Transcripts For BLOOMBERG Bloomberg Daybreak Americas 20240714

In the markets, we are seeing equities a little bit softer across the board. S p features down by about 0. 2 . Tech leading the declines lower in europe. Dollar seeing a stronger ish. Been about the reversal of the trends. Will that continue, or is today just a pause in this new shift in paradigm, as you have yields up by about one basis point . Time now for global exchange, where we bring you todays market moving news from all around the world. Soining us now is bloomberg and the karen bloombergs enda curran and michael mckee. An joins us from hong kong. Removed theave quota you need on stocks and bonds to buy in china. It is not necessarily going to be an immediate game changer. This is all about the narrative around china gradually opening up and trying to get the yuan used more globally. At the same time, it is an example of how china is incrementally littering on some of its pledges. Global message to the Financial Markets them china is open for business, and this would certainly attract capital and help support the currency over the medium to longer term. David weve got cpi and ppi numbers out. What do they tell us . Enda it is still in deflationary territory. It is negative for chinese factory profits, negative for the real cost of servicing their debt, and on the other side, Consumer Prices ticking higher, mostly because of oneoff issues related to port prices. What you have is employers under pressure and having to pay more to their workers, who are paying higher prices on the consumer side. It is certainly conflicting forces on the chinese inflation story. David thank you for being with us. Meanwhile in the united kingdom, Prime Minister Boris Johnsons bid for a snap election fails for the second time. Still, he remains hope for a brexit deal. Pm johnson no matter how many is sentthis parliament to tie my hands, i will try, mr. Speaker, to get an agreement in the national interest. Government will not debate brexit any further. David bloombergs Jess Shankleman joins us now. Say he willard him work to get a deal, which would still have to be passed i parliament, but we are also hearing that the government is consulting its lawyers and trying to find a way to get around this law which was put into law yesterday that says he must delay brexit for three months if he cant get a deal with the eu. Parliament has now been suspended for five weeks. Theres no election immediately on the horizon. It looks very unlikely we are going to have one in october, but both leaders are absolutely in campaign mode, going around the country, talking to potential voters in the hope of winning the next election. Alix rough for politics, good for lawyers. Thank you very much, jess. In germany, finance minister left schulz minister olaf it is essential that we are in a position with the Financial Fundamentals to respond with many billions if indeed economic crisis erupts in germany and europe. Him, orryone agree with are there factions starting to push for more stimulus earlier . Reporter the stimulus debate hasnt really started in germany yet. It is a more International Debate because everybody looks at germany and once germany to get the and once germany and wants germany to get the economy going in europe. Some companies, especially the export exposed industry, sees serious setbacks, but until the low domestic demand declines on a considerable scale, government isnt yet willing to give up the balancedbudget because the balancedbudget is really what this government is standing for. While scholz has been saying we are willing to act, and have billions of euros ready, at the moment there is really no crisis, and we are not doing anything. David thank you very much. Back in the united states, the nfib is out with a Small Business optimism survey. Joining us is bloombergs michael mckee. Michael talk of recession taking its toll on americas Small Business owners. The National Federation of independent businesses optimism index fell the most in five months in august. Expectations from future Business Sales dropped. Small Business Owners reported cutting back on capital expenditures. Economists watching for business and Consumer Confidence to see whether that starts to spill over from the trade war and manufacturing slow down to growth more broadly. You can see on the chart, while the gauge remains elevated by historical standards, it is well off the average that prevailed during most of Donald Trumps term. The chief economist for nfib says, although Current Business conditions are very positive, pessimism is contagious. One other eyecatching bit of news from the abc newswashington post survey this morning, 60 of americans think we are going to have a recession within the next year. Alix wow. That is all the backdrop for a three year note auction, 30 billion coming out. Give us an idea of what the selloff in the bond market has been like and what we can expect here. Michael the selloff has stayed within a range. The bond market is trying to figure out which way the economy is going. Could be ay this notable auction in that we may it the Interest Rate on higher yielding than the last time, which would be the first time they stopped through the higher yield since october of last year. We had 1. 562 for the last auction in august. We may see higher than that today. That was the lowest since september 2017. Alix thank you so much. Join us later because we will be speaking to the head of the nfib. She will be joining us with more on that survey. Coming up on this program, more on your morning trade analysis on the markets for todays first take. This is bloomberg. David now for the bloomberg first take, where you get the trade analysis of the markets. Today we are looking at the global bond selloff, trade, and centralbank easing. Here to discuss our bloombergs Lisa Abramovitz and Todd Jablonski, Principal Global Investors portfolio manager. Isa the interesting take here is that the german centralbank ,eems to be opening its opinion the German Government opening up its mind in order to potentially keep the debt and basically abandon its policy of having a balanced budget. This would be a game changer. I think that is what people are looking at, that this would be to stimulus people are expecting that could actually get the euro zone out of some sort of downturn. Onhink that is really the the edge change in the overall sentiment. Alix to that point, you can see the change in the biggest move since President Trumps election. But are we really going to bet this on fiscal stimulus . Is it easier to say we had a huge, huge bond buying bull market . Todd it is easy to make outside returns by investing in core fixed income for a long time. As sovereign rates come down globally, theyve achieved what we think is inexpensive level in the u. S. And outside the u. S. When you look at those features, i think you have to look at the fixed income market and say, where is their value, and how can we position if there is duress in the credit market . Alix but there is no duress. Todd there hasnt been, yes, but if you look at the lower end of the highyield market, we are seeing issuers with some offerings on the debt side that really challenge investors to identify where the value sets. This is been something people have been talking about for a long time. At some point, people are not going to get paid for the risk they are taking. Bond yields have just gone lower. So at what point, what is going to change this . Theres a question also of, our u. S. Treasury yields are that of, are u. S. Treasury yields all that low . David is it possible to be answering questions that we dont know . You said german fiscal stimulus. On the other hand, we have mr. Scholz saying we are not going to do that. President trump says maybe we will have talks with the chinese. Do we just not know . Lisa we have no idea. Thats correct. Alix so how do you think about it i think the so how do using about it . Todd i think the number one issue driving markets today is centralbank policy and what is happening with the ecb next week. Maybe you get 20 points of easing. Maybe you get tiering. But if you get a rally on euro assets, i think you sell the rally on any sign of weakness. I think it is a shortlived issue for the long end of the yield curve to rise globally. What we really need is a pickup in Inflation Expectations. That has been absent globally, despite the best efforts of Monetary Policy. Globally, but it could really change the long end of the curve in the u. S. And elsewhere. David mario draghi has one more shot here. Hes been trying to get inflation up with Monetary Policy. Hes going to take one more big shot to get whatever it takes. Lisa it doesnt really matter what he does because Christine Lagarde will come in and give it 14 more shots. The question is could it digitally hurt more than it would help. Have some of the executives of the biggest banks in the region saying this isnt going to work. In fact, this is going to in strong this is going to destroy the Financial System over the longterm. That ifention the fact you actually look at loan creation, it has come down in the euro zone, which goes against any kind of logical extrapolation you would imagine. If money is free, you would think people would borrow more of it, but it is it happening. What are they trying to achieve with more quantitative easing . David i want to come back to trade. President trump said yesterday we are talking today, talking tomorrow, talking next month. People seem to be encouraged. At the same time, people are down to namecalling now. We had an undersecretary of agriculture called the president of china a communist zealot, and china came back and said that Peter Navarro lies. This doesnt sound very twotructive to me for people trying to negotiate. Todd it doesnt sound very constructive to me either. He interestingly, i tend to focus on the data. What you see in the data is that chinese exports were week last month. Aey came in a 1 against 2. 