Transcripts For BLOOMBERG Bloomberg Surveillance 20240714

I am Francine Lacqua in london. And little optimism seems to be fading away. We have the 600 opening unchanged. A lot of focus is on the economy. We had a little macro risk out there for now but they seem to be in check. We are getting euro area september manufacturing pmi, 45. 7 is a touch above estimates. We expected a 45. 6. It is below 50, but 0. 1 percentage point higher. The u. S. 10 year yield at 1. 72. Coming up, we speak to david herro on the fallout from the Credit Suisse scandal. That interview at 10 30 a. M. London time. Herros is the biggest shareholder for Credit Suisse. A jinping has kicked off massive military parade to mark 70 years of communist rule and pledged complete National Unity as democracy protesters rally in hong kong. Lets go to hong kong with Stephen Engle. What is the latest . Stephen tens of thousands of protesters are defying a police fromand they are marching the eastern part of Hong Kong Island to central and beyond, perhaps even as far as the Liaison Office of the chinese government. Ban are defying the police and already the police have responded in simultaneous coordinated protests in other parts of the city comedy have responded in a more remote neighborhood with tear gas, and they are clearly showing signs they are not going to tolerate this illegal assembly. Still, these are not just young radical protesters behind me. These are families. These are grandmothers. Young and old are here and they have been culminating over the targetingmonths, october 1 because of what is happening today in beijing. Thes a national holiday, 70th birthday of the founding of the peoples republic of china. The protesters want to send xi jinping and the chinese leadership a message that we want our promised autonomy to last through the full 50 years post and over. Handover. Francine we will have plenty more from hong kong through the day. Lets get to the first word news in new york city with viviana hurtado. Credit suisses coo resigned as the Bank Released findings of its investigation into the spying scandal. He took responsibility for the surveillance of iqbal khan. The bank says there is no evidence chief executive Tidjane Thiam approved the move. Tohas caused Severe Damage the reputation. Japans sales tax increase is climbing from 8 to 10 in an attempt to rein in the Worlds Largest public debt last hike in caused japan to stumble, driving 2014 down consumption and prices and shrunk the economy by more than 7 . The euro area economy being held back by trade uncertainty the European Central bank chief economist philip lane. He says the economy will keep expanding, but more slowly. He said there is even scope to lower. Consumer prices are rising at half the pace of the ecbs target. More than nine. 9 Million Barrels of crude oil a day 9. 9 Million Barrels of crude a day as saudi aramco recovers from a crippling attack on its into structure. Aramco is committed to meeting demand for all customers. We spoke to the chief executive of the trading unit. We will be at capacity by september 25. We will reach capacity and replenish what we used during the interruption. Viviana global news 24 hours a day, onair and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Francine thank you. Boris johnson is facing a moment of truth as he prepares to present his blueprint for brexit. It will determine whether there is any hope of an orderly exit by the end of the month. 28also needs to win over the socalled spartans, brexit hardest pro conservatives who voted against mays deal. If he fails, he will face another delay something he will never do or for say no deal brexit. Is our us for the hour guest. We are none the wiser about what Boris Johnson wants to do when it comes to brexit. Base case . The one thing i think we know ofthis guy has spent a lot time wanting to be Prime Minister and doesnt have Strong Political beliefs on a lot of it gets close to the pressure point, i think he is likely to bend to do a deal. Said you the eu has give us a proposal and we look at it. Is the u. K. Working on active proposals . Jim he was interviewed live about 50 minutes ago, which i missed to come in here, so i dont know quite what he said the e rso know one of g, the hardline brexit crowd interviewed before and he said if Boris Johnson comes back with a deal, we will sign it, which was interesting. Francine what kind of deal . Jim my hunch is whatever he thinks brussels will give him, and they will sign will be the story of the next few days. Whether that translates into whether brussels and eu capitals are happy with it is another matter. Francine what is the chance of a no deal . Jim it is pretty low. Has been for some time. Chaos ofw through the three months ago, two months ago, parliament will fight very hard to make sure. Of course, boris appears to be getting wonderful guidance from , ways around it but in the next fortnight, you will see fresh parliamentary efforts to make it very legally difficult for him to ignore. Francine what kind of deal could the eu and u. K. Agree on . What it be something similar to the theresa may deal and parliament would vote for it this time . Jim probably. In my view. Listening to the chair of the erg this morning, who would be vehemently opposed to anything resa may put on the table we dont even really know what this latest proposal is that he said listen he was proud of the fact he had personal text messaging going on with boris and therefore, francine do they need a deal to win the next election . What has changed is a Prime Minister that is accessed about being in power and one that is supported by i think a group that is facing the reality that if you want to get out, they need to take what they can to get out and start the process of what the longterm trade arrangements are. In that sense, a bit of realization. I dont want overly her tray how obvious it is, but it looks to as the hardliners are coming into line a bit. Voters, one of the after telling us the backstop is the death of good things jim this is why he will most likely banks to do a deal. If you go toows the electorate with no deal, he will lose votes. Francine what if he goes with giving them a deal that is similar to what theresa may put forward . Jim hell be regarded as a hero. Francine regardless of the fact a lot of people in the country have no clue about the details, amazingly, three years on. A lot of people just want out. Francine it looks like the markets dont have much of a view, to be fair. We cant just have this thing surrounding us for the rest of our childrens lives, so we need somehow to get on and if there is something that looks like a deal her deal but is dressed as Something Else, i think the manic outers and marginal players in the polls will probably reward him for that. An extension to me suggests the election might be a lot further in the future than people think. That wouldnt be great for the tories. Francine jim oneil, Chatham House chair stays with us. Resignsedit suisse coo as he takes responsibility for the scandal rocking swiss bank. We will get the latest on Credit Suisse shortly. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. , secretary of state mike pompeo, attorney general william barr were drawn deeper into a house inquiry after new details of the administrations foreign contacts monday. Subpoenas records of dealings on trumps behalf. Stephanie baker has been covering this from the beginning. What is the likelihood Rudy Giuliani complies and if he doesnt, what happens to the house subpoenas . These got until october 15 to comply and this is records of telephone calls, communications, Text Messages which could tell white houseer officials it was in communication with and were part of this effort he was leading to dig up dirt on the bidens in ukraine. He has said he is considering the request but it raises interesting issues about attorneyclient privilege. That will be his line of argument, that since he is trumps personal lawyer he will try to invoke attorneyclient privilege but he will have a hard time doing that because he has been on cable news talking andt all this repeatedly, it really has nothing to do with him defending the president as he was doing in the mueller investigation. This is quite separate. Francine and we her mike pompeo was on the famous call with the ukrainian president. How does that change everything . Stephanie he was asked previously and it did not in knowledge being on the call and feigned ignorance about it to some degree. It does draw him much deeper into this probe, and he will he is also facing a subpoena from the house. The questions will be focused on what did he now . Know . He play a call in suppressing that phone call and why was he not more forthcoming initially . Francine yesterday was a big news day and all this came at once. Are we expecting this kind of investigation to bring more up on a daily basis . Stephanie absolutely and this week, the house is bringing in state Department Officials to testify starting with kirk voelker, the representative to the ukraine who stepped down and had been in communication with Rudy Giuliani over his overtures to aids to ukraines president. The weeket drips as wears on and new revelations will come out as they give testimony in the house. Francine from a market investment, and director at fidelity international. Jim oneil is still with us. Before we get to markets, does this change everything and jim geopolitics . You were at the treasury and are at Chatham House, domestic policy is changing every day. Well francine are you lucky you are not trading it . Jim ive known since my earliest days in the market, still a Macro Hedge Fund and i just shook my head. The signaltonoise ratio is so bad because irrelevant of where this goes, the tweaking stuff. Etin how are you supposedg stuff, stuff. How are you supposed to judge where this goes . OffsiteChatham House on the state of the world a couple of weeks ago and i walked away with more confidence if the circumstances where trump can exist the underlying issue connecting so many different points is the inefficiency of modern capitalism. Unless the center can come up with ideas to make more people winning from supposedly capitalist driven growth what the tories announced about minimum wage is today, Important Development in that regard, i think we are going to get trump like characters that have an appeal with those that have lost out in the world saying what about me . Upncine we have that tweet but what does that mean for 2020 . Is the big winner out of this Elizabeth Warren and it is that change the composition of the u. S. Economy . The impeachment is not a done deal because it has to go through house and senate, so lets hold our horses for a second as weve seen things can get dragged on for longer than people expect. Matters of 2020, it does for the reelection. Trump is polling that he will pretty well, so if that comes down and you see a shakeup at and changeouse, back a few things, particularly around tax reform that trump has enacted. That gave a boost to the economy last year. How that angle will play is going to be crucial, i think. After what continues to drive the market is going to be Monetary Policy. Central banks are in the driving seat. Francine what does the fed do with impeachment . What do markets do . I dont know how you trade it. Pretty reaction has been muted because people are scratching their heads and trying to figure it out. Point, signaltonoise ratio from politics and twitter is not great as a way to invest. Jim im a bit of a distant observer from the minute to minute flow, but what has fascinated me over the summer was trump admitting or sources admitting his claim that the chinese have called up to offer some new things was essentially not true because he was trying to make sure the stock market wouldnt keep dropping. I think that is really revealing, and i often question this guys awareness of anything, but it tells you that he wants to keep financial conditions accommodative going into the election and if he doesnt, my view is hes in serious trouble about the economy because you can see over the past four months of data, the fragility behind the headlines in the u. S. Francine what does this mean for Foreign Policy in the u. S. . Is it in disarray . Stephanie is trying to normalize what is this pressure on a foreign leader to intervene in an election. Hes tried to normalize that, so i think the whole basis of u. S. Foreignpolicy has been completely upended and foreign leaders are obviously treading very carefully when they get one of these phone calls from trump. I suspect other records of other phone calls with other foreign leaders may come out. Jim can i ask one thing before you go . What are the probabilities of the senate impeaching him . Stephanie at this point, it looks unlikely. It is unlikely they would vote unless we get new revelation that would cause a number of republicans to break ranks. Jim that probability changes, the markets go and react. Jimcine Stephanie Baker, oneil from Chatham House stay with us. In the meantime, news from hong kong. It is the 70th anniversary of the peoples republic of china. This is bloomberg. Francine lets bring you the latest on the scandal rocking the Swiss Banking industry. Olivier bouee has quit as coo of Credit Suisse. Lets go to maria tadeo in zurich. We are hearing from the prosecutor that the investigation is continuing. The Investigation Continues and Credit Suisse is in full damage control. This was a pr disaster. The chairman said this was a rogue operation by the coo alongside the global head of security. Both have resigned. He says there is no indication based on the operation that the ceo Tidjane Thiam new or approved of any of this. There are still many questions. How come the ceo is unaware and you have zero prosecutors saying an investigation may be done but we are continuing our probe. We will have more from maria tadeo indirect throughout the day. Next, the peoples republic of china turns 70. Xi jinping calls for unity but the parade is contrasted by more street protests in hong kong. We are live in the region next. This is bloomberg. Francine the president s men. Donald trump allies are entangled in the impeachment inquiry, with barr, giuliani, and pompeo all be drawn and. Tidjane thiam takes responsibility for Credit Suisses spine scandal pierreolivier bouee takes her sponsor ability for Credit Suisses spying scandal. Hong kong celebrates 70 years under communist rule. I am Francine Lacqua in london. We are just getting data out of the u. K. U. K. Manufacturing pmi for september is a little bit better than expected, 48. 