Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

We are getting green on the screen and european equities. Investors are focused on the trade narrative as weve heard from President Trump that a deal with china could be closer than we think. We saw u. S. Stocks jumped the most in weeks. The 10 year yield has jumped some nine basis points moving down three today. Perhaps a bid for safe haven along with risk on trade and the dollar index caught a strong bit yesterday as well. Was that to do with concerns around the impeachment inquiry . Could it been something to do with Charles Evans . The dollar is holding on to that strength in the session. Lots of dynamics to digest. Coming up among dont miss our exclusive conversations with the ceos of xo and ab inbev as well tesco, ab inbev, as well as spains Prime Minister. Boris johnson came out fighting in his first appearance back in the commons. He refused to resign or even apologize saying the Supreme Court was wrong. He challenged his opponents to trigger an election, accusing them of cowardice. Jamie dimon is sounding a bit like President Trump on china. He said at the white houses not fair trade, not part of an ideological struggle but he does not see a deal coming anytime soon. Fair means kind of reciprocal. Trade has never been reciprocal, but closer is good for everybody and i hope we get there. I dont expect it to happen before the election. After that, we will have a fair trade deal. Amro shares are plunging the most in three years after authorities opened a criminal probe under antimoneylaundering laws. The prosecutor alleges the bank failed to report suspicious transactions and did not conduct significant checks on its clients. Abn amro says it is cooperating fully. Imperial brands is falling, saying Earnings Growth ground to a halt this year. And blames a slowdown in sales of a vaping products amidst a rising backlash. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Lets get the latest on the situation in washington. The director of National Intelligence testified today about the whistleblower report that alleged President Trump pressure the ukrainian president to investigate joe biden. The report has been declassified but not yet released. President trump defended himself saying he had a wonderful conversation with ukraines leader. They are getting hit hard on this witchhunt. When they look at the information, it is a joke. Impeachment . For that . When you have a wonderful meeting or phone conversation . Joining us for more is our Senior Writer stephanie baker. Great to have you with us. For those who have not read the rough transcript, who has got a stronger case . The democrats or President Trump . A lot of people are looking at this and thinking that the white house misstep here mistepped here by releasing the transcript. It is not verbatim and there is speculation parts have been cut. But it has not played out the way trump thought it would. It shows that he was clearly pressuring the ukrainian president to dig up dirt on a joe biden and his son. On joe biden and his son and putting that in the context of military aid. Democrats feel emboldened and feel it strengthens of their case. Trump is kicking back and saying this was a wonderful conversation. But anyone who looks at the exchanges, its hard to escape the fact that the ukrainian president was feeling under pressure. Nejra and you talked about the democrats thinking this strengthens of their hand. If we look ahead to the implications way off in the 2020 elections, doesnt it put any party in a stronger position or distract . It depends on how quickly House Democrats move. If they move quickly, and it looks like they are, and it is focus purely on the ukraine issue they have decided to pursue, they could move ahead with voting on articles of impeachment by the end of the year. That would then get it out of the way, at least in terms of the house, before the primary season and states start voting in february. If they can do that, then perhaps that will take the heat. They can then Start Talking about issues voters care about. It will have shown that they have taken action in their oversight role of the president. It will probably get stuck in the senate at that point. It doesnt look like there is enough support to convict him. Anna thank you so much. Lets bring it back to markets and investment. Joining us for the hour is partner and ceo at london capital. Lets start with the impeachment inquiry. As an investor can have you view it investor, how do you view it . Do look at how to invest around it or as part of President Trumps approach to the trade war . Certainly the latter. Trying to know what this will mean for trumps willingness and attitude towards lowering the price the tension. The longer this impeachment process goes, the more difficult it will be for trump to shy away from confrontations with china. Ultimately, trump is positioning himself to a potentially uninformed voter base as the advisor of the establishment and defender of the u. S. Against the rest of the world. This is wonderful news for him and him sure he is reveling in this. I am sure he is reveling in this. Of thences the vision little man fighting the establishment. Procedure in senate or congress will increase the perception. I would be shocked if trump did not take advantage of this and almost delaying any sort of resolution around trade wars. Lets not forget, that is another significant letter he can pull when it comes to the electoral voter base. Nejra i was totally inclined to agree with you yesterday and then you see the u. S. Market and President Trump himself coming out and saying a deal is closer than we think. ,hat made me stop and think actually, is going to make him a back off . But you think it will make him go harder. Does that mean we take risk off the table . Pau not necessarily because of impeachment. Certainly, there is no probability, zero probability this will eventually lead to him being demoted. That is a fact. Given that, i would very much say it is not going to be super impactful for risk markets. The overall picture behind this political theater is one of slower Global Growth and the potential for one or two shocks to take us from lower growth we can live with to higher likelihoods of global recession, which markets would be unable to deal with and precipitate further correction. That is the main reason we need to be careful and be cautious to havesk as opposed the impeachment process will play out. Ultimately, i dont think it will amount to much. Nejra one more thing in the wall of worry. Pau from london and capital stays with us for the hour. Dont miss our exclusive conversations with the ceos of tesco, ab inbev, and minister. All that and more, coming up and spains Prime Minister. All that and more, coming up. This is bloomberg. Nejra economics, finance, politics, this is bloomberg surveillance. Pierre moscovici says the eu is prepared for no deal brexit though he prefers to avoid it. The commissioner spoke to david westin at bloombergs Global Business for. Eu and thethe commissioner for customs is prepared for this eventuality, but we do not wish it and we should all try to avoid it. But you know what happens in the u. K. . Every day is a new dream. But it shows there are institutions in this country, the oldest parliamentary democracy in the world, and institutions are resisting. There is a law which has been voted by parliament. There was a suspension of parliament, spring court said it was illegitimate. Of fightot have a kind between the institutions. But a new extension is possible, and at the end, what they need is a political situation that solution. Political solution. But these views are unclear, and on the other hand they always say what they dont want but are on able unable to define their plan on their own. View is that they will need to be a return to the polls and people either through an election or referendum. Alternative, you would be responsible for customs. 31 are prepared on october to impose of the restrictions you need. Simply controls. Tariffs, controls. It is a matter of control. Eu customs and other Member States are prepared. France, i have been the finance thestry, but is also country with the tunnel. I went to the entry of the tunnel in france and they have hired the right people. , theyave trained them have equipped their systems to have those controls. I dont know if it is the case on the other side of the channel. Thats why whatever happens, we need to be prepared. Nejra that was pure moscovici, eu commissioner speaking to bloomberg in new york. But stay in europe. This ecb board member has unexpectedly resigned two years before the end of her term. Essential bank has given us no reason, but she had been one of the strongest opponents of the latest stimulus drive. Last month, she said a new round of quantitative easing was unnecessary and should be used as a last resort. Still with us is power is pau from london and capital. How do you interpret this . Pau i am surprised at her strong position. We are dealing with a consonant that is struggling to find sources of growth. . Why . Because there is no structural reform and because of germany does not allow the overall provide a bit of fiscal stimulus and counteract the fact that we are dealing with brexit. We are dealing with slowdowns and trade falling off a cliff an absence of significant drivers of growth, i. E. Structural reform or fiscal impulse, you have to rely on Monetary Policy to make things palatable and make sure that capital does not go through the roof and companies cannot operate. I am surprised. Im not sure what the alternative would be. Im not sure whether she would want the ecb to stick to their end qe, all qe of a sudden finding that there is no way is consonant can get out of the hole it is in. Nejra you see no alternative for Monetary Policy, but as an investor, surely it makes things more difficult. What are you doing in europe around fixed income . Do you still see value in Investment Grade credit . Pau you dont, you just dont. You stay away unless you are an institution having to match. Out ofy away eurodenominated fixed income. ,ou look at equities particularly any environment where the ecb will be more aggressive in supporting. Potentially, you can see the euro lose a bit of ground. Is resolution around brexit, you will see sterling jump. This is of the one area, the one where one can change relatively interesting value . Otherwise, it is quite difficult. Asra do you sell subscribe value having more to run over growth . Pau not necessarily. Yes, if you just look at the valuation side of things. It is attractive and tempting to try and buy chip companies. Almost count on the fact that we are seeing an acceleration. Think there has been a technical reversal over the last couple of almost one month. Where value has not done a lot better than highquality growth. Environment picture where the world is slowing