Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

We are seeing a markets trading sideways. A lot of the focus is on potential risks and the potential headwinds that could hit the markets quite hard. A lot of it to do with geopolitics. Keep an eye on the u. S. China trade talks. You can see the stocks europe 600 gaining. A similar move for the s p 500 futures and the 10 year yield is at 1. 54. Coming up, we will be speaking to the shell chief executive. Dont miss that exclusive interview just after half past 10 this morning. Lets get straight to first word news in new york city. Balance sheet growth resumes for the Federal Reserve chairman Federal Reserve, chairman Jerome Powell says dont confuse this for qe. In no way beuld confused with the largescale asset purchases. Neither are the recent technical issues nor purchases of treasury bills we are contemplating to resolve should materially alter the stance of monetary policy. Chairman powell also hinted at the possibility of another rate cut. He was confidence the economic expansion can be sustained. According to a senior government official, Turkish Forces will cross the Syrian Border closely, a move to back kurdish militants off turkish soil. Ifdish Officials Say that they enter syria, they will attack the Turkish Military. Irelands Prime Minister says it is hard to see a deal being clinched next week. Are the irish p. M. Has agreed to meet Boris Johnson for talks by the end of the week. Singapore replaced the u. S. At the top spot of global , citingiveness rankings growing uncertainty from u. S. Business leaders and declining trade openness. Topfive spots in the wench to hong kong, the netherlands, and switzerland. And today in ecuador, protests are continuing over the end of fuel subsidies, prompting the president to dissolve congress, impose a curfew, and temporarily moved the capital. The subsidies have been in place since the 1970s and have cost the government close to 1. 5 billion a year. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thank you so much. Trade negotiations between the u. S. And china are set to restart tomorrow but the relationship seems to be deteriorating by the day. Thats after the u. S. Announced it was blacklisting eight companies on monday. We heard the state broadcaster was dropping nba preseason games and now the u. S. S has slapped a visa bans on chinese officials. Top bloomberg guests but they are expecting. Worse,he rhetoric gets you may even be in recession simply because the consumer will lose faith. The concerns about unreliable supply chains we see in and is ad the china conflict little more enduring and more of a change. We will be talking about trade peace, not war. Everyone is a loser in a trade war. Therefore, everybody would be a winner in trade peace. Francine for more on the deteriorating relationship, selina wang joins us from beijing. Whats the response on china from the blacklist . Some harsh words from china on the blacklist, saying to expect retaliation. Retaliation to stop on internal affairs. We could see them try to enact nontariff barriers and more detail around is unreliable entities list china had announced that when huawei was put on the list. This could target a broad swath of Foreign Companies that china could deem to be violating the legitimate interests of chinese companies. Reportedly, fedex could be on the list because of the rerouting of huawei packages as well as hsbc. Certainly rankles beijing and take the trade war into a different direction. This is the first time the Trump Administration is citing human rights for this type of action. D. C. Lawmakers have long been itsicizing china for alleged violation of human rights which the u. N. Says up to one million ethnic uighurs and muslims have been detained which legitimateis counterterrorism efforts. Is the timing of this incredibly provocative, given that we are one day away from trade talks. Francine what exactly is the significance of the nba fallout . Have thought a single tweet could wreak havoc for a company that has spent decades building its business in china where it has been racking up doubledigit growth since 2008 with more than 800 Million Viewers last year. But this is not the first time china has taken a hard line, zero tolerance policy when it comes to a company that seems to be questioning sovereignty over certain territories as a perception of foreign interference in its countrys affairs. But the wave of companies that have rapidly cut ties is evidence of the delicate line that western companies have to toe when they are in china. You had mentioned in state broadcaster will stop broadcasting the nba. ,e have Companies Like tencent a number of sportswear companies, all cutting ties with the nba. This is just one more example of core differences between the two countries leading into these trade talks. Not to mention that this also angers politicians in the u. S. Who say this is another example of a western company kowtowing to the Chinese Governments demands. Francine thank you for the update. We will have plenty more from beijing throughout the day and keep you uptodate on trade negotiations. Well also look at how that is impacting your markets. Plenty coming up. The fed grows its Balance Sheet but it is not a return to qe. We discuss that next and the brexit blame game. Talks keep stalling and we focus on key Sticking Points in negotiations. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash in new york city. Saudi aramco is expected to establish its ipo prospectus before the end of the month. The wall street journal reports it will come out in arabic on october 25 and in english two days later. Be offering will probably made after a Book Building process in november. The journal says aramco did not officially common. Beenon and johnson has ordered to pay the largest u. S. Jury award this year. The 8 billion verdict is over the mishandling of an antipsychotic drug. The jury found that they wrongfully marketed the drug to teenagers. The verdict is unlikely to be upheld on appeal but sounds and warning. An ominous is considering a return to u. S. Wealth management after a fouryear absence. Thats after the lenders chief looks to boost growth in private banking. Miami and focused on a new business for latin american clients. They say no decision has been made. Talks as the swiss asset manager works on its turnaround as a standalone company. The crisis started last year when a star fund manager was suspended and triggered a flurry of withdrawals and the ouster of the chief executive. Francine . Francine thank you. The fed will grow is Balance Sheet once more. Jay powell says the central bank plans to resume her kisses to ensure calm in the money market but he also stressed the room move should not be seen as a move towards qe. Theywant to emphasize that should in no way be confused with largescale asset purchases we deployed after the financial crisis. The reasons technical issues for the purchase of technical bills. Joining us for the rest of the hour is chris turner at ing. Priceds investors have in an even greater possibility of a rate cut. Call it what you want, it is basically telling the markets that and easing cycle is here. Chris jay powell out of his way to emphasize the technicals. , the terminal will show a rate cut is about 83 priced. Day, they of the could be adding anywhere between 200 and 400 billion to the fed Balance Sheet. That is consistent with policy. Francine he suggested the purchases would be made up of treasury bills. Seen ast wanted to be going back to the era of the financial crisis, but it is all the same. Chris i mentioned the general public might be quite confused. Qe, a recession, a multitrillion dollar program, so this is just a limited, technical program. Francine talk to me about these insurance cuts. Is the market cornering the fed where jay powell would be much more prudent . Ago, two or three months there was the view that the fed it could withstand this market pressure. But given what is happening with leading indicators following falling and the chances for a cut, the fed will have to go out there and discourage the market from these notions quickly. Perhaps using data, if it is strong enough. Ifities would have a bad day a rate cut is expected and suddenly is a noshow. They have to be very careful about managing market expectations. Francine chris, thanks so much. Chris turner from ing stays with us. Up next, the brexit blame game escalates and talks stall. We are live in dublin after ireland presents its no deal budget. This is bloomberg. Francine this is bloomberg surveillance. Two big stories to keep on top of. First, you are looking at live pictures of the Syrian Border. This is a southern border town in syria. This is where turkish troops will begin processing crossing into syria and have begun moments ago this is after what President Trump said a couple of days ago and turkey had warned that they will cross the border with northeast syria very shortly, aiming to push back kurdish militants. Another story moving very rapidly as the california is bracing for a historic power shutdown. Most of the San Francisco bay area will be affected in this preemptive move to make sure they are preventing wildfires. We understand that pg e has just started to proactively turn off power in california. We will keep on top of both of those stories. Game is brexit blame escalating as talks between britain and europe seem to have reached an impasse. Hopes of a deal rests on a meeting between Boris Johnson and his irish counterpart leo varadkar. Tother side looks likely give ground on the crucial issue of a shared border. Anna edwards visited the border to look at the key sticking Points Holding back negotiations. Anna 31 the 310 mile border looks unremarkable now0. Road, the only clue youre leaving ireland and headed into the u. K. Is this reminding you of speed limits will be in miles per hour. But the border has had a famously bloody history. Violence between Irish Republicans and prot u. K. Unionists escalated in the 1970s. The troubles eventually claimed more than 3. 5 thousand lives. Market90s, the single meant the checkpoints like these were allowed to gradually fall into ruin and the good fragment good friday agreement meant security checks were increasingly unnecessary. Today, people and products flow seamlessly over more than 2 hundred rd crossings. Trade is worth about 1. 