3. The forecast was 47. If you look at pound, cable. A lot of the focus is on a possible new deal that Boris Johnson may not get may or may not get. We are expecting the Prime Minister to present a new plan for the brexit deal to the eu later today. There are signs that might fail. Lets check in on the biggest stock movers. I want to start with as, up more vest than 2 . They won a contract. Ryanair to the upside, up 3 . Bank of America Merrill lynch reinstates their coverage of airlines. They have a buy rating for ryanair and like the carriers model. Greggs down more than 5 this morning. This is a u. K. Bakery. Seems to be there some slowing momentum. They say the stockpile for some of their key ingredients for their vegan sausage rolls. Francine the vegan sausage roll, which i have not tasted yet. Lets get straight to the bloomberg first word news. In new york city, heres viviana. We begin in the u. S. Some of president Donald Trumps closest allies being dragged. Into the ukraine the saga. U. S. House democrats subpoenaed Rudy Giuliani. Secretary of state mike pompeo listened in on trumps july 25 call with ukraines president. That is a conversation central to the impeachment investigation. And the u. K. Today, Prime Minister Boris Johnson will unveil his new brexit plan to eu leaders, according to the daily telegraph. The key will be the reception the new plan receives on both sides of the channel. He is still planning to deliver brexit on october 31 with or without a deal. In australia, for the third time this year, the reserve bank cutting the cash rate as it tries to shield the economy from a slew of global risks. The key rate was reduced by 25 basis points to 0. 75 . The governor signals he could loosen policy even further. Global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thank you so much. As the peoples republic of china celebrates its 70th anniversary, president xi declared that no force could stop chinas rise. It comes as he faces unprecedented challenges from protesters in hong kong as well as Donald Trumps trade war. President xi called for stability in hong kong and National Unity. We must remain committed to the strategy of peaceful reunification and one country, two. Systems we will maintain longterm prosperity and macau. Francine Stephen Engle is in hong kong and selina wang is in beijing. What is the mood like in beijing today . Beijing has been on highsecurity for weeks and weeks leading up to this parade, with more than 100,000 people involved. It is really about celebrating chinas 70 years of communist party rule. That is one more year than how long the soviet union lasted. It highlights chinas enormous transformation from an impoverished, warravaged state to the worlds secondlargest economy that is now at the cutting edge of technology. One way to display this a economic and political clout is through a massive military parade, where we saw china show off some of its most advanced military hardware. We got our first public in of one of the worlds longest range worlds longest range missiles. It is a display of just far just how far china has come since 1949. Francine protests in hong kong in the meantime have intensified. Absolutely. I mean, we are here in the middle of central hong kong, where just a few minutes ago, tens of thousands of people are estimated to already be out on the streets in multiple areas of hong kong. And central, it is the epicenter of a lot of the angst in central, it is the epicenter of a lot of the angst. The loudspeakers came out. Danger, central is in so people started to go the other way. Thats where they are heading back right now. There has been a slogan among the protesters, and that is be water. That means go where the police are not and cause disruption wherever they can. Right now, the latest report is the water cannon with blue dye are out in the next door neighborhood, near the headquarters. We have also seen tear gas fired in at least two districts on the others of the hong kong harbor. A number of people have been arrested. These protests are in defiance of the police ban. The Police Obviously did not want to see the unrest in the streets of hong kong on the same day as the National Celebration in beijing. The people here who are upset at what they say is an erosion of their promised economy in hong kong autonomy in hong are sending a message, layoff hong kong. Francine thank you. It was amazing. Lets get those pictures back up. They are quite incredible. Came as thesery industrial and Scientific Achievement this industrial and Scientific Achievement parade was going on. We saw ballistic missiles, which we understand could circumvent some of the u. S. Defense systems. How are they dealing with the trade . Is this are they actually being hurt back handedly by trade . Francine, yes, it was an incredibly lavish display of force and military might. Xi jinpings speech is sort of a message to the world and to the United States that it will not be held down. There is a growing view in beijing that the United States is trying to contain chinas rise. Of course, the trade war is taking a toll on both economies. Xi jinping, though he has consolidated power since he assumed leadership, he is now facing unprecedented challenges, including the trade war, hong kong protests, a slowing domestic economy that was already slowing before the trade war, rising inequality, rising consumption prices domestically because of the african swine fever. He is facing a number of challenges and is calling for unity, calling for the domestic people to look at him as a symbol of hope that china can sinceue to move forward 1949 and even into the decades into the future. This lavish parade is one way to cement that vision. Francine thank you so much. Selina wang in beijing, Stephen Engle in hong kong. Lets get back to our guests. When you look at, i guess the message from xi jinping is, look, the rise of china is unstoppable. Is that what the u. S. Wants . It is unclear if the u. S. Is trying to get a better trade deal, stop intellectual property theft, or if this is a two decadelong war to keep them from rising. I have these stronger beliefs about the failings of modern capitalism. I know the session was all about this. I now worry that the trump approach has solidified this view in the u. S. That we will do whatever we can to stop china becoming bigger than us, which is very stupid, and is possibly almost probably going to fail. It is worrying. I think there is a lot of illogical thinking coming out of the u. S. You guys were the first people who carried this story where they are exploring Delisting Chinese Companies from the new york stock exchange. Next thing you know, i dont know if it were true, china would respond by banning u. S. Companies from being in china. I dont really get what is logically going on in the u. S. , but it is a powerful force. Obviously, xi is going to say this kind of stuff. Thing is notump quite really what the chinese expected. Francine he has a lot of support, right, President Trump . People say it is working at the margins. He does but it is unlikely that he is going to be able to stop the tide of capital going to places like china. At the end of the day, if you in the works of global logistics, you can do so for a little bit, but companies will adjust. Flesh. S a philosophical flash. They are suddenly no longer registering in the u. S. , in london. Francine what is unclear is whether this is President Trump wanting to go into the 2020 election fighting, because thats what his base wants, or whether he secretly once a deal wants a deal. His reaction is going to be actually important to see, because either he goes and softens up his stance to get a deal to show that i have got a deal and the election is come get coming up. There is lots in that i can talk about. China, strange, obviously given my background. By a large, china is going where i said it would. Francine this is 20 years ago, right . 19 now, yes. I find myself thinking, strangely, that this hong kong thing could be the source of i still bigger risk than francine like what . I am not quite sure how they get it under control. This is not like Tiananmen Square. We have one quarter of hong kongs population protesting. As we have just seen a little bit of it there, it goes on. I do not quite know, other then just the long game of attrition, that might be the most sensible thing for beijing to do, i dont know how they stop it. If they try to be really aggressive, i think that would be a big mistake. Francine what happens if they do not stop it . Would if this continues what if this continues . I have been of the view for 20 years that hong kong was never anything like as important as it was. You go over the border, you have got a city that i think its average gdp per capita is already bigger than hong kongs. None of this is going to help hong kong. One way of really bringing around the underlying stability is to do something to dramatically lower land values and house prices in hong kong. I think some of the protests relate to that. I agree. Francine we are looking at live pictures of hong kong. Even the traits but, i dont know whether you want even the trade spat, and i dont know whether you want to bring in hong kong, if there was a real trade war between the u. S. And china, who would win this . I do not have a crystal ball in front of me, but what we do see is that at least china has got a lot of ammo that it can deploy. Being able to control the capital flow much better than the u. S. , it gives them a le ver, as well as fiscal levers that they have used, but can use more of, and controlling the general flow of cash in the system much more finally. Ly. There is no fine there is no winner there is no winner. By u. S. Economy is dominated over 70 gdp of its consumers. Bashing on what is going to become the largest economy in the world is just basically stupid. The u. S. , we are all at chatham is to somehow make people feel more comfortable. Luxembourg does not sit around and moan about germany being so big. Got to findsomehow a way of starting to do with that. Because otherwise, they are going to still not succeed in being the Biggest Country in the world and be a lot poorer as a result. It is a slightly, causing strategy in my view , kamik aze strategy in my view. Francine we will talk more about that in the central bank. This is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua here in london. Lets get straight to the Bloomberg Business flash. Chiefdit suisses operating officer resigns as the bank release to the findings of its investigation into the spying scandal. He took responsibility for the surveillance of iqbal khan. The bank says there is no indication chief executive Tidjane Thiam approved the move. Credit suisse adds the incident has caused Severe Damage to its reputation. Wework is now looking elsewhere to find a new capital after it formally withdrew its ipo in a botched Fundraising Campaign effort that caused the Top Executive its job. Coceos are weighing possible staff cuts and asset sales. Boeing in the final stages of preparing its 737 max 8 a return to the skies, according to the companys chief executive. It follows two deadly crashes that prompted a global grounding. They are discussing the timing of their recertification with u. S. Officials. No date has been set. That is your Bloomberg Business flash. Francine . Francine the rba has cut its key rate a quarterpoint to 0. 