down, Political Uncertainty combines with fundamental absence of growth drivers, i would rather ,e in slightly better priced i. E. More expensive, high quality earners as opposed to more cyclical, cheaper but obviously cheaper for a reason value stocks. Nejra are you expecting recession in germany . Pau you could see that can actually. Actually. That would not surprise me. Industrial production, a leading indicator, is not is already suggesting that. Ifould not be surprised germany was in a negative growth territory. Nejra up next, johnson goes on the attack. Fresh from his loss in the Supreme Court, he challenges his opponents to trigger a confidence vote. We speak to one of the debt liberals next. This is bloomberg. Nejra this is bloomberg surveillance. Lets bring you another exclusive interview from bloombergs Global Business for. The spanish Prime Minister has sold us a note deal brexit would be the biggest risk to his country. Pedro sanchez spoke to our editor in chief. I had the opportunity to meet him at the g7 summit. We had a conversation that was really positive. Of the rightstee and freedoms of our citizens in the u. K. And spain. Spains economy is very affected by brexit. Arguably the third most after britain and ireland. It is indeed. It is one of the Major Economies in the European Union. We receive a lot of tourism coming from britain and we appreciate british tourism. That is why it is so important for us to be ready in case we have a no deal brexit. Another big issue is on the scottish. Is the scottish. If they have a referendum, last time, spain made it very clear that they did not want scotland to rejoin the European Union. In your view but if scotland said we wanted to come back to the European Union, which spain now be more welcoming . [laughter] it is a very tough question. It is a domestic and political issue and i respect bridge politics. British politics. We are following closely what happens and we have our territory of tensions and persistent problems in catalonia. Understand the problems in catalonia that a referendum is not a solution. It divides societies and creates a huge fracture in societies. Does not give a positive or constructive way out. I think it is much better to open a dialogue in order to restore and rebuild. Left of then European Union and the scots were thinking about going independent, spain would not necessarily be very supportive of that. We would think about it. You saw president rouhani yesterday. Do you think the iranians were responsible for the drone attack . Apparently, the information we get from Different Countries is the way you are pointing out. But the opportunity i have yesterday was to send him a clear message from the European Union. Idea,s, its not a good not a positive idea to withdraw from the nuclear agreement. And that, of course, spain is willing, with other european countries, to reinforce our commercial relations with iran. Nejra that was the spanish Prime Minister Pedro Sanchez speaking to bloomberg editorinchief john micklethwait. Green on the screen and european equities but futures are struggling for direction. This is louvered. 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. Nejra the impeachment inquiry gross. Trump dismisses allegations as a witch hunt while democrats see their case bolstered. The director of National Intelligence testifies today. Johnson doubles down. The u. K. Refuses to apologize for suspending parliament. Sabinerd member lautenschlager unexpectedly resigned. This is bloomberg surveillance. I am nejra cehic in london. President trump urged ukraines leader to investigate joe biden according to a memo of their call. The u. S. President asked his counterpart to contact the attorney general. Trump says the rough transcript of their conversation reveals no pressure whatsoever, but democrats say it justifies their impeachment probe. Closer and closer to a deal with china. Those are the words of President Trump. He says both sides want to make a deal, adding that there is a good chance it will happen. It ends the threat of u. S. Auto tariffs on tokyo. European Central Bank Board member Sabine Lautenschlager has unexpectedly resigned more than two years after her term was due to end. The ecb gave no reason for her departure, but she was one of the strongest opponents for cutting rates. She will step down october 31, also Mario Draghis last day in office. Benjamin netanyahu has been tapped to form israels next government. It comes just a week before netanyahu faces a crucial corruption hearing. The allegations have clouded the last three years of his tenure. Softbank is in talks on whether to increase his pledge in investment in we work. The original value was part 1. 5 billion for 1. 5 billion. It comes as we work is likely to postpone its ipo until next year with its ceo stepping down. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am Sebastian Salek and this is bloomberg. Nejra thanks so much. Lets check in on the bigger stock movers. A lot of these big movements we see today are to the downside. I want to kick it off with abm criminaling a investigation to do with antimoney laundering. Imperial brands plunging this morning, down some 11 . They cut their revenue guidance and see sales coming in at about 2 . This is due to a slowdown in vaping in the United States. We have seen in the coming weeks this a backlash against ecigarettes. Pearson down more than 18 . They see revenue coming in at the lower end of their guidance range. This has to do with sales and u. S. Universities in u. S. Universities. Nejra President Trump followed his comments a at the u. N. Saying a trade deal could come sooner than we think. He said he would not accept a bad deal. Twoours later, he said the sides could reach an accord. Guest iss as our our guest. Even though equities s p 500 is not that far from a record, we have only gained 4 since january 2018 when the tariffs started to be imposed. Looking at the state street Global Market index, which shows investors are the most cautious on equities since the financial crisis. It tells me a lot of money is waiting on the sidelines to be put to work. Is your money part of that money . Part of that money, not all of the money. Thankfully, we have quite a bit of money in equities in general and u. S. Equities in particular. It is good news for equity markets. We are not good news because we are about to see a reevaluation in prices, but it doesnt suggest it will be very difficult for us to see the kind of a melting down for equity 0 , 30 sort of correction. I think there are enough people who have been waiting to go in and that will be a support for markets. Having said that, i would not take this reasonably bullish indicator. Whenever the market is worried, its always a good thing. As the evidence to pile up on cyclical growth equities. The environment still remains quite sobering. We see an absence of growth drivers, we see a lot of debt in the system as well. We see Central Banks worried for a reason. I would suggest we are a bit closer to the kind of environment where you still want to be in equities, but you want to be slightly safer equities. Equities perhaps well have an income component to them as opposed to equities that will provide you with capital gains. Nejra if you look below the hood, defensive equities have been outperforming in the rally as well most recently. If you look at u. S. Assets there , and a lot of people would say in the event of global slowdown or any of the bad things, the u. S. Is a defensive market. Would you agree . If so, do you prefer u. S. Fixed income over equities . You do. Yes, until we get a much more recession, bear market. U. S. Centric assets will still have that safety haven component, which makes it a bit more attractive. It is on the bond side of things where opportunities become a lot more appealing for investors. First, u. S. Equities are a bit richer than other counterparts, but also, the central bank in the u. S. Is very determined to continue lowering rates, which is good news. Also, of course, in the u. S. You find a bit more opportunities in credit versus financials. We have seen quite a significant amount of deleveraging by u. S. Banks. I still think about the buying of debt issued by u. S. Financial institutions remains one of the better spots in a world where it is quite difficult to access any meaningful yield or meaningful capital appreciation. Nejra so u. S. Financial credit is something you are looking at. Our guest stays with us. The u. K. House of commons has begun sitting after yesterdays heated session. The government is expected to put down a motion for another break so the conservative party can hold its conference. We watch for headlines from that. This is bloomberg. We do also have lines actually parliamentercow same did it self no credit on wednesday and saying the atmosphere was the worst ive known and toxic. This is bloomberg. Traditionincipal and le and tradition principle and tradition. I have overnight received an 32 2 senior members pushing the consideration for Going Forward. Manifestly, any such formal structure, any such conference, deliberation would not take place under my aegis. I just want what is nejra this is bloomberg surveillance. I am nejra cehic in london. British Supermarket Chain tesco turns 100 years old this year. Lewis,panys ceo, david says his key priority is fighting food waste. He spoke to Francine Lacqua at the Global Business forum in new york. This year is very important, because one of the things we have announced is we want people to be aware that not only is food waste morally wrong, it is commercially rug, but also environmentally wrong, but also environmentally wrong. A percent of the total Greenhouse Gases emitted 8 of the total greenhouse is emitted, which for a country would be third. Francine are consumers asking for this . Increasingly. Consumers are increasingly environmentally aware. The environmental agenda is actually really quite francine how will that impact the way people eat in 10 years . If you look around the world, if you look into the developed world, we need to think a little bit on the fact that we waste a lot of food after we have bought it. How we purchase and consume food, so Portion Sizes are changing. Elsewhere in the world, its much more about, how do we actually provide the food . There will be changes, depending where you are in the world, there will be changes. Here in north america and europe , it will be about how much food we consume. Francine what do your customers want of the . Want of you . It is always about service, quality, choice. Thats what tesco has done. We are 100 years old this year. Thats what we will focus on for the next 100 years. Francine we will talk a little bit about brexit and things outside of your control in a second, but is there anything in your control that you could change in the way that tesco operates, what would it be . Food waste. One third of all the food grown in the world is wasted or lost. Billion dollars of value destroyed and takes 25 of the worlds resources to produce it and then we waste it. Announcedthis week we the 10 largest Retail Service and food providers will recruit 20 of their biggest suppliers against the journey of food waste. As an industry, we can do. Nejra that was the tesco ceo speaking at the bloomberg Global Business forum in new york. Avian air shares are plunging after authorities opened a criminal probe into the bank. They are saying the bank did not conduct sufficient checks on its clients. They are cooperating fully in the investigation. Imperial brands is also falling. Earnings growth ground to a halt this fiscal year. Is blaming it on a slowdown in beeping sales in the u. S. Vaping sales in the u. S. Eloton has raised over 1. 