1 billion a week, an estimated 150,000 vehicles cross the border every day with no stops and no checks. So what would happen if, after brexit, custom checks are restarted . We have no borders, no controls. Under this proposal, we will be faced with technically to two borders with a fiscal and Customs Border and another across the sea. That presents a lot of red tape, administration, and costs. We really will live. Because we are a Service Really rely. Because we are a service provider, if we see manufacturing output dropped in Northern Ireland there are less goods to move and we see that is a huge threat. Anna communities fear division. The border runs right down the middle of this country lane. Thats ireland on the side, the United Kingdom on that side. It is the very open nature of this long and historically troubled border that makes taking the u. K. Out of the use difficult. He eu very francine lets get straight to anna edwards in dublin. Chris thanks very much. Anna thanks very much. Im pleased to say i am joined by the british and Irish Chambers of commerce and a partner at an irish law firm. Good morning to you, john. Let me ask you about preparedness. Is it possible to prepare for no deal . It is not possible to fully prepare. Everyone knows that. The businesses you are talking to, what with a fear . What are they fear . They need certainty, a legal framework, and an orderly withdrawal. No deal offers none of those things. Anna the Boris Johnson plan on the table at the moment, things are still evolving. The government has a lot of issues with it. What would your perspective be on the plan . It is very interesting. There are three elements. One is regulatory alignment. Andis a customs arrangement two is a free trade agreement. A regulatory alignment is absolutely what the u. K. Wants and needs. Moment, itly, at the is simply the potential alignment. So what businesses have to is that there would still be jeopardy as to whether there would be regulatory alignment. They dont know whether there would be regulatory alignment, and indeed, every four years thereafter, further jeopardy. There is no certainty that will actually occur. That is the first point. The second is that the proposals simply wont work. Even yesterday, the British Department specified that over 15 billion is going to have to be spent at the very least over the next 12 in relation to putting such arrangements in place. But most of all, business in northern in south ireland must have been in addition to regulatory alignment, customs alignment. From a Northern Irish is this perspective, it is the best of both worlds. That takes us more into the territory of the backstop than the current Boris Johnson deal. Only way to the solve this would be to go back to something that looks more like the backstop . As a last resort, keep Northern Ireland and the customs union. We should avoid nomenclature. What does business require and having people live their lives . Business requires people live with the minimum of regulatory paperwork and tariffs and that is what people need. And be actually assist beneficial to businesses north and south and how people live their lives. We havet helpful to say compromised, you havent, we have moved, you havent that gets nobody very far and provides nothing but uncertainty. From then cronin, british and Irish Chamber of commerce, thank you. Francine anna edwards with some great reporting on the ground in dublin. Up next, our exclusive conversation. They talked about trade concerns and a little bit about china and europe and where europe fits into all of this. This is bloomberg. Relationsu. S. China result in travel bans on chinese officials. Beijing calls it interference in its internal affairs no cooperation. The white house is the president will not participate in the impeachment inquiry, calling it unconstitutional and invalid. We are live in dublin with the latest. Good morning, everyone. Good morning good afternoon if you are watching from asia. Lets check on what is moving in the markets. Gbc, one of the biggest movers in the stoxx 600 today. The Gambling Company up more than 3. 5 . We are seeing gbc rise after they raised their fullyear outlook, saying that even though they had tough comps last year n it was the full world when it was the full world cup, trading at a one year high. Asset manager down nearly 4 , said it is no longer talking to suitors including generali. It started to look at possibilities of mergers last year, but now the company says it is going to focus on the business and the standalone company. Rallying with an allshare merger at the end of the year. There was a Third Quarter update. The timing for that merger, and said the online deliveries and orders were up 87 . Rbc out with a note saying there is a clear path for profitability. Francine dani burger there with some main movers. Pictureshe latest with of the turkishSyrian Border. We understand that turkish troops have begun crossing into the northeastern portion of syria. Backing militants away from its border. This is from a turkish official who spoke to bloomberg in ankara today. We are seeing a little bit of movement. We need to be careful about what we are looking at. But that is exactly the border they were looking at. Is on the back of the Foreign Policy situation that the u. S. Did in syria, and we will see what that means for the middle east and the whole. The bank of england says the u. K. Risks big economic upheaval. With a no deal brexit, on the back of backing accords, but they are also focusing on the resilience of banks, the bank of england saying that u. K. Banks are as prepared as they can be for brexit. We will have plenty more on the boe and what they have been saying. We will look at the data. The main thing to watch out for, as anna edwards was just telling you can see the pound currently at 1. 2266. Lets bring in our exclusive interview. The new head of the International Monetary fund has given her first address, talking about the worldwide effects of the u. S. China trade war. She spoke with tom keene about the possibility of a further slowdown. The bigurse, there is issue of trust. There is also, in my view, a risk of complacency. We are decelerating. And it is stopping, not that bad. Yet, now we are risking a potential more nasty slowdown. You brought up the issue of trust. It is absolutely fundamental for trust to always think not only ist is good for me but what it that you face . What is your domestic constraint. What are the challenges for you . And how we can craft space for thesionmaking that allows sun him of the individual parts. With all this news flow coming in, and it is titfortat not only with the obvious statement and to mention two nations, the United States of america and china, but as you mentioned, switzerland, it resounds across everyone right now, this trade war. How will you define the trade war at these meetings, and what is your twodo list to remove us from the titfortat . Kristalina we are going to be talking about trade peace, not about trade war. What is so obvious is that it is the indirect impact that really fights lights of fights lots of confidence. Becauseproductivity, there is more being pager credit because they are trading with a partner that may be in worse shape. So the indirect is what we need to zero on. Why . Confidenceknow that undermined e once undermined is hard to repair. The confidence necessary to get your piece of trade. Kristalina what we need to do is to show as clearly as possible that everybody is a loser in a trade war. Thereby therefore, everybody would be a winner in trade peace. And make it clear that that is that that loss may be higher on some countries and lower on others. But everybody is impacted. Francine that was the new imf managing director, kristalina georgieva. Lets get straight to the bloomberg first word news. Goinga the lights are out in parts of california. Utility pg e cutting power to millions of people, most of the San Francisco bay area, plunging into darkness. It triggered a scrabble for residents to prepare for what could be days without power. For pg e, there is no choice. It is a key strategy to keep powerlines from sparking, spreading wildfires. And more breaking news. Turkish troops began crossing into syria moments ago, according to a turkish government official. The move is intended to force to. Backed kurdish militants back away. China says it is making excuses interferingon and with its internal affairs. It is the latest and escalating titfortat battle between washington and beijing. Trade talks are set to restart tomorrow. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more im vivianantries, hurtado. This is bloomberg. Francine . Francine lets stay with the economic slowdown and the Global Financial crisis. From the World Economic forum, the subject of global competitiveness, i am very pleased to be able to speak with the managing director of the World Economic forum and ahead of the center for the new economy, and she joins us now from geneva. Thank you so much for giving us a little bit of your time. The report gives us a good picture of what we should look at with a main pitfalls and the challenges. What surprised you in looking at the report . Despite the massive injection of cash in the Global Economy, from the largest Central Banks alone, we have not really spent as much time investing in dealing with not just his shortterm emergency with the crisis but the longterm emergency, which is productivity growth. This report looks at those 12 factors that really matter for longterm growth, and it is very clear that even though there has been investment in ict adoption, there has not been the commensurate investment in Human Capital and skills so that people can work with technology. They have not been investments in improving institutions and infrastructure. There are a number of areas where a lot more that needs to be done has not been done in the relatively positive outlook over the last two years. Now that we are looking at a possible slowdown, we have a very narrow window left to make some of those investments. Francine one of the things that you also point out is that basically it is the global ispetitiveness gap that particularly concerning. Especially at a time when the Global Economy is facing a downturn. Are there countries that could be more competitive that are just not putting those Structural Reforms in . Saadia absolutely. That is the case for all countries, even those at the top. Singapore is number one, the u. S. Is just behind. The u. S. Is the best economy out of the g20, the g7. There is a 15point gap with the competitive frontier. They need more in terms of their skills for, infrastructure, and in the case of the u. S. There has to be there will some concern in trade. There is a downturn in sentiment already, even though this is a longterm index. It is very clear that there are some things missing, even the countries at the top of the rankings. And then if you look much further down, if you look at the brexit, and the larger economies, a lot more needs to be done on Human Capital, skills, capital, business dynamism. It is not just about investing into ict and development, it is about making sure that those products make it from the lab to the market, and those of the kinds of things that these countries have not spent an a normas amount of time doing, not with the investment or the Structural Reforms were what can be traced by the government. Francine how much does this have to do with the trade war . You highlight that Business Executives and i sit i think you said 13,000 of them they have lower confidence and are worried about the uncertain future. Is this trade related . Saadia there are a couple of pieces to this. We are not yet seeing an impact in the hard data. And that is an example