Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Surveillance. Thee a lot going on in markets. After this attack on an iranian tanker, you can see crude oil gaining 2 . Is at 64. 53. Gaining andrently the pound is at 1. 2 460. We are also getting headlines outlook iea cutting its as the economy eclipses the saudi attack. They are pointing to a little bit of Downside Risk in the worldwide economy, saying that will impact demand. Lets get straight to the bloomberg first word news in new york city. Quote very well. Thats how the first day of trade talks went according to donald trump. Today, he plans to meet beijings top negotiator. These are the first highlevel talks since july. But sides are working to end the 18 month long trade war. Besides appear willing to agree to a partial deal and would leave controversial issues for the future. And two associates of the president s personal lawyer are accused of violating Campaign Finance laws as part of a plan to oust the u. S. Ambassador. This scheme is part of the u. S. House impeachment investigation. They arrested the two men at Dulles International airport outside of washington dc. They were leaving the country with oneway tickets. Syria, the eut in is floating sanctions against turkey. They will be the rate of at a summit after president erdogan quote threatened to open the doors for 3 million refugees. Turkeys incursion into Northern Syria is in its third day. Is poised thousands chief executive just days after its partner nissan chose a new ceo. Working ton they are move past the carlos ghosn era. He is also defending his record at renault. Taxing digitalt companies such as facebook and atbat that follows frances similar initiatives and races prospect of u. S. Sanctions, and initiative to pose abroad levees. Other countries are mulling similar digital taxes. 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 . You so much. Nk an explosion on an iranian tanker has reignited fears of unrest in the middle east. Iranians National Chemical company said it was hit by missiles from saudi arabia. But get straight to our guest. Thank you for speaking to us. Is once again the one thing markets wants to know about. Are we still trying to get to the bottom of exactly how many missiles struck oil tankers and where they came from . Do we need to get used to these kind of attacks . We seem to have is a pattern of skirmishes. It is not the fullblown oil crisis and it will deftly be a big macro issue. Probability the that will escalate the strait of hormuz. That is the big one. This is where we start getting oil prices. This is where you will get a proper, negative impact. Stage, as long as we dont get into the streets of hormuz, it strait or remains manageable. Francine lets get straight to our middle east executive editor. What do we actually know . Who was struck and by who . Information ishe coming from the various iranian news entities. Even the iranians, we have one report on iranian Oil Companies officials saying they probably came from saudi arabia so there is still a lot of question marks we have had from the saudis a call to the port authorities think they are aware of the incident dont know the nationality of the tanker and what exactly happened. The coast. Far off francine all sides have said they want to avoid war. This is coming on the backdrop of ongoing tensions in the region. How concerning is it that this is excellent . Escalating . Was quiteevious guest right. The concert will be that of escalates to a point where it will actually impact oil this, atbeing shipped the moment, is not the case. There will be some speculation if this is responsibly to the attack on the aramco facilities. It could be they could keep it , however, it is unclear exactly what have again, the source of all of this is from the iranians. I think people will be asking a lot of questions about exactly what this is. Or is thisescalation something completely different . Francine what does this mean for the World Economy . Stage, nothing to him who the point where you have to realize global forecasts, you probably need to get to above 80 per barrel, which is what people have in mind this is usually what people have in mind. If you go to the strait of hormuz, you get oil for two. Hundred dollars and reduce global. Global growthduce growth. Francine is it more difficult to protect the price or is it still range bound . Not the first despite it always remained around this same range. Seems that as long as a good chunk of oil supply is not impaired, which would happen only if the shipments were blocked, it seems the market is taking it in stride. It moves a few dollars but does get. Eally out of that range there is no reason to think that should change. We see more escalation from where we are to really get into this sort of territory. Thank you so much. We will get back for more with our middle east executive editor. Stay with bloomberg surveillance. A pathway to a potential deal, constructive talks are held between Boris Johnson and the irish premier could this mean a clear brexit by the end of the month . And then our exclusive interview with Robert Kaplan mwai kibaki not sure the slowdown can be avoided. Kaplan, why he is not sure the slowdown can be avoided. This is bloomberg. Francine economics, finance, politics, this is bloomberg surveillance. Lets get straight to our Bloomberg Business flash. Coceos will replace the sap chief who is stepping down. He has been in the top job for about a decade as the company moved to embrace Cloud Computing were previously there. Klein was the chief operating officer. Being cut