly don't know the size of the scope and scale of these explosions yet. but this is something -- i would suggest, francine, it's been widely anticipated because of the chemistry industry within houston. francine: one of the c.e.o.'s are or the people involved at arkema this wasn't mandatory but 300 people in all have been evacuated ahead of the explosion. tom: there it is, breaking news in houston after the sunrising near the 7:00 hour this morning in houston. stay with us. this is bloomberg.
late august in new york city. we welcome all of you worldwide, in london, francine lacqua and tom keene in new york. our first word news with taylor riggs. taylor: harvey continues to take a toll. arkema confirmed a explosion at the texas plant and says the threat of additional explosions remains and the best course of action is to let the fire burn itself out. meanwhile, the floodwaters are starting to recede in the houston area and now firefighters will begin a block by block search looking for more victims of tropical storm harvey. at least 31 deaths are blamed on the storm. president trump putting pressure on congress, this time on overhauling the tax code. the president kicked off his campaign in springfield, missouri and says he doesn't want to be disappointed by congress. the administration doesn't have the tax plan but is counting on congress to write one. consumer prices increased at an
annual rate of 1.5% in august. next week the u.s. central bank policymakers will debate the future of their stimulus programs. the e.c.b. has been pushing for significantly faster inflation nd rising wages. in france macron lays out his plan. he wants to make it easier to negotiate working conditions and pay and limit compensation for severance. labor unions are opposed and called for protests next month. global news 24 hours a day powered by more than 2,700 journalists and analysts in more than 120 countries. i'm taylor rigs, this is bloomberg. francine and tom? tom: thanks again. the reminder of explosion that the arkema plant outside houston seems to be in control as the company says they're letting the fires burn out at this time. right now we look at the firestorm that will be the discussion on tax reform. the president splashed in missouri yesterday and with us
and slie to provide wisdom timothy graf of global markets as well. the president went out and does what he does so well and then there has to be a legislative follow-up, do you have a clue what the plan will be? leslie: i don't know we know what the plan will be. he's short on details and said for a long time he'll bring corporate taxes down to 15% and reduce the number of brackets. beyond that there's not a lot of detail and leaving it to congress to put a plan together. we haven't seen that or heard of it and people are a bit bewildered and wondering if he can do this. he has to get something through. congress needs a victory and so does donald trump before the end of the year. it's very unclear how it will come back. there's a lot of politics in the background to make it difficult for him to do this. tom: not to show my age but at least moderate conservative republicans in majority or are we really at an age, a
neorockefeller republican? leslie: where are we with the republican party? that's a difficult question. and there are many divisions and a the lo of those divisions will come out once we start to see the politics of working through the details of this tax reform and i think that's where it stands to possibly fail. remember, the tax code hasn't been reformed since 1986. it's a very long time coming and a very complicated tax code. there are a lot of questions here but the big one for donald trump is can he frame this into something that will deliver to the base, to the working class, wall reet, not just street and if the frame falls apart it will be difficult to get the support he needs. a lot of divisions across the republican party and what they want to see in tax reform. it's where the republican party lays -- a lot of that will come out watching the politics of tax reform the next week or months. francine: we can't get an agreement on tax reform but
where does it leave the debt ceiling and everything else. leslie: we're pushing forward on the politics on that and donald trusm is throwing things in the mix and from a political angle he continues to go back to you need to fund my wall and if you don't, i'm shutting down the spending. so it's not clear what's going to happen. i think you can't forget the context of the hurricane which is going to color a lot of the debates we'll see in the next several days in congress over spending and tax reform. it's going to be very politically difficult and shape the tenor of the debate. francine: this is the effect of corporate tax over the administrations and we took it way back to 1970. tim, what does it mean? the political match'sations, what is clear between reality and rhetoric and maybe the cam feign for 2020 and what does it mean for what can happen and therefore how the french view this?
tim: the fed highlighted in past meetings they're watching this and it's very important particularly given how little is priced in for what the fed could be doing the next 18 months. i think if trump is able to show some degree of leadership maybe he failed to show in the health care reform debate and the process there, it does i think offer the possibility of the fed to take notice and there's very also term premium priced into the u.s. rate curve. that might reprize higher as a consequence of successful passage. it's quite significant, not necessarily over the very long term because there's the issue of will he have enough democratic support to make it permanent? that's a separate question but for the near termites a quite important question. tom: it's an important question across the many taxes americans pay. are we focusing too much on the corporate tax because we don't want to look at all the other taxes we enjoy saying?