of the fact that these are recent developments affecting a small number of products. But youre are seeing that downturn. I caught the tail end of the interview you were doing with the head of the imf, and it is absolutely the sentiment of uncertainty, and that will change how people will make Investment Decisions today. Francine let me also bring in chris turner from ing. This brings us to what we were talking about, the strength cat the weakness in the economy. When is the downturn going to be visible . Already is in it large parts of asia with the slowdown, and we are already seeing that in the euro zone in terms of 20, 2019. It has been very disappointing, particularly with the likes of germany. Germany did not appear in the top five, and that is one of the things that are german team has been highlighting with generalization digitalization improvements that we have been highlighting. It is an opportunity for germany to invest in those more productive measures. Adia, you have singapore on top, but the u. S. Is down a touch. Saadia yes, the u. S. Is down a little bit, and one part of that is the sentiment around trade, but the other part is the skills of the workforce. Business leaders are convinced that at the moment in the current job market, they are finding the skills they are looking for, but longterm they are not that optimistic. They do not believe the future workforce has the critical stills Critical Skills they are looking for. That is another area that impacted the u. S. Francine this goes back to the new world of fx. You could look at productivity puzzles and have an impact on flows from investors. Yeah, and particularly with investment intentions. Think, interesting for the u. S. Because the u. S. Has been quite insulated toward this. Now it seems to be spreading, and it is showing up in investment intentions, so it looks like it could be a tough 2020 that regard. Francine thank you so much. Forum, saadiaomic zahidi joining us from switzerland today, and chris turner stays with us. Tellsump administration Speaker Nancy Pelosi they will not cooperate. More on that next. This is bloomberg. Bloomberghis is surveillance. Im Francine Lacqua in london. Tosident trump has refused cooperate with the house in its impeachment inquiry. The administration called the proceedings unconstitutional and invalid, in a scathing letter to nancy pelosi. Joining us on the phone from kiev in ukraine, stephanie has investigated the impeachment situation, and regularly brings news to us. First of all, the white house says President Trump will not participate in the inquiry. Can they force him to comply with subpoenas . Well, certainly they can proceed down the subpoena route. However, this is a setback for the democrats, who had hoped to proceed with the impeachment procedure quickly. The u. S. Ambassador to the e. U. Was due to appear yesterday, and now they stopped him and they will be forced to issue a subpoena against him. Now he will be forced to choose between whether or not to comply with a subpoena or resist and potentially face jail time. If they go down the subpoena route with these witnesses, they will succeed eventually. It will take longer, and it will become much more of a political fight. I think the real issue here is that if the white house continues to resist, the democrats in the house will be able to use that as evidence of obstruction and potentially add that as another article of impeachment. Francine we also had a report saying that a pressure operative said that he made America Great again after President Trumps win. How will that be taken by the Republican Party . Stephanie it is further evidence that, you know, russia adversary and is intinuing to intervene elections around the world, and there should be concern about what kind of activity that they are up to a head of the 2020 election. But so far we have seen republicans dismiss those concerns and not take it seriously. We have not had any real action or at least plan as a way of, you know, preventing further russian interference in the 2020 election. They have continued to sit on the fence on this. Francine thank you so much. Bloomberg Senior Writer Stephanie Baker joining us on the phone from ukraine. Lets get back to chris turner. I dont know whether this has an implication on the dollar at the for investments in the u. S. , or how it translates to the world. Chris i think it is very much an added layer of noise at the moment. We saw that when this first story broke. The dollar fell briefly, the yen briefly appreciated, but then got back to starter levels. I think there is a sense it will be tied up into courts and committees for a long time, probably well into 2020, so making decisions based on that is very difficult, sort of one layer amongst many. Amongst the u. S. Slowdown, the global slowdown, the trade war, brexit. It is probably not enough to turn itself into an fx trend. Francine we will go to a report in ankara to talk about the turkey situation. As geopolitics escalates and seems to be permeating through the market, what is a haven . Chris if you look at may 1, that is when the trade dollar broke down between the u. S. And china. The strongest currency since and the been the yen, dollar is up there as well, really. The dollar, in terms of deposits, offers 2 more than anything out there. For the time being, that is kind of winning. Where the fed to cut rates another 50 or 100 basis points, i would tend to favor the yen more than the dollar, but for the time being, the dollar is holding its own. Francine chris turner is the head of foreignexchange at ing. Turkish troops have been crossing into syria. We will have the very latest on what that means. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. The Turkish Military has begun crossing the border into syria, according to an official. Pushing back kurdish militants. Days after President Trump said america would not stand in the way. Dozens of american troops had been working closely with kurdish led forces in the fight against Islamic State. We have also learned that turkish state banks have rushed to prop up lira, as the countrys planned intrusion into syria affect investors. Istanbul, first of all, do we understand the turkish president s intentions . Of turkisha number troops began crossing into syrian territory this morning. Including earned again, this was a decision by a number of officials, including earned erdogan. Including is innot know if it operation or just a few Surveillance Team who might be testing the waters for the full scale operation begins. But we now know turkish troops are in syria to push militants away from the border, which has been the long run objective in syria. Francine what does it mean for the economy . For the moment the turkish lira has held steady. Could that change . When the news of the phone call, the u. S. President signaled the green light to turkish operations, there was a reaction to the currency. But it has held steady, including this morning, when news of the operation broke. But of course, like every other of ation, there is risk political and economic fallout. Francine thank you so much for the update. Phonent joining us on the from istanbul. In the meantime, we are looking at markets. I think they are trending sideways, looking at a number of headwinds, turkey being one of them, the u. S. China trade war being the other big one. Bloomberg surveillance continues into the next hour. Tom keene joins me in the next hour. A guess joins us for an exclusive conversation, at 10 30 london time, 5 30 a. M. In new york. This is bloomberg. 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. U. S. China relations worsen as washington imposes travel bans on chinese officials. Beijing calls it interference in its internal affairs. No cooperation. The white house says the president will not participate in the impingement inquiry, calling it unconstitutional and invalid. Inquiry, impeachment calling it unconstitutional and invalid. Brexit talks turn angry. We are live in dublin with the latest. Good afternoon, if you are watching from asia. Good morning, everyone. Francine lacqua, with tom keene in new york. We have to talk about these talk with the imf chief. Trade is one of the things markets are worrying about, but in the last tournament its we are told that turkish troops had begun crossing into syria and the turkish lira is holding steady. Tom we did speak yesterday on Bloomberg Radio with the middle east director for the managing director of the imf, and he made very clear, even though it is distant, even though with turkey, the president of the United States, it will have a huge impact on all of the middle east. Francine it certainly will, and we need to understand what is behind the move from president erdogan. Lets go to viviana hurtado. Viviana turkish troops began crossing into northeastern syria. Their goal, force u. S. Backed Kurdish Forces away from the turkish border. The Trump Administration says it will not stand in the turks way. The kurds have been helping the u. S. In the fight against Islamic State. Turkey used the kurds as a security threat. Donald trump escalating the fight over impeachment with u. S. House democrats. The white house says the president and his administration will not cooperate in the investigation, calling the process unconstitutional and invalid. Nancy pelosi says the white house is trying to cover up the president s betrayal of democracy. To the u. K. , that is where the government of Prime Minister Boris Johnson is preparing for a nodeal brexit. In three weeks, negotiations negotiations appear to be headed for breakdown. The irish backdrop is one of the global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianatries, hurtado. This is bloomberg. Francine . Tom . Tom let me do the data. I have one screen again, two days in a row. The markets have been quiet even after the speak from yesterday. We are watching oil. It is a little weak, a little weak on the turkish news, but i dont want to oversell that. Francine, futures advance. Francine i think they are a little bit in a holding pattern. Certainly when you look at european stocks, they are higher than yesterday. But investors are trying to reappraise a host of potential headwinds. Looming trade talks between the worlds economies. On the worlds biggest economy, it seems trade negotiations are going nowhere. They are escalating when it comes to tensions. They are due to restart tomorrow, but the relationship between the u. S. And china seems to be deteriorating by the day. Joining us now from beijing is salina. We were hoping for a status quo, may be some kind of many trade mini trade deal, but it seems things are escalating. What is the point of no return . Broad possibility of a trade deal is close to none, but now the possibility of a mini trade deal seems to be low. There have been reports that china may be gearing up for its own restrictions on certain u. S. Nationals. China could also gear up for its own unreliable entities list, which reportedly could be adding Companies Like fedex and hsbc to them for their involvement in the