1 billion in its ipo. The listing values the company at about 8. 1 billion. The firm is expected to reap a 1 billion profit on its investment. Nejra lets get back to brexit. Boris johnson made a defiant appearance in the house of commons after he was forced to fly back from the u. N. Following his defeat in the u. K. Supreme court. In heated exchanges, the Prime Minister refused to apologize or resign and repeated his challenge to the Opposition Party to vote for a fresh election. ,oining us now is chuka umunna and still with us, our guest from london is Michele Norsa, and still with us, our guest from london. There are two levels of concern. One is more technical related to exchangerate. The second point is collateral damages. I think reputational damages. We have seen often in the past, countries and products being somehow boycotted, but not in a strong way like the japanese have been doing. But i think the sentiment towards British Companies and british products could deteriorate in europe. It was very impactful, for example, the thomas cook failure. It is something that impacted a lot of people. Everybody has been traveling with them, so the way it collapsed. This kind of thing may impact and will impact, so i hope that most of this problem will be addressed. Also, imething which is would say, impacting the top class of accounts. Everybody wants to send their children to a university or college in the u. K. Most italians still think london is the best city to live, so we must protect this. Nejra it is interesting what he is saying about potential boycotts of u. K. Products. Are you feeling you might want to stay away from u. K. Assets, u. K. Equities for example . Attractive,ties are well priced, and there will be some resolution. Any resolution, even if it is a pretty bad one, will be good news for markets. There is a lot of cash on the sidelines waiting to be deployed in u. K. Assets. Therefore, you want to almost sort of get ahead of that development. On the others, if on the , if it, if the gets extended down the line, you were to see a no deal brexit, you would see the kind of disruption that would take those prices a bit lower. We are beginning to dip our toes in the water and progressively an asset class or region within an asset class that like us, many other Asset Managers have been ignoring. Nejra speaking of opportunities for business, yes, there are concerns around brexit, particularly around a hard brexit. How can businesses use that as an opportunity . Michele i would say the opportunity probably is to become more competitive. Once you have a difficulty on a market, hong kong, or the volatility of the british market, you can take advantage in the organizing. You can probably get better leases. I think not all of the leases in london will stay so high. For a very long time. People who are looking for new spaces. Definitely you could also try to become a more competitive become more competitive. Ssia Michele Norsa from stays with us. U. S. Farmers and japanese automakers get a helping hand as the two countries find a trade deal. Does it clear the way for a deal with china . We will discuss trade concerns. This is bluebird. Bloomberg. Nejra still with us, Michele Norsa from fsi. Great to have you with us today. I want to take the opportunity to ask about gucci. More than a dozen former and current gucci executives are being targeted by this tax investigation for payments received abroad. Are you concerned this issue might spread to other italian fashion houses . Michele no. There were opportunities with swiss locations for the company, in terms of logistics, of course, and also fiscal positive implications. Several companies took advantage of it. Very specificly a subject related to a very limited number of people. What hurts is it keeps going into the news. Any fiscal process takes a very long time. Is doing such nice work in strictng with very behavior and governance. I hope it can clarify fast, because also, you dont really understand who was involved or not. I think the most important thing is to get it very clear. Nejra youve got a lot of insight into the world of fashion. You are out and about during the last fashion week as well. Are there any brands you are looking to invest in a next . Michele yes, of course, but i cannot mention them. Smallre very shareholding. I am consulting and a board member of many different houses. Victim become extremely interesting and timeconsuming. The speed of change is faster and faster every year. Nejra for an active investor like you, you will want to keep up with those changes. Are you invested in the luxury space at the moment and in what capacity . We are not but it is one area that is very clearly subject to trade war discussions, very subject to what the euro does. War atentering a period some point we will see a resolution of trade wars, maybe after elections. We might have to wait another 12 months. That would be very good news because that would be a problem taken out. When you come to look at the euro zone and what the ecb is doing, i would suggest we are entering a period where the tailwinds will be a bit more positive for european luxury rents. Of course, brent. Of brands. Of course, the devil is in the details. That are so many ways consumers make up their minds when deciding what luxury brand to go for. We need to not just talk about the luxury sector in general, but also about the particular strategies of some of these companies. Nejra feel free to have a conversation with michele if you have any questions about luxury, if youre looking to invest. What he was saying about European Luxury Companies getting a tailwind in relation to the trade war. Whats your view on the impact on the luxury market from the trade war as it stands . Michele the trade war that has been impacting specific sectors, specific locations in the world. Probably most important, in fact, is on china and hong kong. From one point of view, the hong rebellion also generated a break between china and the european countries, the european brands. Makecould in a certain way life for some of the products more difficult outside. On the other side, the opportunity is the Chinese Government is pushing very hard on local spending, local consumption, not only in luxury, but generally, and it is very effective. What companies are losing in hong kong very often they get back from chinese local markets. Nejra great to have you both with us. Thank you both for joining us today. , industriala partner at fsi. Bloomberg surveillance continues in the next hour. Francine lacqua joins tom keene in new york. Dont miss our conversation with oecd secretarygeneral. This is bloomberg. Custom ink helps us celebrate and drive our students achievements with custom gear. They love custom inks different styles and designs. We love how custom ink makes the process simple with their easy to use design lab, expert artists ready to help, and unbeatable customer service. Custom ink allows our kids to show everyone their accomplishments and the pride they have in our school. When we place an order, i know they got our back, so we can focus on the kids. [narrator] custom ink has hundreds of products to make you look and feel like a team. Upload your logo, or start your design today, francine the impeachment inquiry grows. Trump dismisses allegations as a witchhunt while democrats see their case bolstered. The director of National Intelligence testifies today. Boris johnson doubles down. The u. K. Prime minister refuses to apologize for suspending parliament. Ecb board member Sabine Lautenschlager unexpectedly resigned. Was this a vote of noconfidence in Mario Draghis stimulus plan . Good morning, everyone if you are watching from asia. This is bloomberg surveillance. We are live from london headquarters. If you are Market Participant today, it is all about politics. There was that surprise resignation from the ecb and we need to understand whether that will complicate or make Christine Lagardes job that much easier when it comes to cutie. Tom you some qe. Tom you saw madame lagarde moderating yesterday. I heard matt millers interview with axel weber and this whole idea of how they generate fiscal stimulus in europe. To me, it is a mystery. Francine we also had some good conversations. Even if germany were to put some fiscal stimulus, where were they put it . In for structure pretty strong infrastructure already strong in germany right now. Lets get the bloomberg first word news. President trump urged ukraines leader to investigate joe biden. That is according to a rough transcript of their phone call. The u. S. President asked his ukrainian counterpart to contact the attorney general and his personal lawyer regarding the matter. Trump says the summary of their conversation reveals no pressure whatsoever, but democrats say it justifies their impeachment probe. In the u. K. , Prime Minister Boris Johnson came out fighting in his first appearance back in the commons. He refused to resign or even apologize. He said the Supreme Court was wrong in has suspension of parliament his suspension of parliament. Imperial brands is falling this morning as the u. K. Tobacco company says Earnings Growth grounded to a halt this fiscal year. It is blaming a slowdown in sales of vaping products in the u. S. Amid a rising backlash against ecigarettes and a continued decline in smoking. 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. Tom thanks so much. Equities, bonds, currencies, commodities. Dollar strength is my lead item. Futures churning. 15. 68 in the yield. A lower yield by 1. 70. A lot of gyration in the yield in the last 24 hours. The dollar, 99. 