75 . The Central Banks decision has been widely expected as it seeks to shield australia from rising global risk. Guests both still with us. That what isear driving Global Growth or making it not fall off a cliff at the moment is central bank policy. At the limit of what they can achieve . That is a question central bankers have to ask. There is more room, but we are not far from where they need to pass on the baton to fiscal. Europe, in particular, is a case in point. Lower lower rates and qe benefit is getting lower and lower rates and qe benefit is getting less. Fiscal has to do more. Without Central Banks, you know, they have to be there just to keep things steady. In order for things to improve, you need Something Else. Francine what happens to the european economy . I had a long conversation with Christine Lagarde. Its very clear she felt a duty because she was told she had the skills to make a difference. That would be being a politician per fiscal policy. Policy. For fiscal i feel for her. Mario has made it a little bit easier for taking by taking so much of flak. I have the luxury of standing back from this. It is not clear to me whether the mandates, which of course all these Central Banks are technically fulfilling, which is the inflation mandate, are really very rational. What is blatantly obvious is this pursuit of some marginal Monetary Policy easing is going to make a difference until the cycle or more importantly, the underlying issues i mean, its just not. Its blatantly obvious that germany should finally wake up and come up with a big fiscal stimulus. Francine spending on what . If i am in germany, i am being told this infrastructure is pretty good. What do you spend it on . I have no idea what it should be. All i know is that you have a country that is running perpetual structural surpluses. Its debt to gdp is falling sharply. It has ridiculously negative bond yields and you have huge german current accounts, so big that the euro zone is the biggest current account surplus place of any sizable part. It is not making any sense whatsoever. They should wake up and do something about. In terms of where to spend it , either tax cuts or actually investment directly into the infrastructure will help. This level of Interest Rates in fiscal is actually pretty high. It does not take on a normas amount of money to smooth the normas an a enormous amount of money to smooth the needle. Francine jim oneill, Chatham House chair stays with us. Up next, a wall of worry. Investors worry more should investors worry more about politics or the economy . This is bloomberg. Francine says we are worried for investors. Should markets worry about politics or economics . We are asking that question on mliv today. Lets get the views from jim oneill from Chatham House and are other guest. I am looking at some pretty concerning pictures out of hong kong. Should we worry more about economics, politics . I also find myself thinking that a lot of generally stick views at the moment generalistic views at the moment have got it slightly off. This is a ridiculous simplification. We think there is all these weird parties and populism. I sort of now have come to the view that actually, maybe it is a logical consequence out of the failings of the modern capitalist business system, certainly in the past 11 years since the crisis, but the whole of this millennium or this century to date. We have about 20 years where it has it is not really helping a lot of people. It came at a time when all these general parties came to the center. You have to have the central wayses coming up with new of making the capitalist system work better. Francine redistribution . That is one of it. Doing Something Like the u. K. Seems to be flirting with, taking some risks, but deliberately boosting minimum wages, which indirectly could force profitability to start working better. I think that could be really sensible. Francine we will get you both back on. We are running out of time. We will have plenty more from hong kong and Credit Suisse as well. This is bloomberg. Francine the president s men. Donald trumps allies are entangled in the democratic impeachment inquiry. Credit suisses coo resigns. Pierreolivier bouee takes responsibility for the companys spying scandal. The banks chief executive the bank says its chief executive, Tidjane Thiam, was not involved. Beijing celebrates 70 years of the peoples republic as hong kong is hit by further protests. Good morning, everyone. Good afternoon if you are watching from asia. Bloomberg surveillance. This is this is bloomberg surveillance. Im Francine Lacqua here in london. Tom keene in new york. The focus is firmly on trade concerns. It is on hong kong protests together with the celebration over in china for the 70th anniversary. You overlay that with what is happening in brexit and of course the impeachment process. Tom president xi in his comments really talking about the format of modern china, not of october, 1940 nine, but the modern china of two systems under one nation. A lot of nuances here. Stephen engle is in hong kong. Francine i am looking forward to hearing from him and selina wang. Lets get straight to the bloomberg first word news. We do begin with chinas marking 70 years of communist role. President xi jinping overseeing the military parade through the center of beijing. It featured some of the countrys most advanced weapons, among them, one of the worlds longest range missiles, capable of hitting the u. S. Police fired tear gas at protesters, tens of thousands of marching in simultaneous rows across the city. Several president Donald Trumps closest allies are being dragged deeper into the impeachment inquiry. Three house committees subpoenaed has personal lawyer, Rudy Giuliani, for records of his dealings with ukraine. Secretary of state mike pompeo was among those listening in to a call between the president and ukraines leader in july. That is the call at the center of the investigation. British Prime Minister Boris Johnson facing a crucial moment for his brexit strategy. He is preparing to present his blueprint for a deal with the european union. The response will determine if there is any hope of securing an orderly exit from the eu later this month. There are already signs johnsons plan could face trouble. In japans Prime Minister, shinzo abe, rolling the dice on his political legacy. Today, an increase in the governments tax from 8 to 10 taking affect. It is aimed at helping japan at rein in the Worlds Largest debt load. Previous tax hikes derailed political support. Next month, he will become a longest serving Prime Minister he will become japans longest serving Prime Minister. 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. We begin the Fourth Quarter with a really interesting twist to the market. We have the idea of spx up as well. Lets go on to the screen because i dont know what the numbers mean. Im kidding, folks. I do. The spread widened out to seven basis points. The world is coming to an end the fourthay in quarter, francine, i am lost. What do you need to know . Francine we are looking at the last quarter of the decade, tom. If thats not exciting, i dont know what is. European stocks are fluctuating a little bit. Investors are kicking off the Fourth Quarter trying to figure out exactly what the macro risks for their portfolios. We are getting some euro area data. This is quite significant cpi. Se it is this is quite significant because it will have an impact on what mario draghi sees and what madame lagarde will do when she comes in on november 1. You can see inflation slowing to 0. 9 . It was a little bit below what the median estimate was of 1 . A touch below expectations. It gets credence gives credence to the line of thought that things are becoming a little bit more like japan. Joining us for the hour, sheila patel, who was recently named chairman at Goldman Sachs Asset Management. She oversees over 1 trillion in assets. First of all, congratulations on the promotion. When you look at the ecb, inflation, hong kong, when you look at everything, is there anything that should really give hope to investors or is now the time to hunker down . Sheila i think from an investing standpoint, we are at an interesting Inflection Point when you try to make a call on growth. We see a relatively benign inflation environment. We see continued consumer demand in the u. S. And consumption in china as well. There are some positives. On the flipside, the headwinds that have been making all the investors nervous, u. S. China, things we can inflict on ourselves basically from a political perspective. Uncertainties around brexit, et cetera. We tend to lean on the idea that growth may persist for a bit longer, that we are in a relatively benign environment and can therefore have decent markets for longer. Francine what do you do with your . We had this think europe . We had this inflation report, a little bit below estimates. We are coming to the limit of Monetary Policy. Sheila i was just on a trip around the world, about 17 days. I spent the last several days around asia. One thing we all realized among this large group of sovereign wealth investors and other people very involved in the markets is we had talked about the u. S. And asia so much and never talked about europe. I have to say, we look at that as an opportunity. As many things as there are challenging in europe, as many questions as there are, there are also some glimmers of hope. We think the Financial Sector is starting to looking bit better. When you look at some of the cleanup that has been done, when you look at the supportive nature that the ecb has an the recent measures taken on reserves charges, there are some glimmers. European equities might have a shot for some unexpected returns. Tom may be it is because of greater exports. Lets look at the chart of the euro right now. Standard deviation representation of a weaker, weaker persisting eurodollar. Lets begin with the Inflection Point, which is stable and stronger dollar versus the euro flat on its back. Are we going to see parity . Sheila well, we are not quite at the point of predicting parity yet. I absolutely think that this question of the stronger dollar is weighing on our portfolios. When we look at our positioning in fixed income, we are overweight december Interest Rate futures. We think that given the environment that we are and when you think about every centralbank out there, who has the room for movement . There is a chance that the fed might make a surprise cut or at least it is being underpriced in the market for october. We see that situation from currency persisting, we dont see parity. Francine what is tom what is your differential in equities . What is the new thing on the Goldman Sachs equity call . Sheila when we look at equities, to us, the question of what are the key themes driving the market are essential. What i look across are a large ream of portfolios. When we have found something related to an underlying activity in the market, we are driving persistent alpha. I will give you a great example, millennials. You hear it way too much already, but in the aggregate, they are controlling more wealth in terms of their income for any generation. Given that wealth, how they spend it matters. Targeting a portfolio, for example, as we have on millennials has become a first quartile top driver of alpha. Francine how many people want to go to cash . How many questions do you have to field along that . Sheila it is definitely a question. I think it is quite down in september. If you look at the yearlong flows, for example in etfs, almost half a billion into fixed income, almost half a billion into cash, about 250 billion out of equities. People already have made some moves out of cash. I dont know the move to cash. I dont know how much more of that we will see. Tom this huge move in interest q4, equities really holding on and the yield coming in dramatically. Do you look for a yield backup or sustained lower yields . Sheila it seems to us, you know, from a perspective of where do we see Central Banks moving or what can happen, that we are in a sustained environment. Whether that ends up good or not to some extent depends on the question of growth that i mentioned. Do we see continued tighter labor markets . Do we see continued benign inflation . That balance may tip the edge for the central bankers and that definitely will weigh on where fixed income heads from here. Staysne sheila patel with us. In the meantime, we have plenty more coming up on bloomberg tv. Dont miss our interview with the chicago fed president , charles evans, just after 7 30 a. M. In london tomorrow on thursday actually, two days on thursday. This is bloomberg. You are watching bloomberg surveillance. Lets get the Bloomberg Business flash. The chief operating officer of Credit Suisse resigned in the wake of that spying scandal. Pierreolivier bouee assumed responsibility for the surveillance of one of the banks former executives. Credit suisse says he does not discuss the surveillance with the ceo Tidjane Thiam. They worked together at several workedkhan and thiam together at several jobs. Experiencingies their worst month since the depth of the financial crisis. That is your Bloomberg Business flash. Tom we welcome all of you worldwide, coasttocoast in america and of course, later midday here in the United Kingdom and europe. It has to do with catching up on the daily impeachment report. We can do that