case. The latest move by the Trump Administration really escalates the trade war, and takes it into an a different direction since it is the first time that trump is citing human rights as a reason for action here. Lawmakers in washington, d. C. , have long criticized china for its alleged human rights abuses many have been detained arbitrarily. But china is disputing those claims, saying that is in their legitimate interest and their right for this counterterrorism efforts, they say. As we heard again today. Tom within the chinese press, do we have any understanding of the messaging of president xi or how unified the communist party is over the last number of days . Selina i think what we have seen has been quite interesting. That actually shows a sense a heightened sense of sensitivity when it comes to the Chinese Government and their percent opedere i did see an talking about the nba, talking about what is going on in the u. S. Blacklist and how this maximum pressure strategy is not going to work, but i think the response we saw to the nba is interesting in that you are seeing china to take this hardline, zerotolerance policy approach when it comes to any businesses that seem to be questioning the territorial sovereignty of certain areas, and this comes at a sensitive moment for china, because they are also dealing with the hong kong protests, with the tariffs, with the trade war, and at this point in time, it xi jinping wants to send a unified message to china that they are not going to back down. But at the same time this complicates trade talks since it reinforces a view in the United States that china is not playing a fair ballgame, and this is another example of u. S. Companies having to kowtow to the Chinese Government. Therefromselina wang china. Ofning us is the cohead global equities. Let me start off with you. When you look at what the trade war has become, it seems like it is broadening. This is no longer a trade war, this is trumps war on china. One of the conclusions is it is not going to end their there is no plausible agreement that could resolve all the issues that have now come into the fore in the last six months. The way the situation has soured not just with the specifics of the trade negotiations that we will see later this week, potentially around the edges, but these much broader issues, where the chinese increasingly feel with some justice that the americans are not just complaining about the trade stuff, they are complaining about china getting big and chinas whole develop and strategy. If that is a problem, you will not get china to sign a deal saying we are going to give america the right of approval of our longterm development strategy. Francine eleanor, what does it mean for markets come on the back of that . It it nies point, we are beginning to see that the trade war is not just affecting chinese companies, u. S. Companies directly directly trading with china. Whether everything is necessarily clearly related to the trade difference between the United States and china is obviously slightly open to debate. We are seeing slowdown in europe, we are seeing lots of sentiment coming from Smaller Companies in the United States. Some of it some of it may be linked to economic cycles, but it does not help to have this noise around something which is going a little bit beyond the economy at the moment, at which people do see as possibly having negative effects on the economy in the long term. Optimistic iny hoping that these discussions on trade between china and the United States or within europe, namely the usefulness of barriers to trade globally, but shortterm clearly there is a political it is political as opposed to economic rationale, which seems to be Guiding Principles and the debate. Tom yesterday in my discussion with the manager of the imf, she , from aup a speech slide, and then we brought it up one or two times as well. I look at confidence. What does Bloomberg Economics say about the confidence in the system and the confidence of the politicians and the confidence of business . Been looking have through, economists have been putting together their q4 outlooks, and what struck me is that all the way through this we have talked about the shortterm impact of tariffs and trade wars, and no matter how you do the numbers, you cannot get a very big number just around the formal measures of trade on tariffs, on goods. Where we have seen and i think everyone has been surprised by this where we have seen a bigger Economic Impact is precisely through confidence and what that does to capital spending. I had an interesting conversation with the chief economist of the World Bank Last tradewho is a fantastic economist, penny goldberg. She says it is not she says that what trade deals have done in the past is not just brought down tariffs, but it provides certainty. If you throw all of that up in the air, you really do not know where it is going to end. Tom the backstory of the 12 hundred people in the Christine Lagarde atrium at the imf yesterday, lets listen to the 12th managing director of the imf. Talkinge going to be about trade peace, not trade war. Everybody is a loser in a trade war. Therefore, everybody would be a winner in trade peace. That losst clear that may be higher on some countries and lower on others, but everybody is impacted. Tom it was an extraordinary phrase. I really had not heard it before. I know, elinor, you have. Trade peace. Can you invest right now for the coming trade peace . I am slightly concerned about the vocabulary being used war and peace are very Different Things concerning economic growth. Investing in areas that would be less effective where possible, more defensive industries. The one great phenomena of the with thebal growth trade agreements we have seen over the last couple of decades is that most companies, large companies, are very international and have been able to find growth in different communities and enabling a more dynamic middle to be created in some of the countries which had not known that in the past. So we will continue to look at the companies which are perhaps less cyclical come as much as that is possible. Difference on trade between the United States and china is that we are seeing some industries that we would consider being defensive, such as the diagnostics industry, we are seeing a slowdown in spending from hospitals in china at the moment. That is a subject of concern. I continue to think that yes . Francine let me jump in because we are getting breaking news. We understand that china is open to partial u. S. Trade deals despite the tech lack list. I dont know whether you have access to the the tech blacklist. I dont know whether you have access to the markets, but it is something we need to understand. Given every thing that has happened with the tech blacklist, with the very latest with a trade war between the u. S. And china that seems to be broadening. But we are just hearing from an official saying that china is still open to a partial u. S. Trade deal, despite the blacklist. We will be back with ellen taylor gelatin and stephanie. This is bloomberg. Tom it is breaking news and it is on the trade war, china open to moving forward with, and the partial u. S. Trade deal. And forth. A back you experienced it yesterday afternoon with various news, and we see it in the early american warning. I dont have it up right now, but renminbi with a very weak close yesterday, francine, up to 7. 15, dare i say 7. 16. Rights. Dcny is at 7 13 now. So you on strength right here off the headline. Francine i do have a great you on chart right now. Chart right now. This could signal that beijing is somehow focused on the damage on the economy because of the trade war and what we understand through our reporting. That china would accept a limited deal if tariffs are imposed by President Trump. Keep an eye on that. These negotiations resumed tomorrow. We will have plenty more on the u. S. China trade war and more data checks throughout the day paired lets get straight to the Bloomberg Business flash with viviana hurtado. Viviana an 8 billion punitive damages verdict has hit Johnson Johnson, involving the antipsychotic drug respurred all , finding that the drug was wrongly marketed to teenagers. The award is likely to be reduced on appeal, and it may force Johnson Jenna johnson to seek that Johnson Johnson seek according to the wall street journal, paving the way for a final decision to proceed with the share sale. The aramco ipo is expected to be one of the worlds biggest ever. That is the bloomberg is flash. Tom thank you so much. We will now go to istanbul, which is 800 miles from two villages on the turkish northern Syrian Border. Triangulated 400 miles from damascus. It is essentially in the middle of nowhere, where turkish troops are beginning to cross. I have seen one tweet from an official source, but i do not document it, suggesting that they will establish a band within the northern Syrian Border. We are following this in our news. Ul bloomberg on a whole inion support of mr. Erdogan as he moves the kurds out . Onur i think a huge measure of theturkish because of theensus in turkey that Kurdish Group that the turks is a mortal the ypg enemy. Turkey hassure that fought against for more than three decades now. Francine what can they do to actually stabilize lira . How will traders be looking at this . Traders definitely are looking at this as a potential source of risk, geopolitical risk. The Syrian Civil War in the past ofht years has been a source geopolitical risk in the turkish economy. There have been many up and down moves because of uncertainty. Whenever there is a military operation, into a neighboring country, of course it brings along its own risk. Right now the risks appear to be less than they did a week ago President Trump set american troops would not stand in the way after six months of advancing into northeastern syria. It is a crossborder operation, a major operation, and when a fullscale operation begins, it is a source of risk. Tom thank you so much. We look forward to seeing you in our next hour. Our Turkish Bureau chief. It is breaking news, it is financial, and it is truly extraordinary. Of differing countries, this is truly amazing. Greece with a negative yield on their tbill. That is really, really something. We are showing the 10 year yield, the short term paper, a negative yield. Extraordinary. This is bloomberg. Tom bloomberg surveillance. Good morning, everyone. With now, too short a time Eleanor Taylor joliden. We will have her back for a much bigger length. And Stephanie Flanders, waiting to go all qe on us in the next halfhour. R, let me go to your slides. With a dissertation on multiple topression, how close are we multiple compression in equities . Are think we eleanor i dont think we are necessarily that close to it. Since thewe have Fourth Quarter of 2018 seen a lot of Market Expansion over the course of 2019. That is what explains a very Strong Equity performance we have had this year, because unfortunately on the others, the earnings picture has not been quite as rosy and we have