Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

Francine welcome to bloomberg surveillance. Green on the screen for european equities, but we are headed for the first weekly loss in six. U. S. Futures are struggling for direction, along with the 10 year yield after we saw stocks as the marketsy assessed the risk around the political situation in the u. S. Table taking ahead, dropping below 1. 23. Previously, one of the more hawkish members saying that rate cuts might be needed even with a brexit deal. Coming up, we speak to commerzbank ceo Stefan Engels after they have revamped their strategy. But now, lets get first word news in new york. The bank of england may have to cut rates you but if the u. K. Avoids a no deal brexit. The comments are a sharp departure. He previously was considered the most hawkish member of the Monetary Policy committee his argument is brexit uncertainty will continue to depress growth. Thats even if the exit is delayed or canceled her the u. S. Federal reserve is looking at a possible shift to its inflation strategy according to richard clarida. Pastwould commit for deviations from its 2 inflation target rather than treating them as mrs. And moving on. Commerzbank is giving up its goal of high revenue. They say economic slowdowns and lower rates are forcing them to cut costs. They are trying to reverse years of falling revenue and they say that returning to profit will be down to when it can agree on its restructuring. With the Interest Rate environment and all of the positivity we have right now, that seems to be a pretty tricky idea. But the assumption is that we can not only compensate for the negative Interest Rate environment, but also that we have the ability to have growth by 2023. Where carrie lam is taking blame for the entire arrest rocking the city. Try to reducey tensions ahead of the peoples republics 70th anniversary. Already granting an application for a rally on saturday but organizers of march on sunday say they will go ahead without police approval. And france released a 2020 budget is set to deliver tax cuts in an effort to appease socalled yellow vests protesters. According to the spending plan, the lowest tax rate will be cut by three points but it will mean slower progress on cutting the nations budget deficit. 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. Francine thank you. Nejra thank you. Trump has is a closed door meeting to disparage a whistleblower complaint over his controversial phone call. Whistleblower. The whistleblower, its the same. I could not have put it better if i wrote it myself. The video was obtained by Bloomberg News. Nancy pelosi quickly raised the specter of a white house coverup. Joining us is our senior writer. We learnedt yesterday at how this pushes it forward for us. Whistleblower but also the director of national intelligence. On the whistleblower complaint that was released yesterday just before mcgwire testified, the three takeaways for me are that one, the extent of concern amongst u. S. Whocials in the white house had expressed their concern to the whistleblower about what had and is abetween trump lengthy and the ukrainian president to dig up dirt, many were concerned. We do not find out the names of those individuals, but i think the impeachment inquiry will be looking very carefully at who those people are. And perhaps calling some of them to testify. The whistleblower himself will likely testify. They are trying to get him in. Secondly, the issue of the call transcript or the rough transcript seemed to be put on a separate system designed for highly sensitive intelligence. That was a key takeaway and that is something that has been seen democrats as a cover up. There were actions taken by people in the white house to this call and the concern around it did not get out. Thirdly, the role of Rudy Giuliani, trumps personal lawyer , and how he used back channels ofreach out to the circle advisers around the ukrainian that became very clear from the details. Sum of thatt was much more wideranging. Anna has impeachment risk increased . Yes. Between the rough transcript being released, the whistleblower complaint which is very well written is clear or documented it is quite a clear narrative for the democrats to push. That is what they are now looking at them are having a very narrow impeachment inquiry focused only on ukraine, setting aside the obstruction of justice lines of inquiry they were going down before. I think it does look like they will move quickly with drafting articles of impeachment. We dont not how long that would be about what it could be six weeks. Nejra thank you so much. Hen gallo. Is step said impeachment risks have increased, but what does that mean for the dollar . And i just say i think the u. S. Long dollar has been one of the most unloved trade in all of fx. It has been profitable on a number of axes, but it has been it hased axis,but been unloved. People want evidence things are going back to how they used to be. It is clear that the world has changed, i have to say, yes, i absolutely agree. I will not say it is my base case, i have to leave that to my economists, but the odds of impeachment have gone up enormously, i think. Happen isk what will if the impeachment process blows the dollar will become even more of an unloved trade. If the impeachment proceedings or inquiry itself blew up, the dollar is going to go even higher. I coulde a situation only describe as pentup dollar strength. Which, at that speed, becomes more of an issue for the Global Economy. Specially against the backdrop of dollar shortages in repo i think one ofis the biggest market related events of the year, if not the biggest. Nejra we talk more in a moment. Mention of a special program coming up on bloomberg tv. We go inside the protests in hong kong and talk to key players. We look at causes of the arrest and possible solutions to a crisis threatening the city. This is bloomberg. Nejra this is bloomberg surveillance. The fed is considering altering its strategy for achieving rice stability according to richard clayton. The central bank could commit to making up half deviations from its inflation targets rather than treating them as misses. Gallo. Ith us is stephen what is your base case from what we get from the fed . We are in a rate cutting cycle. Its just a question of the timing. The other big question is the affect. U. S. , andolicy in the you could argue fiscal policy, has more traction and maneuverability than it does in the rest of the Global Economy and other major economies. A point with a structural factors in play means that the impact of fed rate cuts and the broader em space and other g10 currencies visavis the dollar, is quite limited. Analogy or time reference is immediately following the Global Financial crisis when we had a big downturn in growth in the health of Financial Systems and western economies. To,started printing qe1, and there was a huge ballooning of foreigncurrency debt by em economies. That is less likely to happen now, even if the fed where to go down the route of a more aggressive Balance Sheet expansion program. Again, a lot depends very much on what happens in the 2020 u. S. Election. This will be a very ugly year in u. S. Politics and a very uncertain year in u. S. Politics. So what i am talking about is u. S. Trade policy. And are turning more inward that has structural ramifications for the Global Economy. Nejra had to all of that the wall of worry you are outlining. You have cautioned about making links between the repo market and the fx spot, but nonetheless, what is your thinking around this issue . The longer that these a dollar shortages persist, the more downside Global Growth risks there are. Even as you rightly point out there are no direct links between a dollar funding stress at the spot value of the dollar. If nonu. S. Entities cannot get access to dollars cheaply to roll over the existing foreigncurrency denominated debt, etc. , and if Central Banks, china in particular, are still bleeding reserves, thats a serious issue for the Global Economy. Im not saying this will turn into an acute problem yet, but gun to my head, my call would be that this issue, weve seen similar situations to this before. This one has the risk of being more chronic. Nejra does it make you take the risk of more riskaverse trades . Invest only in the soundest em currencies you can find for the right yields. , the central bank is arguably whether restrictive policy stands. Various other geopolitical reasons. I dont think that is a bad bet on a relative value basis but southeast asia, china, these are countries you typically want to avoid you are seeing these types of moves. Stays withhen gallo us. And up next, we bring you our interview with the commerzbank cfo as they try to get back on track your thats coming up, this is bloomberg. Nejra this is bloomberg surveillance. Marks one year since commerzbank was kicked off of germanys benchmark index and has just downgraded its revenue outlook. Earlier this morning, matt miller sat down for an interview with commerzbank see the cfo stephan angles engles. We have not given an exclusive a number in terms of percentages. With the environment and the volatility we have, that seems to be a tricky idea. But again, the base assumption is that we cannot only compensate for the next Interest Rate environment by growing customers and assets, but also we think we have the ability to have growth by 2020. Are you going to be passing on a negative Interest Rates to your retail clients . This is not a discussion that anybody is really happening realistically. Have, like we have been doing and copper, obviously will have focused discussions about certain thresholds, but they are far away from what the normal retail client would look at. We have talked about this before, the fiscal spending in berlin. Do you think they are doing enough argue think that merkel and coneed to do more . Firstly, i would still say that we still have a Strong Industrial base. It is still on the right track in that sense. For a lot of people, it is kind of a first time that they are seeing growth in being a little bit slower. And we are not even talking about a recession right now. So i think that makes the discussion a little more hectic than it should be. Do you see a recession coming in germany . Stephan we definitely see slower growth. Or twobug other one quarters of technical recession remains to be seen. The tradeake conflicts and other stuff going back and forth. Theres a lot of volatility even on a twitter to twitter base, so to speak. But back to germany, if you look at the latest political packages on the climate , you can debate whether there should have been more. But this is a clear first sign that there is activity from the government. Matt joins us now from frankfurt for more. Great interview and great to see you. Profitability continues to be a challenge largely because it is hard to generate revenue so will they have to rely on cost cutting . Matt absolutely. Even that wont be enough. This is a bank that was forecasting 3 Revenue Growth over the next few years and only a 4 return on tangible equity. Those goals now are no longer told,t, as i was just because of the slowing German Economy and it negative Interest Rates. Be able to going to forecast growth in revenue for question,rofit is in depending on where they put these restructuring costs. It is a difficult environment to say the least. Theyreank 5. 