Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

We see a bit of a drop when it comes to european stock equities, down some 0. 4 . A lot of the focus is on what Central Banks will and wont do in the upcoming days. Looking at pound, because of herschel he parliament and the suspended. Rogued, 1. 63, soear yield at it is stabilizing a little bit. We will be speaking to a Morgan Stanley chief executive. That interview coming up at 7 30 p. M. London time, but first, lets get straight to new york city and the bloomberg first word news. Of the chineser communist party taking aim at comments from a peter navarro, saying they are unconstructive lies. The president ial advisor is considered a hawk. He has repeatedly accused china of seven deadly sins. The peoples daily says such comments are preposterous. Te winningster con the first of two confidence votes in the italian parliament. Withomised to work closely brussels on a 2020 budget featuring lower labor taxes and a minimum wage. Later today, his Government Faces a senate vote. Factory prices in china for the 0. 8 in august compared to a year earlier, threatening to add deflationary pressures to the global economy. China saw a runaway price gains for pork. Rosell Consumer Prices 2. 8 year on year. Hong kong leader carrie lam has rejected caused by protesters requiringegislation annual of the citys special trading status. Lam told a news briefing that such for an intervention would be extremely inappropriate foreign intervention would be extremely inappropriate. I strongly disagree with foreign interference in hong kong issues. We all have to be respectful to each other, especially on an international level. We work and its largest investor are discussing the possibility of shelving its anticipated share sale. Softbank is oppressing the company to postpone the ipo amid concerns about losses, its Business Model, and corporate governance. We worked was expecting to hold roadshows to promote the offering this week. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Rancine . Thank you so much the u. K. Prime minister, Boris Johnson, says he will continue to work for a deal with her the eu while preparing for the possibility of leaving without one. He was speaking after he suffered a sixth defeat in parliament, this time over another attempt to. Call a snap election. A bill requiring johnson to seek a brexit extension beyond october 31 in the event of no agreement became light yesterday. He promised to work for a deal with the eu. No matter how many devices this parliament invents to tie mr. Ands, i will strive, speaker, to get an agreement in the National Interest. Not delaynment will brexit any further. Francine despite protests by mps, parliament has now been suspended. For five weeks joining us is elsen, and our Senior Executive editor, David Merritt. We were looking at the pictures yesterday. Parliament suspended. What is going to happen . Are we going to see a campaigning Boris Johnson or Something Else . Parliament is out the door five hole weeks until the middle of october. The Prime Minister said last night he will continue to get a deal try to get a deal. They are targeting the European Council meeting, the 17th and 18th of october. Thats the moment when johnson says the europeans will fold and offer me a deal. Resignations saying there is no plan to get a deal. Andink of light yesterday this question about what might happen to the irish backstop. Idea being that maybe you expand that. That was the original idea of the backstop, that Northern Ireland gets carved off the rest of the u. K. On johnson no longer depends the majority because he does not have a majority. Perhaps that is one possibility that he can pursue back to that original idea, bring that back. How is he going to get a deal e that the parliament through parliament . Francine is he ready to break the law and go through with no deal . This is an extraordinary question that the Prime Minister is contemplating. His ministers suggested he might be prepared to break the law. He has said he will not do what parliament has told him to do. He could resign, of course. There are other suggestions he might write one letter and send another one saying, i do not really mean it, and they the french will veto the whole thing. We really dont know. There is a lot of rhetoric coming out from both sides. We have had such a momentous week. Anything can happen. Tom what does it mean francine what does it mean for the economy . What is it mean for the pound . Yesterday does it mean for the pound . Saying, ime start by am stunned that the Credit Rating agencies have done nothing, really to my knowledge. I cannot think of any other country going into such a complete meltdown of governance and a weak economy and there is nothing. The gilt market has not moved. I would have thought they should have issued a move even more. The economy is francine is that because they are confused . I mean, about what shape this thing will take . Erik i think thats right. There is so much going on in the world and it has not been particularly easy for hedge funds and other fast money to of one trumpess tweets, when Boris Johnson when trump tweets, when Boris Johnson says something. It is one of the few European Countries with a current account deficit. You still need money coming. In this scenario, there is a possibility [indiscernible] francine lets listen to some other things we heard yesterday ,n parliament with john bercow the speaker of the house. It is one of the longest for decades and it represents not just in the minds of many colleagues, but huge numbers of people outside, an active executive fiat. Fiat, andexecutive therefore, i quite understand, and i already said the queen and their commission is doing their duty and i will play my part. I dotely understand not require advice on order from you. You are a master of disorder, man. I completely understand why very large numbers of members are much more comfortable staying where they are. Francine all right, that was speaker of the house condemning prorogation. When you look, david, at the possibility of an election, will it happen before december . The situation seems untenable at the moment. Seems unlikely we will get it in november or december. Winter elections normally happen in the spring or summer so october is completely out of the question because there is no time, even after parliament gets back, to get it done before october 31. Mr. Johnson is not going to be able to get anything out all through. The definition of a government is that, is able to pass a budget . Thats not going to happen. Sometime in this autumn going into winter that bo is going to come vote is going to come. Francine only a fiveweek prorogation. I think i said five years. [laughter] what will move sterling . Any news on the deal. I think people cannot quite put their head around a no deal brexit. By the same token, there is also a possibility he goes to brussels and gets a deal, which i can only think about a deal like [indiscernible] here will be a couple of, commas, but nothing substantial. Francine we will have plenty more on brexit throughout the day and week. Our Senior Executive editor, David Merritt. Erik nielsen stays with us. Investor,largest softbank, is said to postpone pushing the company to postpone the public offering. This is bloomberg. Olaf scholz speaking. This is one thing investors and the markets want to know about, is about fiscal stimulus. Saying he is presenting a solid budget. Germany also has a strict rules on what he can or cant do. We will have to keep an eye on this. As we listen to him, the main takeaway is, are we going to have to have a recession of 5 in germany for them to start spending . Erik i dont think so, but your point is well taken. The german budget is actually expansionary already, one of the few ones in europe. They have the rules of the balanced budget and there is a huge commitment, as you heard him say now, to it. Germany is almost technically certainly in a technical recession right now. Certainly, a lot of germans understand that the need they need to invest more and do more at this stage. Certainlyably and not enough of what i would like to see. Francine that is probably one of the big challenges for Christine Lagarde. The largest and investor in we work is pushing the company to put off its ipo. Softbank is reacting to concerns about we works drop in valuation. Earlier this year, Goldman Sachs pitched we work as a 65 million our business. Company talk that the 65 billion business. There stopped at the company could be worth much less. People have been struggling. They dont understand how this business could even be pitched at 65 million. And has lost 3 billion over three years. No one really quite understands their Business Model. Drop] it all seems a bit puzzling. Now when they finally go to meet investors and try to give them something about the real valuation of this business, it is far from what they promised. Francine weve heard this before with other companies that ipoed. We had concerns with uber. The Business Model can be replicated even easier than the car company. Erik thats a great point. With uber, theres a very good argument that it was really disrupting the business. Realwe work, theres no argument about this changing the real estate business. We highlighted the fact that softbank, the main people in charge of softbank, pitched a very similar business to we work with a far lower evaluation valuation. They ignored it because they really bought into this i did that we are the disruptors. Francine when do we find out if they ipo or shelve it . Erik sometime in the next few weeks. Things to be seem to be happening very quickly. Now worth less than 20 billion and softbank is thinking suddenly now worth less than 20 billion and softbank is thinking about point out. Francine alibaba faces the end of an era today as the cofounder steps down as executive chairman and hands over the reins to the chief executive. Chinas biggest ecommerce made ma chinas wealthiest men. Here is man. Jack ma started out teaching english more than 20 years ago for just 15 per month. In 1999, he jumped on the internet train, setting up a platform for businesstobusiness selling, alibaba. After, he took aim at ebay. Alibaba a milestone, as listed its division in hong kong only to do list five years later delist five years later. The company