2 expectation. That doesnt surprise so much because there was a front loading on chinese products before the tariffs went into effect. What is interesting is to watch korean export markets, down 13. 6 in august. Alix that is also the japan situation, too, right . Todd what i noted was that while units were up 0. 1 , of that decline, all of it came on pricing. It comes back to the inflation side. Where are we going to see pricing power, and what is going to move up longterm expectations . Lisa i wont say theres a negative way to read the chinese data, a very negative way, which of course, i am going to go to. Basically, it explains why china is engaging in a steeper than expected round of stimulus, because they are not expecting a trade deal. Alix but is it steeper than expected . Theres another store that says it is not aggressive as they could be. Lisa totally, but i am talking ut, some otherc measures they have taken, that they were a little bigger than people expected in the short run. Whether they engage in that in the long run is another question, but i think what people are looking at is it seems like they are trying to hunker down for the long haul, and that doesnt bode well for the prospects of an actual trade deal. David and maybe send a message to President Trump, we are ready for a long, cold winter, so to speak. Todd theres a definite Winning Strategy in fabian tactics, the idea of avoiding direct confrontation and extending this out. Alix we mentioned fiscal, but the monetary part comes first. Deutsche bank had a fairly aggressive call in terms of rate cuts, saying the economy is showing a greater sensitivity to this turmoil. Leading indicators for manufacturing sentiment and sending dire signals and accumulating evidence of spill over the broader labor market. They now see 100 basis points of cuts. Where do you sit now on the Monetary Policy front here in the u. S. . Todd going back, it is easy to look at december last year and wonder what the tightening move was. We tightened in december last year, and now weve done some easing this year. Moving forward, we expect at least 50 bips this year, but this Federal Reserve board has essentially disappointed. It will be interesting to see are they able to deliver the cuts the market is expecting. What so lets talk about the market is expecting and what the fed to do. Lets say they cut basically 100 basis points. Lets say they below Market Expectations out of the water. Do you think markets rally . I dont think so. If there is a downturn, the fed has no ammunition. Todd i dont know. If you get 50 bips of rate cut, you have to look at some of the pmis. Is that enough to get something in the 49. 8, 49. 9 up to 50 . I think we are talking about just getting past the Tipping Point on Economic Activity. I think it bodes well for where you could see that virtuous circle take off and see earnings and productive output begin to grow globally. David will the market be satisfied or just price in another 50 basis points . That is how the pattern has been. Todd theres certainly plenty of greed in the market. I think 50 basis points were delivered to the markets a set of easing that would give investors some confidence we are no longer any midcycle adjustment, but have a direct easing cycle that leads toward easier monetary conditions and Monetary Policy. Alix to bring that fullcircle come of the Carlyle Group had a really Interesting Research report yesterday that talked about how this low yield alonenment is not anymore. They say you can no longer say i cant invest in bonds because they are too expensive. At has to be relative trade. That is the way you take on risk and make money now. Do you agree . Todd i think there are pockets of inexpensive nest investors need to watch out for of inexpensiveness investors need to watch out for. Youve got to point to areas where there is red is of value where there is relative value , and that does extend to asia and europe as well. Lisa i will just say this. There is a potential Systemic Risk that emerges when you start to have an increasing relative value type of mentality, which , aif there is a disruption major disruption, say interment bond yields or european bond yields because of a move the ecb does, that could disrupt the entire relative Value Proposition globally and cause a pretty makeshift. That is one potential a pretty big shift. That is one potential result you have. All of you start to get some serious potential moves. Alix like a carry trade, basically. Lisa correct, and some capacity. David but as much as people have said we may see cracks, we. Havent really seen them yet. Why is that we havent really seen them yet. Why is that . What will cause them . Lisa i was speaking about this with someone at the tech conference, and was saying we havent seen a credit downturn since 2008 that was a market event. He is saying we are overdue, that we had an expansionary credit environment for a long time. We are not aware or prepared of what will happen when it cracks. Go. D there you a sobering thought to end on. Bloombergs lisa abramowicz, thank you. Todd jablonski of principal be staying with us. Live from new york, this is bloomberg. Viviana you are watching bloomberg daybreak. Moodys is expressing doubts in fords turnaround planned, cutting the automakers Credit Rating to junk. They say cash flow and Profit Margins are below expectations, likely to remain weak the next few years. Ceo jim hackett has been struggling to win over wall street with his restructuring proposal. Antitrustning in an investigation into google, focusing on the business and advertising practices. State attorneys general citing concerns google is raising costs for advertisers. They also question whether consumers are getting the best information from search results. The richest americans could see under artunes shrink wealth tax proposed by, craddock president ial candidate Elizabeth Warren. Billionaires such as jeff bezos, bill gates, and Warren Buffett could collectively lose hundreds of billions of dollars in net worth over decades, only if they do nothing to avoid the proposed tax. That is your Bloomberg Business flash. Alix well, this is radical. David it is radical what elizabeth proposing what Elizabeth Warren is proposing. The headline is how much they would have lost if, in 1982, theyd started this tax to date. But they have a lot left at the same time. Jeff bezos loses a lot of money, but still has 86. 2 billion left. Alix no, but still. You have to wonder, you are going to find a workaround. David probably so, but i think the largest point is to look at the debates coming up on thursday. This puts it front and center, wealth and income inequality in the country. Even though i dont think anything like this is ever going to happen, it puts this front and center. Just on the not french, but how scared are they . David the people ive talked to are concerned, particularly is thethat think if she alternative to joe biden, that will not bode well against President Trump. Alix coming up, automakers under pressure. Global concerns weighing on automakers and their outlook. This is bloomberg. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Alix this is bloomberg daybreak. Beenn in the market has really interesting rotation out of defenses and into more cyclicals like growth and value. What was working is no longer working. Is there a paradigm shift or just a pause in the markets . Inside, you can see some whippy action. European autos up, a lot of them unveiling new vehicles, but warning of lower growth. Youre looking at a moderately stronger dollar on the day. Eurodollar down by about 0. 