with Stephanie Baker, are bloomberg senior writer, with her true expertise early trump financial allegations and crimes. Stephanie baker, the headline today in bloomberg is that all of a sudden, the secretary of state and the private lawyer, mr. Giuliani, are more involved in yesterday. There is a lot more going on here. Can i guess that what caught your attention yesterday was the senate is beginning to respond to these new realities. You heard Mitch Mcconnell say that if the house does indeed impeach or adopt a vote on articles of impeachment for trump, they would have no choice but to take that up in the senate and proceed with the trial. Now it looks like, you know, this whole question is, how quickly do they move on . Do they try to on it . Do they try to dismiss that if it gets to the senate . If so, they would need all republicans, most republicans on board to do that. Or doesnt actually go to some sort of quick trial as it did with president clinton . Tom within all of your reporting, the Stephanie Baker study of how mr. Trump reacts to adversity, how do you expect him to respond to all this in the coming days and weeks . Well, just based on his twitter feed, he does appear to be in panic mode. , you know,ing attacking this as a witchhunt, accusing the House Intelligence Committee chair, adam schiff, of treason. He is sort of all over the map. You know, but they dont seem to have a coordinated response to this. In light of a what came out yesterday that mike pompeo, secretary of state, was actually on the call with the ukrainian president , but when he was questioned about it earlier, did not acknowledge or own up to that. This is a sign of a deepening house. Within the white we are likely to learn in the coming days of other individuals that were on that call or aware and participated in the decision to sort of put the summary, the memorandum of that call on the special server. Francine the fact that mike pompeo was on the call, how does that change impeachment proceedings . He has already been , as theed for documents house tries to determine what role state Department Officials played in this back channel effort by Rudy Giuliani to persuade ukrainian officials to dig up dirt on joe biden. I think the state department will be central. I think Rudy Giuliani will be absolutely central to this whole thing. He was issued with a subpoena for communications us night. We expect him to play a central role in this. Francine do you have to comply with the subpoenas . What happens if you dont comply . Rudy giuliani and mike pompeo can and mike pompeo has already failed to comply with requests from the house. They can fight it out in court. I think giuliani will have a hard time resisting that subpoena for communications, because he has talked about it so extensively on cable news. He will try to invoke attorneyclient privilege. , itink for much of this really has little to do with trumps actual legal issues so he may have a hard time asserting that right. Tom Stephanie Baker with us this morning on a story just beginning to develop on this first court Fourth Quarter month as well. It is extraordinary imagery from beijing. It is what is expected, not what is expected, but the symbolism as well. President xi wearing the traditional mao suit before the gathered. Exceptional imagery today. Kong is from hong Stephen Engles from hong kong. Extraordinary difference between beijing and hong kong this day. It is a simple shot in hong kong with umbrellas out earlier. Now, fewer people, but nevertheless, clearly the smoke a protest in hong kong versus the pageantry seen on this 70th anniversary to october, 1949 of the communist party. In london with us is sheila patel of Goldman Sachs. A fabulous article was written yesterday on the mystery of the riskfree rate, the mystery of where we are on pegs and foundations to the market. It was a tour de force. How can we do business and how can Goldman Sachs Asset Management do business if you dont have a riskfree rate to work with . Sheila well, it is a changing environment. When you think about the question of riskfree rate, as you have in the header, it is one of many things that have changed about the environment we work in. That is actually why we rely on the investment that we have made in quantitative analysis and in data more than ever. You know, he used to be very simple. You take a risk few rate, plug a few things in, then make your calculations. Today, the variables involved in valuations in the market is extreme. Tom whether it is a tangible rehash of a derivative strategy or is the only hedging we are doing in our minds on retirement plans, the heart of this is you have to go out and rehedge forward. How do we do that with negative rates . Sheila that is definitely a challenge with negative rates. And terms of a rehedge forward, i see people just modifying the entire way they run their portfolios. I think when you look at the change and the move from even just very macro public to private investing, you are finding ways to find yield from new sources. You are finding things like private credit. We definitely see much more demand in more simple approaches to finding yields. People are just redefining what portfolios they are willing to invest in, the way they asset allocate, and thinking about risk allocations versus just asset class allocations. Francine what is the one thing people worry about . I dont know if they worry about bubbles or their take on fixedincome. Sheila certainly, bubbles is always a risk. If you can identify a bubble, it wont be. I think people are definitely worried about the underpinnings of the market from other places. If markets are hard to predict, politics are even harder to predict. So right now, use a how people reacted to a bit of good news on u. S. China yesterday. And a bit of good news is great news. These are the two great economies pushing forward Global Growth. Francine where our havens . First are havens . If there was something ugly on the geopolitics front, how would the market react . Where do you find refuge . Sheila there are no havens but we see an increasing focus on understanding domestic activity market by market. India has been a bit unloved lately. A lot of issues going on there, a lot of questions, even with modis strong win. When you look at a market where so much about the economy and potential growth is domestically driven, it turns the minds eye a little bit and i look see clients looking at that question. Francine is this Structural Reforms . Mr. Modi had promised a lot of things that are coming true. Sheila absolutely. There is a lot of focus on reform. There is a lot a focus on how quickly the ball can move forward. You have quite an engaged consumer engine and investment technology. It is a bit of a race. Which one do you think moves the market quicker, a disappointment in the reformed pace or an actual drive of the burgeoning middle class . Tom bloomberg was out today with an omnibus on the oneyear David Solomon rain at Goldman Sachs. I dont want you to talk about the Senior Management and the travails of your company, but i do want you to talk about the Goldman Sachs Asset Management strategy and is activepassive debate. What is the patel pact on what youre going to do . Sheila you and i have talked about this before. We see room for both in the marketplace. First of all, just talk about historical passes. Do you drive your grandfathers car . Do you use a washing machine from the 70s . We think that classic indices have a place but are not the future of investing. Some of the things that we have done to bridge the gap between various ways people can use active and passive is by launching etfs in europe. Betactive approach, active approach to u. S. Equities is a place where we take a quantitative approach to move forward from classic market cap waited. Indices. It was a huge success for us in the u. S. And we think similarly it will be a valuable tool for investors here in europe. We try to offer a range of those strategies from the quantitative to the true fundamental to help people find the places were active can drive the most alpha, such as money is. Francine sheila patel there. Us. Stays with in the meantime, we will have plenty more on your markets. We will look at Monetary Policy. We will look at hong kong, where protests continue on the 70th anniversary of the peoples republic of china. Tom these are images of a more empty hong kong. That was not the situation two hours and five hours ago. Of course, it is evening in hong kong, pushing on 5 30, into the 6 00 hour as well. Theres pageantry in beijing. There is not in hong kong. Our Stephen Engle, our Bloomberg News chief asia correspondent, has seen more of china than anyone at Bloomberg News, and we welcome in on this 70th anniversary of the communist party of 1949. Stephen, it has been a long reach from chris patton and a different hong kong of 20some years ago. What was it like three and four hours ago on the streets of hong kong . Stephen just within the last 20 minutes, you know what hit the proverbial fan right here on queens way. I can just step aside for a second and show you the aftermath of the latest pitched battle between protesters and the police. Riot police just a few minutes ago, too bad we werent on tv, but they came rushing in and here scared the hardline elements out and away from this central part of hong kong. This is the admiral, really the epicenter of many of the clashes. You can see the blue dye, the residue, from the water cannon that they sprayed at protesters. Off to the other side, you can see the remnants of a barricade, which was set on fire. Just as quickly as the riot police moved in, protesters scampered off, heading off to another district. Again, their slogan has been be water. They move where the police are not and where they can cause the most civil disruption, and thats whats happening right now. Already weve heard from various media reports, including the south side morning post, one protester has been hit by a bullet reportedly from, i dont know if its from police, but a live round of ammunition, were waiting to confirm that right now. Tom weve seen those reports, and again, they are unconfirmed. Stephen engle, you are an expert at the pageantry of beijing and how it rebounds across all of asia. What happens when those parades are over . How will hong kong change after he parade is put away . Stephen very good question, because four months of the summer of discontent in hong kong has been culminating to this date, october 1. The people here on the streets of hong kong really wanted to send a message to all those leadership there in Tiananmen Square for the military parade that they want bay zwroing keep their hands off. Theyve promised 50 years of semiautonomous rule here in hong kong. They feel that their rights are being eroded, so they are trying to send that message with more civil disobedience and unrest. Beijing, we know they didnt want the party spoiled. Obviously images are coming from the main thoroughfare that runs through Tiananmen Square is showing all pageantry and armament, but its competing for air time with scenes like this, tear gas on the streets of hong kong, rioting people, chinese citizens, i might add, rye on thes against the rule of beijing. So its competing images that they have to deal with. Francine i mean, this seems to be a catch22. How difficult is it to find a way out . How will this end . Stephen im south korea a fire truck just went by, and i didnt hear your question. Francine a very difficult stephen, the difficult question is how does it end . How does it end . Stephen how does it end, oh, boy, ive been trying to answer that question for a long time, because theres no solution on the table. So how can it end if theres no solution to be debated . There are demands of the protesters, and there are the government has said were not going to give in, were not going to acquiesce. We already did that on the one bill, the extradition bill, but theres still more demands, including the overarching goal, and that is universal suffrage, which protesters say is baked into the basic law of the mini constitution. However, in the constitution, it says its a gradual process towards universal suffrage and dependent on the conditions of the day. Well, the conditions of today are rockets, and theres unruley behavior on the streets. So they argue they cannot give universal suffrage when the situation is like this. Francine stephen, thank you so much, Stephen Engle, chief asia correspondent. Were back with sheila patel, Goldman Sachs Asset Management chair. Away from the protests, the trade concern is something thats keeping everyone on their feet, including markets, including the Global Economy. If there was a tussle that lasted 10 years between china and the u. S. Who wins in the end . Sheila thats another tough one, just as tough as predicting what goes on from a hong kong perspective. The question who wins is a losing prospect f. One side wins, probably the globe loses. China and the u. S. Have to come to some new relationship, some new status with each other, and that, i think, is what everybodys grappling their way towards for better or worse. You