03, that is a big deal on the standard dxy. This is not the bloomberg dollar index. Sterling pulling back, euro pulling back, you see some Dollar Strength. That is a landmark to see it over 99. Francine i am looking at european stocks. They are struggling a little bit for direction. When we woke up this morning, they were down. We had a bit of a mixed reaction when it came to asian shares. They are trying to figure out what these next developments in trade, in Political Drama actually means for them and looking also at treasuries climbing. Gold climbing following a plunge yesterday, so there it is. Tom very good. I want to show the dollar chart. This is the bloomberg dollar index. It is actually really good mathematics and it does not have the angst of a lot of other dollar charts. Nevertheless, the president s selection here, Dollar Strength president s election here, Dollar Strength. We are just near or just above the recent trend. We need to get started with any number of things, but of course, this historic moment in washington really something. The bloombergk opinion columnist for being with us yesterday on short notice from harvard with his wonderful book on impeachment. Here is the latest story. Adjacentyork times and this is what you are seeing to our global audience, the tear apart of the transcript with the ukraine leader. Our chief content officer joins us and we are thrilled that hugo rogers could be with us from deltec. We have gone through this statement. Now we move onto the next day. The testimony this morning is key. Yes. Thee special report special report was transmitted to congress and now the acting dni director will testify before the Intelligence Committee. It will be interesting to see whether we hear anything about that testimony. It will be behind closed doors. We may be able to get some sort of inkling of what goes beyond that transcript. Tom this is a newer position. I want you to compare and contrast the dni director, and this is the acting director, with the national security, what mr. Bolton was doing earlier. The report does fbi, cia report into him . They do not report into him but his position is unique. Excesses among the Intelligence Community that there and that threatened the American People get transmitted to congress if it rises to the level of concern. The law is unambiguous. Those reports must be turned over to congress. That did not happen here. Francine what does this mean for 2020 . Only three president s were tried to be removed and that way. Every time, the party that initiated it won the next election. People forget that. I was thinking about the nixon impeachment driving here today. It is so different from this situation. There were conspirators all around Richard Nixon which he was complicit in, so there were tons of witnesses who could come forward and give texture. This is only one person and that is donald trump. So the real question is, will this particular incident rise to high crimes and misdemeanors that the house will go on and passed to the senate a vote on and pass on to the senate. In the senate, it would be a huge hurdle to get a conviction. Francine which means it could backfire against the democrats . Thats what caused nancy pelosi to move so cautiously. All the polling shows that the public is not in support of an impeachment proceeding. What will be interesting to see is to see the polls in the coming days as a result of this ukraine incident and whether there is an impact on the impeachment the. Tom i want to view. Tom i want to turn to another topic. Hugo rogers with us with deltec. In the back of this research note, you mention this repo market issue that will not go away. You have a brilliant sentence, unorthodox monetary policies. Hoursding in the last 24. An expert on the repo market and others are still focused on this mess and you go to unorthodox monetary outcomes. Link those. Rememberple have to the open Market Operations were the norm before qe came in, before we started anchoring at the lower bound the fed fund targets rate. What happened in open Market Operations and restarting open Market Operations is youre seeing the scarcity of reserves come back into the system, or that circumstance reemerge. The surprise, i suppose, is that public markett to operations yet. This would be tantamount to almost openended quantitative easing. Tom some call it qe light. Public officials and former Public Officials have an ingrained need to say everything is fine. This is the angle, vice ferguson with us yesterday, bill dudley with us a few days ago, and others. I hear grizzled pros go wait a minute. What is the wait a minute on a thursday morning . Hugo this is qe light. What is going rock to mean that you are wrong to mean that youre having to lunch qe light launch qe light before you are ready to make that announcement, before employment and so on is bad enough to lunch official qe launch official qe. That is the excess of reserves. Francine the only . Its really want to know is whether we are creating the only question markets really want to know is whether we are creating bubbles. Are we . Hugo i would suggest the open market is a bubble of epic proportions. If there is a big bubble out there, we think it is in the bond market. , i suppose, isn not whether it is a bubble or not, but how does that resolve . When you are still willing to pump in stimulus when the ecb is on the road to qe forever, that open market operation we saw two weeks ago, is there is no end to that quantitative easing within the program. The bubble is continuing to receive liquidity, continuing to be pumped. The bubble continues. Tom the bubble continues and the drama continues. Thank you for the comments. He will continue with us through the next halfhour. Hugo rogers with us as well. He will be introduced to the nation today, there is no other way to put it. Im not a big fan of the phrase spy chief, but maybe that is what he is. Mr. Maguire will testify. Really interesting. Joseph maguire, the acting director of National Intelligence. This is bloomberg. Trade wars are not good for anyone. They are not good for the u. S. , they are not good for china, they are not good for emerging markets. While globalization has been great and trade has lifted hundreds of millions of people out of a pretty, there is out of poverty, there is the other side of that. We look at china perhaps in a different way. There are clearly serious trade related issues that have to get dealt with. I look at china as more as a glass halffull. The Chinese Government has many more levers to rely upon than most other governments do. I think they are very focused on ensuring the effects of the trade tensions are not felt to the full extreme. Two countries have started as a result of false starts and a variety of other tactical stuff, you know, are starting to decouple, which is very dangerous. Trade has never been reciprocal, but closer to reciprocal in a way that is good for everybody. I hope we get there. I do not expect it to happen before the elections to tell you the truth but i hope that after that we have a fair trade deal. Francine those are some of the highlights of business and government leaders speaking about trade at the annual bloomberg Business Forum in new york city. President trump has set a trade deal with china is getting closer and closer. That could be obligated by u. S. Sanctions on chinese Tanker Companies for continuing to carry iranian crude. The president signing a limited pact with japan that eases access for over 7 billion in u. S. Farm goods. Lets get back to hugo rogers from deltec and bloombergs chief content officer. When you look at trade, what is the level of trade confusion . Are we closer to a deal, are we not . Donald trump got asked that question specifically at his press conference yesterday afternoon. If you watched his reply, it looked like it was a casual, offthecuff, yeah, we are getting closer with Steve Mnuchin standing there looking confused as to what he was talking about. I dont know that a casual, offhanded remark represents progress. There are discussions coming up in two weeks, but this is going to take a tremendous amount of time and detail. Intellectual property is still the gorilla in the room. There is no sign of progress on that issue. Francine do we think the president wants a deal and is the president distracted because of, you know, these proceedings with possible impeachment . I think he wants a deal on his own terms. He has said himself he does not need a go to win reelection. The democrats have been pretty quiet on this whole issue of china and there are many off the record that will back Donald Trumps stance on china. I think china is in a difficult position. If they want to get a deal with the United States, they are going to have to move. Tom how does this for the into investment fold into investment . Investors . T mean for i cannot get there, i cannot link trade over to what i need to do with investment. Hugo the trade issues feed into Economic Growth, as you just pointed out. If the sanctions, the economic sanctions, the tariffs ramp up in the way that has been tabled, to can actually see a hit consumption, because prices rise. Thats why this latest round of tariffs has been slow in its gestation. For china itself, though, it hits margins directly. That is why the chinese have rmb to fall. The there is some risk that the consumer gets some price increases that damage their net income, effectively. Francine thank you both. Hugo rogers from deltec stays with us. Lets check on some of the european movers we are watching out for this morning. Some of the biggest moves come moat avn armo, Imperial Brands down, and pearson plunging. Have plenty more on your stock movers. This is bloomberg. Is bloomberg surveillance. Lets get the Bloomberg Business flash. Softbank is in talks on whether to increase its pledge of investment in we work, according to the financial times. The original value was for 1. 5 billion, but the paper reports it is looking at whether to provide an additional billion dollars. This comes as we work is likely to postpone its ipo until next year with the chief executive stepping down. At ericsson expects to pay 1 billion to resolve a u. S. Probe. The investigation was into breaches of Business Ethics in six countries, including in china. Ericsson has cooperated since 2013. It is one of the costliest Corruption Cases on record. Raised over 1. 1 billion in its ipo. The Fitness Company pricing shares at 29 a piece and the top of its targeted range. Aboutmpany is valued at 1. 8 billion. The firm is expected to repay 1 billion profit reap a 1 billion investment profit off its investment. Francine we are getting some breaking news of the chief executive of Deutsche Bank. He is speaking at a conference right now in frankfurt and saying that europe will see banking consolidation to lower costs. Remember, tom, we were talking about them potentially merging with commerzbank and that did not happen. He has also saying that europe needs the right framework for consolidation. I wonder whether that is just a dig at regulators, that so far people say have actually held banks back. Tom i would say hes managing the message in frankfurt this morning talking about better Economic Growth in europe right. Hugo rogers here. Both of our guests have taken space at we work and they join us. Here is the vote of the street you cannot vote. With the equity because they cannot get it done. They have a bond that has migrated south since the middle of september. You have enjoyed a move on your bond price down to 92 and at 9. 