0 is what calling it, that can tell you how long they have tried to turn this thing around. Really coming down to closing branches, cutting costs reducing staff, and trying to get clients that are used to this old traditional german , those who still are but to stop going into the local branch and to start banking online. Nejra if the cost cutting might not even be enough, what more can they do . Certainly does not help when you get comments from chief economists saying because even more rate cuts. Matt one of the things i thought was really interesting in that conversation was that he said a they are not too keen on deposits right now. That is not the way they want to build capital. The prefer to look at other ways. This is not an issue that just affects commerzbank, it affects banks across europe. Thoughtked him what he about the rate situation and he said listen, its not up to us. Take the information as it is and try and make the best of it. This is the way he thinks they can do that. I will remind you that he is on his way out. He is only remaining chief finance officer until the end of q1. Then he is moving to danske bank and will be relocating to copenhagen. He says that is merely for personal reasons. Nejra we will see what his successor does. Great to catch up, thanks so much. Was woes. Peloton because the latest to slump on opening day. The latest to slump on opening day. This is bloomberg. Almost a spy. President trump lashes out at the whistleblower, adding fuel to the flames of the each meant inquiry. The bank of england says the u. K. May need a rate cut even with a brexit deal. Downgrading a revenue outlook. Speaking to the cfo. It is sobering lee realistic. Thatis not the first time we have taken decisions a little bit earlier than the market. Matt im nejra cehic in london nejra im nejra che attend london. I want to kick it off with ashmore. The emerging markets fund manager got upgraded by morgan stanley, who said their concerns seem to be overdone. Potential sales of iron ore positions. The canadian ones could be most interesting. Downside. O the chip stocks have been in focus after what happened with micron. They are also sounding the alarm on chipmakers in general. Nejra thank you. Lets get the bloomberg first word news in new york. Threat tohe biggest his presidency, donald trump lashing out at the whistleblower at the heart of the congressional impeachment blurb probe. Bloomberg obtained this video. Who was the person that gave the whistleblower the information . You know what we used to do when we were smart . With spies and treason . We used to handle it very differently. U. S. House Speaker Nancy Pelosi accuses the administration of a coverup. The news coming shortly after the tanker began transmitting its location for the first time in weeks. Saudi arabia dropping it strict grass dress code for foreign women as it attempts to boost tourism. Foreign women will not have to wear the cloak that for decades seems to have been mandatory attire. It is optional. In the going to be clear online visa applications. They see it as a part of the culture. Global news on air and at tictoc on twitter. In viviana hurtado. This is bloomberg. Telethon has become the latest major debut. Agency toted a talent postpone listing. Why so many ipos underperforming . Or is it just unfortunate and each have their own issue . I think each does have its own specificity. I think keener focus is developing in the possibility. Part of that is to do with the fact that they may have stayed private a bit too long. They have got very punchy evaluations. Justifying the valuations they are getting. Is essentially the part of it the ipos being mispriced in the first place . I think there is a bit of that. Pellets in. They would have to empty half the gyms in the u. S. , which is a big ask. ,qually Something Like endeavor they do not have the predictable Revenue Streams that you would expect. Are going toct you have subscription stretching into the future. If you lose a client, that could damage your revenue as a Talent Agency for an extended period. From one moment to the next. Nejra great to have you with us. Thank you for joining. You are about to hop back on your peloton . [laughter] nejra for next time. Thank you. Worth individuals are fling the u. K. Amid brexit concerns. That is according to the chief executive of petermann constancio, based in zurich. He spoke exclusively with bloomberg. People are asking, is that brexit . Is it Jeremy Corbyn . Is it both . We have seen a number of clients choose to leave the u. K. To various german destin u. K. Destinations, including switzerland. Clients have always been globally diversified. In other news of difficult market decisions, rate cuts may be needed even with a brexit deal. That is as bloomberg has learned the eu hopes of reaching a deal, those are fading, and Boris Johnsons language is offputting. Still with us is stephen gallo. We got the news breaking earlier this morning. One of the most hawkish in the mpc saying we might need rate cuts, even with a brexit deal. Do you think that is what the bank of england is going to have to do even if we avoid in no deal . Means they have joined the chorus of global Central Banks using. The difficulty is what if we have a wto brexit . It raises all sorts of permutations and scenarios. He has set more firmly that we would ease policy. But the Exchange Rate impact on the economy. European countries in the euro zone, they dont have nominal Exchange Rates anymore. Farcical, but that is another story for another time. Britain still has a floating nominal Exchange Rate and that has to be taken into account with their future policy decisions if we have a wto breakthrough. Right,let me get this you dont want to make probabilities on brexit, but given a comment like this today, even if it is difficult to trade you more, doesnt make inclined to sell the pound . Stillrall, my buyin is negative on cable. Structural and cyclical factors. Once that date becomes certain, there will be a kneejerk reaction lower. Im not saying it will bring us , buty with cable especially now that level, if we were to get back to the entrylevel, that is for sure. Election risk, why do you see that is cable negative. A very confusing picture, as of the electoral maps. Day,is going to be a field the selection, for people who study electoral statistics and electoral maps because i think it is going to break historical norms. With labor being modeled on brexit, the lib dems have a very clear policy on brexit. The conservatives have a more sterling Economic Policy agenda, brexit,erring a no deal is kind of of risk evening. It is a tough trade right now. You have to look for opportunities to fade cable strength. Nejra curves telling you everything is possible right now, what are they telling you . Brexit in some sense you could argue is working marvelously because it has done two things. The first thing it has done is expose a rotten core at the heart of british politics. And an enormous gap between popular and parliamentary sovereignty. When you have a situation where the constitution is being rewritten on a daytoday basis, there is no way to predict what is going to happen tomorrow or next week and that is what the volatility curve suggests at the moment. At least at this point, it looks like the European Council is going to be a nonevent. The other thing brexit has done, which is very clear, all personal politics aside, every time brussels opens its mouth and every time we see what is going on in westminster, it reaffirms why they voted leave in the first lace. It is an impossible environment to predict. Nejra that is what will take away. Tough rallies and cable. A quick mention of a special program coming up on bloomberg. We go inside the protests in hong kong. The causes of the unrest and possible solutions to a crisis threatening the future of the city. This is bloomberg. Domestic flights have carried 9 u. S. Passengers. There is not Much Airlines can do to push back. The passenger miles are at least four times that of trains. European airlines has the most to lose. They fly a lot of short flights. Highspeed rail is a viable alternative across the continent. A flying shame, you can fly out more. Lets get the Bloomberg Business flash. And apple economic slowdown and lower rates an economic for slowdown for a german lender. With the Interest Rate environment and all the volatility, it seems to be pretty tricky and idea. The base assumption is that we cannot only compensate for the negative interestrate also we havebut the ability to have growth. The loselose situation, the impose a billion dollars of tariffs on eu goods. Airbus is at the center of a feud between the eu and the u. S. Staying with the airline industry, delta is dramatically expanding in south american foot rent, agreeing to a 2. 