byare 70 by 2030 before going Carbon Neutral. It europes biggest polluter also sees healthy tax generation giving it the firepower to invest in renewable energy. We spoke to the finance chief of germanys largest utility. We will embark on a huge corporate transformation to become Carbon Neutral by 2040 and have a very diligent carbon reduction path from now with clear measures, and of course, the goal to reduce Carbon Emissions and compensate for the lost power production. That is the Bloomberg Business flash, francine. Francine thank you so much. A pathway to a potential deal. On renewedas jumped optimism a compromise can be found. Most in rose by the months after a positive meeting hiseen Boris Johnson and opposite in ireland. After hours of talks, they emerge seeing a pathway to a possible deal. I had a very good meeting with the Prime Minister and our teams together. For a and very promising. Now absolutely convinced that both ireland and britain want an agreement is in the interest of ireland and the United Kingdom. Towards an pathway agreement in the coming weeks. Francine for more, we are joined by our reporter. Is this renewed optimism being shared by brussels . Francine, that is the big question. But its true that the phone around the conversation has really changed over the past few days. Im sure youre ever that controversial readout between the Prime Minister in which officials claimed they had given up on negotiations and the deal was unlikely. That conversation was different with the irish saying it is possible to get the deal done before the end of the month for the big question is whether Michel Barnier and steve are playing that optimism in favor and turn this into a new document leaders can go through and agree to when it comes next weeks summit. Two biggest sticking points have to do with the customs union. There are many questions. The europeans are worried that this is a very unstable assembly. Those two sticking points can be bridged, it would be fair to say we are close to a deal. But thats point at this point, that is still a big question. Francine now lets go back to the chief economist at our guest. Our guest. T, were hearing both sides. Brexit could be a huge problem or worrying for the Global Economy. For europe, no deal would be an issue. Especially since it would happen against a complicated background. My point on this is very simple. The u. K. Observes roughly 13 of eu exports. A no deal brexit, we would get a recession. If you have got one of your biggest external markets in recession, it impacts you. If there is no deal, we may have logistical issues compounding the normal impact of recession, so it matters to us. Francine is no deal off the table . The market is not really believe in it because the premise for it be forced to ask for an extension. It is never off the table because it is the default solution if nothing changes. Is is potential fatigue. Done,what parliament has it cannot be the baseline that we have a no deal. We definitely need to hear progress here very quickly. Francine what does it mean for the u. K. Economy . If we have a session, its likely we could go in for a general election. For the british economy, the problem is that extension is no longer cared for stability. This time, extension will begin coupled with elections, the most predictable election this country has had in a long time. I would say the marginal returns on extensions is probably falling over time. Francine what does it mean for the boe . Actually, they have changed tack quite a lot. Francine they dont want to be seen as political. Well, the bank of england is quite clearly sitting they will ease further. Where is at the beginning of the conversation, they were ambiguous on how they would medication fore quite some time now is not to worry. It is still unclear to me what they would do or if it would be commensurate with the task. Is that because they would decide to look through inflation because of pound weakness . It would make sense. Textbook economics would tell you Central Banks could just disregard it. Francine thanks so much. Our guest stays with us. Coming up, our exclusive interview with the dallas fed president. His views on the severe slowdown next. This is bloomberg. Francine this is bloomberg surveillance. The saudiccused arabia of an attack on an oil tanker in the red sea. It is impacting the price of oil. As we stay on top of the story, you can see crude oil gaining 2 . Now lets turn to the worlds biggest economy. The jury is out on whether the current u. S. Slowdown will turn more severe. That is the view Robert Kaplan told us in an exclusive interview, telling us any Rate Adjustments should be modest. Market expectations can change on a dime. I dont think my job is to satisfy the markets. It is to figure out whether we have the right policy setting that fosters economic growth. Also, the other part of my job is to call out not just Monetary Policy. More Monetary Policy will be needed if we are to grow faster. I am talking about growing the workforce, improving trade and the escalating trade tensions and other moves on education, skills, things that would increase our ability to grow. The minutes of your september ofting show a discussion when you would and the cutting cycle. Do we get Something Like that . Robert i am not necessarily sure that is appropriate. Hearing people like me and others saying they are agnostic about whether we move from here, that would tell you that if nothing changes, we will stay where we are. We have got so much uncertainty and policy uncertainty. Wise for usould be not to over