1 . Yields moving a touch higher in europe. Here in the u. S. , moving a touch lower. Hey, you are not inverted. That is something at the end of the day. If you want to buy the dip in bonds, that will have to be answered by markets today. Auto executives are seeing risk and uncertainty around every turn. Nobody knows whats coming next. This transformation for the industry is going to be a challenge for many. Flexibility is clearly one of the areas, particularly in production, we most focused on because we know from the past that markets are volatile. Because theres a trade war, really come of the car market is basically in a recession, but we prepared for that. We have transformation going on beside the trade war. There is risk for the industry, but we are ready for it. David we welcome our colleague matt miller. I understand you dont want to get between matt and a ducati. How nervous are they about things like the conversion to electric vehicles, brexit, soft market . Theyve got a lot of challenges. Absolutely matt absolutely. First of all, you have a reduction of Sales Numbers here in europe and in china. Second, electric vehicles are more expensive to produce and need fewer people to put them together, so they have to downsize their staff, and margins get compressed. You dont have that with the 6, the wagon you see behind me. It is a mild hybrid. If you do see a car like an a etron, however, you will see that. Alix here in the u. S. , we are like, is it going to make a difference if you are a business investor, if the ecb cuts rates . Do they see that making a difference . Matt most of the ceos ive talked to have said it will make a difference, it will help their businesses. You see this bugatti next to me. Can get ad, and i loan at 4. 99 . What they are hoping is that with a rate cut, i can get it at 2. 9 and might be able to buy this superbike, which, by the way, was used win 13 of the 13 superbike races. David with a rate cut, i can ged it out and figured out exactly what the Monthly Payment is. [laughter] david great to have you with us. Have a good time there at frankfurt at the auto show. Still with us is Todd Jablonski of principal Global Investor strategy. I will put up a chart that shows manufacturer investment strategies. How concerning is this in terms of what it could mean for Global Growth and a recession . Todd i think it is deeply concerning, but i am optimistic that some of the worst news is behind us. I think we have seen erosion in the strength of the u. S. Manufacturing sector, taking it below 50 on the pmi level and into shrinking mode. What is interesting is i think this follows what is happening with services. What we are seeing on the manufacturing side validates what is happening with the service data. There are signs of bottoming out. Theres reasons to believe we could see acceleration even later this year and into 2020. Alix that takes the question of the whole fiscal stimulus thing. On the one hand, the rhetoric is, particularly in germany, that we need it. The Banking System really needs some help. If we are bottoming out, maybe we dont need it. The finance minister in germany was basically saying we need help if things get early bad, but we are nowhere near that yet. We want to keep the balanced budget. Todd the question is, can we join that with Monetary Policy to arrive at what we think is an appropriate government response to stimulate Economic Activity . Today it has just been absent. Here at home, i dont think you have in the u. S. A real reason for both sides to agree to a fiscal stimulus, and the u. S. Is already running very large budget deficits that continue to mcmeekins earned. Alix in germany that continue to make me concerned. Alix in germany . Todd in germany, they still will not commit to running an unbalanced budget. Until they do that, my expectation is more of the same out of germany. David i wonder if there is a parallel issue with fiscal and monetary. In the united states, we had fiscal stimulus in the tax cuts. It didnt quite get the job done. Same thing you could say about low and even negative rates. Is the answer to double down and do more, or do we need a different approach . Todd i think the answer is a bit of both. If there is a solution, central bankers would have found it. Lower the rates for borrowing, make access to capital easy. Thats for sure. But on top of that, fiscal stimulus is what is going to put employment in the right direction, continuing to or receive very good employment numbers continuing to where we see very good employment numbers. Alix you mentioned value in europe, relative value in a ship , maybe here in the in asia, maybe here in the u. S. How do you trade the relative value play . Todd i did mention youve got relative value in europe. I believe using data going back to june 2003, the European Index has been cheaper only 36 of the time, so there is value there. But guess what . We are overweight u. S. Thats where weve been since year end 2017 because we think there is momentum in u. S. Earnings, and the stronger u. S. Dollar will be in play for a longer time. In particular, we focused our u. S. Overweight towards mega caps, looking at the largest Transnational Corporations in the u. S. Cheap, liquid exposure to names that have transnational exposure and can harvest global earnings by bypassing tariffs. David that may be the answer in the long run. In the short run, arent a lot of those most exposed to Global Growth issues and trade issues . Todd they are come up of these are not th lumbering behemoths of yesteryear. Todays Transnational Corporation can avoid tariffs by just using foreign affiliate sales and earnings that can then be repatriated back home as a means to get exposure to where the Global Growth is strongest, and they are nimble. Agile. E todays make cap firms are able to take resources and steer them towards the most productive output to drive sales and earnings through efficient deployment of capital. Alix pivoting a little to Corporate Credit, we Start Talking about autos and so many being hurt. No doubt we are in a structural shift in the market like ev, but then you have a story like ford getting downgraded to junk by moodys. How do you look at the Corporate Credit market . Todd we are bullish on Investment Grade credit, our favorite space in the u. S. Investment market. I tend to stick towards the midrange zone. As an asset locator who evaluates managers, a lot managers like to get right against that level and take as much risk as possible. I think it is key to keep fixed income investments right down main street in terms of where the Credit Rating is set relative to benchmark. We are underweight highyield. Although investors do have some concerns, youve seen a lot of outsized returns with subdued volatility for a long time. We expect that to pick up in the next 12 to 18 months. Alix when you have something that happens with, like, ford, is that indicative of a catalyst, like now we have all of these fallen angels, companies threading that needle . Would you have a credit event likely sell was talking about, or do you look at it as idiosyncratic . Todd i definitely view that as an idiosyncratic element. One has to look at investments and managers who can identify those idiosyncratic wonders with Business Models that can grow. The key feature i think is identifying firms that have underappreciated potential for topline growth. That i think is an area where the market has sold off on some interesting valuations. Todd jablonski of prince will global strategy, thank you for being of principal global strategy, thank you for being with us today. Now i look at the first word news with viviana or todd of with Viviana Hurtado. Viviana north korea tested two short range missiles after saying it was willing to resume Nuclear Talks. They expressed a desire for negotiations. The country, though, making no mention of new concessions. Earlier this summer, president Donald Trumps Approval Rating flipping. 38 ofng to a new poll, americans approve of his performance in office, down from 44 in june. , 60 urvey says next year say a recession is likely or somewhat likely. U. K. Prime minister Boris Johnson is now pledging to work on a brexit deal with european union. Lawmakers blocking Johnsons Brexit strategy, handing him six legislative defeats in a row. Last week he tried to get numbers of his own conservative party to back his strategy that guaranteed leaving the eu on october 31, even without a deal. They refused. Johnson lost a key vote. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Parliament might have gone on hiatus, but it did not do it quickly. It was there until the wee hours of the morning bating up and down in quite a spectacle. Alix as you can imagine, if you are in a pub late and be singing, that also happened in parliament yesterday. Hymn, and they started singing it in harmony yesterday in parliament. David quite impressive. Im not sure our congress could do that. Singing the harmony . It was pretty impressive, but the welshmen. Together in the early hours of the morning. Alix this is bloomberg. [singing] [cheers] viviana this is bloomberg daybreak. Coming up later today, an exclusive interview with bruce richards, Marathon Asset Management ceo, chairman and cofounder. And now to your Bloomberg Business flash. British airways was forced to cancel almost all of its flights on the second day of a two day strike by pilots. The pilots union calling on the airline to make new proposals to resolve the dispute. The strike is costing it almost 50 million a day. Another walkout is set for september 27. Spirit airlines counting on a rebound in 2020. The u. S. Discount Airline Planning to step up efforts to squeeze more revenue out of passengers. ,ince becoming ceo this year 40 fallny has seen a in shares. Ma ending his 20 year reign over alibaba, one of the most spectacular creations of wealth the world has ever seen. Ma is stepping down as executive chairman of chinas Largest Company on his birthday. Hes amassed a fortune valued at 41. 8 billion. He cofounded alibaba in his apartment. That is your Bloomberg Business flash. David he was an english teacher. Alix amazing. David he had a great idea and ran it out of hong kong. Amazing story. Alix 460 billion Company Started out of the best on out of the basement. You have to wonder if that kind of thing can happen anymore these days. David he had a really good idea, and was there at the right time, but hes also an extra in everyman. Hes really smart also an extraordinary man. Hes really smart. Alix thats great, but im also excited to see this party they are throwing in the elliptic stadium. In the olympic stadium. We turn now to wall street beat. First up, a mixed bag for banks. Born aboututsche revenue decline deutsche warn about revenue decline. Goldman is now one of the strongest contenders to lead the biggest ipo in the middle east. And softbank tries to get wework to postpone its ipo over concern about its business and Corporate Governance. David here to take us through it all is sonali basak. Lets start with the banks. Various banks cfos are starting to give us interim results. There were two very different stories today. Sonali this is really a make or break year for those banks. Last year, bank of america lost a lot of dealmakers. Now they say their Investment Banking revenue is holding pretty strong. I think what is going to be the question is, where . See bank of america having a really strong year despite losing a lot of dealmakers. Citigroup, we will see how that comes in. Citigroup right now is number four in m a. Is behind that. It will be concerning where they are winning and losing. Alix what about Deutsche Bank . Sonali they are blaming it on negative Interest Rates in europe, already bringing revenue targets through 2020 down quite a bit. It is looking tough for a lot of folks because of negative Interest Rates. Lets see how they change their strategy to respond to that to make sure they can keep the revenue higher. Alix in terms of the u. S. Banks and the yield curve here in the rates for the fed here, which banks are more sensitive . Which banks are going to feel that the most, and what way . Sonali back to bank of america. Wells fargo already gave sort of a tough flow when they said revenue would come down again. Holding steadyen on the consumer. David it is not good news for bank of america at all, but there are fees coming in that could make up some of this. Right now they are saying the volume is making up for this. Sonali and jp morgan heavily pushing the Digital Strategy as well, picking up more consumers. Alix and dont miss our exclusive interview with Morgan Stanley ceo james gorman, coming up at 2 30 eastern. He always has interesting things to say, particularly when it comes to china. Goldman also fighting for part of the saudi aramco ipo. Where do they rank . How does the 1mdb thing rank in that . Sonali very tough. I would be has publicly abu dhabi has publicly been very upset over the handling of 1mdb. In saudi arabia, you have dena powell out there. Theyve been doing pretty ok. Number two on deals in the region, courting to our reporting from the middle east. Remember, it is very competitive. Morgan stanley has saudi representatives on their own board, for example, so it is going to be very competitive. You have to remember, she actually put together that first trump trip overseas, which wasnt just saudi arabia. I ami you know what curious about with all these trade tensions . Remember, goldman and cic also created an interesting deal years ago. Deals aresee what her going to be like as well. Alix remember with khashoggi, everyone was like, we are not going. We are going to put the hammer down here. Sonali the whole thing blew over by the beginning of this year. Alix because there was money there. Sonali because there was money. Go to the ceos didnt desert. David lets go to our favorite, we work. What about that ipo . Hows it coming . Sonali if you are ceo of a company and softbank owns 29 of your company, which is more than what you own, and softbanks saying they dont want you to go public, and you are the ceo and you still want to go public, do you let them take more control of you if you are already disagreeing . That is the interesting tension we are seeing right now because softbank may infuse more capital, which means they have more control of the company, and then, who can solve the strategy moving forward . Alix but heres what i dont understand, the why behind softbank. I dont understand why that would come up now when they have a 29 stake in the company. You would think they would want to go over some Corporate Governance and business plans. At the beginning of the year, Goldman Sachs bankers had told them they could fetch maybe 65 billion, which was higher than the valuation earlier this year. David they are ape ritual motion machine. Drive on growth. They need capital for growth. If they dont get the ipo, whered they come up with the cash . It will just keep raising money and debt markets, but i some point, that tries out. I dont know. Alix and essentially you are a junkbond for a real estate play, at the end of the day. Michael right sonali right. David sonali, thank you so much for being with us. Coming up, we take a look at california legislation targeting ridehailing giants like uber. Alix if you are headed into your car, go to Bloomberg Radio, heard across the u. S. On sirius xm channel 119, and on the Bloomberg Business app. This is bloomberg. This investigation is not a lawsuit. It is an investigation to determine the facts. Right now we are looking at advertising. The facts will lead where the facts lead. David that was texas state attorney general speaking of the steps of the Supreme Court yesterday, talking about joining 49 other attorneys general to investigate google on antitrust charges. This is a serious piece of business. 48 states, plus the district of columbia and puerto rico, will do the investigation. Alix what exactly are they investigating . David we dont know, but the speculation is it is largely about monopolization and also search. As they sat on the steps, being big is the problem, but what you do with being big is. They are bringing in all sorts of things like invasion of privacy, improper use of their clout in the marketplace. The other thing you have to watch out for come of the states can cooperate with the federal government. The federal investigation is going on. It increases the firepower of the federal government because they can have access to all of that discovery. It can be a long, drawnout trial. Alix blue states and red states against big tech. David it is interesting. Thats one thing that is bipartisan in washington right now, skepticism about big tech companies. And not just google. California is now on the cusp of passing a statute tightening up the labor laws that basically, as i understand it, would say rideshare drivers are not freelancers. They are employees. It could affect the fundamental Business Model for both uber and lyft. Alix because you have to pay insurance, benefits. David the whole thing. Alix which shows the power the states can have if they do something, and makes the argument that europe would want to look at that and do some the similar. Coming up, christopher wolfe, First Republic private Wealth Management cio, will be joining us. We had a shakeout in momentum and yields over the last few days, so now, what do you do as the dust settles . This is bloomberg. Mberg. Welcome to bloomberg daybreak on this tuesday, september 10. Heres what you need to know. [indiscernible] british Prime Minister Boris Johnson now promises to work for an exit deal with the european union. Parliament didnt give him much choice. Lawmakers blocked Johnsons Brexit strategy. Hes lost six votes in a row. Approvalsident trumps rating has slipped to 38 among voting age americans. Meanwhile, six out of 10 expect a recession in the next year. David north korea fired two shortrange missiles after it said it is willing to resume Nuclear Talks with the united states, citing comments expressing a desire for negotiations. Alix hong kong chief executive carrie lam pushes back against protesters calling for u. S. Assistance, saying that is inappropriate. R regret deeply such moves. We all have to be respectful of one another, especially on an interNational Level. A liveou are looking at shot of hong kong at 8 00 p. M. This evening. In the markets, its been a move into things like value, cyclicals, and out of bonds, it reverse of the norm over the last few months. Can it continue . S p futures down now by about 0. 