seen considerable earnings downgrades for this year. Having said that, we are still just in a couple economies, in positive territory for Earnings Growth in 2019. For 2020, i would argue that the Earnings Growth is possibly a little bit overly optimistic, notably with energy and materials. So there is room, certainly, for a multiple compression. Whether there is genuinely rez on debt for that to happen, i would suggest is open to debate. Unfortunately, because i prefer things to be decided on the basis of equity fundamentals rather than external political noise, i expect that what happens in terms of the multiple for equity is more depended on decisions taken by Central Banks and particularly possibly the political framework that we are in. Francine thank you so much, Eleanor Taylor joliden. And Stephanie Flanders, Bloomberg Economics senior executive. Coming up on bloomberg daybreak tom the irish finance minister. That is coming up at 1 30 p. M. In london, 8 30 am in new york. Of course, the focus on brexit. This is bloomberg. Everyone uses their phone differently. Thats why Xfinity Mobile lets you design your own data. You can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. All with millions of secure wifi hotspots and the best lte everywhere else. Its a different kind of Wireless Network, designed to save you money. Switch and save up to 400 a year on your wireless bill. Plus, get 250 back when you buy an eligible phone. Thats simple. Easy. Awesome. Call, click, or visit a store today. Surveillance. Francine lacqua in london, tom keene in new york. Futures up 25 off the chinese headlines. Thisanie flanders has tattooed to her brain, the Balance Sheet of the fed with the optionality off the repo, the short term paper issue. Thisersey came up with where yellow is conservative, purple is stasis, and blue is where we are heading. Like butrsing your qe not qe. What did powell say . Stephanie one of the reasons he was surprisingly lucid on the subject of the Balance Sheet, they want to make clear they think of this in a different way from quantitative easing. This is a response to what happened in the repo market, and we are clear that they will at least be allowing some expansion of the Balance Sheet in line with natural growth, and remain open to the idea of having a step up beyond that. He was basically saying we need to think about increasing the Balance Sheet. Tom you read it on a global basis. Where on duration or maturity do we tip from a shortterm Balance Sheet dynamic out to a more qe dynamic . Five, seven, or 20 years out . Stephanie it is a good question. It feels like they have less leveraged at the five or 10 year. The emphasis on these purchases on the expansion will be on the tbill, another way they are trying to distinguish this from the quantitative easing which you would expect to have a longer duration. It is a good question, are we reaching a lower bound, not just on the policy rate but on the long rates as well . Francine why is he taking such pains in explaining that . Is it so the person does not say this brings me back to 2008, or it is something more technical . Stephanie they want to be clear. It is hard for people to understand and people have a sense that expanding the Balance Sheet is printing money and quantitative easing, and he has made it a point of bringing the fed out into wider america, talking to everybody and not just bloomberg. Francine how much are the markets influencing insurance cuts . You have a great new steam in the u. S. Trying to understand what the economy is like. Does it warrant so many cuts or is it insurance . Stephanie if you are the fed and thank, what was our reasoning for increasing Interest Rates, probably to bring growth down to where it is now. That is where they think the potential growth rate for the u. S. If you look to the real data and ignore warning signs around ism, the u. S. Is in a good place. What is helping them in trying to square the circle between that and the panic, the fed must do something, is the fact that inflation is coming in low, so they still have the inflation justification, which those who worry about another rate cut which likely we will have this prices are still coming in very low and we have an inflation reason. Francine Stephanie Flanders stays with us. Lets go back to new york with the bloomberg first word news. Trumpa the administration is pressuring china over human rights. This is mostly symbolic, because officials rarely travel abroad. Is planning tighter visa restrictions for u. S. Nationals. Those sponsored by u. S. Intelligence and human rights groups. China is turning up the heat on the nba. Tiesare suspending their after they said they would show the preseason games. The general manager sent out a tweet backing hong kong protesters. Brooklyn and the l. A. Lakers are in china to play exhibition games. China bracing for power cuts that will affect millions. Will shut off power for close to a million homes and businesses. Facing threeady hundred billion dollars in liabilities from fires the last two years. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom thank you so much. It is an important conversation, the leadership of ireland and the leadership of the United Kingdom, but there is an immense backstory. Your data on brexit maybe two, three years back, or may go back to the good friday agreement. Anna edwards has been reporting in dublin. Anna thanks very much. An important conversation that fits into the political spectrum. Lets bring another political voice in. Collins,ed by niall Foreign Affairs spokesperson. Not in coalition but certainly in partnership. Of do you rate the handling brexit . Niall as we judge the governments performance, ireland as part of an e. U. 27 negotiating group and the negotiations are being led by Michel Barnier on behalf of ireland. We broadly support the government in terms of our approach to those negotiations, and i think there is pretty much unanimous support across the Irish Parliament in terms of the governments approach to brexit. We have been critical of the government in relation to our internal preparedness. We have been highlighting that consistently pretty much for the last two and a half years. All the Major Economic and representatives support organizations like the institute of accountants and ireland, various banking services, business representative organizations, will tell you business has not been prepared. The Governments Department of business carried out a survey that showed the level of awareness ahead of brexit was very poor. Anna what can you do to prepare for a no deal brexit . I spoke to someone who said it is not possible. Niall i would not agree. You have to make people aware of the potential consequences of a no deal brexit. You have to support them. You have to equip them to prepare for the eventuality, if it does come to pass. ,ne of the simple barometers the government created a loan scheme to allow businesses to draw down money to protect for brexit. That is a fair barometer, indicator which Shows Government has not in our view, stepped up to the plate in terms of preparing businesses. Anna they recently put a new offer on the table. The ireland tea shop does not like part of it around customs. The backstop is still being talked about, maybe bringing back a timelimited element. Would you go with that suggestion . Importanthink it is that people understand why we have the backstop. The backstop was a creation to allow the island of ireland to continue post the Peace Process. The Peace Process and good friday agreement are key, and the backstop is so important in avoiding a hard border on the island of ireland. Trade between north and south ireland is huge. Tore is east and west mention, but when you go along the border counties and you see how those communities are reliant on smes, small and medium enterprises, manufacturing and products, and adding value and supply chains. A hard border for a Customs Border oror a customs withorder of yesteryear military checks simply is not feasible. Anna Boris Johnsons plan is not talking about that. He is talking about customs checks that may be done by mobile units and some use of technology to survey the area, but not going back to the infrastructure you described. Given what you said about the backstop, what it be possible to have a timelimited backstop . Niall when the time runs out, what comes in its place . That has not been addressed. This is part of the problem that particulate and in terms of everything Boris Johnson is proposing, no details. Technological solutions, mobile within factory precedent, this does not give us any degree of confidence that it would work. In the absence of that, we fall back to the agreement that the e. U. 27 made with theresa may and her government, of course which Boris Johnson was part of at the time, and that was the backstop that avoided a hard border. Equally important, it protected the good friday agreement because peace and ireland, lives have been saved. The border communities and businesses have prospered in the north of ireland, and that is a point that is lost on a lot of people in the u. K. , across europe, and the International Community. A lot of people get it, but we have to reinforce it, peace on the island of ireland is paramount. Anna it was wonderful to visit the border and see how peaceful and open it is. Thank you for bringing your thoughts this morning. Niall collins joining us in Northern Ireland. I will be speaking to the finance minister a little later on, Paschal Donohoe. Francine thank you so much. Anna edwards in dublin throughout the day, great reporting on the backstop. A lot of people know exactly what is at stake and a lot of people dont. We have a brilliant piece on the terminal saying that this is now an angry stalemate with the u. K. And e. U. Blaming each other because they cannot get anywhere. Stephanie there was a lot of debate of whether yesterday was the end, where both sides said we would not get a deal. That was the feeling, but we have more time before the crucial summit. At the London Invest conference yesterday, you had the leader of the brexit party, and one of the prime instigators for the legislation that is supposed to prevent no deal, the one thing they agreed on was that we would definitely have a delay. We would not have a no deal brexit at the end of october, even though Boris Johnson still talks about that. Some of this question about the blame game goes on to how long is the extension . What do you e. U. Leaders decide to do . That was a vigorous debate the last time they had the small extension and then the longer extension. They ended up with a compromise. That is where the debate moves now if we do not get last, latebreaking breaks. Tom Stephanie Flanders, thank you so much. It is partial breaking news. It is there a few minutes ago, china mentioning off of a bloomberg article, china open to a partial u. S. Trade deal despite the black list on technology companies. Futures up a solid 22. Anu on stronger stronger. , if the rhetoric gets worse you may be in recession because of the consumer. Unreliabilityout