72 , 10 yield beckons as well. Hugo the bonds, it is the company done is the company done . Maybe not yet. They are having to pull an ipo until next year. They need the ipo to release the funds from jp morgan to keep the machine rolling. I think this is indicative of something we have spoken about in research notes. The unicorns are dying. Maybe not debt, but dying dead, but dying. Tom is a game over . It came over . Hugo it all ties into this unprecedented it all ties into this unprecedented bubble in the bond market. All it takes is some existential shock and these companies are in real trouble. Their Business Model falls apart. Aswork likes to cast itself a tech disruptor. It is a real estate company. Israel question oh whether their business that it is a real question whether their Business Model works it is a real question on whether their Business Model works. Francine who is to blame . Is it the banks never blame banks . Never blame the banks. It is exactly the conversation we had a moment ago. When your cost of capital is zero, all of these things become infinitely highly valued. Who are the funders at softbank . Their cost of capital is as close to zero as you will get anywhere. They are talking about moving off divisions tom they are talking about moving off divisions. Thank you for joining, head of all of our content on bloomberg worldwide. Hugo rogers of deltec with us as well. There is much more to talk about through the morning on the conversation will turn to a really important oecd report of a few days ago. We will do that with their secretarygeneral. Down in the Global Economy is called for by laurence boone. The oecds secretarygeneral and the 10 00 hour. I am watching in the 10 00 hour. I am watching stronger dollar that has come up against the recent technical resistance to dollar. This is bloomberg. This is bloomberg surveillance. That is a picture of london. It is pretty ugly. Raining for about four days nonstop. I am sure a lot of market researchers are having field trips in their morning notes about johnson and parliament, how it inflamed divisions and opened the skies. Readsure some people will into the fury of the parliamentarian. I watched it yesterday. Tom it was lost in translation for me. Francine a lot of the rhetoric, Boris Johnson got personal, and alienated a lot of people. In terms of temperament management, you would wonder who is advising both parties. Parliament, ar of member of parliament is murdered in the north of england and this was brought up yesterday, i believe in the house of commons. This is really getting personal. Francine that shook the nation. I remember when it happened. It goes to the fact that members of parliament feel like they are in touch with their constituency and many times, risking their lives. The fact that the Prime Minister shut them down because he did not want to hear from them was may be little too much. The u. K. House of commons is returning and we will see what happens next in the brexit negotiations, and what impact that has on pound. To 1. 2xtending a drop 316. 1. 2316. We will see what happens next in brexit. Lets get straight to bloombergs first word news. Ritika the u. S. Is imposing penalties on a handful of Chinese Shipping Companies after they continue to carry iranian oil. After sanctions waivers lapsed, they have been charged with knowingly violating restrictions. The waivers bar the companies from working with u. S. Banks. Violence has been escalating in recent weeks since the collapse of a u. S. Taliban deal. The taliban has been warning voters to stay away from the polls. The incumbent who is facing allegations of corruption and abuse of power, is the leading contender. 18 candidates will be on the ballot. Benjamin netanyahu has been tapped to form israels next government. It brought him a political lifelong lifeline after a stalemate, just weeks before he faces a crucial corruption hearing. 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 reddick a group to. A. Ritika gupt tom we are considering the fourth impeachment after andrew johnson. Johnson is the Senior Research fellow. It is great to have a distance perspective of london as we look at this historic moment from washington. What is original for our global audience is unlike others where the Judiciary Committee leads, we have six committees involved. Lastong will that charade before we get serious and get to a focused Judiciary Committee hearing . Lindsey what we have seen as informal investigations being conducted by various committees. Announcementlosis to undertake a more formal impeachment process, the umbrella will come to fall quickly under the Judiciary Committee. Unlike during the bill clinton impeachment process, democrats have not decided to take an initial vote in tabling the process. That gives them more flexibility to investigate. Tom is it an impeachment process, investigation, inquiry, and less they take a vote . Lindsay the crucial vote will come at the end of the investigation process. There is no need for them to commence with an initial vote. When they get to the end of the investigation process, whether they have a House Majority to say yes, they want to indict the president and have the senate consider a trial for induction. Conviction. Francine what do they need to find, a smoking gun or something less evident . Lindsay they have released the transcript and print quote quote was not in the transfer quid pro quo was not in the transcript. It was an effort to influence the president to look into joseph biden and his son. We are hearing overnight that House Democrats now have a majority willing to vote towards impeachment, but republicans remain quite united behind trump. Mitch mcconnell says it is laughable to think that provides a concept context for impeachment. President trump tweeted he had some of his best fundraising during this period. Francine unless the republican turns against the president or is more strict, does this impeachment process go anywhere . Lindsay that is the big gamble for democrats. This moment that they decided to do it right now. We had 18 months, two years of the robert aller investigation Robert Mueller investigation and they moved forward quickly on the ukraine issue, whether President Trump attempted to have president zelinski look into joseph biden and whether there was an effort to withhold military aid in response. Tore are issues related sanctity of elections, u. S. Democracy, that remain in play. Tom does an impeachment process impinge the president s foreign particularlypinge his trade war with china . Does it change the dialogue . Lindsay it is an interesting question. We have seen before, it is worth mentioning that we have seen president s say they are going to withhold aid until something happens in a country. President obama did this in 2013 in egypt after the military came to power. What we havent seen is that second step, we are going to withhold the aid until you do something, perhaps a favor for me, was the language in the transcript. We have to think about what that means for leaders of Foreign Countries when they take an administrative call. In terms of u. S. China, it is interesting to see the administration slap additional tariffs related to iran, but we think that is not something that will be resolved overnight. The impeachment story will take a while so it diverts assets and headlines. U. S. China,mpact on countries may be turning towards china, but the trade negotiations will be ongoing. Tom thank you. It was a topic front and center. I like Mike Bloombergs statement to mr. Modi, the idea of Climate Change at the bloomberg Global Business forum. Coming up, joseph maguire, director of National Intelligence. Right now, i want to go to the bloomberg Global Business forum on Climate Change. Materially over the course of the last year or two. We do not have the right to exploit our earth. The time is running out for us to reduce Climate Change. I look at Climate Change is a hear cannot make issue. It is the carrot that has got the ability to get us there. To scale up what we are doing today, we should be working much more closely. The private sector and the public sector. This is bloomberg surveillance. Shares of abn amro plunged by the most in more than four years after dutch authorities opened a criminal investigation into the bank under antimoney laundering laws. The prosecutor accuses the bank of refuse to report refusing to report transactions. Pearson says earnings will be at the low of their expected range for the third quarter. They point to weakness in sales to u. S. Universities. Schools have been abandoning textbooks in favor of other learning tools. New primegreeces minister has pledged to improve Climate Change in their country. Here is a conversation with Erik Schatzker. Technically, we have a high debt to gdp ratio, but if you look at gross financing needs over the next decade, they are low. Greece is returning to the market and borrowing at Interest Rates that are much more reasonable. Loansend to repay our imf as soon as possible, and we have filed the necessary documentation. These are expensive loans, so our debt will look much more reasonable, taking advantage of the lower Interest Rates. Moreebt be much sustainable if we manage to restore high growth rates. Erik i know you feel straitjacketed by the primary surplus. A previous government agreed through 2022. Have you talked to your creditors about bringing that down to a more realistic level in the near term . Of course we have, and i have made the case at the very beginning that these primary surpluses are a relic of the past they were put in place and a time where there was little trust in greece. We are working to restore trust in the economy and the government. In a low interest environment, we need to rethink those high primary surpluses and what they mean for debt sustainability. I first want to restore the credibility of the government, put through a aggressive reform agenda and reduce the surpluses for 2021, not necessarily next year. We feel confident we can meet our obligations for 2020. We will submit our budget and the next couple weeks. We are in discussions with institutions as we speak, but we feel comfortable we can find a compromise that will not endanger fiscal sustainability, allow us to push forward with our tax agenda, and keep alive thediscussion around reduction of the primary surplus. Tom good morning, everyone. There, then is still structure of european science and how it finance and how it redounds on the rest of the world. With us is hugo rogers. Greece,ld days, portugal, ecuador, they did a debt workout. You extended maturities, lowered the interest rate. We did not do that this time, did we . Hugo no, we didnt. E. U. , and the imf come together to find out. The