telegraph where we are in the cycle. That this cutting we are doing should be limited, restrained, and modest. I still believe that. Francine that was Robert Kaplan speaking to bloomberg. I guess the concern is how many insurance cuts does the u. S. Really need . Is that the question we need to ask ourselves . Robert in a way, yes. Behind the question, you need to make a decision of whether you think the risks are going to disappear within the next 36 months. What a listen to mr. Kaplan what he has in mind is waking up in the next three or six months with a deal between president. Rump and president xi jinping we removed from the World Economy a big source of uncertainty and discover the fed did not need to cut that much. It is probably a rational baseline the problem is we cannot be sure. New source of uncertainty has emerged. Another problem which was recognized in the minutes is continue,onger this the slide in growth, the higher the probability that we see the downturn spread to the services sector. Once this is started, it is hard to reverse. Francine until that person holds, are we ok . As the labor market is holding firm, were probably spendinge consumer will remain thoroughly. If it stops, we have a big issue. It tone how difficult is actually put a timeline on that . Down the line, all of this depends on the decision of three or four people in the world. We are completely dependent on the news flow coming along trade in the impeachment procedures. We have issues not just china but with europe. These are individual decisions and so i understand his hesitation. Francine what happens to dollar from here . Probably around where we are right now. Maybe some softening. Francine softening from next year or in the next couple of weeks . I dont see big moves at this stage. Between now and the end of the , i think they are stuck on their narrative. So i think it is 2020 when things could change. Francine thank you. Cis shares a slump after cutting revenue forecast for the second time in three months. We bring you stock movers next and look at brexit. We look at pound and oil on the back of that tanker. 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. Francine tensions rise in the middle east. Accuseses jump, i run saudi arabia of the attack. The irish premier says he can see a way forward on brexit, the process positivity extent to brussels . President trump says the trade talks are going very well. Good morning. This is bloomberg surveillance. Lets check in on what is moving the markets with your main stock movers. Upside this morning, s p surging up more than 7 . Though mcdermitt is stepping ,own making way for two others and then he also read or reiterated their guidance for two thousand 19 and 2020. Down more than 11 , they cut their Sales Forecast yet again, this is the second time in just three months. This big company is not spending as much on tradition advertising, and not making up the money. Hugo boss nearly down 14 this morning, they also cut its outlook for the financial year. They were talking about weakening sales in north america , on top of that with this news we have from then to downgrade their stock. Straight to new york now, viviana oil surging after the attack in saudi arabia. Local media reporting the explosion damaged one of its main oil tankers. The oil ministry saying a spokesman for the national say the missiles probably came from the direction of saudi arabia. A step closer to agree to terms for brexit after a positive meeting between the british and irish Prime Ministers. Resumees ek 8 u. K. To talks in brussels, but the discussions continue to hit a stumbling lock, what to do about checks at the irish border. Now to the conflict in syria, sanctions,bating that is after the president threatened to open the door for more than 3 million refuges seeking shelter in europe. This is now in its third day. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine china to remove ownership cap on financial firms, part of an overture when it comes to the trade talks trade yesterday we heard about a deal on the currency packed, i think is how he called it. Lets focus on global trade. Optimisticounded and note after day one. China also signaled open over dealrospect of a partial on further tariffs. The talks continue today with trump set to meet with vice the vice premier. I am dealing with china right now. They are in washington. We will see if we can make a deal, but they want to if they want to make it, we will determine if we want to make it. If our opponent would have won that election, right china would become it would be the number one economy anywhere in the world and right now i can tell you they are not even close. Lets get straight to our reporter. We talk a lot about trade impacting the markets, and we had this breaking news saying that china is now setting a timetable to move ownership cap on financial firms. Are they trying to strike a deal at the margin with the u. S. . Sum this up, can lets deal with the small things first and the big things later. Are aligning stars for a modest deal where china offers some agricultural purchases, maybe some commitments on currency, in exchange goes home with some relief on tariffs and maybe some easing of the restrictions. If you are china you walk out this evening, and thats a pretty Good Standing because they were looking at trying to address some of the bigger issues and those have just been pushed down the road. Francine what does the u. S. Want . Trump says the talks are going well. With a be happy to sign off to currency packed, maybe something on financials . I