2 . Yields go nowhere here in the u. S. Crude continues to get a boost, beating to its own drum. China removing one more hurdle for Foreign Investment into its Capital Markets, scrapping the 300 billion cap on overseas purchases of stocks and bonds. Joining us with more is michael mckee. What is the significance . Michael it is significant in that china is now opening up more of its Capital Markets to the rest of the world, but the immediate practical consequences are very small. The state of the administration of Foreign Exchange says foreign governments no longer need approval on a quota to buy chinese stocks and bonds. However, foreigners had only used about 111 of the 300 billion as of august 30. David is this an olive branch to the world or a reflection of the fact that their trade balance situation is changing. Theyve been in surplus for a long time. They are headed into deficit. Michael it is basically both. The chinese have been opening up the yuanbased and renminbibased economy to the world, and now that is another step in that direction. We saw exports dropped significantly. The trade war is taking an effect, so their current account surplus has been rising. If they can attract more foreign capital, that can help ease some of the criticism. That is the chinese current account in white, the u. S. Current account in blue. The comparison is a percentage of gdp. Alix more news we got out of china was happened with their cpi and ppi. The ppi moving further into deflationary territory. Can you walk us through the line the pboc has to tread to reflate certain areas but not other areas . Michael it shows you the dilemma right there. They dont want inflation out of control, so maybe you dont cut Interest Rates. They dont have an inflation problem yet. They could leave rates alone. Is seen as a proxy for Chinese Industrial production. If production is falling, you want to do something to stimulate the economy. The one thing the chinese have not done so far is cut Interest Rates. They cut the reserve ratio, they are spending more on infrastructure. Analysts think that is a negative come of it which of these two lines is going to drive that step . David what about the consumer side . To what extent are they seeing inflation related to foodstuffs, and do they have an issue potential he on spending too much for food . Basically ais reflection of thes wind loop problem that has killed off some money of the pigs in china. If they can get a handle on that, then the question becomes, can they import enough to make a difference . The chinese have not been wanting to do business with the united states, so we will see where that goes from here. Alix they did by a lot of soybeans come up with they did buy a lot of soybeans, but we dont know where they bought them from. You have pretty contentious insults being thrown. The undersecretary for ag trade accusingthe chinese ying thatarro of l china is absorbing all the tariffs. We dont know the imperative to either side to make a deal. Logically, it seems like the chinese would want to wait out donald trump, and donald trump has made a whole political issue out of the idea of being tough we were talking about in the last hour, if we are going to see Donald Trumps Approval Rating go down and six out of 10 think we are going to see a recession ahead, may be political calculation changes. David that is the key question. He has told us again and again that their economy is in worse shape and we are. At the same time, president xi seems to position himself to say, i can wait this thing out. David the big difference is that x michael the big difference is that xi is not running for reelection next year. He can tough it out politically, where as President Trump has a big problem. We saw a report from shawn donnan that in the states President Trump narrowly carried in 2016, his Approval Rating has gone down a lot, and they have been losing jobs in those states. He cant afford that. Rumps up for reelection, xi is not, but you have that 70th anniversary coming up, so you have something to put on a deal. Xi wouldit is unlikely tot to be seen as kowtowing the united states. I wouldnt think we would see anything in the for rent. They are only talking about putting a meeting together, and that hasnt yet happened. They were going to have a meeting about the meeting, but that meeting hasnt yet happened. We keep getting headlines and it is probably strong to droid on the headlines because we end in a status quo situation. David in the last report, they couldnt even agree on the document they were going to talk about. Think you so much for being with us today. Now for what is going on outside the business world. Viviana hurtado is here with first word news. Viviana british Prime Minister Boris Johnson is promising to work on a exit deal with the european union. Last night, lawmakers handed johnson his sixth straight defeat, refusing again to let johnson called for a snap general election. Johnson also had to give up his north korea testfired two short range missiles after the country said it was willing to resume Nuclear Talks. A statement cited recent talks by u. S. Officials that expressed the desire for negotiations. The country making no mention of new concessions. President Donald Trumps have dippedings lower. 38 approve of his performance in office, down from 44 in june. Meanwhile, six out of 10 say a recession is either very likely or somewhat likely in the next year. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im Viviana Hurtado. This is bloomberg. Alix thank you so much. Mixng up, big bang scenes coming up, sending mixed igns on the bond market. This is bloomberg. Viviana you are watching bloomberg daybreak. The largest investor in wework is pushing the company to put off its ipo. Softbank is reacting to concern about weworks drop in valuation. Earlier this year, Goldman Sachs pitched wework at a 46 billion valuation. Now theres talk the company that. Be valued at 1 3 of jack ma is ending his reign of alibaba, one of the most spectacular wealth creations the world has ever seen. Ats amassed a fortune valued 41. 8 billion. Alibaba in his apartment. Moodys expressing doubt in fords turnaround plan, changing the rating to junk. Ceo jim hackett has been struggling to win over wall street with his restructuring proposals. That is your Bloomberg Business flash. David thanks so much. We are listening to mark carney head of the bank of england, here in manhattan, speaking there the former treasury secretary and chairman emeritus of the council on foreign relations. Mr. Carney is making some headlines about where we are with the Global Economy and what can be done about it. Alix he said, a Global Economic slowdown is underway. There is fiscal space to counter the slowdown. That, to me, is no surprise. Of course, you are going to have a central banker put the onus back on fiscal, and a Global Economic slowdown. It was a global expansion, and now we are in slowdown mode. Mr. Scholznder if was listening, coming out this morning and saying we didnt need to borrow any money. Alix it is not great, but it could be worse, i guess . Im anticipating is going to get worse and worse. David hes got a really hard job within london, so he is probably glad to be in new york talking about the globe and brexit. Alix he does say things like we are getting closer to a global liquidity trap if a downturn arrives. Fiscal policy will be needed. Those things are not so great at the end of the day. You are looking at s p futures lower, down 0. 1 . Rotation has been working into the other guys. Defensive have moved into cyclicals. You had some growth move into value. If we switch up the board, could you can see what happened to bond yields. A huge selloff over the last few days, and now we are coming off of that just a little bit. In europe, we are still seeing yields move higher, up by another two basis points. Here in the u. S. , weve stemmed that just a touch. This is bloomberg. David the National Federation of independent business is out with its latest survey on Small Business optimism, showing not as much as in recent months. We welcome now juanita duggan, nfib president and ceo. Tell us what we should be looking at in this survey. Juanita thanks for having me. Nfib has been doing this Small Business index for 40 years monthly. This month, we saw a drop in optimism by 1. 