creditors are german. The creditors are across the e. U. , so that was a message to avoid causing that. Tom yesterday there was a headline, Deutsche Bank is going to bring the dollar amount where you need to take the price of negative Interest Rates down to retail investors. His 2020 the pain of negative rates and the lack of debt workout . Hugo yeah. The model here is japan. We have been here before, negative Interest Rates across europe, past to consumers. What do i do with my money . It is literally under the mattress. It is a very large distortion that Central Banks feel they have to do to avoid a debt inflation spiral. Francine this goes back to the question about bubbles. If you are an investor or even mr. John and need to put some money somewhere, you are looking for yields. Is there too much risk in the market . Hugo the answer is yes, but back to the question we were asking earlier, when does that end . Example we used earlier, when it is costing you to lend money to somebody which is happening with negative Interest Rates, you push up valuations to extreme levels. You see that in the bond markets. That is a game that continues when you are a buyer of last resort, central bank. Francine it is linked to the repo market. Investors could go into liquid assets. Audio] circumstance. You can see a big mean reversion. The Erik Schatzker is that plaza hotel talking to the Prime Minister of greece. It is a victory lap for greece. Francine has other stories where there has been stabilization. It has, at the price of negative Interest Rates and the effect on saving and incentives within the greater europe, on a microcosm oris, the success of greece maybe there will be a success for the new managing director of the imf with argentina. It comes at the price of people who do not have a voice. Hugo the savers, you are entirely correct. It is undermining the currency. It is the distortions created by excessive Monetary Policy. Of riskrts the balance and reward for the longterm, we would argue. When you get some kind of mean reversion, it could well be ugly , but it is difficult to pinpoint the catalyst. You are starting to see some catalysts. The repo market was one of them. Excess valuations on tech unicorns are others. Argentina offering a very long maturity bond at 7. 5 , scrambling for yield because there are no alternatives. In the equity market, you could argue it is expensive, but where else you generate income, it is a reciprocal of negative rates everywhere else and you end up with high valuations you can justify as long as the rates stay anchored up low levels. That is why Central Banks find themselves in this conundrum where they must issue stimulus even though the u. S. Unemployment is below 4 and inflation is benign. Francine hugo rogers stays with us. Coming up, we go inside the hong kong protests and focus on the opposition to an extradition bill, wider anger over civil rights. Stephen engles talks to players on both sides, seeking possible solutions to a crisis threatening the future of this unique city. That starts tomorrow. This is bloomberg. At that time of year, if i give you an example, the you today and parts most of its tomatoes from spain the u. K. Imports most of its tomatoes from spain. Tourismceive a lot of coming from britain and we appreciate the british tourism. It is so important for us to be ready in case we have a no deal brexit. Francine that was test goes chief executive tescos chief executive and the spanish Prime Minister speaking yesterday. We see next,hape Boris Johnsons backing backlash with his attacks on opposition politicians, accusing them of surrender. We are none the wiser about what form brexit takes place, but Boris Johnson has had a tough week. Hugo yesterday and parliament was quite ugly. People should not lose sight of this, what is the outcome . Still deal, no deal, except that has taken a backseat. ,t needs an election, we think to get anywhere near no deal. Or some kind of second referendum or an election with the promise of the second referendum built in as one of the offers on the table. Upped theson has stakes. What we saw at the Supreme Court earlier was actually very good. Primacyood because the of parliament as the well of sovereignty in the u. K. Was infirmed. Confirmed. It does not matter which way your political leanings are. Of parliament and the sovereignty of the u. K. Resting in parliament. Francine does that mean there will not be a no deal brexit on october 31, but there could be an election where they campaign for a no deal brexit . Hugo that is the most likely outcome. It is almost a certainty that no deal brexit will be a headline between the parties. The brexit Party Campaigning for no deal brexit and all the other parties campaigning for some second private site, or the liberal democrats are looking for revocation. Tom there will be more scheduled events this morning. Hugo rogers with us, thank you so much. She is looking for sub 5 gdp for china. , and stevenjoins us wieting. 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. Tom this morning, what next for the president . The house and then the senate for impeachment. Joseph maguire will testify before the house committee. Nadler says the president dragged attorney general barr into this mess. It is a messy brexit, boris returns. The markets, we consider the repo mass as the Dollar Strengthens. Mess as the Dollar Strengthens. Live from new york, tom keene. , your thoughts on new york city . I am not escaping brexit. I am getting away from the rain that has been horrific in london. London weather bad, new york traffic bad. Tom what did you learn from mr. Dimon and iger . Or they find Common Ground go at each other . Francine they were trying to do each other like they did in life, but it was interesting to hear about trade and their perspective on where they see trade going, and how much they worry. On london, Boris Johnson sparked a backlash. Sparks flying. It was very italian like. Tom bring up there it is. This brings together iger and dimon. Out walt disney figured around americas love affair standing upand iger for brexit. Francine Boris Johnson address conservative mps in about a half an hour, and the opposition parties are meeting to discuss how to counter Boris Johnson. Tom is that in public . Francine usually private doors, and then they go public. Urged President Trump ukraines leader to investigate joe biden, according to a rough transcript of their call. The u. S. President asked his ukrainian counterpart to contact the attorney general his personal lawyer regarding the matter. President trump says the conversation reveals no pressure. Benjaminy it netanyahu it comes just a week before he faces a crucial corruption hearing. Allegations have clouded the last three years of his tenure. Imperial brands falling this morning, Earnings Growth grounding to a halt. It is blaming a slowdown in vaping products amid a rising backlash against ecigarettes and a rise in nonsmoking. 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. Ritika gupta. Francine in the last couple of minutes, we just found out through the asp, citing the , they of Jacque Chirac former president has died. We will think about what he has given france. He of course was still quite unknown. He was involved in the formation of europe and frances role within that. Tom it is timely to see the passing of mr. Chirac and mr. John major was in the Supreme Court just a while ago. This goes back to chiracs it goes back to de gaulle saying france will be different, we will have a government structure. The government would be intrusive daytoday in society. Chirac, weacque understand through his family, has died at the age of 86. Tom lets move on to the data. We have two wonderful guests. Centric,p, dollars euro weaker, sterling dramatically weaker. Some curve inversion. The vix, 15. 75. Dollardxy. That is very sterling specific to see that Dollar Strength. Francine if you look at european equities, they are jumping around to gains of 0. 6 . Treasuries climbing. I am looking at gold. Yesterday it was down quite significantly at 1507. The dollar steady after rallying the most since march. Fromony among politicians all parties in the u. K. Tom history being made in washington, and our chief impeachment correspondent is kevin cirilli. America has no clue who mr. Maguire is. He will sit down in front of a redhot democratic committee. What do you presume we will see . Kevin it is about the whistleblower complaint which has been formally transmitted to capitol hill within the last 12 hours. Members of the house and Senate Intelligence committees have reviewed that complaint, democrats saying this and boldens their cries for impeachment. That is what i would anticipate the acting director of National Intelligence to face questions on. I want to keep tabs on what republicans are saying. Mitt romney, always somewhat critical of President Trump, saying the transcript was deeply troubling. Tom this is a public testimony in the house with mr. Maguire, but we are all shaded by mueller and the show of it. Do you do a show with the head of National Intelligence . Will people pontificate just ask questions . Kevin there will be pontification and question asking. The Republican Caucus in the house of representatives have defended the president. It doesnt seem as of now the story has moved from the political realm into the constitutional round, but there is a cloud of pressure hanging over the administration and over the biting campaign. Biden campaign. The quinnipiac poll yesterday has senator Elizabeth Warren surpassing joe biden. That illustrates this is not a good news story for President Trump, but is not a good news story for joe biden. Francine what is the likelihood of President Trump resigning before impeachment, and if that does not happen, how much of a backlash is there . St analystll measured at at 22 that he does not finish his term. Not evenonnell has begun entertaining the possibility that there would be a trial in the senate. That is where the process becomes important. Yes, in the house of representatives, there are articles of impeachment and democrats have control. They would send it to the senate and in order to convict, they would need two thirds of a republican senate. We are nowhere near that conversation. Francine are we talking about a smoking gun . Presentsthink it another investigation hurdle for the administration to clear. In terms of the transcript, they released that. There is some frustration for why they would even release that. We are in the middle of this process playing out, and todays hearing is a huge marker. I also think should the whistleblower be made public and testify publicly, that would be another thing to watch. Senator Lindsey Graham still very much standing behind the president. I have not noticed any republicans breaking away from the president. Tom we will have this on Bloomberg Radio and television, the live testimony