3 million the for a 20 stake in largest Latin American Air carrier. That is your Bloomberg Business flash. Nejra thank you. The french government unveiled a budget that delivers the tax cuts promised to the yellow vests protesters and a fiscal boost for the european economy. The tax rate will be cut from 11 to 14 . Low earners will get the biggest. It will hinder fiscal reforms, but it will boost economic 2020, outpacing germany. Stephen gallo is still with us. If you look at a chart of the euro, it is testing multiyear lows. Would it be even lower than this if the market was not anticipating some fiscal policy action in europe . That is one of the Things Holding it up. Reason why implied volatility has been crushed for is that investors are waiting for results for these big geopolitical issues like the u. S. China trade war, will trump slept tariffs in the eu . Et cetera short eurodollar is still one of our top or preferred trades. Aregiven what i think elevated risk as of impeachment proceedings, if you are going to add to a long dollar position or short eurodollar, i think you need to keep your stocks tight for the time being, especially wherever money positioning is, which is net short euros. Nejra the reason the euro was one of your biggest shorts is based on the general risk out there, low growth. Is it based on the outlook for ecb quality or is that having limited impact . Zone is anthe euro illconceived catastrophe that is in a state of terminal decay. That is the longterm picture. In the short run, i think what you are seeing is that increasingly it looks like there is going to be an alliance macron,micron conte, and lagarde when she comes into the ecb, which will marginalize germany. You will see increasing calls for german interest toward a more expansionary fiscal policy. I think this will pave the way for future political fragmentation, but for the time being, the risk premia nejra territory in europe, as well. The ecb base rate, the deposit rate . Nejra yes. It is quite possible if my assumptions in german fiscal policy are correct. There is going to be something there, but it is probably not going to be enough to move the needle significantly. Among other things that are affecting the general political sphere, i think you have to be aware of the fact that the scars of the euro zone crisis, probably the first of many, have left marks on the german psyche, and they know. They know whether it is from the central left or right, increasing spending significantly is going to force other countries to want to do the same. And we have a problem when that happens, dont we . Because it breaks rules. Nejra your short euro trade, is that mainly against the dollar, or against other come currencies . Euroyen aret other ways to play this, but you get paid to be short eurodollar. I think with rising impeachment proceeding risk in the u. S. , coming into a month weather will be more u. S. China trade talks, you want to be cautious with where you put your stocks on the topside. Cautious. , but stay i think there is downside in eurodollar. Nejra great to have you with us. Stephen gallo. Spy. Xt, almost a President Trump lashes out at the whistleblower complaint, adding fuel to the whistleblower inquiry. This is bloomberg. [indiscernible] [indiscernible] [laughter] nejra that was President Trump talking about the whistleblower at a closeddoor event. Bloomberg obtained the video. For more, lets get to annmarie hordern. Annmarie impeachment talk has been surrounding Donald Trumps entire presidency but is only now becoming a tangible possibility with nancy pelosi saying she would launch in impeachment worry. What is impeachment . Or what isnt it . It does not entail removing an official from office. It is a longer road. The constitution sites treason, bribery, or other high crimes and misdemeanors, which congress has included misusing the office for improper purpose or gain or abusing power. Next, congress will investigate and judiciary would recommend one or more articles of impeachment or written charges. Then we have the house voting. It takes a simple majority by the house in any article of impeachment to send to the senate. Democrats hold 235 of the 435 seats. The senate then basically tries the president , this would mean 100 members would become a jury in a trial. Witnesses would be called and evidence submitted. Two thirds of the senate then vote to convict the president and he would be removed from office. This is a very high bar right now, especially considering the republicans hold a majority in the senate. Nejra thank you so much to annmarie hordern. The market was weighing up the risks of this yesterday. We sell the s p 500 tumble, along with 10year yields. The yields more study this day. We are seeing gains in european equities. Heading for a weekly loss, the first of six. Equities. In u. S. Good day . Maybe not such a good week. Surveillance continues in the next hour the Francine Lacqua and tom keene. This is bloomberg. Francine almost a spy. Lashes out at lashes out at a whistleblower and fuels the flames of the democratic impeachment inquiry. The bank of england founders as the u. K. May need a rate cut even with the rate extension. Even with the brexit extension. Good morning. This is bloomberg surveillance. Our last day in new york. We will be headed back to london. We have euro data. 01 7 confidence up 101. 7. That is the lowest in a month. What we heard from mr. Sanders at the bank of england was interesting. Tom citigroup at first nudged toward a rate cut in the United Kingdom. Francine governor tearney has been careful because he does not want to see is being political but we had mr. Saunders saying they should get on with the cut no matter what happens. Plenty more on your market news but lets get straight to bloomberg first word news with viviana hurtado. Viviana we begin with the biggest threat to his presidency. Donald trump is lashing out at the whistleblower at the heart of impeachment probe. Speaking at a closed door meeting, bloomberg obtained this video. Person whoo know the is the whistleblower. Who gave the whistleblower the information . That person is close to a spy. You know what we used to do in the old days with a spy if we were smart . Nancy pelosi accuses the administration of a coverup. Mitch mcconnell is trying to shield republicans from any potential fallout from the impeachment inquiry. A british flag oil tanker has entered International Waters. It has been held by iran since july. The news coming shortly after the tanker begin transmitting its location for the first time in week. In hong kong, carrie lam is taking blame for the entire unrest rocking the city as the government is trying to ease tensions with the head of the peoples republic. This weekend, police granting an application for a rally on saturday. Organizers of the sunday march said they will go ahead without police approval. France releasing a 2020 budget said to deliver a series of tax cuts in an effort by Emmanuel Macron to appease the socalled yellow vests protesters. The lowest income tax rate will be cut by three points, but it means slower progress on cutting the nations budget deficit. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom thanks so much. Lets do a data check. I almost did not do a Second Screen but there are some Currency Market Movement that is interesting. It is flat. Equities a little bit dampened into the close yesterday, with the vix elevated somewhat great we are having trouble getting to that screen. Screen,go on to the dollar continued strength against weaker sterling on the boe news and also a weaker euro. Markete a lot of the after the be on bank of england policy maker Michael Saunders said rate cuts will be needed even if there is a brexit deal. Also looking at crude oil, west Texas Oil Futures around 56. The vix remains lower than the rest of the week. European stocks trading sideways. Tom trading sideways at the end of the quarter. Let me look at the bloomberg. This is an honor francine, she is going home. She is paying dollars while she is over here so she is living large off the weaker sterling. Down past the, 1. 40 level. That we could see a rate cut on sterling. Something to ponder and the u. K. Ready weaker. Stephanie baker the rainy weekend. Stephanie baker is here with us and has been a wonderful student of the challenges of the Trump Administration going back to paul manafort. T you observed yesterday what is different this time for the president versus all that you have covered with those first glimmers of mr. Manafort . Stephanie this is quite a simple narrative. Out, orhe evidence is much of it is now out. The rough transcript of the call between trump and the ukrainian outlines how he put pressure on him to dig up dirt on joe biden. When he said do me a favor. Complaint,blower which was published yesterday, the key take away from that is how the transcript of that call was uploaded to a separate system for classified information, even though the contents of that call did not have any classified information. That has led democrats to charge that this was a coverup. That is a familiar phrase that we all know from the nixon era, the coverup. This is a simple narrative for voters to grasp onto. The question now is how quickly do they move . Do they try to draft articles of impeachment in the next six weeks . Do they try to get some of those white house officials that had expressed concern through the whistleblower . Do they try to identify those individuals and bring them in . Do they try to move quickly and stick to a straightforward story. Tom you are one of three people alive who know the lawyer stream of the Trump Administration, the private lawyers in, the private lawyers out, the official lawyers in and out. How is President Trump lawyered up for the next six weeks . Stephanie the other key take is the role of his personal lawyer, Rudy Giuliani, who i have written about extensively. He was all over that whistleblower complaint. It is unusual that he has his personal lawyer he is not a Government Employee doing the president s Foreign Policy in an unofficial capacity. The thing that came out about that is how the state department was trying to interject themselves to try to control him. It is unclear what role Rudy Giuliani will play in this Going Forward since he is a central character in the impeachment investigation. I think he has to get another lawyer to defend him and this will play out in ways that are hard to predict. It does not look like there is panic in the white house at this stage. I am not sure they realize the serious situation they are in. Francine the implications are this is a bigger threat than the Robert Mueller investigation was. Is that correct . Stephanie yes. It has created a majority in the house to proceed with impeachment, with an impeachment inquiry, that you do not have before with the Robert Mueller investigation. Dozenwere a key congresspeople change their mind and said yes we would back an impeachment inquiry. That indicates a majority in the house. It does not look like we would get the votes in the senate because of republican control of the senate. Whether or not that would shift as the inquiry proceeds is open to questions. We could get a vote in the house supporting impeachment, a move to a