tim: the message being pushed is corporate tax reform will allow for greater flexibility and investment spending and maybe greater pursuits of labor and allowing for the u.s. trend growth rate to improve further as a consequence of that. and i think it's also being done to maybe overcome some of the details we've seen or hints we've seen that this is largely a personal tax cut for the very wealthy and will be downplayed if a populist message will be put around this? tom: there's an important report from years ago saying america is overtaxed. is america over or undertaxed? recently: most americans feel we're overtaxed. but i think if you look at it comparatively once you add up the taxes america faces and americans abroad, the numbers are quite high. so there is a desire for tax
reform but there's a perception and accurate perception a lot of where this benefit will go is to wall street and not main street. remember, donald trump is supposed to be about main street, if he can't deliver to his base or at least capture the message and carry it forward, then i think there's a very serious problem for him politically. i also would note many of the people in his team of six that are working on the details of this new tax reform with him, you know, he's lost some of their goodwill recently, paul ryan, mitch mcconnell, gary cohen. this is contentious politically in terms of the relationships that exist among him and those he's trying to work with. very difficult now. "not only republicans versus democrats anymore but what is going on among the republicans and those who he really needs to support him. can he hold on to those people. not clear that he can. francine: let's get to the morning must read and is nice because it links everything together. today's morning must read comes from bloomberg's economist
jonah sera, he says on tax reform -- the article is written saying why president trump will fail tax reform, too. he says as the republicans in congress well understand, there's simply no way to significantly lower taxes on the middle class without drastically increasing the federal deficit and that's something they can't do under the current rules of the game. besides, republicans don't much care about middle class taxes, it's the rich they're looking out for. tim, first of all, this is more complex with hurricane harvey coming out on top which means you need to fund relief efforts there and does it mean it will be pushed on to at least 2018, the tax reform? tim: i think it will be challenging to get it done this year for certain given we have the lack of detail and he expects congress to provide that detail lieu through the ways and means committee and the big six trying to negotiate this and get it over the line. the impact will not be felt until 2018 at the earliest.
even if it's passed the effect it will have on financial markets like i mentioned like the dollar and u.s. rates, the real economic effects will take a lot longer than that. tom: leslie to summarize this, what's the likelihood we see tax reform? do you have a percentage likelihood on this? leslie: i'm a skeptic and put it 20%. tom: that low. wow, wow, wow. leslie: i'm happy to be wrong. francine: thank so you much. for more bloomberg, pick up the latest issue of "bloomberg business week" on newsstands and digital in the u.s. and the "cover story" is on hurricane harvey and the hard lessons learned in houston. internationally we talk unilever. is it the last good company? we'll visit businessweek.com and subscribe to access and analysis and benefits to stay ahead of the competition. this is bloomberg.
♪ francine: this is bloomberg surveillance, francine lacqua in london and tom keene. let's go to san francisco. macron faces his first hurdle as he introduces his plan for labor reform in france. the economic strategy the next five years may hinge on the perception of the proposal but with his popularity falling and opinion promises and unions threatening to protest, can he succeed where his predecessors failed? let's get the latest from our paris correspondent. caroline, this is extremely important because he really put the unemployment legislation at the heart of his election campaign. what are the chances that this succeeds and he can push them through? caurline: in fact, the feeling we have among executives and
even among the unions is that this is going to be easier to pass his labor reform than we've seen in the past for two reasons. first, the method used by emanuel macron, the executives bypassing extensive debates in parliament and second, the fact he's got a clear mandate for it, he was elected on the reform platform. this is the whole contradiction about the french and 60% say they don't believe in macron delivering the labor reform but at the same time, 56% of the french actually believe that the labor code need to be revised. francine: what will the labor reform look like, the german model or u.k. model? caroline: looks more like the german model if i may though we still expect the details over the next hour or so in 20 minutes, the prime minister will give the press conference and we'll have 16 measures and really about making it easier
for companies to hire first, for example, by losing tax and the benefit contributions from the companies but also to make it easier to fire, by, for example, by catching litigation cuts and also to lower the power of the union. so making it easier for companies to negotiate at the company level rather than the industry level, so in some cases bypassing the unions. tom: but let's assume there's protests in the street, come on, it's france and that's what we do in france in september. what will be the character of the protests? are they routine, union, anti-macron protests or will it be something different? caroline: so the interesting thing, tom, is that only the second biggest union, the c.g.t., is planning a strike at the moment on september 12. at the moment the other big union has decided not to join the strike.