6 point, but it is still within a very High Historical reading. The interesting thing is that this report shows that in the month of august, there was job creation, there was sales increases and profit increases come about the same time, uncertainty increased increases, but at the same time, uncertainty increased. Think that is because of manic productions of recession coming. Chart we will put a up here that shows three recent indicators from your survey. Capital spending looks like it is sort of flat, despite the increased uncertainty. This is conditions are deteriorating. Are people so investing in hiring . Juanita yes, they are still hiring. We are seeing record numbers of jobs being created. At the same time, the number one business problem for Small Business owners right now is the lack of qualified labor. Highs. Heading record it is the one thing really prohibiting growth. , wee could prevent this could see even more growth in the Small Business economy. It is the Third Largest economy in the world, half the gdp and half the payroll. The lack of qualified workers is a real problem. Also, uncertainty in creating is a problem. Normally when you ask Small Business owners, are you going to invest, they usually say yes or no. When they start to say i dont know, that tells me they dont know what to expect. Alix the fed solution to data him what the market seems to want the fed to do is to cut rates. Do you have any insight as to what Small Businesses will do if we have a federal funds rate lower by 25, 50 basis points . Todd weve asked our Small Business owners juanita weve asked our Small Business owners that question, and theyve indicated that their plan would not change significantly, either with a small cut or small increase in business rates. They seem to be pretty neutral about that, so we are not seeing that is a big driver of this decision. The thing about the Small Business Economic Trends report indicatorse of the are actual Business Operations. What are we doing now . Actual Business Operations are great. Ithin a 15 high but expectations are starting to lower, and certainly, if you start hearing every day that theres going to be a recession, even if it is not true, you might start to believe it. Alix if a rate cut from the fed isnt going to make them do anything one way or another, what do you get the sense that will make them do one thing or another . Todd the thing juanita they thing that has been so successful for the Small Business economy over the last three years was the deregulation agenda and the tax cuts and jobs act. Small Business Owners got a 20 reduction on business income. That related to 414 billion of tax cuts, and they really felt the effect. The Small Business economy is on fire because of that. One of the things we need to do is not mess around with success. Lets keep doing what we did that creates these historic highs. David you mentioned a couple of times sentiment, in anticipation of a recession. That is not just happening in a vacuum. We see real downturn in manufacturing come up with some parts of the country arguably already in recession. We also see softening Global Growth. At what extent is this tied into trade uncertainty . Juanita weve been asking members if theyve been having any negative effects due to uncertainty with the trade policy. Only about 30 are pulling a state had a negative. Ab that is a lag come about right now we are not seeing a big impact in our numbers because they trade policy. Productivity . Ut you mentioned the big problem is filing qualified workers. Its productivity helping them out have to help their you unit laboreir costs . Juanita so far theyve been able to absorb. If had to raise wages because that is the only way they can get people into the jobs. Money in theirre pockets they have had more money since the tax cuts, so theyve been able to absorb at this point, but at some point that has to catch up. Alix juanita, really great to get your perspective on the report. That is the nfib president and ceo. Joining us now is christopher wolfe, First Republic ive it Wealth Management cio. Good to see you. What i thought was very interesting is that 50 basis points, 25 basis points isnt going to do anything for their business. What you expect on a fiscal front . Chris one, we are likely to see more fed cuts. Is 25 now, may be another 25 later, as chair powell has indicated. However, you really have to see a change in the yield curve because the smallcap index has more sensitivity to Interest Rate shapes in the yield curve. Until there is a big shift in the yield curve come i dont think smallcap stocks will respond as much. We are probably in the big trade we have been in, which is u. S. Largecap stocks. All of their cross functions across many business lines. As a result, they have been boosting profit lines. I think that leaves us in a story that is less monetary and potentially more fiscal spending on what conversation goes into next year. David on the monetary side, is it within the power of the fed to affect that Monetary Fund . Is it a matter of Inflation Expectations which seem to be pretty stubborn . Chris not three and a half, four weeks ago, we were headed into global recession. China is coming a lot of is coming under a lot of pressure. Line, though, is everywhere than the u. S. Is actually in a pretty tough spot. Theres likely to be more stimulus. The anticipation is that policymakers will start panicking. Markets, i think, are doing a little bit of a rebound in normalization. I dont think it is coincidence that the bond yield went from 1. 36 all the way back to 1. 66 . Starks actually started to outperform. Question, raises the what you do with that investment . We going from higher. I agree with peter. Good news is good news for risk. Alix is it that simple, higher rates equal good news . Blipit is just a momentary and you want to be in, say, momentum or growth. Chris we are still going to see pretty good growth this year, 5 or 6 . Experts will come down as they still moderate. Bond yields at 150, 160. Cash flows at relatively low rates. Are still a good story to be in. To the extent that we get extension in this cycle, which is what it is starting to shape up as, a lowflow environment is not bad for. David how concerned should we about the u. S. Consumer . Chris they are actually still in pretty good places. That is important because it leads to spending. What it is not good at is the stock market timing indicator. System as this remains relatively positive, a good thing. A good thing. Alix so for treasuries, do you sell rally . Chris we are continuing to invest in fixed income in our value portfolios. Muni markets and credit markets more broadly have been behaving relatively well, despite all the supply on the corporate side. David is it a demand issue or supply issue . Chris theres a lot of demand states out there, so we anticipate that will remain in place through the balance of the year. Alix christopher wolfe, First Republic private Wealth Management, will be sticking with us. Up, how fortis looks at the economy. Their ceo barry perry joins us. This is bloomberg. Alix this is bloomberg daybreak. I am alix steel. Take a look at the equity market. Holding on a loss. S p futures off. 2 . An interesting rotation in the last few days. If it was by bonds, it became sell bonds. Will that last becomes the question. In other Asset Classes seeing a stronger dollar, reversing the trend of the last few days. Basis pointsr 300 but flatter on the margins. Yields continue to move higher in europe. Here they are taking a pause. 