trial in the senate, which may not pan out. Tom stephanie baker, thank you so much for the briefing. No doubt we will see you on monday. This has been a huge news event. There has been all sort of talk, not hysteria, but hyperbole. We thought we would bring in someone fair and balanced. She has a history of linking her intomics and Public Policy markets. , explainobal audience the linkage of all we are seeing politically into the odd thing of uncertainty and the market. Are they linked or are they separate . Any time there is political uncertainty, something extraordinary like an impeachment or a big election where the outcome is unknown, that creates uncertainty in the markets. That is because it is unclear what the policy preferences of an incoming politician would be or what would be the ability of the Trump Administration to enact some of the policies that were going to take place, such the u. S. Tification of canada mexico free trade agreement. A middleclass tax cut, and so forth. Those are the things those are the concerns that take place in the market. If you are positioning yourself one way or the other, therefore you are not quite sure what the probability is. Francine does this mean the president is distracted in dealing with trade and take away the focus from the economy, or does it make a more focused on the economy to try to distract from the impeachment process . Sharyn the president seems to be all over the place anyway, independent of an impeachment process. It seems like he has been being impeached since the day after he was elected. I do not know if that in itself will be distracting. What will be problematic is the ability for him to work with congress to pass any agreement whatsoever even though there was a possible window in a couple of areas. Wrote 22 years ago about the partisan paradox. This is the big different the big difference from nixon and clinton. The partisan divide is extraordinary. How does that partisan politics affect the process of this modern impeachment . Sharyn you have increased polarization, and where you would before yet a moderate group to work with the president , even the speaker of the house, they are no longer willing to do that, partly because of the political tensions that have taken place. Anything out policy area, any of that policy agenda is gone. Tom i think we should take the next three months off. Francine can wait . We . Can policy is done. Sharyn policy is done in the sense that will not be a lot of gridlock there will be a lot of gridlock. It does not mean the regulatory agencies stop working, but it does mean the window of opportunity to do anything before the election is gone. Columbia University Professor stays with us. Lets also have a look at what the pound is doing. We had one of the policymakers from the bank of england saying the central bank may have to cut Interest Rates, even if the u. K. Avoids a no deal brexit. Mr. Saunders was speaking in a northern town and he stressed the uncertainty should not be a recipe for policy inertia. We will have more pound checks and also get gilt. Cable at 1. 2284. Francine this is bloomberg surveillance. From new york this week. Now we cover a lot of market movements with the vix less elevated, a little bit of movement on the pound after the boe comments. The fed is considering altering its strategy for price stability according to vicechairman richard clarida. We will have a lot more to talk about treasuries and of course what is going on in the markets. Joining us from london is aldeans level investors global strategist. Neil, great to have you on the program. When you look at Market Sentiment surrounding the fed, it seems people talk a lot more about geopolitical rest. Are we forgetting what happened to the repo market last week . Neil i would say so. Given the opening comments about where we are politically, the only hope for the u. S. Economy is the Federal Reserve is there is a standby. That is why the s p is near alltime highs. We can debate whether we think the fed can save the u. S. Economy, whether we are in an insurance world are about to head into a u. S. Recession. From the markets and a repo perspective, i think the fed is not taught a wheres unawares some articles are suggesting we need a three hundred billion dollars to 500 billion repo issue to satisfy the credit which tells you and i the world is short dollars. Francine does that mean we could see a similar move on repo or somewhere else, something that hurts the markets . Neil i do not know if there is a whale that is dead like into thousand seven or 2008, but it tells us this 15 trillion of is starting tot feel some of the pressure and is feeling the pressure of the u. S. Raising rates. Thisnk at the margin, rolling of this debt through emerging markets is exacerbated by argentina, is making people more cautious in funding the world in dollars. We have a professor from columbia university, her cv of looking at trade and Public Policy is extraordinary. A few years back, big data in the regulation of financial markets. Is this a dilemma we have, not ut big data but a little these two big to fail banks there is definitely an interaction between the regulations and the willingness of large banks to lend. Tom is at the like is that the lack of trust on the part to pick one bank . Sharyn for example, jp morgan has to handle all of these different types of regulation and Capital Requirements and all of the addons. In that case, you need to be implicated when there will be a return on that lending, and given such low Interest Rates there is not a real concern about whether you will do that. That is not the area you want to invest in. Theres not a lot of cash in the system, not a lot of liquidity in the system. Therefore the risks being imposed is holding up the credit right now. They would rather hoard. Tom they will hoard. Thatrofessor can say cannot get in trouble. If i say that it is inflammatory. Is that what we are seeing, hoarding and the liquidity market . How will that redound to fixed income or the equity markets . Hoarding,her it is the way i would frame some of the issue is that as i understand it, the top five u. S. Banks have 90 of these excess reserves. Therefore, if they are not prepared to let those excess reserves out of their site, the 10 cannot do enough heavy lifting for the liquidity. It is one of the constraints we have now if not only the Federal Reserve policy but the regulation sitting behind this. That is why we are seeing these spikes in the overnight rates. I do not think in the short term this tells us there is any potential risk to the liquidity markets other than the read across that the u. S. Dollar may remain well supported. For the equity markets, we are generally watching not only a splurge of credit issuance, which i think is supporting the buyback the, but we are beginning to worry that as the fed continues to cut rates, we are seeing more and more parts of the Interest Rate sensitive markets begin to price in lower net interest margins and potentially higher bad debt. Francine thank you both. You will both stay with us. Becamemeantime, peloton the latest major Public Offering to follow its face, dropping as much is 11 . The companys chief executive remains upbeat about the future. People see it or they do not. There are believers and nonbelievers. The people who invest in have been in peloton very happy. We will continue to delight the Capital Partners who invest in us. Viviana you are watching bloomberg surveillance. A look at the bluebird business flash. The Bloomberg Business flash. This comes after the company postponed its ipo over concerns of its valuation. Alsoe told wework could turn to job cuts numbered in the thousands. Slumping oneloton its debut. The latest in a long line of Tech Startups to slump on its ipo. The Fitness Company raised 1. 1 billion. Tom we will come back and look at the initial Public Offering losses we have seen over the last number of weeks. Right now, a morning muster. For our global audience, the former mayor of new york. The atlantic has a piercing study. Giuliani it is impossible the whistleblower is a hero and i am not. These more ons. When this is over, i will be the hero. He goes on to other choice phrases. There it is. I am not acting as a lawyer, i am acting as someone who has devoted most of his life to straightening out government. Francine what is amazing as an outsiders you see these complaints emboldening the democrats. We know nancy pelosi did not want to go for impeachment, but that republicans, many of whom have criticized the houses move toward impeachment, or refraining from comment. Tom the refraining is there but there is little bit between the lines. It is a sequence to impeachment. I cannot say enough about a Bloomberg Opinion writers single monograph on impeachment. It is outstanding. It is a friday in washington. It will stagger the sunday talk shows. Kevin cirilli will brief us. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Bloomberg surveillance, that is one of our team working out on their way in 3 00 a. M. I want to mention the philippines and further action to provide accommodation to their economy. I believe they did a central emk cut yesterday a lot of jockeying around in the markets. With us our Sharyn Ohalloran and neil dwane. We have never been on a peloton. Francine we do not even run for the bus. Tom i am going to go to a chart. This lift with a left and then not lyft and then not. Yellow. Ile direct, in slope matters. What is going on for global wall street . Witht buy the comparisons 2000. Sharyn first of all, we have very cheap money now. We have very few investments yielding, low rates, and so forth, so everyone is going after the possibility of a high payoff. Even if you invest in 10 or 20 of these, one is hit, and that is the logic behind it. Valuation oneal cash flow issues that you would normally do an evaluation on. Tom they all want to be amazon. The model is, trust us, revenues will grow, we will work it out. Is that model broken . Sharyn it is finally broken in the sense that not everyone is playing the game on the market. You have a public who will not relive 2001. Tom why are we running this video . Are you trying to tell me something . Do i need to buy one of these . Francine i feel like we are the only ones who exercise. Sharyn they are selling an idea. Francine an idea doesnt make revenue. Tom cut and chiseled. Neil i agree. Not only is it the factor of cheap money that has allowed these companies to stay in private hands longer than the past, i would not say the amazon comparison is quite right. So thesee investing businesses will end up as monopolies. When it comes to the valuations, and a private equity firms have used discount factors closer to infinity, so the businesses are worth whatever you think. The profitability and cash flow lies somewhere between year 11 and year 100, and that is not good enough for the equity market who are beginning to fear a rising risk of recession, and just how essential these businesses will be. Francine we havent even touched on wework. Tom that worked out. Francine will that make it much more difficult for any Unicorn Company to lift . Neil i would say so. , 2. 