of course, this could change after the details are ironned out today but at the moment, it's been said they're satisfied with the way the negotiations have been carried on over the past three months. now, it will also depend on the far left wing party. remember, the candidate who almost passed the first run in the elections is planning another protest in the next three weeks from now on october 23. and we will see whether this can damage this reform and the authority of president macron. francine: thank you so much, our paris correspondent. now let's get back to tim and leslie. for europe to stay together and get stronger you need this franko german access to work, will it? leslie: there's a lot of investment and goodwill and desire to have this work especially in the face of brexit and in the face of the larger geopolitical conduct of
what's going on in the united states, external security threat. so i think it's likely to continue to work because there's so much goodwill to make it work, undoubtedly what's going on domestically in these countries presents some constraints but i'm fairly optimistic about this going forward. francine: where do you see some of the stress points? is there a danger we focus so much on angela merkel being re-elected and focus so much on anco german process that we don't see risk in italy and the populous with the a.d.f. getting in the german parliament? tim: italy remain as next year issue but you look at the italian unemployment rates that rose in q-2 after seeing improvements the last couple years. structurally the labor markets remain rigid in italy and unemployment remains uncomfortablely high. the popularity of the euro if that is to play out and remain in the euro zone with the
populist movement in italy still quite strong it's a risk but probably more 6-12 months from now as opposed to the one in front of us. francine: what would you buy in europe now? is the euro overcrowded, does it have further to go and what about equities? tim: it's certainly crowded. i whng currencies trend they tend to overshoot and most fair value models would put the euro only back at fair value on a lot of different base he's. there probably will be overshooting against the dollar and sterling and maybe against the yen to a certain degree. i think it probably makes european equity as little less attractive given the export channel and given we've seen significant strength. i'm a little more neutral and european financials would probably fare best given the valuation case that's there, probably not as crowded and if you get the e.c.b. responding to some of these inflation data with tighter, easier policy in the financials. tom: is europe, all boats rising now? there's 17 countries, 25 -- i
can't keep count. is it all boats rising? tim: it's more and more boats rising. you probably still have to leave greece out of a lot of that discussion given the obvious problems we've had there over the last 5-7 years but more and more countries are seeing rising rates of core inflation and that's the case across the majority of the euro zone countries. the majority of countries are seeing rising growth rates. the majority of countries are seeing slightly tighter labor markets. it's maybe not a question of all boats rising but certainly most are faring much better. rancine: thank you both. we're just getting breaking news and video coming in from japan for our radio listeners at the moment you see the prime abe, r of japan, shinso i believe teresa may is to his right.
we did hear some explosive, actually news from the prime minister yesterday. she was talking to i.t.v. in kyoto and says she'll run for re-elections. we've had quite a lot of media coverage on that as a lot of her colleagues were quietly saying that's probably not what's going to happen. we'll keep an eye on teresa may in japan. this is bloomberg.
♪ taylor: this is "bloomberg surveillance." i'm taylor riggs and this is business flash. they are confident they'll pay a thousand per user for research. after the free content goes into effect. we've been speaking with the chief executive officer. >> i'm sure people will pay us for that. >> $80,000 a year? >> i assume they will because that's how they'll have to get it. because i think with our customers and clients that do tens of millions of volume, to me it's not been the biggest issue i've been worried about. taylor: disney may cut costs by as much as 10% at the abc tv unit according to persons familiar with the plan. disney networks are the source
of almost half the company's profit but they've lost viewers in the most recent tv season. abc finished last among the big four broadcast networks in the prime viewing demographic. that's your bloomberg business flash. tom and francine? francine: thank so you much, taylor. teresa may says she'll stand for re-election as she tries to convince the public and her own party she's no lame duck. the u.k. prime minister tried to end rumors about her future after newspaper claimed to know the date in 2019 when she was planning to quit after she lost her majority in june's snap election. you're seeing live pictures of teresa may together with the prime minister to her left of japan, shinso abe. for radio listeners it's the news conference with the flags of the u.k. and japan in the back ground. during her visit to japan yesterday in an interview, she was saying she's in it for the long term. let's get back to tim graf at state street global markets
head of market strategy for e.m.a. when you listen to teresa may the last 72 hours, she pains in saying she wants to be re-elected and will stand again next time. is that a good or bad strategy? it's called a lot of people to center within her own campaign because she was blamed for botching the june elections. tim: we won't know the way brexit will unfold or the way the negotiations are going right now, it doesn't seem like probably the most likely thing to happen and so it sets herself up to be quite embarrassed if in fact she's not in position to run if she faces a leadership challenge within the party. so i'm not certain it's really something we can think about so long down the road. i think we have to come into a lot of these negotiations over the very first points between the u.k. and e.u. to see some level of suck sets before we can have any degree of confidence she will in fact last that long. tom: somehow i don't think she comes back through heathrow through customs. i don't think they make the
prime minister do that torture. when she gets off the plane on return, what will greet her? tim: i think what will greet her is the continued skepticism that the u.k. is going to be able to put itself into a better negotiating position with the e.u. over some of these very fundamental issues that the e.u. is insisting are resolved before we even think about a trade agreement. so that pressure that's on her i think will remain ever greater, particularly since she's coming from japan where they've already said they're going to prioritize a trade deal with the e.u. that doesn't necessarily look good when you're trying to frame all of this brexit process through the notion of pursuing bilateral trading arrangements. francine: this is euro pound, will we see parity? tim: the trend is certainly in no danger of breaking down now. the pace at which it's happening leaves it within the realm of possibility the next 12 months. sterling remains weak for the negotiating process in its entirety.