made a big comeback in 2014, raising 25 billion in new york with the worlds biggest ever ipo. Everybody should have a drink. What if that dream dream. What if that dream comes true . He has left an empire that has extended aggressively. The challenge ahead in the face of growing competition and a slowing chinese economy may be sustaining that growth. He has warned about the u. S. China trade war, saying the impact could last decades into the future. Hes also urged chinese businesses to find opportunities from it. Jack ma has not forgotten his roots. September 10 is teachers day in china. Ma. Cine that was jack coming up, we speak to james gorman, the Morgan Stanley chief executive. That interview coming up 7 30 p. M. London time. It is an interview you dont want to mess. This is bloomberg. Miss. This is bloomberg. China is basically a healthy market, because but because of the trade war, the car market is basically in a recession. Thats scary for us. Bmw group is probably the manufacturer best prepared to. Volatile markets. Why . ,ecause flexibility is one area particularly in production, we most focus on. Its something we have to deal with. Nobody knows whats coming next but we are prepared for that. We have to do a lot of other things. Francine those were some of the top Auto Executives at the frankfurt auto show commenting on what an as clayton trade war on mean for the industry what a trade war may mean for the industry. Still with us is erik nielsen. Erik there is a big risk, right . I think the key issue for Central Banks, not only for the ecb, is how to assess the risk that seems toar be out there, but still is mostly between america and china, and how that impacts overall. Global trade. In the Second Quarter of this year, we had negative growth yeartoyear in global trade. Only the third time in 25 years and the two previous ones were after lehman and after the 2000 bubble. This does not look good. How do Central Banks react to it . Thats not so clear . If you get a trade war and lower global potential gdp, there is nothing a central bank can do about it. You can maybe cushion it a little bit if you have firepower. Francine do they have firepower or are they running out . Erik yes, they have, but not within that toolbox that is politically acceptable. Francine meaning what . To do firepower, they should do helicopter money or hand out cash . Erik of course. They go direct or helicopter money versions, by equities, bank bonds. You can do a number of things that as far as i can judge are not politically acceptable in this time. Box that seems to be acceptable, i think they are out of firepower and potentially negative. Francine do the politicians realize . Because if they realize, then maybe there will be an agreement between the u. S. And china and maybe we will get fiscal spending in europe. Erik hallelujah. Get both. I am back. On equities again, then the i will look much better am back on equities again, then the world will look much better. ,hen you hear the noise around i think there is definitely im sure there is a greater appreciation when it comes appreciation. When it comes, it usually comes later, but there is movement. Francine and that will be spearheaded by Christine Lagarde . Is that her only job . Although its not her job at all. Erik i think she can help, she can help. To hope a new Central Bank Governor can trigger fiscal spending i think is too much to hope for. Lean her voice into this and that will definitely help. In berlin, my assessment is that below the finance minister there is a lot of appreciation for some need for rethink. It goes slowly. Francine thank you so much. Erik nielsen from unicredit. We will come back and talk about the ecb and mario draghi. This is bloomberg. Francine losing streak. Parliament hands Prime Minister Boris Johnson two more defeats. With the chamber suspended for five weeks, brexit comes under threat again. Stuck in neutral. We are live at the frankfurt auto show talking to the worlds biggest automakers about the trade war, Global Growth, and brexit. Ipo on ice. Softbank is pushing we works to postpone its offering over concerns about a drop in valuation. We are getting a little bit of data out of the u. K. Yesterday, we had better than expected gdp figures for july. Today, it is basic wage growth slowing down to 3. 8 . We were expecting a 3. 7 handle. Unemployment rate fell into 3. 8 . Lets get back to Matthias Zentgraf from unicredit lets get back to erik nielsen from unicredit. How do you describe the current economic environment in the u. K. . It is actually maybe not as bad as expected, but maybe not as good as it could have been. Erik thats right. I think there is a it is clear that it has gone less bad than we and many other people thought it would. They have done some very Good Research now on developments in gdp in the u. K. Compared to the doppelganger. In the metrics, you develop an artificial twin brother to the economy, see how it would have done. Now lower in gdp levels then if they had continued along what the parallel economy would have done. This is all since the referendum. In my opinion, there is no doubt tot you lost out compared where you could have been because of the uncertainty. It has not been quite as bad. Markets have held up better than i thought they would. It is one of these peculiar things. The rating reason is agencies dont seem to be worried. Francine we will see what the rating agencies do. Erik nielsen from unicredit stays with us. Lets get straight to the bloomberg first word news. He will continue to work for a deal with the eu while preparing for the possibility of leaving without one. This coming from Boris Johnson. He was speaking after he suffered a sixth defeat in parliament. A bill requiring johnson to seek a brexit extension beyond october 31 in the event of no agreement became law yesterday. Parliament has been suspended for a. For a time of five weeks. No matter how many devices this parliament invents to tie my hands, i will strive, mr. Speaker, to get an agreement in the National Interest. [uproar] government will not delay brexit any further. The flagship newspaper of the Chinese Communist party taking aim at comments from peter navarro, saying they are unconstructive lies. The president ial advisor is considered a hawk and has repeatedly accused china of seven deadly sins, and cling cyberattacks, forced tech transfer, and yuan manipulation. Prime minister Giuseppe Conte winning the first of two confidence vote in the italian parliament. He pledged to draw a line under italys past clashes with the European Union and vowed to work closely with brussels on a 2020 budget featuring lower labor taxes and a minimum wage. Later today, as Government Faces a senate vote his Government Faces a senate vote. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thank you so much. Oil extending gains this morning from its highest level in six weeks. That follows a commitment from saudi arabias new oil minister to output cuts from the kingdom. Lets get straight over to manus cranny at the World Energy Conference in abu dhabi. Manus . Thank you very much. I am joined by the vice chair of ihs market. Always great to get your insight on the market. What do you think his game theory is going to be for this new saudi playbook in oil . I think there are two things that are moving ahead on the ipo, thats very clear. He also made it clear that the minister is different from his business past. That hes a regulator of the oil industry, not the person chiefly in charge. Thats a strong message to the financial community. In terms of personality, he has been in the ministry for 30 years, the deputy minister. I have known him, seen him in all sorts of international settings. When saudi arabia was joining the wto, he was the man in washington to negotiate it. Hes very familiar on the international scene. Him as a fashion regulator rather than an arbitrator . Does he have less power than . Sure, its a very different job. The previous minister was the chair of saudi aramco and that was a central job. That job of being chairman has been moved to the head of the Public Investment fund. Manus do you think we will see more of whatever takes rhetoric . , he wouldand then say, i will do whatever it takes to balance the market. Saudisly, crowley want a stable oil price. The demand is weak. Our numbers for demanded this year are under one Million Barrels per day. Demand this year are under one Million Barrels per day. Tension,een a lot of the weakness in the global economy. The impact of the trade war on psychology of business. Manus 950,000. At what level does your demand go into recession . If it was a recession, it would certainly be lower than that. We dont have a specific number. We are not talking about a recession. We are talking about a lot slower growth. Will he look at our numbers, economics when we look at our onics people around the economics people around the world manus of course thats affecting the oil price. Deputy Energy Secretary for the u. S. Side we are targeting 30 Million Barrels per day by the end of this year. Me, is that the biggest headwind in the oil market, the oil price . I would have said shale was but weakness of demand, which is a different story. By the end of this year, as you just said, we will be at 13 Million Barrels per day or over. We will continue to grow. We see growth slowing down. We will not have these amazing 1. 5, 2 Million Barrels per day of growth. There is a new relationship between investors in the shale industry, which has put the focus on capital discipline. That means not growth at any cost, but rather growth at what cost . Manus exactly. Somebody over at Energy Aspects suggest that there is a 15 upside in oil if there is a substantial trade deal. Would you agree with her . What is the upside on a good a trade deal . I dont know what a good trade deal is. It will be defined by the victors who declare a victory in the traded deal. , allow that the market markets respond positively when it looks like everybody is going to get together and get something done. Manysus whats that worth . 