5 trillion waiting in the equity wings to move into the market. One has to question the credibility of the return they earned in the last three or four years, but also what they have been telling about the type of returns they will be able to deliver. And elians alianz are who people are going to. We used to do a company would go public and you would sell it. There was a traditional method. Say to j. P. Ianz morgan and these other bankers, we are not going to buy this stuff . Neil i would love to say we had that market share in the u. S. Applied for no uber shares, so therefore we are trying to push back on wall street and the implicit verification of these businesses that have been run with zero Interest Rates behind their valuations. We are not prepared to apply that when we look at the cost of equity at 6 or 7 Going Forward. There is not only pushback. There is a lot of friendly money that goes in, hoping to make a bit of a return and then sell it to the index funds who will as stuff gets put into indexes. Francine is this skewing the game for perfectly Good Companies . Sharyn if you dont trust valuations, you dont trust valuations and that is what is happening. Think any company now, an ipo that can show any return will do fine in these markets, those are not coming. Tom a fear fall and everybody else at the nba schools mba schools have taught people they can get away with a scam. When does the government step into the bankers and say, this is not proper . Sharyn the prospectuses the sec requires should be made making a more stringent demand there is more disclosures and Due Diligence around what is going on. I dont think people understand how the valuations are being done, if it is being built off a zero or negative Interest Rate market. Tom we dont know the riskfree rate. Sharyn those are the types of things the sec could push on. Tom interesting. Right now on a friday, your first word news. Viviana donald trump is lashing out at the whistleblower at the heart of the congressional impeachment probe, making the comment at a closed door meeting. Is thent to know who person who became the whistleblower, who was the person that became the whistleblower. Do . Know what we used to treason, we use to handle it a little differently than we do now. Emergingthose comments as nancy pelosi accuses the administration of a coverup. The whistleblower is a cia officer assigned to work at the white house. Decidesuisse is set to the fate of top executives. Learned a sweat law firm is probing the operation Swiss Law Firm is probing the operation. Saudi arabia is dropping its strict dress code for foreign women as it tries to diversify its economy. Foreign women will not have to wear the flowing cloak that is mandatory attire. This is going to be clear in the online visa applications. Women would like to experience it and see it as part of the culture. Some will decide not to wear that and i understand their rights. Viviana global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado. Ana this is bloomberg. Francine the pound a little bit down this morning after one of the bank of englands most hawkish members turned darvish. He said darvish. Dovish. In the last two minutes, Boris Johnson has gained a muchneeded as Northern Ireland ruled as a matter for the government. Lets get straight to Sharyn Ohalloran and neil dwane, both still with us. N you look at the last what we heard from mr. Saunders talking about the boe, they have been at pains trying to be as neutral as possible giving an indication of brexit. Do they need a cut, or is it a way of saying the economy is under severe stress . Neil i think given that our central case has to be another some type of extension, we can debate off camera how many extensions they will need to remain as confused as we are today from the politics in the house of parliament. The bond markets and the gilt markets are telling the world that the u. K. Is heading towards a depression. 50 year yields are down at levels we have not seen for a very long time. I think the bank of england has to see, given that they will get canolitical help, what they do to support a very recessionary environment in the next few months and quarters. Francine given what we are seeing now, does it warrant a cut . You see pound volatility and inflation being high, especially with tariffs for importing things. Neil i think many Central Banks will have to weigh the effectiveness of Monetary Policy against the rising of inflation because of the week this of many currencies around the world weakness of many currencies around the world. In the shortterm, they will not see offsetting growth. No one is expecting investment or employment to start growing in the u. K. If we see further extensions to the brexit calendar. I am not surprised when one reads the polls in the u. K. , people just want a decision. The uncertainty is killing the economy. Tom the uncertainty is the man of september and many would say that is john major, former prime minister. Lets bring up a chart. The lower left corner is the week to the debacle of weak the miracle we go pound, down we go. Returnedrner, we have to the 2019 john major which is a shockingly weak tradeweighted sterling. What is the wealth destruction in this United Kingdom . Neil the way i would answer that is i think the wealth destruction with the pound where it is, is one of fear. The pound is beginning to price in another Hung Parliament or a change in administration towards a labour Led Administration captain power by the scottish nationalists, as long as we have a second independence vote for scotland which would tear apart the union. There are concerns emerging about where the politics may go in the next three to six months, which are not explicitly being talked about because they are focused on that difficulties of the administration and brexit. Tom neil dwane and Sharyn Ohalloran with us this morning in the Early Morning in new york. Coming up, and incredibly important interview given what we have seen in germanic and e. U. Banking. The stunning battle between Credit Suisse and ubs in zurich. Stefan angles in conversation with matthew miller, this is bloomberg. This is bloomberg surveillance. Its to 20 . This as japans number one automaker faces tech and new Business Models including self driving vehicles and evolving services. Toyota first invested in subaru in 2005. Has agreed to a 2. 3 billion deal. This gives it a 20 stake in latin americas largest air carrier. The partnership is similar to an American Airlines plan. That is the Bloomberg Business flash. Francine today marks a year since commerzbank was kicked off the dax index. It has downgraded its revenue outlook. Earlier this morning, matt miller sat down with an interview with their cfo. Stephan we have not given an explicit growth number in terms of percentage, because of the Interest Rate environment and the volatility we have now, that seems to be pretty tricky. The base assumption is that we can not only compensate for the negative Interest Rate environment, what we think that we have the ability to have a growth by 2020. Matt you talk about the positive growth. Are you going to be passing on negative Interest Rates to retail clients . Stephan for the broad retail clients, this is not a discussion anyone is having realistically. Wewill have similar to what have been doing in corporate clients. We obviously will have focused discussions about certain thresholds, but they are far away from what the normal classical retail client would look at. About thislked before, the fiscal spending in berlin. Are they doing enough, or do you think that merkel needs to do more to get germanys economy on the right track to get europes economy on the right track . Stephan i would still say the German Economy, we have a Strong Industrial base. It is still on the right track in that sense. For a lot of people, it is the first time in their work history they are seeing growth being slower. We are not even talking about recession. I think that makes the discussion more hectic than should be. Stephan do you see a matt do you see a recession coming . Stephan we definitely see slower growth. Whether we go through one or two quarters of technical recession remains to be seen, and it depends on the u. S. China trade conflicts and other stuff which is going back and forth and has a lot of volatility on it. Germany, if you look at the latest political decisions on the climate package, yes, you can debate whether there should have been more, this is always the case. This is a clear first sign that there is this activity. Commerzbankels of will wander off to take on duties of dansk a bank. Danske bank. Neil dwane and Sharyn Ohalloran with us. Bankers are known to manage the message, but around the cards they are dealt. Matt miller mentioned Interest Rate negative Interest Rates. That is not in your textbooks. Sharyn we do not think of people lending money at a loss. Tom the free lunch where they will not pass on the cost to retail, this is a surreal system. Sharyn it is. It means the banks do not want to hold deposits, they dont want money. They will lend only in very specific cases, so you should start seeing a crush happening at the small to mediumsize firm that are trying to actually get money. Available, but no one is going to lend it at those types of rates. What he just said is they are only going to look at the large corporates and work with them with different types of arrangements, not just you pay Interest Rates, but an investment in probably the profitability to get that return. Francine is the only way to try and manage negative rates better in europe through ray consolidation . Neil i dont think so, because i dont think the banks can effectively cut the cost to a level that allows them to compete. I think what has been perverse for the German Economy is negative Interest Rates created a desire for germans to save more, which is not what the ecb was expecting. And industrialde production being in recession, i am more hawkish than the cfo of commerzbank, the idea that they and to invest is very low there is little demand for the lending that commerzbank can do. I would say commerzbank is priced for this. This is not new news. Nearlybank is trading on 0. 