and so yeah, i think the probability it gets to parity is pretty high. tom: tim graf, greatly appreciate the briefing this morning. we have more coming up next hour. we'll look at e.d.m. dynamics. in houston the sun is rising, moving on from the horrific rescue efforts of the last days, complicated by a chemical explosion this morning. this is 25 miles northeast of houston, a chemical explosion, widely predicted and seemingly to be contained at this moment. we'll have much more on that. taylor riggs with the updates at the top of the hour. stay with us. this is bloomberg. . ♪ .
threat of further explosions at a flooded chemical plant downtown. , disinflation far and wide. tomorrow, the american labor economy booms, or doesn't. good morning everybody. this is "bloomberg surveillance." francine, houston still an evolving story. francine: it still is. looking at commodities and the loss of human life, but also a business story, whether debt ceiling negotiations and gdp. tom: an explosion early morning appears to be contained. more on this throughout the hour. with first word news, taylor riggs. the french chemical
plant exploded earlier today. the company expected that to happen after the storm knocked out power needed to refrigerate volatile chemicals. all workers had been evacuated. meanwhile, harvey has knocked out almost one fourth of oil making capacity. harvey's move into louisiana has made matters worse for the energy industry. warning congress not to blow the chance to overhaul the nation's tax system. he kicked off the campaign for tax reform in springfield, missouri. >> i am committed to working with congress to get this job to beand i don't want disappointed by congress, do you understand? cuttingresident says the corporate tax rate to 50% will help workers. he is counting on congress to come up with the plan.
the central bank expected to buy fewer bonds according to a survey of money managers. the boj comes out with its buying plan later today. it cut bond buying as the benchmark slipped. revolutionary therapy for leukemia patients. it involves extracting a patient's immune system cells and modifying them. $475,000,ill charge but developing programs where were only get paid if a patient responds to treatment. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. i am taylor riggs. tom: thank you so much. , quiet data. row really elevated, the vix
showing that recovery. some curve steepening. a chart on that later in the hour. crude oil churning here. ,hat we are seeing in houston minimal market affect in houston . sharese: european gaining for a second day. we had that encouraging number four u.s. gdp, underscoring the resilience of the american and chinese economies. we also heard warren buffett say .e prefers stocks to bonds the dollar is steady. treasury yields rising for a second day. tom: very good.
we are doing this morning is brushing up on the organic and inorganic chemistry. our guest is very good at andyzing disaster, weather, each and every hurricane has a different geography. he joins us this morning. a geography, fred come of chemical business in the oil business. we had explosions this morning. adjust to adapt and disaster front and center on america's chemical industry. thank you for having me on and thinking about the people .own there around the plant the good news is -- the only good news in a pretty bad situation as we started to get
word of this yesterday, that this plant had a high of exploding and they moved away everyone they could. everyone washat out of the area at the time this thing went. it depends on where the winds are blowing. and you look at the storm the fact it is moving off, there chance that there are back winds pushing it out to shore. tom: what are you doing this morning? is a clumsy. of disaster and immediate rescue and the follow-on in houston. what is planalytics studying this morning.