see china making interesting moves lately. Were moving quotas that went almost unnoticed at the beginning of september. Thats a big move and a pretty irreversible move towards opening up domestic markets from an investing perspective. There are other moves being made that will be tougher and tougher to unwind in terms of china opening up. On the flip side, some of the concerns in the u. S. That have been espoused by the administration are real, and some company concerns are real. Its kind of expected, i guess, negotiation between great powers in a markets context, but i think if one side truly wins in 10 years, well all have lost. Francine does the trade war, if it continues as it is, does it bring forward the risk of recession . Sheila certainly, if the trade war continues as it is or escalates significantly, it absolutely affects Global Growth, and therefore, brings forward potential recession. Tom the trade war is there, and its going to take a bit off g. D. P. You have to deal with the writings of joyce check, j. P. Morgan research, Goldman Sachs research as well. How much do you take off the spirit of the economy given the chinese slowdown . Is it half a percentage point, or can it be more . Sheila i think at the moment you take a bit off, and probably youre in that half a percentage point zone or thereabouts. I think the real question is whether a trade war escalates, if concerns escalate overall, do you see industry pulling stpwhack youve already seen corporates pulling back, concerned about what they can do, and what becomes a vicious circle. I think we have a lot of concerns about vicious circles forming, particularly with reduced consumer confidence, or rather, corporate confidence. Tom how do you define scale . Scale is all the rage, still the rage. Does scale mean more m a and more consolidation given diminished growth, diminished Revenue Growth . Sheila it could certainly mean that. When i think about scale, i certainly think one of the Big Questions the market has to resolve for themselves, particularly in the u. S. , is this question i mentioned earlier of private versus public. The change in the dynamic, the amount of investment thats going into the private space, and the length of time that Important Companies with an important bearing on the future of global economies are staying private, it matters. And were spend ago loft time on that question. Francine what will it take for chief executives to start spending again . Spending on their infrastructure, spending on their investments . Sheila i think the c. E. O. s we talked to, the concerns that they have, if youre a multinational, whether youre sitting, trying to figure out brexit, whether youre trying to figure out u. S. China, the problem is youre making investments that need to pay off over 10 to 20 years, right . Does it seem unreasonable to wait three to six months to figure out what the lay of the land is . Thats, i think, the delay youre seeing. Certainly in the brexit context, i think with some of the more recent activity, Court Decision etc. , theres a view that we could be in this stasis for a prolonged state, that we do end up with an environment where things might not sob bad or change very much over the next three years. And that would lead to corporates maybe being more willing to spend a bit and try to just get on with business. But most c. E. O. s would like to get on with it, but find it very difficult. Tom sheila patel, thank you very much, on this first day of the Fourth Quarter. Futures elevated. Gold trading off this morning. Right now, from new york city with our first word news is viviana hurtado. North korea says this weekend it will resume Nuclear Talks with the u. S. The countrys official news agency referring to the discussions as working level. During a meeting in june, kim jong un and President Trump agreed to hold talks in a matter of weeks, but they havent met since then to discuss details. And President Trump and his republican allies ramping up the pressure to unmask a ukraine whistleblower, a big departure from the way both parties have handled allegations of corruption for years. It also risks detering future whistle blowers from coming forward. Lawyers for the official are negotiating with congressional committees over closed door interviews. And it used to be the richest person in brazil, now former billionaire facing almost another nine years in prison. This after being convicted of insider trading. He already was sentenced to 30 years of house arrest, for paying millions to get government contracts. Global news 24 hours a day, on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. Francine thank you so much. Now lets bring you the latest on the scandal rocking the banking industry. The chief operating officer of Credit Suisse has quit. Ets go to our reporter. The chief executive being exonerated, but one of his key al lirkse the chief operating , is saying he will still down. Then we had a headline saying investigators are still looking into what happened. What can you tell us more . East decided to step down, and thats deflated some whole balloon of negative publicity, which has been affecting Credit Suisse the last couple of weeks. Theres still some open questions, which i dont think were really answered at a press conference this morning by the chairman. First of all, it was a very short investigation. This thing over lasted one week. Some of the information they were looking for, for example, instant messages, they were not age to find. I think thats definitely something which people are going to be asking about, theyll also be asked if thiam could have known that this surveillance operation was ordered by a direct report to him. Francine are we expecting this to be contained now, patrick, or are we going to hear more from investigators in the oming weeks . Credit suisse is saying the investigation is over. They dont want to dwell too much on this any further. Theyre saying surveillance itself was wrong, and they shouldnt have done it. They want to draw a line underneath it. Of course, it seems the police are still looking into the death of the middleman, and that was the guy who was between Credit Suisse and the detectives, which they hired, and that could still drag on and still actually be a problem for the company. That hasnt gone to bed yet. Tom let me ask the dumb foreign question. I can do this to you with your masters in history out of zurich. Real simple, what is the separation of the police power from elite banks . How intertwined within the Zurich Community are the inspectors from the bankers . I would say, in my humble opinion, theyre not extremely connected, and i think there is a very decent separation of powers there. I would, by contrast, sight legal and financial worlds are extremely interconnected. Francine patrick, thank you so much. Patrick winters, whos been driving a lot of the stories out of Credit Suisse. Stay with bloomberg. Tomorrow were live from milan with a host of guests, including general ali Prime Minister, the former italian Prime Minister, and the well talk about trade, well talk about politics in europe, and, of course, Monetary Policy. In the meantime, were keeping a close eye on whats happening in hong kong. This on the 70th anniversary of the peoples republic of china. China saying chinas rise is unstoppable, but hong kong violence is increasing. Were keeping a very close eye. We were briefed by Stephen Engle on the ground, and it was very interesting to hear president xi celebrating the communist ruling with this pretty lavish military parade. Tom these are extraordinary images, as Stephen Engle said to us moments ago. The reports are out there. I want to be very careful here. Theres been a shooting with live ammunition. Theres only one or two reports on that. Mr. Engle of Bloomberg News is trying to confirm that at this time. But this is a real representation of what weve heard from our team in hong kong about the momentbymoment tensions in the city. Of course, as francine mentioned, stunning, these differences of an individual in hong kong versus the cadre of military seen in beijing. Francine . Francine yeah, even before the parade ended, and i have to say, we need to keep on these important and worrying reports that you were just mentioning, tom, but its pretty incredible to have the two sidebyside pictures. We had a military parade in china, and at the same time, prodemocracy protesters gathering in several neighborhoods around hong kong. There were loads of crowds growing into the thousands. If you look at the pictures, demonstrators, barricades, antichina graffiti on buildings after clashes by police. And what you were saying, tom, we need to look into a little bit more of tseng engle saying about live ammunition possibly being fired, and of course, that takes a turn for events in hong kong, tom. Tom the span of history from october 1, 1949, to that moment 20some years ago where the british gave over hong kong to china, and the tensioning between hong kong and beijing that have been seen each and every day for a good two, pushing on three decades. These are extraordinary images that weve seen in hong kong. We will continue from new york and london. Stay with us. This is bloomberg. Tom it has been 15some weeks of protests in hong kong, but today is decidedly different, the 70th anniversary of the advent of the party. Nicely west of the pacific rim where mao began this experiment. There were real upsets. We just had images of an individual being fiercely questioned by police. In one report, francine, in one report of Police Shooting with live ammunition. Francine this is in the citys northwest. The chinathe South China Morning Post cited an innamed source. There are a number of videos appearing to show protesters treated by Emergency Personnel circulating on social media. So far Police Spokesperson said they were still trying to verify the report. But if this comes out to be true, its a pretty big turn of events. Of course, these demonstrations, tom, have rocked the city since early june, triggered by this proceed toesed legislation, allowing extradition to china before morphing into a broader push back against beijings grip on hong kong. Tom for those waking up in america, anthony, if you can, could you bring up the images from beijing just to juxtapose what we snow hong kong against the order and pageantry seen earlier, as president xi in Tiananmen Square did a very traditional parade. I thought what was fascinating, francine, was president xi and the address of mao in the suit, and then we went on to other former leaders in their western suits and ties, maybe showing some of the tension of mr. Xis modern chinese experiment versus what weve seen for the last 20 years or so. Francine it really showcased their achievement, including some sophisticated weaponry such as the ballistic missile. Well have plenty more, of course, on the pageantry of china and on the protest in hong kong. Now to brecksity and Boris Johnson, the moment of truth as he prepares to present his blueprint for brexit. The reception will determine whether theres any hope of an orderly exit by the end of the month. Joining us is the intelligence director in new york with tom. Wolfgang, thank you so much for joining us. When you look at brexit, there seems to be a little bit of concession, if not by Boris Johnson, from the e. R. G. , that they believed willing to sign some kind of deal. Will we get a deal, and will we get lots of different deals that theresa may brought home . Well, i think there will be a deal, or at least i think theres a possibility of a deal , and i also believe the e. R. G. Will probably compromise this time. The key component of this deal, i think johnson will compromise. It will probably not be fundamentally different from theresa mays deal with the exception that the arrangement r the trade might be different, to the extent that it can be negotiated. But the key point, the key point this deal will include ill be a commitment by the e. U. Not to extend. If they refuses an extension and frames this decision as deal versus no zpeel you have no other choice, then that would be the best in fact, the only way for him to get this deal passed. Francine wolfgang, the e. U. Would actually say no to a deal . I always assumed, or i was always told, that the e. U. Dont want to be blamed for no deal . No, thats indeed the case. The e. U. Does not want to be blamed for no deal, but the e. U. Also has experience that it negotiated, spent two years negotiating a deal, and that was rejected in the parliament. Again, if Boris Johnson were to negotiate a deal without any with the extension still open, then we are back into a threeway choice between deal, no deal, and extension, and theres no way anyone can win a threeway bet in the u. K. Parliament at the moment. This is an srble element or we might as well not bother. Tom you have absolutely nailed the path to no deal. Reaffirm that right now. Do you still see this as a tangible outcome, and what would be the ramifications day one, week one, month one of no deal . I was sort of talking about no deal when no one did. I see the probability as less ow than i did when i did