that we see in then around the u. S. China conflict, that is more enduring. We are going to be talking about trade peace, not trade war. Everyone is a loser in a trade war. Therefore, everyone would be a winner in trade peace. Francine we will talk more about u. S. China, trade war and trade peace as the imf director was saying. Oil executives from some of the Largest Energy companies are gathering in london. Annmarie hordern is standing by. Annemarie he is the chief executive officer of shell. Energyusing the word instead of trillium. Petroleum. Oil is trading where we were presaudi attacks. Is there too much oil in the market, or are people not taking into account geopolitical risks . It is a bit puzzling. It shows how professional and got a response of saudi aramco and the kingdom has been to protect the reputation as a reliable supplier. That was probably not factored in to how events like this played out. The other thing, i think the market is ns the size by the so it has become blase about geopolitical risk and ed is not representative of the picture. Suspect we areou going to continue this slide . Ben it is hard to make sense out of the market on the best of days because it is so much driven by sentiment rather than the real strong fundamentals of it. Of course, we observed the price of oil. It says a lot about Trading Opportunities and how much cash we get in the door tomorrow, but you cannot be driven by todays oil price. You have to make a longterm assessment. We guide it by other considerations like how do you build resiliency up, and if it the lowesthat is possible breakeven price. Annmarie speaking of longterm, i want to ask about your dividend. You have never cut since world war ii. You are trading around 6. 3 , 6. 4 . You have not raised it. How do you entice investors . Ben we have a strong dividend track record. Our dividend yield is disproportionately high, so it is a buying opportunity. We have to get to a point that we have Dividend Growth again, and we have been clear before the summer, we said we will start raising the dividend again , and we have line of sight to completing our buyback program. By now, we do about 15 billion of dividends and the last few months we have done about 10 billion of buybacks, so 25. Illion of cash we hold as we complete the buybacks, the risk, our capacity to pay the dividends at these levels, we can think of raising it. Annmarie i want to ask about expanding in the u. S. At one point you said shale is expensive. Are you missing out . Ben i dont think so. We look at shale and our opportunities inside and outside the u. S. , and put our capital to work where we think we can get the best opportunity. We do not have mantras. It has to make sense in terms of credit, but the economic decisions are driven by economic and capital to division. Foreign investors spend about a billion dollars a year, and it is not just shale. A lot of it is petrochemicals. We put money to work increasingly in power. Annmarie i want to ask about the speed in which we are seeing the social and political backlash against big oil. The Royal Shakespeare academy dumped bp. Groups are protesting in london. Are you shocked and what is your response . Ben first of all, even though there may be objections against big oil, we are not big oil. We are big energy increasingly. Of can see the acceleration how society is mobilized, which is a good thing in general because in the end, if you want nize, it is about making sure demand transforms to low carbon demand. We will supply the Options Society needs, so we need to change the debate to a more mature debate where suppliers and users of Energy Figure out how to do things. We are in the middle of that position, but you have some people who say maybe it is us as society who needs to transform and not just suppliers of energy. The world has no choice, so we will get to a better place. Annmarie ceo of shell, thank you so much. It is no longer big oil, it is big energy. This is bloomberg. Comment francine from london and new york. Going on income china. Buy 10s offered to billion of agricultural goods. This is the trend, just half an hour ago from our own bloomberg reporting. China is also open to a partial u. S. Trade deal despite the tech blacklists, a signal from beijing it is interested in lessening the damage to its economy rather than continuing the trade war. Trade meetings and what we will see into october and november as well, i think we are moving headline by headline on the markets. Futures up 25. Dow futures up 195 points. Drew matus of metlife will be with us, some optimism, a better tone on the american economy. More news on turkey into Northern Syria as well. This is bloomberg. Tom this morning, it has begun. Turkishreports that forces are crossing into Northern Syria. Do curd forces await . The gop awaits a cogent response from President Trump. Chairman powell provides a cogent response on 2020 qed. Qe. China brings peace to the trade war. Futures surge. This is bloomberg surveillance. Tom keene in new york, Francine Lacqua in london. Reportingds in dublin and tomorrow ireland and the United Kingdom meet. Francine that tension is pretty high. There is an angry stalemate. As Stephanie Flanders was saying , yesterday was the realization after the phone call between Angela Merkel and Boris Johnson they cannot agree because they each have redlines they are sticking to. Maybe we are unlikely to get a no deal, but probably will have an extension and elections. Yesterday was the time we realized that. Tom with our first word news. Viviana china is signaling it wants to limit the damage from a trade war. China is still open to a partial agreement with the u. S. The Financial Times reporting china is offering to buy an extra 10 billion of American Farm products. Turkish troops have begun crossing into northeastern syria. Their goal is to back Kurdish Forces away from the turkish border. But Trump Administration says he will not stand in their way. Turkey views the kurds as a security threat. Donald trump escalated the fight over impeachment with house democrats, saying the white house and his administration will not cooperate in the investigation, calling the process in constitutional dutch unconstitutional and invalid. , Prime Minister Boris Johnson is preparing for a no deal brexit in three weeks. Negotiations appear headed for a breakdown. Johnson had agreed to talks with irelands Prime Minister this week. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom equities, bonds, currencies, commodities, completely different from 90 minutes ago, futures advancing big time, up 23 points. Curve steepening. Massive risk on feel. It has the character of the whipsaw we saw yesterday. Oil may be elevated on the turkish news. 10 year yield we are watching most closely, three basis points higher, some of that off chairman powells speech yesterday. Francine this is my data check. We are looking at uncertainty on the market. Stocks jumping on fresh trade deal hopes. They are basically reviving hopes of progress in trade talks with america this week, between china and america. Treasuries and gold turning lower. For more on the headwinds and the fact that we could have more help than we did earlier this morning in a trade deal between the u. S. And china, is enda curran and Kevin Cirilli. The fact that the u. S. China relationship was deteriorating until we found out china was willing to sign something, maybe a partial u. S. Trade deal, despite the tech blacklists, to safeguard the economy. What does it mean . What is china focusing on . The i guess the fact that talks are still going ahead in the first instance despite the backdrop of growing tensions do indicate china wants a deal. They are willing to make a partial trade deal, and the ft is reporting that would be an extra purchase of agricultural goods which speaks to the idea that trade war is hurting chinas economy and they want a pause on additional tariffs due this month. We are not talking about an end to the trade war, but something of a new and extended truce. Francine at the same time, we were just trying to figure out exactly what this trade war was because it is broadened all of a sudden and President Trump is just going after china, no longer trade in china. Kevin i agree with that. Todays truth is tomorrows tweet. There has been unpredictability in the u. S. China trade negotiations that has perplexed the business community. From President Trumps perspective, he does not feel he is under pressure to get to some type of broader deal by the election. Usmcahe advancement of increasing, one trade deal completed what allow him more maneuvering in the long term, they believe, to deal with china. Tom and all my research i would suggest this is not a partial president. How does President Trump react to partial . ,evin he does not like partial and has said consistently that he wants to get to some type of big deal. What is interesting is that u. S. Foreign policy as a whole is influencing and driving these discussions perhaps even more so than the chinese, quite candidly, are aware. With regard to tariffs and intellectual property, and the situation in hong kong, the u. S. Is prepared, according to the democrats, to play a long game. Tom where are the democrats on this . Theand i have a mantra director of the imf alluded to yesterday, republicans and democrats do not want to give anything to china. Kevin that was such a fascinating interview because it captured a lot of the conversations being had in the halls of congress, which is essentially when i talk to democrats, they do not necessarily view some type of shortterm deal as in their best interest. When you play it out and look further into the longterm, you will see the administration, whether it is republican or democrat, that is fully prepared to take on china. I hear that on the campaign trail. They do not like the way the president tweets, but tariffs and intellectual property, they are with him. Tom our chief washington correspondent. Nda curran, thank you as well joining us is drew matus with metlife. He brings a terrific economic backing. I want to talk about the business of the markets. Lets go to trade. Imf, theyat the quantified what the trade war costs. It is a big number due to confidence. Does that cause you to bring down your gdp number for the nation . Drew i dont think so. When you look at the data that people have blamed on trade, the nonmanufacturing ism is the best example, people say it is a result of the trade war, but export orders are rising. What is being conflated with the trade war story is a cyclical downturn in manufacturing because manufacturing is still cyclical. Some of it is trade war related and some of it is the natural cycle. Francine and i are in washington at the imf World Economic outlook. Lets listen now. We are going to be talking about trade peace, not about trade war. Everybody is a loser in a trade war, therefore everybody would be a winner in trade peace. That losst clear that may be higher on some countries and lower on others, but everybody is impacted. Tom fascinating