>> planalytics specializes in the impacts of these events on shoppingmy one behavior, and we are estimating that the overall storm is going ofhave a retail sales loss over $1 billion, which is quite high, money that one never come back to these companies. you compare that with the overall cost of this storm, which is surely could to be atth of where katrina was at $125 billion, so we are looking at the largest and most expensive disaster to hit the
american shores. , fred, thes katrina one you need to benchmark against? industrial production, data toppedcs, inflation after katrina. is it the one you need to use as a blueprint of the u.s. economy and what could happen? >> that is the big unknown. we don't know how this thing will end up. views,re all types of some of which say houston and aat region because it is such heavy industrialized area that it will bounce back fast. some of them are saying you will get that inflation pop, other things going up. what we do know is that when you
break it down industry by industry -- again, it is a cold way to do it because you are putting aside the toll on human life -- but when you look at the mostnd gas industry, people and most experts are saying this industry will be back up and running shortly. tom: right. frederick fox, thank you so much, with planalytics. joining us now with great analysis yesterday is the chief economist for bloomberg and ubs head of emerging-market strategy. of youd talk to the two for 3-4 hours and not get through the agenda. note you wrote a great yesterday on an american economy and a recession that seems to be coming to an end. your thoughts on the team thoughts on hurricane harvey. >> it is happening relatively
think theredon't will be a substantial sustained gdp and back, but we will see it in the data as early as tomorrow. there will be several lost fourth-largesthe metro area in the country. you will see it in the jobless claims data, which should back 7500 to 10,000, so a brown out in terms of economic data that is not distorted at a critical time as janet yellen and company are trying to initiate balance sheet runoff and they will have a muddled crystal ball. tom: this is so important. they have to hedge to dovishness , carl. they have to hedge to dovishness given the natural disaster.
politically that is what a central bank does. >> at the time of katrina, the fed stay the course in terms of its policy normalization. i don't think this will bump the fed off the perch with respect to balance sheet balaji. we will have to see with respect to the rate hike. francine: talk to me about gas prices. how vulnerable are they too lengthy supply disruptions? this is a seasonality chart looking at gas prices. >> exactly. the chart on the screen shows gnomeas price trend allies where we stood last december, and that bottom chart, the bottom line on the chart is what we have seen year to date, which means gasoline prices have been inordinately week. -- weak. yesterday, we were $2.40 per gallon, and we should be a $2.60
per gallon, so gas prices pushing us back in line with what the trend should the. francine: what kind of impact does it have on payroll? talking about payrolls. >> we should see some impact, but not in tomorrow's report as the survey was concluded by the middle of the month. lull andhis initial then this boost as repair and all those things kick in. it in payrolls, labor participation, and even average hourly earnings. you have been an emerging market expert for years. it has been a horrific week for exas, about what does this do to janet yellen? we are not expecting a rate
hike until december anyway. whatgives us leeway to see the medium-term impact is on the economy. our economists are expecting her to announce the beginning of the balance sheet reduction process in september. i'm sure they could delay that, but after that strong and thatarter number the economy will bounce back from this however horrific it is locally, one suspects they will try to broadly keep on track because they made it clear they will normalize policy gradually. francine: does the debt ceiling become more or less of a problem because of harvey? makeshink it potentially it more of a problem because you have to find more money for the ,escue effort come if you like which could simply load up on government spending and make the debt ceiling more challenging,
but the process of lifting the debt ceiling, the congressional agreement that is needed to do that, will not necessarily be impacted. funds may beor greater, but you still have to get things done. unique congressional agreement in an environment that is challenging. tom: we will talk about the american economy, that 3% statistic, lots of economists adjusting to a better frame of mind. maybe it has been profitable for american electric power, a conversation with the chief executive officer of aep. stay with us. this is bloomberg. ♪
♪ we go to washington. the president of the white house correspondents association, the most difficult job in washington. the president did his junket, and stevenry cohn mnuchin have to sell the same is anybody going to listen to them on the hill? -- have to sell this. is anybody going to listen to them on the hill? part of the reason white house has left the details to congress is an indication of how difficult this is. the president was hoping to come out of the august recess and put political pressure on leaders with the threat of a shutdown,
and this storm has complicated all of that. he comes back with his hands a little bit tied by the realities of mother nature. the president thanked a lot of people in that speech yesterday, but do not think cohn.cohen -- gary what should we read into that? >> the word from the white house is don't the overdramatic. the white house has a history of rewarding people and stubbing people depending on who he calls out or not. there has been tension with a cohen,ry: -- gary particularly the response to ose events in charlottesville. jeff sessions was dangling by a thread until he wasn't anymore. often these things past.