2 of its book value and the big american banks are trading on nearly two times book value, 10 times the price. Francine neil dwane and Sharyn Ohalloran. Coming up, hong kongs carrie lam takes the blame for unrest. We talk about hong kong next. Bloomberg surveillance, good morning and good friday. This is an exceptionally important special by bloomberg. Stephen engle will provide leadership on hong kong on edge. He has decades of tangible reporting experience in the buttressing of china against hong kong, and we are thrilled to bring this to you tonight at 8 00 p. M. In new york. I am sure it will be held digitally as well. Joining us for a weekend usefing, karen lee joins from our Bloomberg News bureau. What we expect this weekend in hong kong . Karen this will be a big weekend. We have seen the protest taper off in turnout over the next couple of dust last couple of weeks. Last couple of weeks. Outle are expected to come in accordance with the significance of the date. The main protest organizer, the civil rights front that has organized some of the biggest mass protests over the summer, they are preparing a gathering this weekend for tomorrow. We are expecting this to can you continue into the anniversary of october 1. Francine anything short of carrie lam stepping down wont satisfy the protesters, or do they want Something Else . Karen they have five major demands and say they will not go home until carrie lam meets those. She killed held her first public dialogue and addressed about 130 members of the public. Inquiry intot an the Police Tactics over the summer. ,ou can tell that this remains especially that particular demand, it remains a major thing for people and they will not go home or stop protesting until there are steps to meet that. Tom thank you so much, a briefing from hong kong. Continued strong dollar but weak sterling and euro. Weaker overa doubt, what we saw 10 days ago in saudi arabia. Please stay with us. Good morning. 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, a neverending impeachment parade. Senator oconnell and the gop adapt and adjust to their president. Quarter,ts, end of the the mystery of earnings to come. The mystery of chronic negative rates and too big to fail shortterm illiquidity. Call it initial public losses. Classmy 45 minute peloton i will grab and where or lift count theft and failed ipos. I am tom keene, Francine Lacqua. What is your basic thought of new york . Francine peloton, 45 minutes . If you believe that you will believe anything. And the was significant timing of the impeachment process when all the World Leaders were here was significant, and Boris Johnson having to leave earlier because of the Supreme Court ruling, we have had quite a week. Tom the video that bloomberg obtained of that u. N. Comment was extraordinary. As a nation, we have really never seen anything like that. Lets get now to our first word news. Viviana we begin with that video as the biggest threat to his presidency, donald trump lashing out at the heart event impeachment probe. Speaking at a closed door meeting, bloomberg obtained that video. I want to know the person who became the whistleblower, who was the person who became the whistleblower of the information. You know what we used to do in withld days with a spy, spies and treason . We used to handle it a little differently. Viviana nancy pelosi accuses the administration of a coverup. Mitch mcconnell is trying to shield republicans from potential fallout from the impeachment inquiries. A British Oil Tanker has entered International Waters after being held by iran since july, the news coming shortly after the tanker began transmitting its location for the first time in weeks. Ishong kong, carrie lam taking the blame for the entire unrest, as the government tries this weekend could see more mass demonstrations. Police granted an application for a rally on latterday. Saturday. Organizers of a sunday march are vowing to go ahead without police approval. 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. Tom equities, bonds, currencies, commodities, not much going on. 1. 0 922. The vix, 15. 7. Dollar strength is the headline with the euro and sterling south. Struggling to hold francine struggling to hold a modest gain. Europeans are concentrating sideways. We are seeing a key inflation port later on, but i am seeing a lot of move when it comes to pound, pound sinking, guilds climbing after they say rate cuts may be needed. Tom it has been a shocking week in washington. My summary is this is not nixon or clinton, it is a unique era of impeachment and impeachment allegations. Kevin cirilli is expert. I know there is a whole thing you can talk about, what will happen today, what goes to the sunday talk shows. What i want to know is what will be the response of Senate Republicans . Hide asthey do, say, or we go into the weekend . Challengey have a because they have to appear to be measured and taking this incredibly seriously. They also as of now are still backing President Trump. Which ishment happens, increasingly likely in the house of representatives, it is increasingly looking like that will happen by the end of the year, there needs to be a two thirds conviction for the impeachment trial in the senate. That is 20 republican senators. What you willhat see happen over the next several weeks and months as this continues to be investigated, is far republican senators to be critical of President Trumps actions but say the actions do not warrant impeachment. Tom what do you expect today and into the weekend as everybody manages the message to the sunday talk shows . Kevin with regard to democrats, you are seeing a steady drumbeat towards the path of impeachment. There is a Bipartisan Group of lawmakers who are set to be going to ukraine over the weekend, and the house of representatives. On ourviewed one of them Bloomberg Radio show, a democrat from california, and he says he will be asking several of those ukrainian officials about this. There are going to be more hearings, subpoenas issued, and the divide in the senate amongst republicans, the Senate Intelligence committee will look into the matter of what the house did, and a renewed pressure led by rand paul, a biden. Can, to look into that will take shape over the days and weeks ahead. Francine republicans have largely refrained from comment. Why . Kevin they want to appear measured, that they are taking their time and doing their Due Diligence to look into everything. What will what you will see happen in the senate is a dual investigation of sorts, where they will be looking into the actions of Rudy Giuliani, the president s personal attorney, as well as william barr, the attorney general, and President Trump. You will also see them look into the bidens. Away, imy biggest take am a political junkie. My biggest take away is that the politician in america who had the best week is senator Elizabeth Warren. Poll,ry single paul, broadly speaking for democrats, senator Elizabeth Warren has surpassed joe biden. This is not a good story for President Trump or joe biden. Senator warren is running on a message of anticorruption and anticronyism. The parallels is she has the opportunity to cast herself more so as a political outsider, the way trump said he wants to drain the swamp. You are going to start to see that from democrats. Francine this is a difficult question, because it is sometimes difficult to see the links between what is happening politically and the impacts on Foreign Trade or geopolitics. Does this make it more likely we see a trade deal . Will he come out more combative against Foreign Countries because he wants to distract . Kevin in the short term, this would not impact this will not interfere with how the president negotiates with china. From a broader policy standpoint , there is uncertainty in the markets because they dont know how to react, but this makes the path less likely for the usmca by the end of the year, this is a major distraction on policy in the sense that trump pricing and policy initiatives become unlikely. The political realm in the longterm, look for president , whatto link the biden republicans would say is the biden conflict of interest to china, that biden would negotiate easier with china. From a broader standpoint, Elizabeth Warren has been advocating for tariffs just like President Trump. Can do that. Illi kevin cirilli, i hope you enjoyed the ballet of washington , and take some time off and look at your eagles as they take on the dreaded new york jets. Kevin they won last night. Tom there is another game coming up. Kevin cirilli, thank you so much. We will segue hard with Russ Koesterich. Really, looking at the larger sphere, we will talk about this later in the hour, but one of the tip points in q4 as we will find out the price of negative Interest Rates. Every bank in europe is bringing down where the price of negative Interest Rates will be held by net worth individuals and retail are we at a point where we test the theory of negative Interest Rates . Russ we have been there sometime. European banks have struggled all year despite a generally good stock are get. The ecb is stock market. The ecb is stretching out its policy. What does that mean for the Business Model of european financial institutions, and u. S. Rates . Much of the rest of the world is in negative territory so we are still at 1. 