56 basis points is where we sit on the german 10 year. Utility Company Fortis holds its investor day today. Fortis is one of the leaders in the north american utility industry, with over 52 billion in assets and over 8 billion in revenue. Joining us is barry perry, fortis president and ceo. Great to see you. Thank you for joining us. Barry good morning, everyone. You the first question is, sit as ceo of Utility Company you have insight into demand and infrastructure. What is your view on the u. S. Economy . Barry i would say the u. S. Economy is doing pretty good. I am coming at it from her perspective of having a Large Business in canada as well. We look at the u. S. Business and our canadian business, i would say our u. S. Business is growing faster than our canadian business. We are investing heavily in all of the trends occurring in electric utilities in north america. David tell us about that. That is what you announced today. You increased what is a substantial Capital Investment plan. What are you investing in and why are you investing in it . Barry we are investing in several large areas. One is grid modernization, making sure the electric grid can provide all of the Services Required that a customer is looking for. These days, a lot of things are strungtrong being up on the electric grid. We are also investing in renewable energy, especially in arizona, building more Wind Generation as we slowly move away from our poll generation assets. From our coal generation assets. In michigan we are holding our investor day. Itc is expending a lot of capital to hook up Wind Generation in the u. S. Midwest. The other areas are electrification of transportation. We see increased investment for evs occurring as well and that is a trend continuing longterm. Alix went to some of those trends become profitable . Barry can you repeat the question . Alix went to some of those trends become profitable and that you invest now but you will not get the payout until later . Barry that is the beauty of the regulated utility business. Once your capital is improved it goes in your revenue requirement, the way you collect from your customers, and you get turned on that investment within 12 months or so of the investment. That is why utilities are considered low risk investments and very attractive, especially if you see a weakening economy or recession. Utilities tend to do well. David provided you get the regulatory approval, what is the overall climate about regulators when it comes to things like solar power and wind farms. Are they open or are they reluctant . Barry i would say regulators in america and canada are good at making the judgment calls about what is the right thing to do for stakeholders, for customers, for the utilities themselves to keep them healthy. We had a Good Relationship with our regulators in each of the states and canada, as well as at the National Level with the federal Energy Regulatory commission. One of the things ford has done is keep its operations local. We have local teams in each of the states we operate in. We have a Small Corporate Office in canada. Having been that close to our customers, to our regulators makes a difference. We have found that over the years we have gotten reasonable treatment from our regulators. Very few this allowances over our capital programs. David let me ask the question a different way. Suppose i am a customer paying the utility bill. Once youve made these investments, is my bill going up or down . Is it more expensive to generate the energy will you be doing it, or cheaper . Barry a successful utility business always has to be concerned about the impact on its customers. If you look at the industry in north america, we have done a good job of investing the right amount of capital but not having a Significant Impact on customer rates. The reasons why that has occurred is we have had good macro conditions out there. Natural gas prices have come down dramatically, that has lowered the cost of power, and that has allowed for investment in the business without having an impact on customer rates. I will give a nod to President Trump on tax reform. Tax is an expense we collect from our customers, and having a reduction in taxes, we pass that on to our customers. Sometime later, we are still not back to the rates we were charging pretax reform. It has served the purpose of increasing investment and benefiting customers. Hasall, the industry balanced the rate increases, i would say below inflation for a number of years. Make to make alix to all of the investments you are talking about, what you will be selling . Barry we have no plans to sell anything. , weenerate a lot of cash also get a lot of our dividends reinvested in our stock. We offer a 2 discount for shareholders to reinvest our dividends. We also have an at the Market Equity Program that is a fairly cheap way of raising common equities. Overall, with debt being raised in our utility and a little but of equity, we have an effective funding strategy. Isa public company, if there anyone willing to offer good value for some of our assets, we will look at that. We did sell a large hydroelectric plant last year at a sizable gain. That transaction went well and that did help us with our funding strategy. David lets alix lets paint the picture in a broader sense when it comes to trade. Thereve been a lot of lng deals between the u. S. And china. Has that continued or has the trade war crimped that . Barry i believe we have to look longterm when it comes to natural gas exports with north america. We have so much natural gas on the continent and as a canadian we have a tremendous amount of gas in british columbia. We have a large franchise there, we serve one million customers. We have most of the Gas Infrastructure in place in that province. That province is looking at exporting natural gas. We are looking at playing the certain way or not in the largescale lng export terminals. We see that as an upside for our business. I think we will get past these trade wars at some point and have stability that is restored and see continued investment in this product. It is a very cheap product that is able to help with cleaning up Greenhouse Gas emissions and helping to move away from coal. I believe it has a long life and there is a tremendous resource north america to take advantage of. David thank you so much for joining us. Barry perry, fortis president and ceo joining us from michigan. Now lets find out what is going on outside the business world. Viviana hurtado is here with first word news. Viviana Boris Johnson is now pledging to work for an exit deal with the european union. Parliament did not give him much choice. The lawmakers blocking Boris Johnsons brexit strategy, handing him his 60 feet in a row. Try to get met his sixth defeat in a row. Johnson lost a key vote. The u. S. Agricultural departments top trade official called chinese president xi jinping a communist zealot, warning farmers the chinese leader is a tough negotiator. He defended the trade war during a speech to his National Farmers union. The u. S. And china have agreed to resume trade tops. Citigroup forecasting gold may go above 2000 an ounce in the next two years. Citigroup giving a laundry list of reasons, including the rising risk of a global recession and the likelihood the fed will reduce Interest Rates to zero. Goals alltime record was 1920 an ounce in 2011. 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. David thanks so much. We turn to financials. Ofheard from the leadership citibank, bank of america, wells fargo, and Deutsche Bank yesterday. Still with us is christopher wells of Wolf Christopher wolfe of First Republic private management. Lets talk about the financial sector. What you make of what is happening to bond yields . Christopher i think it is not a bad thing. An inverted yield curve is a bad thing for financials to make money. You need rate volatility, you need equity market volatility, you also need other things. A low rate environment see continue to foster all of the m a, and also just the basic business around lending is all about having a positive slope, meeting shortterm Interest Rates are lower than longterm Interest Rates. What the fed has signaled their we willting is that probably take a breather, and that gives a little breathing room for the yield curve. Alix we had Lori Calvasina on yesterday and this is her take on banks. Lori what is interesting with financials is obviously the yield curve compression. That seems to be what a lot of these quantum funds are trading. That is a difficult thing to go up against. We have kept our financial overweight on. We think the story will turn at some point. We are telling people to keep your toes and some for cyclical trades. We think financials look like one of the best ones. Alix do you agree . Christopher i agree with the larger premise around keeping your toes in a lot of places. A lot of investors are stuck on the all are nonmarket. By the fangs and chase the momentum. We know that reverse heart in the last month or so. Being more broadly diversified is part of the messaging. It does make a lot of sense. It is part and parcel to how you manage risk, particularly when we are seeing uneven effects from trade policies and Interest Rates, uneven effects from sentiment. Small caps underperforming large caps. That would seem opposite to what you would expect. Business sentiment is good, rates are lower, Smallcap Companies have more leverage, yet they underperforming. This is about what is working in a training environment and who has the ability to keep their Profit Margins high. That is typically the big companies. David thanks a much to christopher j. Wolfe. Do not forget to tune into bloomberg tv later today for an exclusive interview with Morgan Stanley ceo. That is at 2 30 this afternoon. Coming up, apples most important day of the year. Tim cook will unveil their latest iphone offer. We will talk about that with David Kirkpatrick in todays bottom line. This is bloomberg. Viviana this is bloomberg daybreak. Im Viviana