of mr. Maguire. We will go international in a bit with joyce chang and Steven Wieting, but right now on a domestic basis, Steven Wieting linking the economy into the dynamics of corporate profit. You are the one guy i want to talk to. A huge mystery about the earnings season upcoming. What is the distillate of citigroup on what we will see . Steven i dont think this is a particularly great earnings season. Tom versus our expectations, which way is it . Steven probably better than expectations. It probably will be a quarter where eps is lower than a year ago, but there is a path to recovery. If you have a decent, ongoing demand outlook, you can outlast a manufacturing downturn. It does not stop us from having this manufacturing downturn. Differentof gm is from the longerlasting trade issues, but we are having a deteriorating outlook for cyclicals in the immediate future. That will affect earnings, but we are in all likelihood not knocking down the demand outlook. You find it easy for manufacturing to rebound to the level of demand. Go through some malleability and flexibility of their corporate plan. Does Corporate America have the flexibility to adapt and adjust to a Slower Economy . Canhe income statement, they sustain margins . Can they sustain margins even in a slowdown . Steven sustain, not expand at this point. We have been through a long period of profits outperforming the economy. Diversionsime of between particular companies and sectors. The net is not a large profit gain, maybe 2 this year and without a recession, maybe 4 2020. Francine what does it mean for unicorns . Steven Public Markets, i believe in markets, and Public Markets and investors are making rational decisions about how adventurous businesses that are possible disruptors. We have disruptors that do great things in our economy and sustain gains and advances in revenue for many years, and there are those that dont. Thrilled to have you with us, Steven Wieting with joyce chang in a minute. Coming up, he is the acting director of National Intelligence. He will be greeted by all of america in the house Intelligence Committee. Live hearings on Bloomberg Radio and television in the 9 00 hour, this is bloomberg. There be a level Playing Field in certain circumstances, absolutely . Are there others that need to get dealt with, intellectual property and cybersecurity, of course . We look at china quite favorably. Fair means reciprocal. Reciprocal,ver been but closer to reciprocal in a way that is more fair for everybody. I hope after that, we have a fair trade deal. Francine on the u. S. China trade conflict, jamie dimon and bob iger at the bloomberg Global Business form yesterday. Donald trump set a trade deal with china is getting closer and closer, but could be complicated by u. S. Sanctions on chinese tankers carrying iranian crude. Chang andus is joyce Steven Wieting still with us. Surveillance. We had some disturbing data from china. Manufacturing and retail are getting uglier. How much should we wary . Joyce we estimate the tariffs have taken. 4 off of chinas growth. 5. 8 below 6 next year to , so all eyes will be on the u. S. China trade talks. I dont think you will see something comprehensive, but some partial deal or transactional agreements, that is important for the u. S. Holiday season. The tariffs have taken a toll on the u. S. Household, costing 1000 per household already. Francine is there an indicator in china you would worry about more than others . We saw Small Business confidence turn a bit. Is there something you would watch out to give an early indication of a more significant slowdown . Joyce the market over remain focused on manufacturing data globally, but Property Data is another one, because that is where you have a lot of the chinese wealth being stored. You have the Consumer Sentiment now, the retail numbers are coming out weaker. Tom we are thrilled to have both of you with us. What does china export, with the jp morgan slowdown and the notoriety talking sub 5 tendency for china, the Economic Contraction slowdown, do they export deflation and is it enough to affect other economies . Joyce if you take a look at global trade volumes, we are back to 2010 levels. That is the key thing we are looking at. For asia, 40 of the trade is with asia. I am focused on the trade talks. Any incremental positive moves moved the market. The slowdown in china growth, everyone percent china slows by. 4 . Ws Global Growth tom a global calculus with joyce chang and Steven Wieting will solve the derivative. What does it do to multinationals in the United States . They are exporting their economic slowdown. How do multinationals adapt . Steven it depends on which multinational and if you are dealing with internal demand inside china. Nike could be different. Or, these are tradable goods which have sharp contractions and recoveries. Whether trade uncertain t has pulled forward certain uncertainty has pulled forward certain activity, and we are in a recovery because we have not completely broken the supply chains. We have a great deal of displacement. When you have the two biggest economies in the world in a trade dispute, it is slowing both economies and will impact the world on a net basis. Some countries have seen a large pickup in activity. Broadly within asia, it seems like a gentle deterioration. Francine when does this hit the consumers . This is probably the question everybody wants to know, because if it hits the consumer it gets the recession closer. Joyce i dont think that consumer will lead us into recession, it is the Business Sentiment and. Capex. You are looking at more pain ahead for the next three to six months. That is why the delays on implementing tariffs will be focused on, is there a deal where further tariffs are off the table . If you put the full tariffs into 1500, that takes about in total out of each household. Is onlyreform benefit 1300 per household. Tom wipes that out. Joyce wiped out most of that already. Tom what is your investment stance given all the chitchat . Steven the last month and a half, we have gone from overweight fixed income globally to modestly underrate, with the u. S. Still overweight. We talked about 5 gdp china. We have a 1. 5 global high yield. This dramatic easing of Interest Rates in a slower hurdle year tom do you go to cash . Steven you look at some of the companies whether financial or nonfinancial, that are more cyclical than utilities and not body equivalents, but those that are growing current bond equivalents, that those that are growing current income. Companies that routinely raise their payouts. We have a neutral waiting on global equities, but sentiment is weak bank and there is a path is weak and there is a path to get through this without recension. Recession. Outlast this manufacturing downturn, we have another year of growth. Tom this is one we want to continue, joyce chang and Steven Wieting. We have much more to come. Across all of surveillance, do not forget live at 9 00 the testimony in washington. This is bloomberg. Of focus onlot london, not the weather, but on the house of commons. We heard from the e. U. Saying a deal is less likely after the hostility Boris Johnson had shown yesterday. Boris johnson will address conservative mps in the next couple of minutes behind closed doors. Opposition parties are meeting to figure out a way to counter Boris Johnson. Tom we have a set of headlines, the queens speech requires prorogation of parliament. This from Prime Minister johnsons office. Am bloomberg surveillance, washington that anticipates an interesting hearing. Kevin cirilli will be there. The acting National Intelligence director, this is a relatively new position over the last two decades, essentially watching over our Intelligence Committee community for the legislative and executive branches. We will see that testimony live on Bloomberg Radio and television. Francine lacqua. Francine in new york. Tom a quieter new york with traffic. Lets get to the first word news. Ritika the u. S. Is imposing penalties on a handful of Chinese Shipping Companies after they continue to carry iranian oil after sanctions waivers lapsed. They have been charged with knowingly violating restrictions. The sanctions bar the companies from working with u. S. Banks. Aliens of afghans will go to the polls to elect a new president. Violence has been escalating since the collapse of the u. S. Taliban deal to end the afghan war. Iban has been warming warning people to stay away from the polls. Ashraf ghani is the leading contender. 18 candidates will be on the ballot. Benjamin netanyahu has been tapped to form israels next government. This grants him a political lifeline. It comes just a week before netanyahu faces a crucial corruption hearing. Thegations have clouded last three years of his tenure. Former french president jackson iraq has died. Jacquessure rock chirac has died. He received a suspended prison sentence and did not appeal. He was 86 years old. Francine thank you so much. President two times as and was the person who took his country into the single european currency. Hasrd members resigned. She was one of the biggest opponents to Mario Draghis latest stimulus. Joyce chang and Steven Wieting are still with us. We had a lengthy conversation with Christine Lagarde earlier in the week, and she could not talk about ecb or negative rates. Intimated that her role will be may be much more political than mario draghi in the past. Will she be able to get that muchneeded stimulus from european government . Joyce that remains to be seen. Germany has not changed its stance. I am not sure we can say there will be a big political change, but a lot of leadership changes are going on in europe now. We have had disappointment on the economic data. If you look at the negative yielding debt, it is two thirds of european debt. Europe, will remain on with the question of with the start of a recession, are we looking outside of the u. S. Where we will see the recessionary risk accelerate . Francine they seem to be taking the brunt of the trade war and Monetary Policy is maybe not as effective in europe. Steven the economy is crawling ahead despite really strong monetary stimulus. It is not the same as falling apart. Industries are not contracting rapidly. Post to u. S. Election, there are risks on the trade front centered on europe, but if you think about global companies, whether they are Luxury Companies that have a great deal of appeal in asia, pharmaceutical area, these companies have an Equity Dividend yield 300 basis points above their debt cost of capital. The ecb is ensuring Interest Rates are no barrier for a long period of time. Lagarde would argue if you really did want stronger growth, you would have to do something on the fiscal front. Tom the study of nation to nation macro prudential risk, do we risk having the macro prudential good feeling of europe break down as they struggle to find a socalled fiscal space