10 . I will not put a price on it. The 70th anniversary of the Chinese Revolution is coming up. For them, the century of humiliation is over. Nus thank you so much, the chair of ihs market. Francine thank you so much, manus cranny in abu dhabi with ihs market. We will have plenty more on these markets. We are also keeping a nine on what olaf sye on cholz is saying at bundestag. Is what we look at every day and they are continuing their rise today off of record lows. This the very latest from germany. We will keep a night on whether there is any keep an eye on whether there is any hint of that. Lets get back to erik nielsen from unicredit. We were talking about germany before and the fact that you think there could be a little bit of movement on it. The concern, which you are explain to us, is that they have this coalition and its unclear who will vote for extra spending because of the laws they have. What happens to germany if we see tariffs coming from the u. S. . Erik a big problem. Tariffs thetariffs would almost the tariffs would almost certainly be on the Auto Industry. Certainlyready almost in a technical recession in germany. There is only so much you can do. They will probably do some emergency spending if you really get into a tariffs kind of war with trump. My concern in germany is more that the Public Sector Capital Stock, so the investment, the cumulative investment of the Public Sector has been declining a longtime. Y other is the onl major oecd country where in capital terms, the has declined in recent years as Public Investment is solo. This is a country that can borrow in a negative rates. Politicians love to say the government is like a householder or a little business and you have to be prudent and other stuff. As an economist, you dont really like to hear this. If you think about it in these terms, what type of business or household would not borrow when you can borrow 10 or 20 year money at negative rates and the Capital Stock of what you have is declining . It is beyond my comprehension to why the politics of this in germany has gotten so extreme . Francine that is the memory all right . Its what happened last time, they worry about what just happened last time basically. Erik yeah. When was last time . Germany has not had a serious problem in over a generation. The reunification of course had a big impact on the country. They became the sick man of europe. God, completely troublesome is germany other time. At the time. Within the auto sector, and its with the auto sector, and its not just tariffs, there is the whole technology change, whether its hybrids or you name it, whatever. There are huge challenges ahead for the german Auto Industry and everything that hangs together with it. I would hope for a little bit more visionary views to be honest out of berlin. Francine thank you so much. Erik nielsen there from unicredit with a very clear message. Coming, brexit, trade war, and for one company, a downgraded to to job. Downgrade these are the problems junk. These are the problems confronting automakers in frankfurt. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua here in london. Thatief executive warning any recession caused by the trade war would be selfmade and unnecessary. The worlds biggest carmaker says the escalation between washington and beijing is negatively affecting customer habits, especially in china. Herbertler kind up with diess at the frankfurt auto show. It has always been a Global Business with a different markets and trade barriers. We can really now enter a situation where this trade war is really influencing the mood of customers and has a chance to really disrupt the World Economy. We feel like in china for instance, china is basically a healthy market, but because of the trade war, the car market is in a recession. Thats a new situation that is scary for us. So far, we defend ourselves. We can gain market share, but our volumes remain at acceptable levels. We hope that there will not be any recession on the midterm or longterm because it would be a selfmade recession basically of the different players. Matt do you plan to invest more in china to have more local production there . We are heavily invested in china. 90 of the product we sell in china is locally produced. We have a about close to 19 market share, though we are very much industrialized in china. We are increasing our footprint in the United States. For instance, we are increasing our footprint in latin america. We are investing in all major regions. Matt you have a huge footprint obviously here at home. Are you thinking about reducing that to some extent as the German Economy slows . I think we are quite nicely set up. We have flexible plans. So far, we have a full occupation levels. We have the possibility to scale our production quite nicely. We agreed that with the electric cars being introduced over 510 years, we will reduce our headcount in germany mostly. Ostly in threecar electric cars require less labor. We can manage this transition together. Matt would you like to see a spending package out of berlin . Do you think german infrastructure needs to be improved . What i really want for berlin is that we commit to the electric car, we Work Together on this transition, that we make sure the electric car is not a , but it is a with the right infrastructure. That is where i would ask for some understanding. Francine matt miller speaking to the vw chief executive. Lets go straight back to matt miller standing by at the frankfurt auto show. Hi. Matt i am here with someone from i am here with Matthias Zentgraf from catl. They make batteries in china and germany. You plan to invest up to 1. 8 billion euros in a factory here. What has brought you to germany . Matthias customer requests, the rollout of electric mobility. We are producing locally. We made a valuation of different potential locations and came to the conclusion that the best ation is matt i know that bmw wants to purchase up to 4 billion euros worth of batteries from you over the next four years. Daimler is also a shareholder in catl. You are a major player here. What is it like in this industry . How competitive is it . You make a different type of Cell Technology than byd or lg chem. Matthias we are pretty dedicated to lithiumion batteries. Meanwhile, two years in a row we are the Market Leader in lithiumion batteries. First sure, we are ready to do everything to further strengthen that. Matt what does the supplysider look like . I know that for a long time there were talks about cobalt prices rising and may be bottlenecks in terms of delivery. Can you guarantee that you can get enough of that for all of your customers needs . Give an offer to a customer, we will be able to provide and get the necessary materials to develop this. Matt what kind of growth do you expect, though . Everybody at this auto show has an electric car they are showcasing or a plugin hybrid. Its all about Battery Power here. What kind of growth do expect in terms of cars on the road . Matthias we are expecting a lot of growth. That is why i am sweating in the. [laughter] the whole industry is talking about the change from gas engines to electric. This is a trend in the motor show this year. We are evaluating plans now. Matt what does the European Market look like for catl, a Chinese Company . Matthias we did a lot of acquisitions and convincing. We are in direct communication with in europe. We are talking. Matt thank you so much for your time. Ntgraf here. So money orders that he is sweating a little bit here. Francine matt miller there. Always fun interviews with matt miller. The fed rate debate. We will discuss why Deutsche Bank has increased to their expectations for u. S. Rate cuts. This is bloomberg. Francine this is bloomberg surveillance. Economics, finance, and politics. Im Francine Lacqua here in london. Deutsche Bank Economists say the fed will cut Interest Rates by a full percentage point between now and january. That would be a cut at each of the next meetings4. Still with us is erik nielsen from unicredit. I have a million questions. First of all, when you look at dollar strength, does it continue, and how much pressure does that put on the fed . Erik yes. Theink you could still see dollar strong for a while. ,ll of the industries you have uncertainty and risk are off. Typically, you flee to safe havens. Thats where people go. I think thats the problem that donald trump is going to face, that the dollar will continue to strengthen. The fed cannot do much about. Francine will these quite easessively will they quite aggressively . One percentage point. Thats more than we have but i dont think its a crazy forecast for the reason that sometime next year, probably in the second half, i think there is a high probability of a recession in the u. S. As the volkswagen ceo said, its mandate. Its so sad to see. That couldmandate come faster, and therefore, i think there is a very high probability that the fed would have to go much more thisssively, and that thing is actually slowing down quite a bit. Francine is that because of the u. S. Or because of everything going on around the u. S. . Erik its a bit of both. Its the longest expansion in history. It will come to an end sometime in america. Number two, china is slowing for democratic and many other reasons. The trade path of the world is slowing significantly because of what the u. S. Is doing. You have a lot of factors come together now. Is difficult to ask you argue that the u. S. Economy can keep cruising along, also as the fiscal stimulus is coming out. What quarter it comes down, i dont know. We think mid next year. We certainly have several fed cuts. They will do them and how fast is anybodys guess. Francine thank you so much. Erik nielsen, chief economist at unicredit. Bloomberg surveillance continues in the next hour. Tom keene joins me at a new york. We will be back at the frankfurt motor show. We will talk trade. This bloomer. This is bloomberg. Francine Boris Johnson parliament and Boris Johnson two more defeats. Stuck in neutral, we are live at the frankfurt auto show. Concern about the trade war, Global Growth, and brexit. Offering with concerns about a drop in valuation. Good morning. Good afternoon if you are watching from asia. Bloomberg surveillance. Francine lacqua in london. Tom keene in new york. Trying to figure out what the fed does and what the ecb does. That is on thursday. Looking at geopolitics and trying to find out the trade concerns for your portfolio and also car companies. Tom i thought the ford motor announcement was a shock. They changed tone at the auto show. A lot of corporate news. Im glad you put we work into the open in london. We company is the talk of new york this september. Francine it is the talk of london. We will get plenty more on we work. London, borisp in johnson promising to work for a deal with the European Union after he could not get parliament to back his Brexit Strategy. Last night, lawmakers handed him his sixth straight defeat. They have refused to allow him to call a snap general election. A new law would ban him from pursuing no deal brexit. North korea testfired two short missiles hours after it said it was willing to resume nuclear talks. Officials have expressed desire for negotiation. No mention ofking new concessions. Said the u. S. Must be careful about accepting people from the bahamas who have lost their homes. He said some very that people try to enter the u. S. Among them, the president said gang members and drug dealers. Company tohing the put off its ipo. Earlier this year, Goldman Sachs pitched we work as a 65 billion business. Now there is talk the company could be valued at less than a third of that. Day news,. 