phrase. What is the elasticity of a movementce, if we get into next year or the following year, the elasticity has to be extraordinary . Drew it does, and you can see it in the market. The market wants this resolved. If you take a step back, there is no point in going through what we went through if we end up in the same place. I think when we are looking at trade, we want a longterm solution that is beneficial to everyone. Att means instead of looking what might happen to growth in the next quarter or the next year, you need to look at what could happen to growth if you had a trade deal over the next 10 to 20 years. That might actually be the main conflict between these two parties. One is focused on a more shortterm gain because of certain cyclical downturns and the other is trying to figure out what the world will look like in the next 30 years, and do not like the way the current trade environment is leading us. Francine what is the likelihood this is a little bit like putting the genie out of the bottle how difficult is it to put it back . Is it farfetched we will have ine passing trade resolution the next 18 months . Drew our view is we will get something eventually, but our view on eventually keeps drifting out. I would like for tariffs to remain in place for quite some time. This is something we have to get use to, and we will see how the world adapts. One thing people underestimate is the worlds ability to adapt and recenter the norm. It used to be that no tariffs were the norm and now tariffs are the norm, and it takes a while to adapt, but when you adapt you can end up with a robust system. Freetrade is better, but there are issues on various sides where you have to say, we have to get to the bottom of what is causing this disagreement, and if we paper it over, we are leading ourselves to a larger problem between the two parties in the future. I would rather have shortterm a resolutioncreate that leads to a longerterm trade peace. You cannot have a piece that leaves issues unresolved. Peace, might want trade but if you settle on terms that are not addressing the issues, you will not have peace for long. Francine thank you so much, drew matus stays with us. , theg up, Paschal Donohoe irish finance minister at 8 30 a. M. In new york, 1 30 p. M. In london. This is bloomberg. Viviana you are watching bloomberg surveillance. It is the largest jury award in the u. S. , eight billion dollars in punitive damages hitting Johnson Johnson involving the antipsychotic drug risperdal. They found the drug was wrongly marketed to teenagers. Seek aforce j j to settlement of 13,000 similar lawsuits. Saudi aramco will publish its ipo prospectus before the end of the month. That paves the way for a final decision to proceed with the share sale. The aramco ipo expected to be one of the biggest ever. Tom thank you so much. The news flow is extraordinary. We will get to drew matus in a moment. Now, Kevin Cirilli in washington and Rosalyn Matheson joins us. The us an update on turkish troopsf into syria. To establish a safe zones of 20 miles wide to place refugees in . Rosalind it is the early stages, just a preliminary action by turkey. We are looking for a large ground force moving in to push the kurds back and hold it. We are seeing early stages in a bombing near a border town. To thee response president yesterday of going after the turkish economy is setting up a safe zone along the border enough of an event to create trump fury . , when iot enough fury talk to republicans and democrats on capitol hill. This is precisely the action that republicans including Mitch Mcconnell and Lindsey Graham were increasingly nervous about. There is a vetoproof majority for there to be more crippling sanctions to be lodged against turkey as this continues to escalate, but this was precisely what the president s critics hoped to avoid. Francine what does president erdogan want to achieve . Rosalind he wants the kurdish problem off his back. The u. S. Has said no, we need to ourect the kurds, they are allies so that is a no go. He gave him the green light to do something he has wanted to do for a long time, push the kurds way back and push turkey in, because they want a future stake in syria. They want to fence their own country from the problems in syria. Francine how much is this a problem for republicans . Given the impeachment, they are still supporting him, but what about Foreign Policy . Kevin to be frank, republicans have told me within the past 24 hours they are two separate issues. They are not conflating the issue of impeachment with Foreign Policy whatsoever. In terms of where they stand with regards to the middle east, here is what i can tell you. To pass fully prepared any type of vetoproof legislation that would really go after and target president erdogan from an economic sanctions standpoint. Tom the fed had a tweet up yesterday that explained a lot and was deleted. His the 27th secretary of defense going the same way as the 26th . Kevin i am not sure President Trump would want that simply because of how influx the administration appears to be right now, and with so many various developments. That said, we had john bolton depart during a key week of Foreign Policy, and that caught everyone off guard. Tom Kevin Cirilli in mathieson, rosalind thank you so much. I cannot fathom what the news flow is. China moving the futures substantially with a tilt towards a partial trade negotiation and agreement. Futures up 23. This is bloomberg. To emphasize that growth of our Balance Sheet for reserve management purposes should and no way be confused with the largescale asset s we employed after the financial crisis. Theher the technical or purchase should substantially alter monetary policy. ,om an important speech chairman powell delivering the goods yesterday. Drew matus delivers for us now. I have eight ways to go in too short a time. They seem to be doing what all Central Banks to. Do. In a measured way, they are adjusting to what they see. What will they measure december 11 . Is it one and done . Drew our view as there will be another rate cut and we will be done. If they expand the Balance Sheet again, what does it mean . It is not qe. Ofhink what the experience 2008 and the response has shown is that qe is not necessarily effective. If you think about qe versus operation twist where they sold the shorterterm on longerterm, if you dug into the Research Area of the fed, they would say operation twist was more effective than qe. Tom dig into operation powell and inflation, cleveland cpi showing elevated inflation. The fed zeitgeist of a lowered inflation regime. Which is it . Always saysd Inflation Expectations drive expect a test inflation, but they are typically driven by food and energy prices. You are looking at noncore items to determine where core may be going. When dot question is, you declare victory and go home . The fed looks at is about 1. 8 . They are 20 basis points away from their target. If you are 20 basis points away from your target and cutting Interest Rates, that sets you up for a negative outcome. Tom we will have much more on this as we drive to october 30, and what will be a fascinating meeting. Michael mckee from denver will migrate to that press conference. We have markets on the move. Upures up 24, dow futures 182. Coming up, the ceo of emeritus. Bob dudley. British petroleum. I am still not used to bp. Dudley, bp, 8 30. This is bloomberg. Francine this is bloomberg surveillance. A lot of the focus is on china. We got up this morning, came into work, and there was so much copy and news about the fact that we are further apart from a deal because it does not feel like a trade war, it feels like the trade u. S. War on china. We heard from the chinese side they are willing to do a deal on agriculture, may be something the u. S. Do not want because they want something bigger. The markets, a little bit of lift because of that encouragement news from china. S p futures are gaining and 7. 1321. At ,om as Kevin Cirilli mentioned we need to see what the president of the United States will say about partial. Viviana the Trump Administration is pressuring china over human rights, proposing bands on chinese officials. This move is mostly symbolic because those officials rarely travel abroad. China is planning tighter restrictions for u. S. Nationals, targeting those sponsored by u. S. Intelligence and human rights groups. China turning up the pressure on the National Basketball association. More groups on the mainland are suspending their ties after they said they would not show the rocketsames, after the general manager sent out a tweet backing hong kong protesters. The Brooklyn Nets and l. A. Lakers are in china to play two exhibition games. Twoident trump will sign executive orders limiting the use of memos, letters, and others businesses have complained they use that process to establish selfrule and circumvent congress. The state of california bracing for power cuts that will affect millions. Toe shutting off electricity 800,000 homes and businesses, to prevent its equipment from starting wildfires. Hit, those that will be pg e facing 30 billion in liabilities over the past three years for fires. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine thank you so much. The brexit blame game is escalating, as talks between britain and europe have reached an impasse. On a of a deal rest meeting between Boris Johnson and his irish counterpart, but neither side looks to give ground on their shared border. Anna edwards looked at the key Sticking Point holding back investigations. Anna the 310 mile border between the republic of ireland and Northern Ireland looks unremarkable. Clueis road is the only that you are leaving ireland and heading into the u. K. , this road sign that speed limits will be in miles per hour. The border has had a famously bloody history. Irishce between republicans and pro u. K. Union unionistst escalated in the 1970s. E. U. Singles, the market meant customs checkpoints were to gradually fall into ruin. Andgood friday agreement security checks were increasingly unnecessary. Products flowand seamlessly over 2 hundred rd crossings. Trade between ireland and the u. K. Is worth 1. 