out there . Joyce they have put mechanisms to keepe in place anything systemic from being a problem. Ecb will help the bank and come, so you are looking at something that is gradual liketom 90 days or a decade . Joyce isi there a japanzation of europe going on . Tom how does Christine Lagarde push against that . Trichet understand how or draghi or lagarde cajole twoc germanic loosen the purse springs strings. Joyce the number of policy options, they have not come through all of them. Francine if germany were two loosen the Purse Strings and spend, what would they spend on in terms of stimulus . Joyce there is the whole way in which we look at certain sectors and what has been guiding it. This goes back to the trade issues. One of the Big Questions we are being asked, what will happen on the trade agenda beyond u. S. China . Those are some of the questions we have been fielding. Tom we will continue, joyce chang and Steven Wieting. Climate one of the themes at the bloomberg Global Business form. The conversation has amped up materially. We do not have the right to exploit our earth. Time is running out for us to address Climate Change. It is right they hold our feet to the fire. I look at Climate Change as a huge economic issue. It is the carrot that has the ability to get us there. To scale up what we are doing today, we should be working much more closely, the private sector and the public sector. Bloomberg surveillance, Francine Lacqua and tom keene in new york today. We have extraordinarily good conversation for global wall street. Joyce chang and Steven Wieting, i want to do single best chart. Direct set from yale , professor ibbotson. It was influential 40 years ago. I used the dow. I pick it up from the guadalcanal low 1942 and up and up. Witho you stay on board this proven American Trend of capitalism, given all the worries of this thursday in the world . Well raise future returns. 2018, wheneriods, everybody believes money is easy, look what it does to returns. That makes me a little more encouraged. The income statement to the sales dynamic, this chart is priced to revenue, price to nominal gdp. Can you assume you will see those deliver out sale . Steven there is a nice gap where in the 1970s and 1980s you were below the trend. In the 1990s, it looked like the future would be much better than the past and now, we are just a little above u. S. A little above. U. S. Shares are the best performing assets. Fivee looking at about a for dividends. Tom the actuarial function of negative one. I am depressed. Francine we should overlay the ibbotson chart with the gdp chart to see whether that is justified because at the end of the day we are seeing a downturn. Year with the average 10. 5 ,l Government Bond at the rest of the world seems to offer better valley. Value. Calls sayf contrarian to look at u. S. Equity stocks. Francine i want to talk about repo, because we have not talked since what happened last week. How should we read the plumbing that is the repo market. Joyce we think it was a plumbing problem that caused volatility. It is something where you have a mismatch and what the demand was in the fed had to step in. You will see these kinds of issues with us. We had the august move in treasuries. In december, you will have liquidity concerns, but that is a feature of the market. We tell investors we think half of the move was technical and half fundamental when we look at markets. Tom i want to go to the chart, this is the great i red jersey chart. Ira jersey chart. Qe is where the concert is where the conservatives want to go. The purple line is stasis, flatline year, and the blue line is what is third jersey and our team suggest will be the Balance Sheet rebill. Is it qe lite . Joyce you have technical issues in the market, but qe lite is here to stay. Accommodation will remain in ways as necessary. Market volatility will pick up at certain peak bang points at certain peak points. What does qe lite due to your world . Steven a year and a half of shrinking lending to the treasury and Mortgage Market while you were executing nine rate hikes, with the Federal Reserve not really knowing where demand would be was more aggressive with the slow pace of tightening. Threatetary policy was a to end the American Economic cycle in 2018. Yields are low again because they have changed that. The fed has veered close to the cliff and has pulled away. They will be more protective to the recovery. This is one sign on reserves the fed experimented too aggressively. Francine thank you both for joining us, Steven Wieting and joyce chang. Bloomberg goes inside the process in hong kong and a special program where we talk to the special players and try to figure out what comes next. This is bloomberg. Ritika shares of abn amro plunged for the most in three years after dutch authorities opened a criminal investigation into the bank under antimoney laundering laws. Prosecutors are accusing the bank of refusing to report suspicious transactions. Pearson says earnings will be at the low end of their expected range for the third quarter. They point to weakness in sales to u. S. Universities. Schools have been abandoning traditional textbooks. The uks biggest grocers are warning of the threat of a no beal no deal brexit. Fresh food items are most at risk. It is a sensitive time for the agriculture industry. The u. K. Looks to other countries for fruits and vegetables. At that time of year, if i give you an example, the u. K. Bought most of its lettuce and salad from spain. It all comes down to what happens at the border. Ritika that is your Bloomberg Business flash. Francine that was an important conversation. We spoke to the tesco chief executive. They arete this at the heart of any breach these from france. Francine because it is close to christmas, there are concerns there would be shortages of possible things you eat at christmas. I did not know that most if not all of the tesco turkeys are british. Lets get back to joyce chang. When you look at brexit, all the options seem to be on the table. Parliament is furious with what happened. Boris johnson had a tough week. Does that mean it is a most impossible to find a deal . Joyce i think the market is assuming you get elections and this becomes more of a january, february discussion. I think the markets still think the possibility of a no deal brexit is not the working narrative. I think that is what the market is feeling, but the currency is moving on this. The110 decision shows level of dysfunction that will not go away. Francine what does it mean for direct investment and Overall Investment in the u. K. . Joyce we have seen a stall and investment proposals Going Forward and that will be a global trend. We are seeing in europe and the United States, and we are looking at asia numbers slowing down. That is a global phenomena. Slowdown, i want you to measure what that positive statistic is which signals global recession. It used to be 3 and you suggest it is beneath that. Joyce the historical averages about 17 and we come to about 40 . Risk,e 12 background geopolitics and trade. , and Business Sentiment Consumer Sentiment at about 1 . About al, we were at 25 risk of recession that has climbed up to 40 which is based on the geoPolitical Uncertainty. Tom joyce chang, thank you so much for joining us. Forward to 9 00 a. M. This morning. It will be an extraordinary seen for someone americans are unfamiliar with. We are familiar with the excellence of stephanie baker. Just an open question, what will you see or look for from mr. Mag uire this morning . Interestedwe will be in hearing details of the whistleblower complaint and how broad is it . What other names have been mentioned . We understand the complaint is not just about this phone call between trump and the ukrainian president , that it has to do with other officials who were aroundo take steps putting pressure on ukraine to take action, to dig up there on biden. I am curious who else might be named. Sortully we will get some of redacted version of this whistleblower complaint later today, and i will be curious to see who else is in the line of fire. Tom what is the value of a redacted document . Stephanie it depends on how redacted it is. We have to wait and see. There has been a lot of speculation about what is in this. We just dont know. Openact that he is giving testimony to the house Intelligence Committee, closed testimony to the Senate Intelligence committee later, we should find out in more detail. The rough transcript that was released yesterday of the call between trump and president zielinski did not pan out the way the white house was probably expecting. It did look like he was putting pressure on the ukrainian president and repeatedly asking him to ordinate with his personal lawyer coordinate with his personal lower lawyer and the attorney general. William barr said he had no contact with trump for giuliani. There is a lot more to come. Francine a lot of focus seems to be on why the nations spy chief waited to give the whistleblower complaint. Is it because of pressure from the white house . Inphanie there was a report the Washington Post that said he threatened to resign if he was not allowed to give a report to congress, and testimony. I suspect he will be asked about that, and i suspect he will repeat what he said publicly. It does look like there was pressure for him not to release it, and that backstory will need to come out and should come out later today as well. Tom stephanie baker, thank you so much. The news flow is absolutely extraordinary. We have the repo question churning with one side saying it is not qe and the other side saying it is instability. There are substories as well. We have london comments, boris is speaking. Francine he is speaking to tory mps in a private meeting. We are looking at protesters kong. Ing outside and hong chief executive carrie lam is set to hold a press conference with the public. There is a lot of uncertainty the market does not know how to price in. Tom really looking forward to Stephen Engles friday. The 9 00forward to a. M. Discussion of mr. Maguire and the house Intelligence Committee. Stronger dollar off of weaker sterling and weaker euro as well. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because 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. Pres. Trump its a joke. Impeachment for that . Alix investors stick with defense. Impeachment consumes d. C. Investors burrow into the dollar and treasuries, even with stocks near record highs. Wins for farmers and wineries. President trump declares victory and says a deal with china could come sooner than you think. Peloton, the latest unicorn, prices at the top of its range. Welcome to bloomberg daybreak on this thursday, september 26. Im alix steel. In the markets, we are still 0. 1 , equity futures rise a stones throw away from record highs. In another assets, it is defense. How long can it sustain that level . Yields down three