4 hours a 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom thank you so much. Risk on field. Finally a positive. A pause. Negative ten. Bond reaches0 year out from 207 2209. Yen weakness. Below 1500 after that 1540 we saw a week ago. Francine european stocks are falling. They are down 0. 4 . The pound gave up some of its games from yesterday as Boris Johnson promised to work for a deal with the European Union. The European Central bank is apparent to me. You can see what is happening to eurodollar. Electrolux, we spoke to their executives last week. Electrolux now out with a restructuring. Lets get to a company that has been in a 30 year restructuring in celebration of Bloomberg Technology and their coverage of apple today. From . 40 a share to two dollars a share. The miracle from 2003, three dollars a share to 200. Us is logarithmic. This is two dollars a share. 200 a share tenfold. I didnt like the super bowl. You wonder where they will be out at iphone xxiv. That,ne i want to have tom, sooner than anyone else. This is an excuse to look at what is happening with u. K. Politics. Boris johnson working now, he says, for a brexit deal after y votes. Ix ke sterling dollar crossing above the 50 Day Moving Average. The Prime Minister says he will continue to work for a deal with the eu while preparing for the possibility of leaving without one. This comes after he suffered a sixth defeat in parliament over an attempt to call a snap election. Promised to work for a deal with the eu. Devicestter how many this parliament in vence invents to tie my hands, i will get an agreement in the National Interest rate this government interest. This government will not delay brexit any further. Francine despite protests, parliament has been suspended for five weeks. Is our bloomberg Senior Executive editor david. Make us wiser on what happens next. Are we looking at an election . We are certainly looking at an election. The Prime Minister has a lack of a majority more than 40. It is not going to happen before this brexit deadline. There is no time for that. Were looking at november or december. The opposition have already said no twice. That is because they want to guarantee that this extension happens. Really they want to see when they can win an election because they are still behind the conservatives. Johnsone 31st if mr. Takes an extension, the polls show that there will be such voters, theelieve polls show they will move to nigel farage is leave already. There could be a collision that could beat him. It will be we dont know, but before the end of year. Francine what does this mean for the pound . Yesterday it was up a touch. I was confused why it was doing that. Everything is not in the open. You have the Prime Minister that can ignore the law and go for no deal. Mentioned, all outcomes are open. We think we are polarizing between either hard brexit were no brexit or no brexit. It will all depend on the outcome of that election. Turn neutralto because we think this election is going to come up, and it will all depend on that election outcome. Tom what happens as we stagger to october 14 . There is a conservative party meeting. What happens over the next 30 days . It is easy to forget the reasons for this long suspension of parliament is we have a threeweek Party Conference season. We have the liberal democrats, labor, and the tories. Rallyare election style conferences. Each of the parties will be laying out their vision for the future of the country. Also what their solution is to the big brexit problem, getting us over that hurdle. That election campaign, although we dont know when the date is, it is already up and running. We can expect more of that in the coming weeks. Tom what is Prime Minister johnson actually do . Notas 21 ministers who will speak to him. What is the Prime Ministers to do list . The big deadline for him is the European Council meeting just after parliament gets back. What he said in his press conference in ireland yesterday and last night is that he will be working to get a deal. A lot of people dont believe them. They think there is no other tweaking of the deal to be done. We have been through this argument for the past three years, and there is no chance of the deal on the table being offered. The parliament has tied his hands with no deal. Is he going to resign . He is pointing hope that someone is going to blink. Tom in the early morning, this is the ceremony of the house of commons walking over to the lords. The times of london said trooping over to lords. They did not fill up the seats in lords. Many people chose not to go. Francine that was powerful messaging. If you look at the fact that Boris Johnson could break the law, what are the actual chances . It is fairly extraordinary, this concept that the Prime Minister could be on the wrong side of the law. They have been rolling back on that comment saying he is going to look for loopholes. The government keeps saying they will not extend brexit, but the law says they will have to. Someone is going to have to give in the next five weeks. A chief economist was saying he was surprised at the rating agencies not looking at the u. K. Yet. Will that change a lot for investors where sterling goes . If you get some brexit outcome, all of these ratings will be updated. One reason they are slowmoving is the economy is holding up reasonably well. Even the bank of england upgraded its outlook. Happens, wecome expect a change in fiscal policy. I think all of those assessments would be updated quickly. Francine thank you very much. Next, live from the frankfurt ralph feds. Dr. This is bloomberg. F this is francine this is bloomberg surveillance. Several land rovers new defender. Hoping the new model will see a revival of its fortunes. Once a jewel of the car industry, it has been hit by slumping diesel sales in its home market. Lets head over to frankfurt, where matt miller is talking to a chief executive. Ralf im standing with dr. Spetz. We have been waiting for years to see this new Land Rover Defender. It is easily the most anticipated product of the entire show. Of me ask you what kind order book you are a have. I heard you sold your first one online. Absolutely, there is a huge order book already. A sensational vehicle. Strongunbelievably offroad. It creates even more capability with on road capability. It is environmentally friendly. It has electrified engine. It has a powerful sixcylinder engine. Upgraded recycled materials. It is a very good choice with a lot of substance. Honest, no gimmicks. Matt you have an entire range of engines. Previously you only had the one Diesel Engine in the old defender. Now you have anything from four cylinders to six cylinders, hybrid engine. You have a ton of accessories. What share of revenue you think land rover is going to make the new defender . I dont think about it at the moment. I think the team has done something special. For years, we had to make the production. Today, we give the defender back. Team has done a special job to deliver a variety of products. The defender is not just one car, it is a family. But itcommercial option, also has 90 and 110. It is a broad family for everybody. Is no secret that land rover has had financial and production difficulties. Will the defender be the savior for your company . Productve a very good portfolio. We are launching the new range rover and the new discoveries four. There is power and momentum. Coppers our cars, we have a new variety of product. The Automotive Industry is in a tough climate, but we have focused on products. Matt you are not british yourself, but Jaguar Land Rover is the most british carmaker in the industry. How important is it for you to avoid hard brexit . I dont want to talk about brexit because you have to be more or less informed every minute. Hard brexit without a deal will be difficult for the export industry, not just only for jaguar and land rover. Especially difficult and talk ough for theler t smaller companies. Matt on thursday, mario draghi is expected to lower rates deeper into negative territory. For someone who does real business on the ground, what difference would it make for rates to go lower from the ecb . Ecb has to face unprecedented issues at the fromt, geopolitical ones china to brexit. We are trying to introduce the latest technology in the car sector so we can step from the internal Combustion Engine to the connected Mobility Solutions , electrified. These kinds of challenges are quite difficult for everybody, but we are small, agile, and we can weather the storm. Matt certainly going to get bigger with this product. It is widely anticipated. Where do you see the most growth for the defender . Previously it was difficult to get one in the u. S. The chinese will want to get their hands on it. The old defender was very limited. The new defender will be a global offer. Matt thank you so much for your time. The ceo of Jaguar Land Rover. Tom, back to you. Tom dont hand it back to me. That is the most car lust i have had since time began. In 1997 whenay land rover said we are not putting an airbag in the defender, and years of my life was ruined. This for me is the greatest car lust since time began. When are you going to pick one up, six weeks or eight weeks . Matt they have just started taking orders officially in this last hour. I am guessing the weight time is going to