7. Tom what is the blackrock view of Christine Lagardes ability to cajole fiscal europe into some kind of fiscal space . What is that and can she do it . Russ it is a recognition that you will not solve europes problems by lowering rates again and again. It is counterproductive, a huge headwind for the banks, and is there a combination of monetary and fiscal stimulus that gives europe the lift it needs . Francine it just needs a better economy, but a better economy in a trade war is tricky. If you look at u. S. China, europe gets the brunt. Russ there is a reason germany has struggled at every print. The iphone numbers and pmi have been poor over the last six months. Germany is more exposed to the tariffs than most. Koesterich with us this morning of blackrock, lots to talk about as we get set up for. In washington, we will speak with brett bruen in a bit. Please stay with us as we look at the dash to q4. This is bloomberg. Way, the spirit of democracy is here. We still enjoy some of the fruits of democracy even though we dont have the tree anymore. The tree was in england. The difficulty is, dont put too much blame on carrie lam. It is the system which is flawed. Who benefits . Certainly not hong kong, certainly not china, but it will tainly benefit the parties the party, i should say, in taiwan who is looking for time on independence. I would not be surprised if someone gives the evidence that that party is involved in instigating all this riot. ,om leadership in hong kong managing the message as they go towards another weaken of protest. Week of protests. Stephen engle has put together an emotional special, 8 00 p. M. Tonight, and 12 00 noon in saturday. Francine . Francine we will have plenty more on hong kong and on your markets, but let get to the Bloomberg Business flash. Viviana Credit Suisse expected to decide on the fate of top executives indicated in a surveillance probe. They had a former Wealth Management had a qualcomm followed. Next week, the board will meet to review the findings. Wework cutting costs, selling the chief executives private jet and side businesses. This comes after the company postponed its ipo over concerns over valuation. Wework could have job cuts. Peloton slumping on it debut, joining a long line of startups that slump on their first day. That is your bloomberg as ms. Lasch. Business flash. Tom Russ Koesterich with us, with blackrock. We number of ways to go, but have to look at the markets going into october, the mystery of earnings season. What are you most focused on as we go into october . Russ a couple of things. What is the guidance from companies in terms of spending in terms of the consumer . We are focused on the risks. Here is one sliver of good news. The u. S. Consumer is in good shape. Tom you dont see that faltering . Russ i look at business confidence. The mechanism which starts to affect the consumer is when Companies Get nervous and pull back on hiring. This could upset the apple card and so far we are not seeing that. Tom we are near record highs. A lot of things are range bound, the dollar buttressed up against the recent range. What is the case of breaking out equities to higher prices or weaker sterling . Russ in equities, it comes down to earnings growth. If you look at the old country world index and look at global stocks, with the exception of the meltdown last december, we have been in the trading range now for about 18 months. This has been a range bound market caught between a decent economy on the upside and low rates supporting, and all the unknowns around trade friction and politics. Francine what does it take for money to come back . How much money is currently in cash or gold . Lot weur view is quite a think the market is under bought. Be removing uncertainty despite everything going on in the world, they are still able to make money and grow earnings. Francine hold that thought, Russ Koesterich stays with us. We will have plenty more on that and Central Banks. This is bloomberg. What the Interest Rate environment and all the volatility that we have right now that seems to be pretty tricky, the base assumption is that we cannot only compensate for the Interest Rate environment by growing customer asset, but think we have the ability to have a growth by 2022. The outgoingt was commerzbank ceo speaking to our matt eller. Matt miller. We are back with Russ Koesterich. We were talking about the fact that stocks are range bound and have been for quite some time. Is there a danger that people looking for yields are going to risky products . Russ that is one risk. The Safe Products are less safe than they think. Parts of the market that have gotten so crowded because investors are desperate for yield, some of the utility and defensive companies have been on a roar all year because investors are desperate for yields. The levels, you cannot justify. Tom the elites want that, but you say there is a price. When do the elite institutions figure out if they are goosing the system there is a cost on the downside . Russ i dont think it is fully appreciated. Again and again, you speak to direct investors and advisors, the level of desperation investors are going to come to get yield. All theinancial crisis, market yielded above 4 in today is less than 1 . The way to get that yield is too risky for most. Tom this goes to the Bloomberg Business forum, all the elites we talked to think this is brilliant theory. Listener thinks the move from far percent to sub it is no longer a viable option for people who did the right thing, saved for retirement, no one expected low yields to last this long. Francine what does that concretely mean . Russ you are seeing segments of the market gets stretched where investors can get yield our income, and they are going up to becausethat are they are going for 4 or 5 yield and there are very few places where you can get that. Valuations are likely to get more stretched in that elusive search for income. Francine if you were looking at bubbles, our bonds part of a bubble, and if so, when does the bubble burst . Russ i dont think bonds are per se a bubble. There are parts of the equity and bond market where valuations are stretched. Treasuries are low for a bunch of reason, one is central bank policy. We are in a world of low nominal gdp. Inflation is low, contained, and stable. The term premium is lower. Tom can you flip the reciprocal and go to a higher pe or price to sales on the equity side . Russ you can and to some extent, you already are. Can you go higher . Absolutely. Tom you can get a 35 multiple on a consumer stock . Russ i can get you a 25 multiple on lot of tech names. Tom i find this is dana ability of the reciprocal flip to fixed income sustainability of the reciprocal flip to fixed income astounding. We understand from a local Hong Kong Television station that the Hong Kong Police have banned the national day protest march. Carrie lam just hours ago taking the blame for the entire unrest. We are looking at hong kong, brexit, and the bank of england. 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. Surveillance, the sun coming up over washington, the library of congress in the distance. In the capital today, no doubt chaos will continue, the news flow historic. What we have seen over the last number of days is a cia type, a whistleblower. We have seen this and that. I would like to talk to someone deep in the trenches. Served president obama, and the tour of duty includes ivory coast, venezuela, zambia, and i guess he wandered to the city of new york as well. D. C. In washington, honored to have you with us. Tell us about the Public Service of the state department and state Department Employees when they see this uproar over a ,rivate lawyer, Rudy Giuliani affecting diplomacy and state department conversations. Brett it is truly astonishing on several levels. The Foreign Policy of the United States is the purview of our ambassador in kiev, and for a private attorney to be running around ukraine trying to peddle influence, trying to scrape up dirt on the political opponents of the president , it just goes against everything in our constitution, everything our diplomats are trained on. Imagine if the shoe were on the other foot. , theis was bill clinton outrage would be extraordinary amongst republicans. Tom we have secretary pam pao, first pompeo, first in his class at west point, what does he have to do to write right the Trump Administration ship to get it back to some semblance of paloma see . Brett he might start diplomacy. Brett he might start by reading the whistleblower complaint. He could only scan the first couple of paragraphs. This is a blistering of indictment of President Trump and the state department. Pompeo has to clean up a mess created by giuliani and other leaders at the white house. Someone has clearly been meddling in u. S. Foreign policy within our government. He has to take the reins back. Francine breaking news out of dow jones, saudi arabia has agreed on a possible ceasefire in yemen. Yemen is the big proxy war between saudi arabia and iran. We are seeing a little bit of an impact on the price of oil, brent crude falling to a day low. We need to be careful because it could be denied, but something we need to take keep an eye on. Tom we can see the lift off of the attacks by crews missile and drone on the audi arabia, the lift saudi arabia, the almost 270 a barrel, and the new migration almost 70 a barrel and the new migration down friends the invention. Francine mentioned. How would you engage on saudi and yemen . Brett way were responsible for the medium to longterm Communications Executive initiatives of the white house and the whole of government. One of the areas we focus is on crisis communication, how do we create capabilities that will ensure when we face issues like we have in the middle east over the last couple of years, we are better prepared. What i am seeing with saudi arabia, their entanglements in yemen as well as iran, is an effort to try and resolve the situation. For ais fishing around deal with tehran that he can trumpet on the campaign trail. Actas told riyadh, get your together, get things cleaned up in yemen. I want to move forward. Francine does the impeachment process make the president want to pick a fight if a foreign country because it distracts, or does it mean he wants a deal with a foreign country . Brett i actually think he wants a deal more desperately to be able to hold up, this is what i am doing, i am making progress on the world stage and the democrats are trying to distract from that. You heard him elude to that in to that in allude his u. N. Speech. He is trying to sell his record and he will remain focused on trying to keep the attention off of what is happening on capitol hill. Tom looking at the geopolitics of brett ands light brett life, we have to go to square one. How do you fold the cacophony of geopolitics into a plan forward . We are lucky we have brett bruen with us now. What do i do this weekend as i try to frame my future . Russ it is hard for anybody. Not what we are training to do and it is too chaotic. What does it mean for the economy, companies, and confidence . The trade friction is a key example. Companies are more reluctant to invest and spend because they dont know the environment. If they build a plant in china or mexico, what will be the situation 10 years in the future . That has created uncertainty and has been a drag on manufacturing. Tom does shadow diplomacy work twitter . N this age of brett it can get things done. The problem is, you have shuttle diplomacy in this administration blocked up against backed up against twitter diplomacy. Folks on the National Security council and state department are handicapped because they dont know what trump might tweet. Talking about that reliability and predictability, it has become difficult in the last two and a half years for companies and countries to figure out where is this administration headed, where should we start growing . Trump has proven he will tip over the table and head in a direction completely different direction. Francine we saw 10 or 15 days ago when you had the drone attacks on the aramco facility. Production. 