that is another element of drama going into next week that complicates the picture. tom: i know it is this the morning at the white house. if you have nothing better to do, maybe you can help mow the lawn behind you. your tax dollars at work, folks. thank you so much. greatly appreciated. truly our chief washington correspondent. not mowing the lawn, but helping us on the economy. carl, you wrote a brilliant note yesterday. you know that profits really matter. explain to us why corporate profits are so important. >> it is the core driver of private sector decision-making when it comes to hiring decisions or big picture strategic decisions. experienced such a dramatic slowdown in recent on year trendyear
was 1.2%, a dangerously slow of a growthback slow down and currency fluctuations in response to the chinese the violation two summers ago, we were in a corporate profits recession. economictright recession, but a corporate profits recession. we saw that start to melt at the end of last year. we had the negative reading in q1, but in q2, we are accelerating in growth and profits, a very positive development for economic prospects. francine: how do you see this debt ceiling playing out? a lot of it will have to be redistributed. is it something that could be fundamentally changing for the economy or at the margins? >> this is an early october story because we have big social security payments at the
beginning of the month. i don't think politicians will be willing to go to the brink, withast in early are over, respect to government shutdown and financial market issues at a time when we have such a severe humanitarian crisis in houston and the surrounding areas, so if anything, it is more likely to get a temporary extension because no politician wants to be seen as defunding fema at such a critical juncture. about, have lots to talk and of course jobs day friday. that may do some data. two days in a row quiet off the korea juggernaut we saw monday. stay with us from london. from new york, this is bloomberg. ♪
indian bonds headed for their first monthly decline. this is "bloomberg surveillance." expected to show economic growth accelerated in the second order. been strengthening on high debt inflows. thank you for sticking around. if you look at india, the only way of getting gdp better than expected his through the banks repaying a lot of loans. what do you see as the biggest potential for the indian
economy? economy is growing strongly at about 7% to come of the emerging market universe. these short-term trends of quarterly numbers are not going to deflect us from that trend growth. lateemonetization process last year certainly was expected to live the economy a hit and it never really happened. the growth will stay around 7% level. the banking system is weak in india and does need gradual restructuring and could be well holding the economy back, but generally a good growth story. also have the introduction of the national goods and services tax, superseding some of the local levies there at how is that working out? the gst was less clean and
pure than intended because there were exceptions granted. it is too early to indicate what impact it will have. it will have a fiscal benefit and simplify sales taxes across india and improve investment climate type reducing costs and frictions in the economy, but it is too early to tell. for investorsant is to take this off as another one of those structural reforms prime minister modi has put in place. that is powerful. tom: coming up, a conversation with dennis gartman. we would do that on bloomberg radio. dennis gartman on gold and a difficult trading environment. this is bloomberg. ♪
from which the president did a lot of his campaigning on. he says the labor law is not solely responsible for employment, but it's a little bit are looking in explaining why france has come to this place. we will monitor that news conference closely and any views on how he will change it. is a cultural shift. all these french leaders look very controlled and in order. when you read the french papers come as i know you do every day, what is the level of up for over this labor reform in france. francine: let's see what comes out of the labor reform. thatproar and criticism is it is taking too much from the middle class and giving too much to the poor. this is the part of the
narrative we have heard with the labor law, not defending employees, but focusing on profit. the devil is in the details often with these things. let's see when we start having more news from the french prime minister. let's get straight to first word news with taylor riggs. taylor: explosions early at a french chemical plant in texas damaged by harvey. expected that to happen after power supplies were knocked out needed to refrigerate chemicals. floodwaters are starting to reseed and firefighters will begin a block by block search. 31 deaths are blamed on the storm. president trump putting pressure on congress on overhauling the tax code. the president kicked off his campaign in springfield, missouri and says he does not want to be disappointed by congress. the administration does not have
its own tax plan. it is counting on congress to write one. inflation in the euro rose more than expected, 1.5% in august to bankweek, european central policy the stimulus program. the ecb has been pushing faster for arise in inflation and wages. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. tom: thanks so much. there is the level of credibility to every think tank come every bureau of analysis in washington, one has been around since 1937 and they are the nerds that grind out tax reform and tax analysis like nobody else. the director of federal projects is here. 1986 whent around in there was a collegial effort to get things fixed.
where is the 1986. in 2017? >> you are right. i was not around in 1986. right now, tax reform will look different than back then. had democrats and republicans working together to fix the tax code. here it will be mostly a republican-driven effort. tom: an open question, you guys are the ultimate being counters of our taxes in an money out dynamic. what is the tax foundation studying in the many what-ifs of tax reform? >> the foundation is focusing on how tax reform will work this time around, how the trump 15%nistration will fund a corporate rate and middle-class tax cuts at the same time as following the guidelines that congress wants to follow, which
is a roughly revenue neutral proposal. tom: when i look at this, in the old days it was something as prosaic as the house ways and means committee. does mr. brady of texas matter in this debate? >> mr. brady does matter. for the last two years, mr. brady has been working hard on tax reform. 2016, he and paul ryan put for the blueprint which was a fundamental tax reform proposal. some of the pieces of that have fallen out of favor, but i still think that may be one of the starting points they use on the hill. francine: i know you don't have time to go through debt patterns, but where do you think the funding will come from? >> it is hard to tell. there are a few basic broaden her's in washington on the table , eliminating deductibility of state and local taxes.