close in on a full year. I am going to put my deposit down as soon as possible. They built 170 accessories for this that are all available online. Tom matt miller, thank you so much for breaking my heart. I know where the next 30,000 is going to go. In my dreams. It is not defender, lamborghini at the frank for auto show. Frankfurt auto show. Defender, silver, roof rack, airbag, yes. Francine this is bloomberg surveillance. Tom and francine from london and new york. We want to focus a lot on dollar strength. Full into that what we heard last friday from pboc cutting its reserve ratio. A lot has been talked about room nimbyhe breaching 7 or reaching seven. A lot happened to it if the trade war escalates. I think the most underestimated point over the summer is how successful the chinese have been in managing the currency. I spent a lot of time in asia before the break of seven, and there was a lot of worry about this impact. It was remarkably ordinary. Seen a big pickup in reserve outflows. This reserve basis between onshore and offshore is wellcontrolled. They are in absolute control of the currency, and they dont want to provoke sharp depreciation. Francine they are in control of the currency and the economy . The economy on some encz is not doing as bad as feared. Metrics is not doing as bad as feared. Especially this post christmas tariff on u. S. Consumer goods, given they are able to control it so well, if you get additional escalation, it will go higher. If donald trump decides to deescalate ahead of the election, then they will hold stable. Francine thank you. Coming up next, well talk a lot more about banks. We will be speaking to the Morgan Stanley chief executive. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Bloomberg surveillance. If you are just waking up, history and the house of commons. Thank you to David Merritt for joining us for an explainer on the suspension. We are lining up now, alex webb in london as well. Right now on the house of commons with our first word news. Viviana british Prime Minister Boris Johnson is pledging to work for an exit deal with the European Union. Parliament did not give him much choice, locking his Brexit Strategy. He tried to get members of his party to back his strategy guaranteeing leaving on the e. U. Without a deal. They refused and he lost a key vote. The u. S. Top trade official the chineseorning leader is a tough adversary in negotiations. He defended the trade war. China and the u. S. Have risen agreed to resume talks. Kong, authorities are protesters who have no clear leader. Protesters organize and Online Platforms that are difficult to gainsoil extending its from its highest level in almost six weeks. The new saudi Energy Manager has committed to cuts and says there will no be not be radical change in policy. Opec will meet to discuss their production agreement. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado. Ana this is bloomberg. Tom this is the global wall street chart for september. It came up twice yesterday, George Saravelos outside of everyone else nails it. It is real tradeweighted dollar, the plaza accord on the left, the rubin dollar in the go one and up we tondard deviation out, up 7 two standard deviations on the long trend. Everyone is looking for a point where President Trump will currency ersal when what the president act . George that is a great chart recently. When you exceed 20 valuation in the dollar, you tend to get intervention. What is interesting this time is because no one wants to accept the strong currency, it is unlikely you get coordinated intervention. The problem with onesided intervention is it rarely works. Are that the risk is not around intervention but if you shift to what we have done ys where the u. S. Is no longer focusing on trade. A bill has been submitted in the senate which tries to do that. Tom are we naive about the taket of money it would to intervene . Thatwould be the weight the United States would have to apply in the Global Market to weaken the dollar . George there is huge constraints around intervention. The fx is the most liquid, 5 million turnover aday. The fed would have to agree to make it more effective. That is precisely the reason the risks are we do not have the typical intervention but an environment where perhaps there is a new discussion in the u. S. Perhaps around raising withholding tax on coupons and treasuries. If you are an american, you get tax but if you are a foreigner, the tax is zero. Why not tax foreigners . Francine it would be pretty punchy. George if President Trump wants lower Interest Rates, all he has to do is raise the withholding tax on Interest Income to foreigners. Francine that is a tax on china. George exactly. Francine isnt that like taking a bazooka . George the point is if you look at the moment, the impact of the trade war, it is not working. It is leading to a stronger dollar and hurting the manufacturing sector. Weakening ofg a the creation of manufacturing jobs. If you ship to a capital wall where you are taxing foreigners and have a weaker dollar,. Olitically it is not as bad francine how will the Administration Deal with a higher dollar . We have been hearing they could intervene out right. If the u. S. Starts intervening in the dollar, what kind of world are we looking at . George verbal intervention is happening. If they start intervening in the market, it is not that unusual in that the u. S. Used to be very activist in the 1990s and 1980s. The Clinton Administration and others were active in the fx market. If they Start Talking about capital inflows, discouraging capital inflows, that may be more effective. Francine if the u. S. China trade spat fines some kind of agreement finds some kind of agreement, does the World Economy get back on its feet, or is their legacy . George it is unlikely, because you would need a full resolution with clarity. We have viewed this trade war as only part of what is going on in the global economy, and uncertainty shock across many fronts. Itselfis a trade shock but the key will be the u. S. President ial election. If you look at the policy platforms of other candidates, they are going to be the source of huge uncertainty as far as which is on a. S. , downward path. I dont see a huge exit from this uncertainty. Tom what is your conviction trade right now . , try tol can you apply make something in Foreign Exchange . George we think q4 will be a tactical market, so some of the big trades we have had we have been arguing for a weaker some oft the yen these trends will take a pause. Structurally, our view is the surplus currencies that have some of these trends will take areachede yen, swiss franc, and eventually the euro, will continually appreciate against asia. In q4, it will be tactical. Tom lets go to the ecb. What do we expect out of this meeting and how do you play it on euro . George unfortunately the ecb is losing relevance. What would be the impact of lower ecb rates and the impact the answer is, not that much. This meeting will be remembered for marking the ecbs ability to influence the economy. Less is more, so if they tried to do more and overdeliver, you will see bank stocks move lower and financial conditions tightening. That is a signal you have reached the reversal rate and then you have two options, go down the route of fiscal policy like helicopter money or buying or you based assets, have to tell governments that now is the time for more spending in germany. Important, arest we just getting used to lower terminal Economic Growth . Or we all rationalizing getting used to to percent growth in the u. S. . Growth in the u. S. . George the environment is different, low terminal growth and weak inflation. Central banks have run out of the ability to do something. The big driver behind higher rates only can be fiscal policy and the political outcomes around that, so whether it is the brexit outcome, a potential german election. It will really be the politics rather than Central Banks that drive currencies, and that is one reason why i cannot get pessimistic on the euro. I dont think the ecb will be able to push it much lower and we see how sensitive it is to any headline around fiscal stimulus from germany. Francine well madame lagarde be able to tell European Countries , directed spend more at germany . Aorge she gave a very long q and parliament and she cap pension think cost benefit kept mentioning cost benefit analysis. It is a very different narrative from draghi who insists the central bank can do more. I think lagarde will mark a shift in how the ecb communicates, more pressure on governments, and to answer your singlethe singular most important factor in germany is the unemployment rate. If the unemployment rates go up, pressure will build. Francine given it is a huge exporting economy, you are looking at the trade war and chief executives not spending. George the German Economy has been especially weak, but the labor market has held up quite well so if you are a german voter you are not seeing the impact of the weaker pmi. The labor market is starting to weaken so more weakness as a point of pressure. We have to see what happens with the internal review of the coalition which is due by december. If there is an early election, that would raise the odds of large a fiscal stimulus. Francine George Saravelos, thank you so much. On Bloomberg Radio lady later, our new u. K. Politics show. This is bloomberg. Good morning, everyone, bloomberg surveillance. They had a late night in the house of commons. More coverage on the history being made. Equities, bonds, currencies, commodities, risk on three or four days in arroyo. In a. Georgel of allahs cell about vix 15. 91. Yen with a multiday pullback gold with a 1400 handle earlier. Joining us with an update on the fact that i and you and everyone else has missed this equity market, leslie marks. How many people have missed this rally . If you look at the move off of december and the gloom of mostber, is most has not everybody participated in this 2019 bull market . Leslie we came out of 20 with negative sentiment so there is a sense a lot of people missed this rally because they became conservatively positioned in a risk off trade. We were overweight in equities. Inrode through the downturn 2018, so our clients were able to participate. It has also been a strong market for fixed income investors. It is the bigger surprise that we have seen yields do what they have done and bonds have been so strong. Tom particularly with price up and yield longer, what do you do . Move from bonds to equities . 