before, because i believe ultimately theres the possibility of a deal, the alternative would be no deesm i see that possibility too. But its more like an accident, like a miscalculation on the part of people. And no deal would be, in the long run, i think it can be managed. I see significant problems in the short run, because you cannot prepare for it. This is not like the year 2000 problem or other foreseeable stocks. There will be shortages of medicine on both sides. People might die. There may be chaos at the borders. Tom youre willing to say people might die . People might die. Ive been torblingde ive been informed tom describe that. Thats an exceptional statement. Well, it will happen by medical shortages and medical supply shortages. Its not just medical, but supplies. Tom come, they can be airlifted in by British Military helicopterment Prince William or prince harry can fly themselves. That is interesting, in both directions, but youre looking at continental european hospitals, just looking at the other side. Continental european hospitals depending on various kits for performing operations, and they will find on the day that they may not have this kit or this kit may number short supply. Thats the kind of situation. This situation will be resolved within a week, i am absolutely sure. But there may be a short period of time, and in that short period of time, operations may be cancelled. That is the danger that could happen. Tom understood. Francine wolfgang, what is the likelihood of a no deal . People say theres a loophole, but at the same time, we still have an open parliament, and we understand that theyll do everything they can to stop the no deal. I agree, the bill as it stands is fairly time. The big gaping loophole in this hole is the European Council f. Boris johnson and the European Council agree on sort of a no extension pact, then the bill is void. Thats the only way he can get around the bill. Otherwise he will have to sign up to it, and there is no way, or some Civil Servant might writ a letter. Tom i want to talk to you about fiscal a territory and the change there as well. Wolfgang munchau with us this morning. Were going to look at oil here, thrilled that he could be with us, this is with brent crude under 60, giving up most of the Saudi Arabian gain as well. They have been extraordinary images from beijing, well rehearsed and choreographed. Less so in hong kong. The hong kong images today have really been quite something. We saw it in this hour bloomberg showing you one protester being heavily questioned as well, and now into the evening of hong kong, quieter streets. This is bloomberg. Stay with us. From the couldnt be prouders to the wait did we just winners. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. Now you can share it between lines. Mix with unlimited, and switch it up at anytime so you only pay for what you need. Its a different kind of Wireless Network designed to save you money. Save up to 400 a year on your wireless bill. Plus get 250 back when you buy an eligible phone. Call, click, or visit a store today. Tom this morning, the Fourth Quarter is upon us, and with it, our collective memories of december 2018. This october morning, a stronger u. S. Dollar. Gold prungs. Brent crude under 60 a barrel. Speaker pelosi, the president , and senator mcconnell, well, they jockey for position on what next for impeachment. And in china, the stunning difference, images of order in beijing, and protests and a reported shooting in hong kong. Good morning, everyone. This is bloomberg surveillance from new york. Im tom keene. In london, Francine Lacqua as well. What an historic day for china. Its been extraordinary, the juxtaposition of images. Francine its incredible, tom, when you think about what the celebration with the parade, the military parade means, and the protests in hong kong actually seemingly getting worse. Its a pretty tense national day if youre living in hong kong. Well, of course, try to collaborate, everything weve heard in the last hoe minutes or so. We heard, of course, that a protester was hit in the chest live rounds fired by police in the citys northwest, according to the South China Morning Post, but they cite an unnamed source, and were still trying to verify the reported. Tom very well. Lets get to news. North korea says this weekend it will resume Nuclear Talks with the u. S. The countrys official news agency referring to the discussions as working level. During a meeting in june, kim jong un and President Donald Trump agreed to hold talks in a matter of weeks, but the two sides havent met since then to discuss the details of a disarmament deal. And today, as francine and tom were discussing, china marking 70 years of communist rule. President xi jinping overseeing a military parade, featuring some of the most advanced weapons. Among them, one of the worlds longest range missiles capable of reaching the u. S. In hong kong, a different scene. Tens of thousands marching in simultaneous rallies across the city. Several of President Trumps closest allies being drawn deeper into the impeachment inquiry. Three u. S. House committees subpoenaing his personal lawyer, Rudy Giuliani, for records of his dealings with ukraine. Bloomberg has learned secretary of state mike pompeo was among those listening in to a call between the president and ukraines leader in july. Thats the call at the center of the investigation. And british Prime Minister Boris Johnson, hes facing a crucial moment for his brexit strategy. Hes preparing to present his blueprint for a deal to the european union. The response will determine whether theres any hope of securing an orderly exit from the e. U. By the end of this month. There are already signs johnsons plan could face trouble. The Irish Government saying a reported alternative to the socalled backstop is a nonstarter. Global news 24 hours a day, air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Tom equities, bonds, occurrence success, commodities, futures up nine. Dow futures up 58. Euro dollar comes in nicely under 109. Much weaker earlier, but nevertheless thats been the trend. American oil, 5462, gives a nice pullback. The v. I. X. Showing the risk. Weve moved toward 16. 36. Yen showing stronger dollar. 10year yield back up. That should be green on the screen, up seven basis points, and yield and gold rocked, well done, under 1500 an ounce. Francine very clearly treasuries are leading a retreat across bonds today. There was a weak debt auction in japan. We triggered a selloff that has been gradually spread across the world. European stocks on the lower side. We had discouraging inflation figures at 12290 as Boris Johnson says hell have a better idea by the weekend if he can get a deal through on brexit. Tom i want to begin our coverage with kevin crir he willie and our Washington Team on what we have. Hes our chief washington correspondent and joins us now. Kevin, i believe it was in the New York Times, hearkens back to the nixon administration. Within your washington, are people doing a and air contrast with clinton and nixon, or is this a discrete impeachment path . Kevin i think theres parallels of nicks sandon clinton for quite some time, and the answer is yes, absolutely, theres been parallels that were drawn. I also think theres a general thinking that no one really knows about the political implications that impeachment would have for House Democrats or for President Trump heading to the next campaign into the next campaign season. I think the bottom line is were entering into week two of this ukraine inquiry, and to be can dirked the general thinking is that the impeachment happens around thanksgiving, and that its done bit end of the year. Tom its done bit end of the year, and then on to the senate. Senator mcconnell talking yesterday, senator graham of justice as well. But what are other senators saying off the mic . Kevin i think theres a frustration with the president s tone. I dont think that that is something thats new, so to speak. But the votes simply arent there for a conviction in the enate as of senate as of now. Last night the New York Times reporting that there was another call with the australian Prime Minister in which there was in which the president raised politics as well. But short end of it is majority leader Mitch Mcconnell told npr, as well as cnbc, he would have no choice but to take up an impeachment trial. But the length of that trial is something that he could decide, which really means that there could be a republican senator that opens for a motion to dismiss, which means that you could have this done very, very quickly. Francine how many more calls are we expecting . I know this is like the impossible dwow answer, but how many potentially calls could there be . Yesterday we heard mike pompeo was on that call, where he hadnt said anything so far. Kevin two things to that. First and foremost, in the whistleblower complaint made public last week, one of the new details that came out was that these calls are being housed on a different type of server. So there are several calls. And then the second point that i would make is it presents a conundrum for speaker of the house nancy pelosi much she says she wants to keep this focus narrow. The more calls that come out, the more details that come out, you know, will that hinder her ability to get this done in a timely process . Francine the house issued for documents to Rudy Giuliani. Will he comply, kevin . Kevin i dont think he really has a choice. And i think that whats interesting about Rudy Giuliani is that the same way that he has been he has had a bit of a perform active appearances on several cable talk shows and sunday shows, if that happens during a hearing, would it go off the rails . In a way, his performance is a strategy. Tom very good. Kevin cirilli, thank you so much. It will be an eventful october in washington. The images from hong kong are really quite something now. The ambulances with their lights take on a new urgency. Again, report of a shooting. Our Stephen Engle saying the report is in the left chest of a protester. We need a lot more confirmation on that before we can say that definitively. Stay with us, with the images of hong kong and beijing, this is bloomberg. The chief operating officer of Credit Suisse resigned in the wake of the spy scandal. Bouee is taking responsibility for surveillance of one of the banks former executives. He did not discuss before coming to the bank. Last month manufacturing in the euro area slumped. New orders saw the sharpest contraction in almost seven years. German factories experiencing their worst month as the depth of the financial crisis. Thats the Bloomberg Business flash. Tom, francine . Tom viviana, thank you so much. An extraordinary news slow day. Were going try to get this in with wolfgang munchau. He is definitive on the shift of culture. Were thrilled he could join us. Wolfgang, many people are hoping theres a generational shift where we get away from the german inclination to what i call austerity to something new. Is there something new out there on fiscal response or a societal response to fiscal policy in germany . Id say there is the potential this might happen in the future, but its not happening now. What youre seeing at the moment is there is a discussion among economists, but what happens is the economists have always advocated fiscal expansion, tom what about the people . The people have not changed. Those who are supporting the green party, thats probably talking about 25 . Talking about 25 . It used to be a small party. Its now a bigger parties. It wants to amend the rules that ensure that investment is holding up. At the moment, in the last 10 years, Public Investment has actually fallen in germany. He public assets has fallen. This is a change. They want to amend the rule to get what you call a Sustainable Investment rule. But on the whole, this idea of policy a fiscal that would compensate for the constraints, there is no support. Tom this is through a Green Infrastructure i guess is how i would call it. Can there be another transmission mechanism like an expanded social policy, not a welfare state, but just a generational shift from the let cents to spend money that you and i lived our entire lives . I would think the window for that second option is closing, because the best way of achieving that would have been through social democrats, who have been in goth for most of the last 20 years, and who have prioritized fiscal rigidity. The debt, the constitutional debt rule was the eye keel for social democratic finance minister. The current is committed to the surplus. The party as a whole has a debate, but majority of the party and shoulders likely to be the partys next leader, the party is a fiscally conservative. Tom explain this with madam lagarde coming in to an e. C. B. Desperate for german leadership on a fiscal solution for europes finance challenges. Does lagarde have a chance of convincing germany to lead the way . No, she will not get it. What she will get, she will get, my calculations are about. 