one of them is limiting the directions for corporate. francine, your question is brilliant. it is the heart of the matter. we find out?n do this is a concern. you pay for one and put it in the other, is there an overarching theme of how you think congress will vote on? >> i don't think so. again, you could start with the blueprint that radio put out a year ago and go from there, which had some named days broader nurse which would raise funds to fund rate cuts. as time has gone on, the administration has been less detailed about what they want to use to fund these rate reductions. tom: you guys make a big splash avery april 15 where we are. if you sum up everything, are we
overtaxed? >> right now if you took all the taxes that we pay, america does pay a substantial amount. it is not the highest in the world as he administration likes to say, but if you ask individuals, they will say i think my tax heard and is too high, which plays well into the politics trump is using. tom: thank you so much. the tax foundation, great briefing. where is howard's baker? -- how would baker. i see no ability to get to anything you are i recall from ages ago. >> we don't have the detail as to what the white house wants from tax reform. you have a very confrontational environment in washington itself, so it will be hard. tom: francine, you have to a for this stuff, or is it as i
mentioned, i rockefeller republican era? is that where we are? >> on the corporate tax front, some of the offsets -- you will and kerr jan incentivize companies to bring that money from overseas back -- you will encourage and incentivize company to bring that money act from overseas. something sacred as the mortgage tax break, which has been phased out everywhere else in the world , phased out in the u.k. gradually. an extraordinary financial boost for the better offs. tom: this is so important. jeff mentions gradually, you wonder where gradually will come into each of these debates as we try to get the reform. francine: you do, but were not
talking about health care bill anytime soon. i don't know whether that comes back. a couple ofe are people you would be listening to does see if this is going to have an impact on the fed. it is not isolated. is there a turning point or timeline. >> one of the most important things is that chairman yellen said all the time that if you ease fiscal policy, we will raise rates more quickly. this country is not in the position needs to be with fiscal policy. you need to see the details of theprocess of tax reform, debt implications. health care reform is pretty much gone for the time being. janet yellen will leave things on her track while the economy is growing at 2% plus and take you get something on the fiscal front, and if that is growth boosting down the road, then
, but that is not likely in the short or medium term. tom: we would do a touch on emerging markets in a bit. bloomberg businessweek, two covers. i love that idea from macon murphy. this week on hurricane harvey. iny stories on the impact texas. an important detail on the consumer goods company, unilever, the last goods company. business week. stay with us. this is bloomberg. ♪
this is "bloomberg surveillance." cut costs by 10% at its abc unit according to persons familiar with the plan. disney networks are the source of almost half the profit but have lost viewers in the recent tv season. abc finished last in the prime viewing demographic. warren buffett may face another set act next month berkshire hathaway needs shareholder approval to boost its stake in butda's home capital group, some investors say the berkshire offer is diluted to shareholders and are urging a no vote. ofna confirmed the day the the national party congress, october 18. the twice a decade conference provides xi jinping the opportunity to reshuffle
oppositions and write his policy into the party's governing documents. that is your bloomberg business flash. francine: thank you. let's go back to france, where we are hearing from the french labor minister outlining the governments reform plan in paris. macron what president pinned his campaign on. we were hearing from the prime minister earlier saying the current system in france does not's hard hiring. weeks according the nations must proffer unions, courting them ahead of negotiations. we are waiting for details. the prime minister explain why the current system is not working. the do we know about how union heads will take this? >> we heard some reaction from the unions. we knew that the second biggest
union is planning a strike on september 12. thesurprise came from largest union, who said they were disappointed when they left the meeting with the prime minister about 20 minutes ago. a sincerethat despite around of negotiations, they are opposed to some measures, especially small companies under 20 employees. they say there is too much power for the owner of those companies. also, the fact that the planning to allow labor judges to only consider of theancial situation company in france when they are ruling. the biggest union has confirmed they will not participate in the strike on september 12. francine: how easy is it to see
whether this will have an impact on the macron confidence. i think he is around 41% in the latest all of popularity. protestsrse if the turn out to be bigger than we expected, this would damage the president's authority and his credibility even on the european stage. partners like germany, it is important for macron to prove he is able to reform france first before negotiating some reforms at the eu level. this will be very important for emmanuel macron. at the moment however, many sick it is do not expect france to the paralyzed by complete blockades over the next few weeks. francine: how will international investors take this? >> there is one positive reform