10 of the kind of oil price does world need for your portfolio model to work . Russ we have not left the range we have been in. This is a different environment than 20 years ago. We have the Permian Basin to thank. Given the ramp up on u. S. Production, you did not see the type of reaction in Global Markets that you would 20 years ago. This is a game changer. For people who are focused on geopolitics, it means the dependence and sensitivity to the middle east is different than a generation ago. Tom this is called Operation Decisive storm, the advent of the saudi effort to the south in yemen. President obama provided logistical leadership to the saudis. What is the difference from the obama projection to this troubled relationship, versus the trump projection . Brett it is all the civilian casualties and deaths that have mounted, and the way in which the saudis have executed on these operations. It has been so concerning and i think trump, on this score, i think they have put pressure on riyadh, both on the yemen front but also in response to those attacks against aramco to say, look, we are not going to escalate the situation. We have to clean up yemen and get our house in order, because trump wants a deal with tehran. After coming up short on north korea and afghanistan, he is looking to seal a deal with iran , because otherwise there is not much he has to show for his time in office in the world stage and major deals. Francine Stuart Wallace oversees our Global Commodities coverage. When you look at the headline that crossed the bloomberg saying saudi jones arabia agreed on a partial ceasefire in yemen, how long likely is it that it will hold . Stuart we have been here a few times before. The reaction in the oil market was dramatic and fast. Thing, given the style of rhetoric we have seen in the last couple of weeks with those attacks in saudi arabia, it may allow saudi arabia to focus on the iran issue is a direct issue as opposed to via the proxy wars. Sits on one yemen of the worlds most important shipping routes. Oilto 40 of the worlds goes through there. That should in general terms be good for oil supply. Tom one of your charms is synthesizing what are the pressures on saudi arabia right now to fix this problem . ,tuart they are enormous because this has been a pr disaster in the sense of them going into this saying, it will be quickly won. We are fighting a chaotic rebellion and they should be straightforward. It did not turn out to be that way, largely because of the terrain they are dealing with, and also a very long history of the yemenis being good at fighting people. What it does in terms of saudi arabias focus, it is fighting in syria and yemen and has all the proxy wars going on, and has done nothing to resolve the iranian situation. The attack on the processing solidity a couple of weeks ago is a stark reminder this is far from over. Find the market may shortterm optimism, we have to think about the problems saudi arabia is facing. Wallace sayr stuart it is a pr problem. You are global engagement. How do we engage with iran to come to a constructive conclusion . Brett you have seen indications that trump is out fishing around for this deal. He has expressed his openness to meet with rouhani to sort this out. The problem is, the iranians are not having it. Trump is using his pyongyang playbook. He says, i will level these harsh attacks, during the uns speech, but on the other hand, the door for diplomacy is open. The iranians do not need a splashy summit or flattery from trump. Restoration of the iran deal. Signatories ofrs that deal are trying to work that out, and i think it will happen because tehran is it an trump desperately wants it. Francine why would saudi arabia agreed to a partial ceasefire in yemen . Are they concerned about additional drone attacks . It has provenk more difficult than anyone was expecting, and it comes down to the issue of asymmetrical warfare. You have prepped yourself for a conventional missile attack or land invasion, what do you do about a series of drones question drowns . Drones . They have not figured out a way of doing it. You have the militias in the north and south, and very little they can do to guarantee 100 they cannot be attacked. We have seen an acceleration in those attacks. The attack was preceded by a series of attacks of shipping along the coast, the pipeline, airports, and so forth. In terms of the motivation, it would seem to be in saudi arabias interest to dial things back in yemen. Maybe this is the first time something will be done. Francine Stuart Wallace, thank you so much. And Stuart Wallace will be back with us throughout the day. Russ koesterich from blackrock stays with us. This is bloomberg. Francine it was interesting to get Stuart Wallace for his thoughts on this breaking news that saudi arabia agreed on a partial ceasefire in yemen. He said, we have been here before and the ceasefire did not hold. We wonder if it is different this time. Tom brett bruen goes back for years in saudi arabia four years in saudi arabia. Single best chart, more than painful. Lets bring it up. It is in pink for lyft, white for uber. Peloton is the blue mark. They are only in day one. Smile direct is in yellow. That is ugly. Our chief financial correspondent with us. Peloton and smile direct . What is the coalescence and theme . It defies gravity. The point of an ipo is to make sure that the prices low enough that it pops the next day. Tom what is going on . The bankers are asking the same thing. Tom are there jobs in jeopardy . Jeopardy,s job is in but we see the underwriting fees dropping it is not looking good for the startups that want to go public next. Francine are these mispriced . That is what is happening. These companies waited until the very end of the window. Tom run the video again, this is team surveillance, and their 2 00 a. M. Exercise. Are you kidding me . Do they have it in london . Francine they do have it in london. Is this a turning point . Well people say, we are not going to buy these stocks if they are not priced operably . Is there a problem that properly . Is there a problem with banks . Sonali peloton and smile direct tried to sell themselves as software companies, but they are hardware companies, and a Real Estate Company that wants to be a tech company. Getting a tech multiple will be harder for these companies that are not rooted in technology. Tom data dog is an actual company, we dog is a joke. Not casting aspersions on data dog. We go to Russ Koesterich. Bigmathematics is Simple Companies doing ittybitty stuff to liquefy the market. ,uss some of this was said companies trying to rebrand themselves to get a larger multiple, i remember this in 2015 in china. You had Chinese Companies rebranding themselves as cloud cement and there stocks double or triple. Companies are looking for the premium valuation and it is not justified. I have gotthematics, to go to ramifications. Screw up one or two, on and on. What are the consequences for the gentleman running this on wall street . Sonali simply lower fees. Will theret buy that be bodies out the door . Sonali on tuesday, all venture capitalists at Silicon Valley are meeting at a hotel to figure out how to overhaul the ipo model. You have these people that do not like the model. Tom what do they propose instead . Sonali direct listing. Francine will they postpone ipos . If you are a unicorn looking at this, do you delay everything by 12 months and revisit . Sonali what if we are in a recession by then . I think the window was now and has closed up. Airbnb wants to go next year. Wework, we will see where it ends up going. Will they get the valuations that were initially fueled much higher . Tom our bar chart, that is a great bar chart. Here is 12 years of debris. I dont agree, i think there will be consequences in the equity shops on global wall street. Stay with us, this is bloomberg. A look atlets have where the price of oil is going. Brent crude heading for the lowest in two weeks. On a partialagreed ceasefire in yemen. Premiumising any risk after the attacks on infrastructure in the desert kingdom. Tom after Lawrence Boone and oecd, they run into global oil demand. All of these supply shocks, but demand matters, and the mystery of oil into q4 is extraordinary because of china and global slowdown. Francine if you look at the ceasefire and how it happened tom in london . Francine in saudi arabia or yemen. They said they were for a ceasefire days after claiming responsibility for the attack. There is no crunch in supply and that gives a reason for the situation vying a little bit. Tom what do you go back to in london . Francine a sliding sound on the back of Michael Saunders saying boe hawks need to turn dovish. It is a divided parliament, that is the polite way of putting it. Tom stay with us. This is bloomberg. 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. Alix President Trump threatens the whistleblower. Republicans dodge questions. Investors look toward the threat of an Elizabeth Warren presidency. Initial public failures. Platonic the worst rating debut in 10 years. Endeavor polls its offering at the last minute. More blackeyes for banks trying to score a win. Welcome to bloomberg daybreak on this friday, september 27. Im alix steel. In the markets, there are two things happening. One is the weaker confidence in europe, not really bothering eurodollar, up by 0. 1 . The big news in the last halfhour comes in the oil market. Oil down by a full percentage point on the dow jones. Saudi arabia will agree to a partial ceasefire in yemen. If it takes hold, they would consider broadening it to other parts of yemen as well