2 fiscal expansion. I think thats a rounding error, but this is about the impact of this climate package that they agreed. Beyond this, i see very little scope for germany, because Angela Merkels party reaffirms their commitment. His is a red line for her. Francine even if there was a stimulus package in germany, where would they spend it . What do they need to spend money on . They would have lots of opportunities there. I dont know whether youve ever tried to make a phone deprall a german motorway, but infrastructure, mobile Data Infrastructure has many holes, so they need to spend money on the 5g networks. They would need to spend money on physical infrastructure. Road and rail is dilapidated. They have not spent a lot of money on Research Centers for a. I. And modern technology. So there is a lot to spend on, and a lot of the savings that germany generated in the last 10 years were actually generated not through social brutality, but through lack of involvement. Tom look at this headline. Francine were just getting breaking news. Lets not talk over each other. This is what theyre saying, wolfgang, germany needs to send signals before a recession comes. How soon would a recession come in germany . I think the recession in germany is more likely to slow the long and shallow one rather than the short and sharp one. Its going to be very different from 2009. What were seeing at the moment is a very significant recession in manufacturing. Its starting to hit jobs. It hasnt hit jobs yet, but we see the first turnaround, companies preparing plans. Its a lagging indicator. The Service Sector is Still Holding up. For as long as the Service Sector is holding up, that will modify the numeric impact of the recession. For all we know germany is in a recession now. My expectation is germany will remain in a recession for a relatively long period of time, because we have no policy response, the e. C. B. Response is not going to make a difference. The german fiscal response is essentially nonexistent. They will let the automatic stabilizer kick in, but theres no discussion at the moment at government level on a genuine fiscal stimulus. My guess is this will play out. Francine wolfgang, thank you so much. Wolfgang munchau stays with us. In the meantime, were looking at protesters across hong kong, in several neighborhoods around hong kong, the prodemocracy protesters were pretty rowdy, growing to the tens of thousands, we understand. Some demonstrators lit fires, built barricades, scrawling antichina graffiti on buildings, even clashing with police, who fired tear gas and swung clubs to disperse them. Well continue to monitor the situation in hong kong. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Tom, as the peoples republic of china celebrates its 70th anniversary, president xi declared no force could stop chinas rise. That comes as he faces unprecedented challenges from provide testers in hong kong, as well as Donald Trumps trade war. President xi called for stability in hong kong and National Unity. We must remain committed to the strategy of peaceful reunification and one country, two systems. We will maintain longterm prosperity and stability of hong kong and macau. Francine for more on the parade, and for more on the protests in hong kong, lets go straight to Stephen Engle, our chief north asia correspondent, who joins from us hong kong. Stephen, there are multiple reports about a hong kong protester shot in the chest by a live round. What have you heard on the ground . Stephen thats exactly what were hearing in the far off district. Were hearing one protester has been shot by a live round, presumably by police, in the left chest. We are still trying to confirm that at Bloomberg News, but the South China Morning Post has reported it. I have seen a video that has been passed around by social media, but i cannot confirm that that was the youngster who was shot. It is quite graphic. Its at pointblank. But again, i cannot tie that particular incident to what ive seen. But that is whats being circulated around, and that is obviously going to make a lot of the protesters who are still out on the streets quite angry. I want to just show you the scene right now. Within the last hour, this was the epicenter of one of the pitched battles between the police and protesters. They brought up the bricks. This is the main center of hong kong. Theres the bank of china right there, the iconic tall skyscraper of hong kong. This is right in the middle, and you can see theyve dug up all the planter boxes and have really turned this place into a wasteland. The police came through here, riot police, as well as the water cannon with their blue dye, pushed everybody out. Theyve all moved onto the neighboring neighborhoods. We hear theyve moved out of the central part of hong kong, but its clear the police are taking a hard line against protesters, because this does coincide with the celebrations that are going on thousands of miles to the north in beijing. And i guess the marching orders is dont rain on xi jinpings parade up north. Francine demonstrations have rocked the city since early june. Are they just getting bigger and more violent . Stephen yeah, i mean, this was kind of the date that a lot of people had circled on the calendar because of what i just mentioned, the big 70th anniversary of the founding of the peoples republic of china. There was going to be a culmination of that anger and frustration and the fact that the government here is not conceding on the four other main demands. That frustration bubbling over here today. Adding to that frustration is the fact that kerry lamb, the embattled chief executive, is in beijing today. Shes not here for this commemoration in hong kong, leaving it to her chief secretary, her number two. A lot of people in society are angered that shes not here when they knew this was going to be a pivotal day in this protest movement thats been going now for four months with no end in sight. Tom were pleased to welcome on this anniversary for the communist party in china Meredith Sumpter from our washington studios. Meredith, what happens october 2 . Meredith thats the key question for kerry lamb. While october 1 is an important, significant day for not only the p. R. C. , but also a focal point for protesters, the fact is, tom and francine, we are 17 weeks into protests, and there are no signs of these protests evading. Hong kongers are still coming out in the streets, including the wruth, where for a long time hong kong authorities had hoped that with september, with the return of students to we have not ps seen that yet. What will beijing permit next to ease tensions . Tom you get to the heart of the matter, meredith. How independent is the Hong Kong Government that needs to do . Are meredith how independent is it is sort of a key focal point for those protesters. As your reporter has noted, carrie lam not income hong kong on what was going to be a pivotal day for those protesters is adding to that underlying anger, which we dont necessarily see going away at all. So what does the Hong Kong Government need to do Going Forward . I think were getting closer to a situation, you get past the october 1 anniversary. At some point because of the lack of nate carrie lam as a leader of hong kong, at some point were going to have to see her resignation tendered before the sbints of those protests are likely to wane. Francine thank you so much, Meredith Sumpter and wolfgang munchau. Well have more throughout the day on hong kong. Well have plenty more on whats happening around the world. Euro markets trading sideways. A lot of focus is on geo politics. A lot of focus is what will happen on this protest in hong kong, protesters and police battling throughout hong kong in some of the most serious clashes since we saw this wide spread unrest beginning in june. Well have plenty more from hong kong throughout the day. This is bloomberg. Tom good morning, everyone. Francine lacqua in london. Im tom keene in new york. It is an extraordinary day for political history. The 70th anniversary of what mao wrought in china in october and we move forward to the many generations of chinese leadership. It has been extraordinary number of years for president xi. Eredith sumpter is with us from eurasia group. The imagery this morning speaks volumes about what mr. Xi would like to message to his people and to people worldwide. Francine . Francine torge the other thing were watching is the latest on the scandal rocking the Swiss Banking industry. Pierreolivier boue has quit as chief operating officer. Aria, what have you learned . Good morning, francine. Credit suisse is in full damage control. The chairman today presented the scandal as a rogue operation by the c. O. O. , alongside the global head of security. Of course, two men have now resifpblete the chairman with no indication in the investigation that thiam approved any of this. He issued a very public apology saying this is something that never should have happened, and he said this is something they simply do not condone. I have to say, however, the investigation from Credit Suisse may be over, but the zurich prosecutor has said their Investigation Continues. We have that story yesterday about that contractor who killed himself last week in connection to this surveillance operation much this is ertainly not over. Tom thank you so much. With our first word news from new york, heres viviana hurtado. President trump is ramping up pressure to unmask the ukraine whistle blow, a big departure from the way both parties have handled allegations of corruption for years, and it also risks detearing future whistle blowers from coming forward. Lawyers for the official are negotiating with congressional contest over closeddoor interviews. President trumps lawyers say democrats cant sue for his tax return. Theyve asked the federal court to throw out a lawsuit by a house committee. The trump team argues instead democrats should use the political process. And japans Prime Minister abe rolling the dice on his political legacy. Today an increase in the countrys sales tax from 8 to 10 taking effect, and its in at helping japan rein the debt load. Next month abe will become japans longest serving Prime Minister. And he used to be the richest person in brazil, now the former billionaire facing almost another nine years in prison. This after being convicted of insider trading. He was already sentenced to 30 years of house arrest for paying millions to secure government contracts. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. Im viviana hurtado. This is bloomberg. Tom thank you so much. Joining us now with a q4 start is david page. Hes with axa investment managers. Theyve put together a terrific issue here. You nailed the q4 issue in that you say yields through the looking glass, and this morning, weve really seen yield up v. We seen the lows of yields for the months and quarters . Weve seen it for the year. We do expect to see a general trend hire, as we smee preliminary signs of stabilization in global activity, but i think this quarter is one where we see negative headlines. Were slightly positive at the moment. That probably carries us higher. By christmas, i think we have bad news that pushes us down. I think were in a range here. We see a trade higher. Next year is a different question. Tom if if we look through the 90 days last, its great to see the Huge Movement down in Interest Rates that we saw. Whats your surprise for q4 . On january 5, 2020, what are we going to look back to . I think what well see this quarter thats going to be a surprise, and its growing now, is a change from the fed. Weve been use to the fed of the fed coming through, and we still think theres another policy rate cut in december. But i think as soon as the october meeting on the 30th, well see the fed shift to reengage with its Balance Sheet. Now, that wont be qe. That will be a technical adjustment, to rebuild resfrpbls the difference in that move, from the possibility 300 billion or so the fed might have to extend its Balance Sheet by, compared to what the e. C. B. Is going to do over the next period is going to be pretty minuscule. That is the next shift coming from the fed, and i think thats the next thing for the markets to digest. Francine when you say were going to get bad news in a custom weeks, what exactly . Is it trade, Something Else . Primarily we think its going to be trade. Were not at all convinced that the tariffs will be table move past the october 15 deadline. We think despite the good news on some of the negotiations that are coming through, theres a risk that we see a hike come through in october. We certainly think that absent the hikes, well see some of those come through. Were also very wary about what the u. S. Might decide in midnovember as well. I think the mood music has been definitely positive over the last couple of weeks. We likely return to a negative news feed on trade going further forward, and i think the data snow going to remain pretty soft. Its clear that the Manufacturing Sector globally is continuing under pressure, and im not sure we see any signs of that picking up in the Fourth Quarter. Were somewhat more optimistic by the time we move into q1 we may see pickup, but i think its going remain down over the next couple