1 billion a affecting 200,000 vehicles across the border every day with no checks. What would happen if customs checks are restarted . We have no borders, no controls. Border have a customs and a regular border across the state. Tape,resents a lot of red administration, and cost. We rely because we are a service provider. If we see manufacturing drop and Northern Ireland, we see it as a huge threat to our industry. Anna Community Sphere division. The border runs right down the middle of this country lane, on this side the United Kingdom, on this side the open nature of the troubled border that means taking the u. K. Out of the e. U. So difficult. Anna edwards, bloomberg on the irish border. Tom anna edwards in dublin. We say good morning to her. You were on a country road. If they are on that country road tomorrow, what will they talk about . Anna good morning. They will be talking tomorrow or friday. They do not see a path through this right now. It is hard to see a deal to break the impasse by next week. Next week is crucial because of a meeting of e. U. Leaders. There are a few dates in the diary we can look to. Stephen barclay, the brexit secretary, is going to brussels continuing what they call a stock take talks. They will be talking principally about the border, whether it is possible to have customs checks that do not feel invasive to the people who live along the border. They will talk about vetoes, whether it is possible for the Political Party in ireland to have a veto over their relationship with the e. U. Conversation is still very key. , which was powerful under Prime Minister may, are they the same powerful or less powerful . Are a lot of people suggesting may be the dup are less needed by the u. K. Government because they have lost their majority and are calling for a general election. Why do you need 10 mps to prop up your government and even with their support, you cannot get your policy over the line . Teampose boris and his would not want to turn them away, but people have suggested the dup has overplayed its hand and does not have the power it used to. They are not happy with everything that has been suggested by Boris Johnson, place. Uts two borders in , nigel the conversation farage look pretty intense in his position yesterday. Way that is the only ify would sign up to a deal, they believe Boris Johnson can leave without a deal . Anna right. This has been the argument the government and london has made. You need to keep no deal on the table because you lose a power negotiating tool powerful negotiating tool. Whether they want no deal or not is a question, but has acted as a bargaining chip. There is anger from the government side about the piece of legislation passed by the rebel tories and opposition parties to force Boris Johnson to ask for a delay. Tot leaked memo seemed acknowledge even the government acknowledge that they have a duty to ask for that delay if they do not have a deal by october 19. We still hear doublespeak where they say that and on the other hand, suggest there is the possibility of leaving with no deal. And the19 is a saturday u. K. Parliament will set. Will we get a deal passed . Will we get no deal . Francine the Irish Parliament speaking now, we have red car. Varadkar. Make it harder with the u. K. Proposal . Anna both sides have tried to play down suggestions there will be escalation at the border. They would not want to put infrastructure there, although they acknowledged a lot of things would be outside their control. They heard from the e. U. They do not want to put infrastructure outside the border, but if they end up with no deal, how do they protect their border . No deal remains key, how you do that if you do not have a deal both sides will sign up to is a mystery. Francine anna edwards on the ground in dublin. For annasloomberg conversation with Paschal Donohoe, the irish minister of finance at 8 30 a. M. New york, 1 30 p. M. London. This is bloomberg. If the rhetoric on the trade war gets worse, you may be in recession simply because what has happened. Concerns about unreliable only unreliability that we see around the u. S. China conflict, that is more enduring. We will be talking about trade peace, not trade war. Everyone is a loser in a trade war. Therefore, everyone within a would be a winner and a trade peace. Chief executives of pimco, standard chartered, and the new managing director of ci net. Yetas not hurt the consumer but you see a downturn in manufacturing. Tom single best chart on the litmus paper of all these discussions of beleaguered ceos and the managing director, this is Interest Rates from the time of paul volcker and doubledigit , 10 and 15 Interest Rates. We have reached down to unthinkable lows. , with the is with us metropolitan Insurance Company metlife. The actuarial assumption is stunning. I saw it with francine, the times of london. One point 9 on a Retirement Annuity in the United Kingdom, everyone is dealing with these rates. Are you telling executives there is a permanence to these rates and a lower actuarial assumption . Drew we are in a low rate varmint until the next expansion cycle. We can see environment until the next expansion cycle. If we look at the world of negative Interest Rates and the global stock of negative yielding debt, something has to change in order for those yields to move higher, and that change probably has to be structural. It is not just the physical response needs to kick in. Reformsed to be labor and regulatory reforms around the world that make the world a more productive place and boost potential growth. Tom ge is moving from definedbenefit to, sorry, every retiree for themselves 401k. What is the actuarial assumption of a 401 k given matus Economic Strategy at metlife . Under 5 . Drew the 401 k will depend what and how you invest. If you think what firms are going through, all firms that utilize Interest Rates are going through, how do you maintain a decent Interest Rate on your investments without taking the kinds of risks you do not want to take . That has been something we have been dealing with for years, and unfortunately, we got pretty good at it. Periodsadapt overlong of time. It is the shock you have to worry about, what if interest higher ined two or 3 a year . Higher rates are better but if firmsot prepared, have had the chance to adapt. It does not make things easier. Francine isnt it getting much worse . I hear so many people saying, maybe it is time to go to cash. For every person who decides to go to cash you have a person deciding to go into a risky asset in search of yield. Is that the biggest concern for the next financial crisis . Drew everyone sitting in cash, that is not good. I have a lot of faith in the average consumer, the average investor. They are doing what is in their best interest. When everyone knows what is in their best interest, sometimes you can get a better outcome. What we are seeing now around the world is that when Interest Rates are too compressed, people save more money. They are not incentivized. You would think they would not be incentivized to save money, but the response is to save more money as Interest Rates fall. This whole idea of staying at low rates for a long time that you see around the world with the fed, the ecb, and bank of japan, that policy does not work. You need to move rates or attempt to move rates to a level that minimizes the amount of savings in favor of consumption on the part of consumers, and for the u. S. , we are well below that level. The ecb and germany are well below that level. Francine do Central Banks have a choice . Drew they do. The greatest fallacy is that negative rates or sustained low rates help and economy. They create zombie economies that create zombie firms that take productive people and put them into firms that should not exist. Then we have a low productivity environment that leads to low potential growth that makes it look like you need to keep rates low to sustain growth, and that is not the case. ,om we have to bring it up this headline is too important. This has already been corrected. This is different than President Trump. The headline of the day is president macron will meet with chancellor merkel over lunch or dinner in paris. That must be something. What is a dinner with macron like . Last time hehink brought the president of the United States on top of the eiffel towel tower. I am sure they will want to have a discussion about Boris Johnson and what to do if the u. K. Asks for an extension. They have more to talk about than brexit, trade and the u. S. China spat. Looking forward to all of the headlines that will come out of that meeting. Tom we will see on the heritage of syrian france, they must discuss northern turkey and syria. Markets lifting off the partial headline from china, futures up 25. Chinese yuan stronger. This is bloomberg. You are watching bloomberg surveillance. Paypal will report 228 million right down on investments in the Third Quarter, a lot of the blame going to uber. Its investment was 500 million at the ipo and has now decline 34 . Paypal purports reports Financial Results in two weeks. The chinese trade war may have an effect on farmers and agribusinesses. A study saying it will be difficult for farmers to find meaningful are tentative markets to china. Highlyll release the anticipated nextgeneration playstation in time for the 2020 holiday season. The playstation 5 will support 8k video and process 3d audio. The next playstation may also be the last because they are making it possible to play on local servers without a device. Francine the Turkish Military has been crossing the border into syria, according to officials, to force Kurdish Forces away from the turkish border. Istanbul is our Bloomberg Turkey bureau chief. We are looking at live pictures in syria. Takingpresident erdogan this . He wants to move them away from the zone to i imagine some sort of buffer zone. How will the International Community deal with this . President donald trump has made it clear american troops will not stand in the way. That has caused criticism against trump in washington, and it left turkey trying to answer questions about how far and deep it will go into syria when the operation begins. The big question everyone is trying to answer is the fate of Islamic State militants being held in makeshift prisons and are guarded by kurdish led forces, which is the forced turkey will fight against. Tom we have images now. This is way out on the Northern Syria border above northern iraq. This is different, small towns in between. 400 miles east, northeast of damascus and in between is where the tension is. What is important is the assumption that the kurds have to do something, and it begins with this border image. Ofthey join up with assad damascus, not because they want to but because they have to . Onur they might. Todish forces have vowed resist the Turkish Military when the operations begin. Whether or not they will deliver that is open to question. The last time Turkish Forces went into syria, everyone thought there would be a major urban warfare and there were early signs of it, but suddenly we saw turkish militant groups vanished, or the militants just vanished, and turkey easily took over the area. Tom thank you so much. Istanbul, chief in this story will continue through the day. This is bloomberg. Alix ptial trade deal on the table. China is open to a limited agreement as long as President Trump implement snow more tariffs. Productsould buy agfa without giving in on would buy ag products without giving others. Venture jay powell says the fed is close to Balance Sheet expansion fed chair jay powell says the fed is close to Balance Sheet expansion, but says it is not qe. Welcome to bloomberg daybreak on this wednesday, october 9. In the market, all about trade. Some optimism because im a little skeptical about what that all means. Equity futures up by 0. 8 . If we see a partial deal, will that be good enough for the market . Eurodollar up by 0. 2 . It is a mixed dollar story