which is aimed to make france more attractive for foreign investors. the prime minister said that for those companies that might be scared to higher in france, he measureducing a new on theevels are based situation of the company in france, and not the global situation of the company. script. me rip up the i don't know how to say that in french elegantly. go --did matter le pen marine le pen go? >> she did not take parts in the debates. in june and will be a voice in the opposition over the next few weeks, that she has not been taking part so
far over the past few days in these debates. it is mostly about the unions and the prime minister at the moment. tom: thank you so much. us.rey dennis with he looks at emerging markets and how the rules change for major economies. an ascendant france, certainly an ascendant germany, what is the em relationship with europe versus america? >> the obvious point straightaway is that there are a markets, emerging central european markets come essentially russia, that are linked to a pickup in the euro area. growth raised our euro forecast on a number of occasions for this year. clearly things are doing better than we had anticipated. other important way it
impacts emerging markets is they also do well when the dollar goes down. .hat is one of my golden rules the dollar has been much weaker than the consensus thought it would be at the start of the year. we had a weak dollar for casserley and our forecast, helpful for emerging markets. it has gone around our number. takes money out of the u.s. and pushes it out on the risk curve in emerging markets, so that has been helpful. europe doing well versus the u.s., it helps some companies and the asset class over all. that's why the dollar may be rebounding a little bit. em ina little barrier for the sense we don't want to see an accelerated yellen rate hike program. to continue to see money
♪ francine: this is "bloomberg surveillance." coming up shortly, bloomberg daybreak: americas with jonathan ferro and alix steel. alix steel, i know you are focusing on gasoline prices. >> we will cover all aspects. we were also focus on houston. .e have the ceo of aep he has 100,000 customers still without power. we want to know why and how fast it will come on, and what the demand fall off will be at a
commercial, industrial, and residential level. tom: thanks so much. withportant conversation brian moynahan. the 1990'shink about and 2000's when you had growth, you had 1.5% a year. it is hard to estimate, .5% to .75%, demand for houses, food, cars, everything, so we have a good solid economy. towill see this thing fight get between 2% and 3% as opposed to easily get there. tom: looking domestically at the realities of our demographics. the single best chart that ties into jeffrey denison's work -- dennis's work. down at the bottom, 7%, not the 9% we knownt -- 8%
-- used to know. u.s. is not in any sense primarily an export economy. it is more of a domestic driven economy, but china is point. as china -- china is buoyant. you will find these growth rates continue to fall. even though there is a blip at the bottom of the chart suggesting a growth pick up over previous quarters, and certainly our forecast this year is higher than it was at the beginning of the year, the trend is towards lower growth. growth of 6.5% to 6% has impact on the commodities producers, australia, south africa, brazil. tom: i have to get in our chart here, the dollar weakness, the
dollar bear market. kiss againstous the moving average. do you see i switched to a stronger dollar, or do you still maintain that weaker dollar? >> we think the dollar will edge higher in the short term. it is done with its decline over the course this year, so stabilization and a bounce with the trading range, but we are still bearish long-term, eventually 125 against the euro. the dollar will come back, and that is usually good for emerging markets. francine: he will be joining tom and david on surveillance radio. some live pictures out of .russels this wraps up a week where we from thehuge criticism
president of the commission jean-claude juncker saying it was unsatisfactory come the u.k. position on paper. he thinks a deal is the best issue. it is all about a timeline. we know the commission wants them to negotiate the divorce the, the amount of money u.k. has to paid e.u.. the u.k. want to talk about future papers, so it seems like a vicious circle. for terminal users, you can look at that press conference on live . this is bloomberg. ♪
a once in a generation opportunity to rewrite the tax code. the synchronized global growth story shows further signs of momentum. china's factory sector beats expectations, and eurozone inflation accelerates. and hurricane harvey takes out 23% of u.s. refining capacity. gasoline advances for an eighth session, surging above $2 a gallon. from new york city, good morning, good morning. a warm welcome to blood vessel daybreak. i'm jonathan farrow alongside alix steele. the state of play as follows -- futures here in the united states, where are we? let's get the markets on the screen, shall we? here we go, up by a quarter of 1%, positive by six points. euro dollar very much on the back. we're down about a quarter of 1%. a reuters report out this morning with sources suggesting a growing unease with euro strength. is that some stealth verbal intervention, alix steele?