2019, for us going into it was an easy decision to go overweight equities, but right now the conviction in that trade has waned from my perspective and looking at the fundamentals. Right now is a difficult time to have a High Conviction view on a tactical perspective. Francine what has changed . The u. S. China trade war, the fact that we have not found a solution and that has at an impact on gdp or Something Else . Lesley what has changed is the perspective around the world that even with all the mullet Monetary Policy stimulus, we are not seeing followthrough in the economy. The u. S. Has gone on to easy Monetary Policy so it will be too early to say whether we see impact, but trade has had a major impact on manufacturing and Global Growth. We are not seeing a slowdown in the u. S. , but we are seeing signs of it. Francine are we expecting too much from Monetary Policy . You feel like market disciplines give it participants give it less time than in the past . Lesley yes, around the world with 16 trillion in negative yields and not seeing strong growth, you could be right. Other regions of the world, we have not seen impact and that is where people are getting nervous , starting to talk about fiscal policy. Tom drawing on your dollar dynamics, the currency movements mean something to the earnings of multinationals. We talked to George Saravelos early. Does currency play into the earnings season . Lesley it will definitely have an impact. That is why President Trump is so focused on the chinese yuan because he knows a strong dollar will be negative for most u. S. Companies. He wants to see the dollar weaker and he is not getting that trade. Definitely a weaker dollar will be better. Canada, wefrom in have had a strong dollar because our central bank has stayed on the sidelines, and that is negative for the canadian economy. We are fortunate our dollar has only moved a couple pennies, but normally we would see a much bigger move. Tom thankfully thank you so much. , iis a timely conversation cannot say enough about the acuity of james gorman, chief executive officer of Morgan Stanley. The firm getting it right on wealth management, gorman in the 2 00 hour. But we wont allow johnson to dictate the terms francine that is Jeremy Corbyn, leader of the labour party talking about possibility of a no deal brexit, saying it is a trump deal brexit. The tories are hijacking the referendum result to help the rich, and he is speaking right now. He says u. K. Workers will pay the price of a no deal brexit. Boris johnson has been defeated six times in parliament, and the u. K. Parliament has been suspended today, for five weeks. Viviana we begin with citigroup forecasting gold made go above 2000 an ounce. Citi giving a laundry list, including the likelihood of a lowball recession and the fed reducing Interest Rates. British airways was forced to cancel almost all of its flights on the second day of its two days strike by pilots, calling on the airline to resolve the dispute. The strike is costing about 50 million a day. Another walk out is set for september 27. Havinggest investor is second thoughts about an ipo. Softbank wants the company to delay, questioning corporate governance. Now there is talk the company is worth less then one third of its previous value. Francine thank you so much. We are joined by bloombergs technology leader. Is this a warning sign for unicorns, or a specific problem to we work . Giles i think it is both. It has been the largest unicorn and if it manages to get away, perhaps the boom will continue. Goldman sachs telling the founder they can ipo for 65 billion and coming all the way past 20 billion now, that is a bad sign for a large and a corn looking to ipo in the future. Francine there is talk about improprieties. How much is the problem that you can disrupt this business very easily . What have they disrupted . Second, it is not managed to standard. Giles they say they are disruptive but others have been doing it for quite some time, not quite as flashy as we work. Friday that a Similar Company in the u. K. Has a valuation of about 3 billion and that was put forward for potential investment for softbank. The founders met with softbank. They did not see the same excitement as we work and that help the overvaluation continue. Tom i do not wanting pin you down on the specifics of the math, but i find it bank,rdinary that soft ordering on 58 or 60 that, debt, part of their balance sheet, this is the only game in town. His softbank the lender of last resort . Giles ed is more a question of who is behind soft bank . It is more of a question of who is behind softbank . Comes to making that huge investment, he is the only one to sign. Tom it sounds like it could be a series on hbo or something. Giles turner, thank you. Next hour, tony dwyer and Derek Halpenny. This is bloomberg. Tom this morning, long after midnight amid a executive fiat, the executive the house of commons walks to lords to suspend parliament. The queen speaks in 34 days. This morning marks pause, dollar finds a bid. In cupertino, tim cook will wander out, another phone and round of toys. In tokyo, we company will decide what to do next. Surveillanceerg , from new york and london. History in Parliament Last night. It is really something to see the house of commons troop over to lords, even if it is 1 30 in the morning. Francine prorogation officially today, the u. K. Parliament is suspended, and they certainly went with a little bit of noise. We look at what Boris Johnson will do next. Jeremy corbyn, the leader of the opposition just giving a speech saying no deal is a trump deal. We will say if they ask for an andciate an extension whether Boris Johnson will defy british law. By labour represented Jeremy Corbyn and mr. Macconnell , making it clear they will not be silenced. Did not attend the ceremonies in lords. With our first word news, here is viviana hurtado. Viviana Boris Johnson promising to work for an exit deal with the e. U. After he could not get parliament to back his Brexit Strategy. He was handed his sixth straight defeat. He had to give up the fight to stop opponents from passing a new law that would ban him from pursuing a no deal brexit. North korea is sending a message to the u. S. , test firing short range missiles after they said they were willing to resume nuclear talks. They cited recent comments by u. S. Officials. The country making no mention of new concessions. Donald trump is warning the u. S. Must be careful about accepting people from the bahamas who lost their homes in hurricane dorian, warning very bad people could try to enter the u. S. Putting off its ipo. Reacting to the drop in valuation. Goldman sachs pitching it as a 65 billion business and now there is talk at could be valued at less than a third of that. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom equities, bonds, currencies, commodities. In the markets, it is applause. Futures at negative it is a pause. The vix, 15. 75. The yen weakens. Announce about0 two hours an ounce about two hours ago. Francine i am looking at what investors are wearing about. We have worrying about. We have key centralbank meetings coming up, and treasuries are inching higher with the dollar. I am looking at the pound on the back of the prorogation, suspension of parliament. Tom i want to look at apple. Bloomberg technology will dive into the festivities at cupertino later on. How about the stock . Sharefrom two dollars a to 20 a share to 200 a share, doing it over the miracle from 1983 when the gradient got a little steeper. It is an extraordinary path when to imagine when we get out iphone xxiv. Francine it is difficult to extrapolate. Simple, daily moving average when it comes to cable. It just crossed the 15 Day Moving Average after parliament strategy. S brexit tom we must stop with kevin cirilli, our chief washington correspondent, and ponder on a new story. Michelle goldberg briefed us this morning in the new york times. There is a lot we dont know about the spy who came in for moscow. Corruptidents relationship with russia and too many and power have grown use to the president deploying National Security secrets in the same way he once traded tabloid gossip. He discloses american intelligence to deflect attention from unflattering stories, suck up to people he wants to impress, or simply on a whim. What we are reading about the extraction of a cia agent from the height of moscow government is extraordinary. What have you learned . Kevin President Trump is pushing back against the notion he has given up National Security information. Tom i saw a bomb thing the other day with his reflection where he xerox copied what many considered to be a classified bombing document. Kevin democrats have said they will investigate. They return from congressional recess and the house with new investigation they will continue to tread down. Yesterday, i spoke with a democratic strategist who suggested that impeachment will be discussed in the house of representatives. As the column correctly points out, there is not much of a andrtisan appetite for that there does not seem to be a significant Political Risk to President Trump. Tom with all your reporting over the years, are we keeping intelligent secrets from the commander in chief . Kevin no. I think the chain of command is in full execution. To me a little bit about Everything Else that people are discussing in washington. Are they concerned about the trade war, Foreign Policy . Kevin lawmakers returned from congressional recess yesterday with a busy to do list. Usmca is top of the republican agenda, getting it ratified over the next two months. Some folks are skeptical whether there is enough room on the calendar. Speaker pelosi would like to get to a yes, but the caucuses divided. Centrist democrats are crucial. The second is whether there will be any gun reform legislation. Last but not least, the senate has to pass a spending bill to keep the government open, and that clock runs out at the end of september. That is the congressional front. From the administration standpoint, a chinese meeting in october and the president expected to go to the u. N. Later this month. Tom a good summary, thank you so much. Right now with us, Derek