Hurtado in the hewlettpackard enterprise greenroom. Coming up later today on the gorman, Morgan Stanley ceo. Now to your Bloomberg Business flash. Almost every u. S. State joining in an antitrust investigation into google. The propyl focused on the search giants business and its advertising practice. States attorneys general citing concerns google is raising prices for advertisers. They also questioned whether consumers are getting the best information from search results. British airways were forced to cancel almost all of its flight on the second day of a twoday strike by pilots. British airways thing the strike is costing almost 50 million a day. Another walkout by the way is set for september 27. The ridges americans could see their fortunes shrink under a new wealth tax proposed by democratic president ial candidate Elizabeth Warren. That is according to two french economist who helped her devise the plan. Billionaires such as jeff bezos and Warren Buffett could have lost hundreds of billions of dollars in net worth over decades. That is only if they have done nothing to avoid the proposed tax. I am Viviana Hurtado and that is your Bloomberg Business flash. David time for the bottom line where we take a look at three Companies Worth watching. We are joined by emma chandra, Brooke Sutherland, and Sarah Ponczek. First we are looking at barclays. Emma barclays heading towards its best day since 2017. Chargeing a 2 billion to cover lastminute compensation claims of ppi insurance. This is the scandal that has cost the u. K. Banking sector over the last years. It looks like barclays total cost will reach 14 billion. Is 65ustry as a whole billion. Analysts are concerned this extra charge could see the bank suspend its buyback program. That was not announced, at least not yet. The analyst saying they see the dividend remaining intact. Investors also soothe are reports out of japan that barclays has been cutting staff in its fixed income unit. We know jes staley is looking to cut as he tries to counter retail profit in the bank. Shares of barclays are down over the course of the past year. European banks as a whole trading close to alltime lows, even as the broader indexes trade close to alltime highs. Lix thanks so much now we are joined by Brooke Sutherland looking at fort and moodys downgrading its Credit Rating to junk. Moodys didan take its rating on for dad to jump citing a deterioration in class for its writing for ford its rating for down to jump. This reraising concerns about whether we could see a spike in fallen angels across the credit sector. Bloomberg opinion writing about that last evening. The good news for ford is that s p and fitch do still write it Investment Grade, two levels above junk. That could help it stay in Investment Grade indices. Bake headwinds on the horizon for ford given the trade war with china and rising concerns about whether we might see a recession in the u. S. That causes automotive economists to say that is a lot of questions about the future for ford. David that is Brooke Sutherland of bloomberg opinion. Our Third Company is apple. Sarah ponczek is here to tell us all about it. Sarah a big announcement is finally here and it is arguably the most important day of the year for apple. Apple is going to be unveiling three new Iphone Models today, including an pro upgrade to xs max, ands, and a completely new model. We should also be expecting a new slate of iphone watches. New devices could last longer. We could have shatter resistant grass. Wheat shatter resistant glass. We all know we drop our iphones. These phones are all about the photos. We have seen apple putting nice gains into the report, today trading modestly lower before the report, but looking out for the announcement. David thank you so much. There is Sarah Ponczek from bloomberg. For more on apple, we welcome David Kirkpatrick, economy ceo and founder. Goingthing we hear today to change how the stock is traded . David k. i doubt it. The problem is this product is so dominant, it is a mature product, we do not see any signs a major shift in the iphone is going to happen or is even possible at this point because it is such a mature product. We will hear a lot of interesting things. Maybe stuff about video and apple tv. A new watch could be interesting. Other interesting rumors, but i do not see a massive market moving event. Alix what would it take . David k. a new product category. Alix isnt that what services is trying to be . David k. services would be a good thing to make a bigger obviously they are growing with their services revenue. There is talk of bundling all of their services into one aggregate price. We do not know how they will price their streaming tv offering, which they are clearly doing great things with. I was talking to somebody who was making a pilot for it that sounded great. The one thing i heard that could be great, and it is more of a peripheral thing, you know how we all lose our keys . If you have an apple watch you can find your phone any time using a peeper on your watch. If they would at that for your you can stickhing on anything you might lose, that is the kind of product area that might make some money. Avid talk about streaming tv i never talked to a producer who do not think the program they were working on was great. David k. it sounded great to me. David the question is who will buy it when you are against disney and amazon. Will they be able to compete in that area . David k. i think they will be able to compete. To me the more interesting question is will they be able to compete fairly. At the same time, there was a report in todays New York Times if you hadng ago music in the apple store spotify came up 14th on the list. They change that so spotify is for. David than they have the problem in europe with spotify. David k. all of these companies. David that raises the company of the that raises the question of the attorney general going after google and facebook. Is it time for the regulators to catch up with these tech behemoths . David k. they will certainly catch up with facebook and google. Facebook invited the thing with rampant repeated misbehavior, which all of the companies are now paying a price for. Apple is not nearly as much in the sites of regulators, and for good reason. Tim cook is one of the great defenders of the idea of privacy. That does a lot to help his image. Has apple misbehaved as the times article about searching with other apps to compete with apple suggests . Yes they have misbehaved, but not nearly as much as the other companies. Alix David Kirkpatrick, thank. Theill be back in covering apple event to tell me what phone. I still have an apple five i still have an iphone five. My daughter once one. Coming up, bond slipping below par for the First Time Since its ipo. If youre jumping in your car, turn into Bloomberg Radio on sirius xm channel 119 in the Bloomberg Business app. This is bloomberg. Alix here is what i am watching. Slippeddebut bonds below par for the First Time Since the company filed to go public. . 98 on the dollar. Their solution if they do not go public is to issue more junk bonds like netflix. The issue is they have different business. David this is not feel like it is going in a good direction. Alix when you have softbank asking them to rethink their ipo because of the Business Model. David they already invested a lot of money. The company did not know how it was being governed. Alix has it gotten that much worse since they invested the first time . That is what i will be watching for the rest of the day. That wraps it up for bloomberg daybreak. Coming up on the open with jonathan ferro, michael purves. This is bloomberg. At comcast, we didnt build the nations largest gigspeed network just to make businesses run faster. We built it to help them go beyond. Because beyond risk. Welcome to the neighborhood, guys. There is reward. Beyond work and life. Who else could he be . There is the moment. Beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected, to do the extraordinary. Take your business beyond. Jonathan from new york city for our audience worldwide. Im jonathan ferro. The countdown to the open starts right now. Coming up, big moves beneath the equity market surface. The worstperforming names balancing back. Citigroup the first wall street bank out of the great morning trading revenue is set to drop. And the newest iphone taking center stage in california. Good morning. Here is your Tuesday Morning price action. Futures negative, down six points on the s p 500, softer. 2 . In the bond market, yields, in to 1. 64 on the 10 year. The dollar stronger against the bulk of g10. Eurodollar 1. 1039. Lets begin with the big issue. A major rotation from momentum into the worstperforming names. Money is going out of the stuff that has protected people and into the stuff that is bombed out. We are due for a catchup encyclicals trade