of months. Francine where do you see the biggest weakness . Is it region by region or certain sectors . Its definitely sectoral. Were seeing weakness in trade and global manufacturing. Therefore, that has different regional implications. You were talking earlier about germany. They have a much higher exposure, both to global trade and its economy, but also to industrial production. Thats why we think theyre in technical recession. The ski how much it travels over into the services sector, and to some extent, theres some spillover, particularly in germany. More broadly, thats not obvious that were seeing that spill over come through just yet. We do depop see some signs that as we get to the bottom of the global trade sibling, perhaps the end of this year going into next, that should start to approximate get more constructive back drop. Francine thanks so much, david page there from axa investment managers. Stay with us. In the meantime, stay with bloomberg. Tomorrow were live with a ineup of guests. Well talk about trade, and well talk about italy, and this is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Tom, were spending a lot of time focusing on hong kongment protesters and police have battled across hong kong in some of the most serious clashes since wide spread unrest began in june. We did have multiple reports emerging that a demonstrator has been shot for the first time, and at the same time, were trying to figure out whether that has been confirmed or not by police. Cable tv said a man was shot and was in critical condition, but when reached for comment, a police spoke person so far has said theyre still trying verify the report. We need to be careful with that, tom. Tom francine, thank you so much. Let me do a quick single best chart. David page with us from axa. Meredith sumpter waiting in washington about the events at hand. This is simply the euro. Weak euro. Of course, strong dollar as well. Its simple were down two standard deviations. Weve had a persistent week. You just presume continued weak euro . For the Fourth Quarter, we think so. But after that, well likely see a turning point t. May well be if we see a shift in the fed policy to an expansion, that is what causes it. But what weve seen, as soon as we see tariffs being imposed, we tend to see that, and if we see auto tariffs, the biggest implication is on euro. I think for the Fourth Quarter, the euro could remain under pressure. But global stable zakes next year could see the euro rise. Tom moments ago, i love the phrase, the pending fiscal carnival. Theres going to be a fiscal carnival. Says who . How do we actually act wait a fiscal carnival across all of europe, and for that matter, the United Kingdom . We talked earlier, we had problems with the German Government with that expansion come through, but the rest of europe is in a slightly different place. We hear from the new Italian Government were likely to see a higher deficit. Its likely france and macron is going push to an easier fiscal place. Within the eurozone, theres a smorgasbord of different policies coming through, and certainly within the u. K. , where one way or another we see an election coming around. We are looking at an election back drop. Whether its with the johnson government or whether its under a corbin government, we should expect fiscal easing in that situation. Francine the Common Thread is populism and citizens that are unhappy with their current situation. Given the geo politics and the uncertainty, are we going to see some kind of coordinated Political Action from countries to either spend more or do something to stop more populism . Francine, terrific question. The key concern here is, at a time when you have populism rising, and you have this pressure on government leaders to take back power from multilateral institutions, you also have a train at the relationships at the top of these governments that are necessary to see that kind of coordinated action through. Certainly while were watching closely moves by finance ministers to try to coordinate these sorts of move and activities, were also looking at the ties of top leaders, and to that end, i havent seen the transatlantic relationship at such a poor spot in my entire professional career. Were watching closely as well, as Christine Lagarde comes into her role, how effective she will be at Building Political ties across the european continent to be able to see such kind of coordinated echanisms through. Francine thank you both, david and meredith. Coming up next, we have to speak with the i. A. Executive director, a conversation on oil, next. This is bloomberg. Francine bloomberg surveillance, tom and francine from london and new york. Oil edging higher this morning after its biggest quarterly drop this year. This comes as investors are weighing saudi arabias quick recovery from attacks against the resumption in u. S. China trade negotiations next week. Joining us is matt mill wary key voice on the energy sector. Matt . Matt im here with the director of the International Energy agency. Thanks so much for your time here at the german economics ministry. Let me first ask you about the oil price that francine is referring to. Why do you think there wasnt more Dramatic Movement in the surge after the initial attacks . There are a few reasons, but two of them are important. The first one i think is saudi authorities very quickly moved and real estate insured the markets they would come back very quickly. And many other players, have , and if se come down there is a need, we will be bringing stocks to the markets and no problem, this is one reason. And second, the United States, Oil Production is still growing very strongly. Theres lot of oil in the markets. And this is out of this, too. We didnt see a major jump in the process. Current levels are there, where we hit just before the crisis. Matt exact, and the saudis have been making remarkable progress on restoring production and exports. Do you know where they are right now in terms of production and exports . Have you heard recent numbers . I think i would like to refer to what the saudi authorities say. They are very close, if not almost there, in terms of more production and exports, and i have no reason to talk about their numbers. Matt on the demand side, the i. E. A. Has expected growth to be above a Million Barrels a day this year and next. Is it still the case . Is that still your forecast, giving the slowing Global Economy . So we expect currently growth about 1. 1 Million Barrels per day. First of all, it is much lower than the historical, much looking at also Global Economics weakening, china, the driver of the global oil demand. Experiencing the lowest in 30 years. Numbers, ise down our demand numbers, next days or months to come, if the Global Economic continues to weaken. Matt do you know what kind of drop its going to look like, when we can expect that revision . I think we will soon look at it again, if theres a need, but theres still a growth in the demand, but it may be lower than what we have now. Matt youre meeting with the minister and the chancellor. Theyve recently put together a 55 billion euro climate package. What are you discussing with them . I think it was a very good move from the german side. Many years ago germany made a big move in terms of the renewables, solar and wind and energy. And they have made a big achievement in terms of the increasing share in wind and solar and electricity generation. But there are other sectors, which we call them hard to evade sectors in terms of emissions, such as the transportation, such as building system. They come up with the climate package, providing financial incentives. Its a very good move, and i congratulate the German Government to make this first move. Perhaps one of the most impressive one is advanced economics. Matt carbon prices have been light, and that plan was criticized. On the other hand, weve seen futures markets pricing carbon or forecasting the price very high, around 50 a ton. 50 euros a ton where. Do you see pricing going . I think that is different in the carbon production, but i believe the general trend will be in a normal economic environment. The reason is we are going see in europe more and more climaterelated policies, Climate Change becomes a cornerstone of the economic and Energy Police making in europe most of the countries, and expected a turn from this Climate Policy that would be in my view an unrealistic assumption. Matt hydrogen is one of the things the i. E. A. Has been talking about. I know with shinzo abe, and now were hearing Gas Companies trying figure out how to get hydrogen through natural lines. What do you expect . Hydrogen is a versatile option. You can generate hydrogen from oil, gas, coal, but also from renewable energy, wind and solar. Very versatile. You can use hydrogen also for many different sources. To feed households, to run cars for industry. Theres a huge potential for hydrogen, but i. E. Is able to lead efforts, because we think its a good news for the fossil fuels, because we still use them. But also providing storage for the wind and solar, so its a good solution. We press down to make it more affordable for the consumers. If i have to make a bet for the future, hydrogen is one of those bets for the next technology to deploy the markets. Matt thank you so much for your time. Really appreciate it, director of the International Energy agency. Tom, francine . Tom matt miller, thank you so much. Right now we need to draw our attention to beijing and hong kong and the fire not seen in the order of beijing, but certainly seen in this tuesday evening in hong kong. Its been an extraordinary day. Meredith suchster with us. Meredith, we all learned the history of 1842, and then to 1860, and then the 1999year lease of 1898, that is gone. As you mentioned earlier, weve got to get to october 2. Theres an imperial history to hong kong. Are we going see an imperial beijing take over hong kong . If you look at the statement from earlier today, tom, i think what were going to see is beijing trying to find a way lessen the immediacy of attentioning around the protest and focus on the longterm nity and development that xi jinping are confident about returning to beijing. The protesters are focused not on october 2, but theyre focused on 2047. Thats the date when the one country, two systems will cease o exist. Tom the other thing is the focus on taiwan, as all are focused on hong kong. Describe for us standing together in 1949, around that time, versus what were going see on october 2 in taiwan. Meredith what were seeing october 2 in taiwan is an electorate watching closely the way that beijing is handling hong kong. And this is actually one of the key reasons, francine and tom, why even with the stepped up and protests and intensity there, there are structural reasons why beijing does not want to take a forceful action in hong kong. So we place military intervention at 25 . And the key hook here is taiwan president ial elections that will take place in january 2020. The popularity of the leader increases as the protests rage on in hong kong, a fact that beijing is really only too aware of. The key here, and the key risk watch moving forward, is if they win in a landslide victory, the chances of beijing increasing its pressure on the island of taiwan as well escalate. And the problems that persist in hong kong, if they cant found a way to quell that tension, whether its getting carrie lam to tender her resignation, whether its trying to find some way to address some of the concerns of the protesters, that 25 can slowly begin to inch up. Francine meredith, were just seeing mr. Donald trump, the president of the United States, congratulating president xi and the Chinese People on the anniversary of the peoples republic of china. Meredith, overall, very quickly, does this change anything in trade negotiations . Meredith no, it certainly does not. Its a friendly message, but again, if you listen to what president xi jinping had to say today, one of his key messages was that nothing can stop chinas progress and advancement. The key message he said was no force can shake this nation. What that really means is he is saying china is going to continue to develop regardless of external pressure from washington. Tom we must leave it there. Meredith sumpter, thank you so much for being with us on this historic day. Please stay with us as we continue to cover hong kong. This is bloomberg. Alix china is unstoppable. President xi proclaims chinas might as he opens up celebrations for the 70th anniversary of the peoples republic. Violence a wreps during more protests violence erupts during protests in hong kong. In Fourth Quarter playbook. Option, andar bond era manufacturing the lowest in seven years. The last quarter begins with a bang. Welcome to bloomberg daybreak on this tuesday, october 1. Im alix steel. I cant believe it is october 1. It is, like, 90 degrees here in new york. So far, we are looking at the best nine months for the s p since 1997. We are eking out a gain in the futures market, up by 0. 1 . It is a mostly stronger dollar story. Eurodollar well off the lows of the session, despite the weak