Halpenny. Early one chinese are we one Chinese Press release away from pulling us back from all this good feeling . Derek i would be in the camp that it is still on fragile ground and we do not have much to go on in terms of what has been lifting sentiment. We have some indication negotiations will restart, which is better than where we were, but it is a big ask to think of what has been a key driver for deteriorating sentiment will suddenly go away. Tom are we within the equity dollaryen,oking at are we moving out of ranges . Derek if the bounce in dollaryen were to break above 108, we would have to question the trend. Over the short term, that is possible. All you need is good news in relation to chinau. S. Or something on brexit, and you could get that left. We are still firmly in the camp that sentiment is deteriorating. The Global Growth story is likely to get worse from here. The global yield environment is yen is the japanese still a favorite currency. Francine good morning from london. If we have good news from u. S. China, does it make you reprice expectations of fed rate cuts . Derek obviously, it depends about what we talk about when we say good news. We could get something that shows a deal, but the true details below it suggest this is just a temporary truce rather than a fundamental longterm deal. We are skeptical about u. S. China trade fractions will suddenly go away friction will suddenly go away. Because of qe being priced in, in europe, because of the bad situation we have been adding, yields getting, yields have been plunging. It is understandable we are getting a bounce back. Yesterday, we had a good gdp print in the u. K. And that seems to have driven yields higher across the board. Tom i am watching 30 year bond u. S. Up to 2. 11 . We will continue with Derek Halpenny. ,oming up with our question james gorman of Morgan Stanley, their chief executive officer, always acute, in the 2 00 hour. This is bloomberg. And transparency. That is the European Commission president a lacked announcing elect announcing the new commissioner. She is announcing her new cabinet. First, a Vice President of the European Commission in charge of us,n deals mr. Dombrosky e. U. Financial affairs. The new Commission President will lay out her team and we will have a lot more insight to what her main strategies are and what she wants to do. Boris johnson says he will continue to work with the e. U. While preparing for the possibility of leaving without one. To seekequiring johnson a brexit extension beyond october 31 in the event of no agreement became law yesterday. He promised to work for a deal with the e. U. And howtter how divided this parliament intends to tie my hands, i will try to get an agreement in the National Interest. Not delaynment will brexit any further. Francine despite protests by mps, parliament has been suspended for five weeks. The pageantry was quite significant yesterday. The speaker of the house, john barco, has been doing that since 2009 and will step down. Im the pageantry last night, am amazed at the idea a Prime Minister can lose six consecutive votes and still be in power. Not that we have an american equivalent to that, but it is extraordinary. This is well after midnight last night. The only one in the upper part of parliament as Francine Lacqua. This is in the depth of the morning. It is extraordinary as they go through the symbolism of suspending parliament. The leadership and mr. Johnsons team getting up late at night and walking over. Now. A rafe l joins us for us the symbolism we are seeing. Therese the prorogation of parliament is not something unusual. The prorogation of parliament for what is alleged to be the purposes of circumventing parliament is an entirely different matter. This suspension that will last for the next five weeks does suit Boris Johnson and allows him to have the bully pulpit to himself, not to me not to be submitted to scrutiny and to go out and campaign. Parliament has passed legislation compelling him to seek an extension, and he has promised not to do that. I would rather die in a ditch then seek an extension. That puts an impetus on him to get a deal and get what he really wants, a parliamentary majority in election. This can work in his favor, as much as it sounds like this has been the worst week for Boris Johnson. Francine what do we know about what he plans to do . Tot he rather resign then go brussels and seek an extension . What he rather ignore u. K. Law . Therese he wants his base to believe he will do anything rather than seek an extension. I think he will try to find some way to get a deal. There has been a lot of talk about a backstop that only applies to ireland, which is the ,. U. s original proposal tweaking the withdrawal agreement. , that wouldion idea be pretty extraordinary, but you could see how that would play out. He would resign rather than seek an extension. You would have a government seeking an extension and then a vote of noconfidence and an election. Boris johnson could go to the public and say, i did not break my word and with a parliamentary majority we will get this done. With al is to come back parliamentary majority after an election, and also to be seen to be true to his word leaving october 31, or not seeking an extension. Francine all options open. Therese raphael. Tom enjoy the next walking tour. Francine on Bloomberg Radio later today, we will be speaking to christie blackman, member of parliament for the Scottish National party. This is bloomberg. You are watching bloomberg surveillance. Jack ma is ending his 20 year reign over alibaba, one of the most spectacular creations of wealth the world has seen. On his 55thng down birthday. Cofounded alibaba in his apartment. Moodys is expressing doubts plans, fords turnaround downgrading them to junk. Struggling toen win over wall street with his restructuring proposal. Almost every u. S. State is joining in an antitrust investigation into google, focusing on the heart of its business, advertising. State attorneys general are citing concerns google is raising costs for advertisers and they question whether consumers are getting the best information from search results. Tom tony dwyer joins us quickly. I want to show a chart. It gives you a sense of the august range we were in. As markets went to sleep dwyer took a four week vacation. Is it for real, and have we seen in equity breakout from the august quiet . Tony it seems like you have had a nice move out, but what people are really feeling over the last couple of days, you have seen the 10 year bond yield rise and there has been such a crowd that ,oved into utility, telecoms and defensive oriented stocks that they get hit. Even though the market is breaking out, it doesnt feel like that to most people. Tom are stocks cheap . And people who are going both ways, long, short. Are stocks cheap . Tony i think they are cheap right now relative to inflation. Clearly, if most you look at the valuation of the market which is what determines cheap, it is determined by the Interest Rates which is determined by core inflation. 3 n core inflation is 1 to the market trades at 9 forward earnings. It is cheap as long as we do not go into a recession. Francine what is the chance that we go into a recession . Tony i think it is really low. I say this not because i have great insight into the data. There is no credit issues. It is a credit driven economy. It is hard to have a recession when there is no stress within credit. People would say the 10 year note yield has dropped all the way to 1. 4 , what do you mean there is no recession . When people say the bond market is telling us something about recession, you have to look at two bond markets. Treasuries are calming down but doing fine. Re francine tony dwyer, thank you. Bloomberg surveillance. Francine lacqua in london, tom keene in new york. We will talk about the brexit move into the markets. Now, our first word news. Asiana we begin with brexit Boris Johnson is pledging to work for an exit deal with the European Union. Parliament did not give him much choice, locking his Brexit Strategy and handing him his sixth legislative defeat and around. He tried to get his party to back his strategy and they refused. Johnson lost a key vote. The u. S. Agriculture departments key personality calling he defended the trade war to the National Farmers union, who have tears criticized the tariffs. The richest americans would see their fortunes shrink under ray wealth tax proposed under a wealth tax proposed by elizabeth warren, according to two french economist. Could collectively lose hundreds of billions of dollars over decades, but that is only if they do nothing to avoid the proposed tax. Oil extending its highest gains in almost six weeks. The oil minister is signaling committing to your production cuts. Saudis meet the with opec and allies. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom you know the rubber chicken economicshether it is or ipos. We call it a stale pastry circuit, where a bank gets together everybody in an into a morning and afternoon soiree to go over there Business Plans for the year. That is happening with barclays. ,lisa martinuzzi joins us looking into the first tentative looks of banking into q4 and 2020. Is there a global slowdown in banking . Marketthat is what the seems to be bracing itself for after 2018, which may have marked peak profitability, which is not really anything to celebrate given the low levels of return on equity across the industry. You are facing potentially lower rates for longer, which hurt the profitability of banks. We will learn more with the ecb announcing its policy moves this week. Tom what do banking officers say about negative Interest Rates . As a failed at it experiment . Elisa that is what you see in the numbers in terms of how it spurred lending growth and how qe overall has not delivered the growth that had been anticipated. You are into negative deposit rate territory, bankers are worrying about it becoming a greater cost. Pay roughly 7 billion euros a year, and that cost will be greater this week. Francine a mitigating factor is a tearing system. His tiering system. Is that enough . Elisa it will not be the same across the board. Different banks from Different Countries have different rules. German banks tend to be more penalized by negative rates. The other thing banks worry about is the flat yield curve, the declining yield curve, and how that affects their ability to lend. Francine what happens to Deutsche Bank . What happens to some of these other banks . Elisa the pressure on cost remains intense. The toplineng details, you have to look at expenses and that is not easy for an industry that needs to invest in tech knology. Technology. They are caught between having to save and having to invest. Is there a Financial Stability problem for the banks if rates go more negative . Derek at the moment, elisa at the moment, it is more pain for longer. You are looking at that potentially becoming systemic down the line. What would help would be consolidation so it is up to policymakers to make that simple across borders in europe. Tom with us is Derek Halpenny. He does not want to speak about specific banks, but he can speak about negative rates, where he is truly expert. Lets bring up the chart to show how inconsequential the relief rally is that we have seen in a higher negative rate, a better negative rate. We have come up just a little bit. The chronic nature of this is extraordinary. What does chronic nature mean for good cfos of good banks . Derek it is extremely difficult , and it is about what happens on thursday, what can the ecb do in terms of the tiering system. All for commercial banking, of our viewers and listeners are saying, a negative rate, no. What is the cfo saying . Derek this is a reflection of Central Bank Policies and it is an extremely difficult environment for banks. There is a case to be made in japan that we have reached the reversal rate, where you have gone beyond the point where you are beginning to impair tom is it when we do not clear the market out of distressed assets so we have zombie corporations surviving because of the negative rate structure . Derek the central bank easing course is pretty much done and dusted. The focus is beginning to shift back to governments to do more, and maybe that is what we will happen if we have lagarde at the a coordinatedl be fiscal policy response. With negative rates, the traction you will get is perhaps negative now. Francine if you look at the debate around fiscal stimulus and fiscal policy in germany, for the moment we are far away from it, but if they started a fiscal stimulus, how would that help the likes of Deutsche Bank . Elisa the Central Banks have run out of policy tools and have done what they can. Whatever they deliver on thursday will not be sufficiently significant for the economies. Francine are we going to see consolidation . What do we know about what the German Government wants to do about its banks . Face significant hurdles and growing capital demands when they become larger. That is an example where they would like to see some pressure being eased. Us an update on u. K. Banking. We come back to autumn and prorogue, suspension, all this chaos of brexit. Give us an update on United Kingdom too big to fail banks. Elisa you have lloyds and rbs, which face quite an uncertain future given the potential for an election, a general election and a Labour Government victory and what that would entail for reform, or potentially a hard brexit. Barclays eeo is a little more sheltered ceo is a little more sheltered, but brexit is weighing on the industry. Tom do you just assume consolidation . Do you just assume a global consolidation . Derek if you go right back to the japanese financial banking prices in the late 1990s, when i was heading out looking for a job, there was like 18 japanese banks. Tom now there is five . Derek really three. There has been massive consolidation. A lot of people ask me about the an is asian of Europe Japanification of europe. Similaritiesleb would be the weekend us weakness and the banking sector. In terms of the longterm direction, you would have to look at a bigger consolidation of the second, similar to japan, maybe on a different scale. Howcine to that point, much would a Banking Union help in europe . Elisa the fact that it is an unfinished project is a hindrance. Ands still face hurdles domestic constraints about how much capital they can move around. And a mood music to that effect would be helpful. Martinuzzi, and Derek Halpenny stays with us we are getting a little bit or news getting a little bit commission. The ecb when you look at mr. Simpson designated e. U. Commissioner for energy. We will look at the full team and what that means their priorities will be. This is bloomberg. China is basically a healthy market, but because of the trade war, the market is in a recession. That is a new situation that is scary. The biggest move as the manufacturer who is prepared to monetize their market right, because flexibility is clearly one of the areas, particularly in production, we most focus on. It is something we have to deal with. Nobody knows what is coming next, but we are prepared. We have to do a lot of things. Francine that was a group of chief executives weighing in on how the u. S. China trade war will affect their business. Interviewed onr the really cool new Land Rover Defender. Said, doesom genoa it come in rose gold . We are pleased to inform you you cannot get the new Land Rover Defender in rose gold. Rancine not yet tom they need the queens green. We can do single best chart with Derek Halpenny. It is an extraordinary chart on this day of prorogation, goes back to john major and tony blair, 1997 with week sterling. We end up withd labor leader blair. Weak sterling on a tradeweighted races and we prorogue again. They are not correlated, but there is a point about government turmoil. There is a point when you get exhausted. Derek there is. The shortterm momentum got exhausted and that has given us a bounce. The difference is we still have a major event coming, whether or not there is no deal or a deal coming. Tom you nailed this when you were doing fx fulltime. Do you have a sterling call . 1. 10, 60 are below probability of no deal. I wouldve agree with therese , with all the news about Boris Johnsons bad week, they want a general election and we are still heading for one. The bulls are suggesting that more and more people in the u. K. Are sick and tired of brexit and they just want it done. His aggression in pushing towards a no deal is resonating with the people, and he has a 40 , 50 gain over the labour party. There brexit plan is a shambles and changes on a daily basis. If we go into when election we will have five weeks of Boris Johnson saying, i dont want to do this but parliament forced me to. When you have the general election in november, forced extension to the 31st of january, there is a good chance with brexits a party brexit Party Support he will come back deal. Who would be the person to ask for an extension . Does it make a difference if it is Boris Johnson someone else . Derek if it is not Boris Johnson, it is a bit messy. Going,have Jeremy Corbyn you have some temporary majority of parliament. The problem for remain as they do not have a figurehead in parliament to lead the remain side. They remain disunited. There is clear unity on the others with a clear figurehead, with Nigel Farages support. , temporarygovernment unity government, if he spends the next five weeks pressing with people how he despises the idea of having to extend to the 31st of january, the voters will acknowledge that when it comes to voting in an election. I am not convinced it will be that damaging for him, if it is him that 60 extension. Seeks the extension. Francine 60 probability of no deal, what does that mean for pound and bank of england . Will we see huge volatility . How do we set Monetary Policy . Derek it is difficult, but we have had more explicit comments for mark carney leaning toward rate cuts. Priced. Two rate cuts as i mentioned, we have cable below 1. 10, eurosterling up at parity. We have significant moves to come. While the speculative data tells you shortterm positioning has built up, a lot of people are not speculating and do not think it is worth it until there is clarity. There is plenty of scope on the downside if we go back to the potential of no deal and it becomes greater after a general election won by the conservatives. Francine thank you, Derek Halpenny. Wework is pushed to postpone the public offering. This is bloomberg. This is bloomberg surveillance. British airways was forced to cancel almost all of its flights on the second day of a twoday strike by pilots. Theyilots union demanding make new pay proposals to resolve the dispute. The strike is costing almost 50 million a day for british airways. Biggest investor is having second thoughts about an ipo. Softbank wants them to delay the offering. They have concerns about the business and its corporate governance. Valued them at 65 billion but now they are one third of that. ,rancine for more on wework lets get to kris bryant. Ng or does not end up ipoi ipos for less than thought, who is this if softbank does not go ahead with what should have been one of the most exciting ipos of the year, or do they pull the plug . Wework investors hope it might wech 47 billion or more and are hearing a valuation of 20 billion or less might be on the cards. Cause valuation would softbank to crystallize losses, which they are not keen to do. If you do not go ahead with the ipo, some of the loans they were conditional that they go to ipo. Up withill have to come a serious plan b if they do not go through with the listing. Francine how did we get a 65 billion valuation initially when billion lease obligation . Chris because we live in an era of extremely cheap money where money is everywhere. Venture Capital Funds can decide what they think the company is worth. Softbank decreased it, saying wework is worth 47 billion. That is not a rail amount until it is tested by public markets, not a real amount until it is tested by public markets. They say softbank inflated the value of wework, causing them to not go ahead with the. Everyone is looking forward to hearing from the chief Financial Officer of we company. What will the company do at the heart and center of this . We have much more coming up on economics, finance, investment. We will touch on the domestic politics of the United Kingdom, some of the challenges, linking this into an ecb meeting and a fed meeting to come. Worldwide, this is bloomberg. Guy david welcome to bloomberg daybreak on this tuesday, some number tense. Apple basically needs. Eople like me