think they are resigned to the fact theyre not going to get this big deal all at once. Hold . Ne so that would thats what the market wants to know. I think the market seems to be absorbing this idea of a mini deal pretty well, but come monday, all these other bigger issues, intellectual property theft, the industrial subsidies, those are the kinds of things the u. S. Is not going to walk away from easily and those will continue to way on sentiment going forward. Francine we were talking before about this benefiting the. Resident right now if we have a mini deal, that change the path of fed or the economy . I think the key is whether or not we get the next wave of tariffs, i think thats what the economy is focused on. This is going to start hitting consumer goods directly, and so what so far is an issue in terms of uncertainty, this would stop feeding through to the consumers, if we can stop that, or at least a reprieve of this for a few months, i think this would change the equation. I agree that it doesnt deal ofh the overall iteration sentiment, but we would get a reprieve. Francine is there an industry where we need a more than others , just from an economic point of view . Agriculture, technology . They are doing it to themselves. What the need is is not to hike to thist this is is the american decision. I a not sure they need something from china at the moment. What they need is not to do something that would harm their own demands. Francine we are getting more on that news. China is basing basically setting a timetable say would basically craft this limits on Futures Companies from january 1. Is this reforms that china has promised theyre just doing, you know, more quickly, to impress the u. S. . It sounds to me like these are window dressings around this agreement that there coming to. I dont know the details, and its all in the details on how these pledges work from china because the u. S. Would say they have made a lot of commitments like this in the past only to not follow through on them. It sounds like the mute music mood music is pretty good and china is hoping to forestall those tariffs next week and then the ones that are coming december 15, and the Trump Administration is looking at a slowing economy and they know those tariffs will bite at consumers at a bad time of the year. Francine because the highlevel negotiations are resuming, is that a strong indication that we could get something . Sign, thatsinly a something the americans can look at and go, see, china is moving in the direction we want them to. Rancine thank you coming up as we wait to hear if the brexit deal can be done, we will discuss what that means. That is next. This is bloomberg. Francine this is bloomberg surveillance. Eye on keeping a close this after there has been many changes at the top, but we understand the board will replace its executive. You can see the share price over two days getting something. 2 . We had a report from paris and we will cross over there shortly for more on that. In the meantime, another market mover that we are keeping a watch on is oil after early this morning iran said missiles struck one of its tankers probably came from saudi arabia. This marks the latest escalation in this conflict between these two powers, and that is affecting markets. You can see crude oil up, and actually brent gaining. France has been banking on brexit to give it a boost. Campaigns were launched in 20 17 to learn new business to the country, but numbers havent materialized. Of the five thousand jobs forecasted have moved to paris according to reports. For more on this from the other reporter e our we arest, and also adding a french labor to everything. Has Brexit Change things for paris . Have you been able to attract as many people as you thought you would from the u. K. . So first what i want to say is of course that brexit is very bad news for france and europe. This has consequences on the french gdp and on agriculture, some businesses, so this is bad news for the french economy. But we are being pragmatic. We are in International Competition and we want to attract the jobs that would enable that u. K. To go somewhere else. Its true that Many Companies are waiting for the real brexit to take place, so all the discussions are taking place right now, and Many Companies prefer to wait for the real decisions, but many jobs have already been implemented in the paris region. Also we have the European Banking Agency were relocated in paris, so we helping all these people to settle in the paris thatn with various action we can explain. Francine what is Holding People back to move to paris . I dont know if theres anything that plays against paris, labor laws, whether its the language or something else. Is it real estate prices . That there are many points on which we are wishing, so first i what to say that working, so first i want to say that we have had good results. We are the first region in the investments so numbers are showing the attractiveness of this region is high right now, but we are working on some points like you said transportation system, also a multilingual region. We are doubling the number of International High skills schools, because we know this is a weakness, but many changes are being made. International high School Numbers have numbers, and we are also implementing a website to learn french as a foreign language. Lessonsfor the french of the partners of the employees of one agency, so we are working on this aspect. I think we are the first region like in europe where people look at relocating also from the world, not only from the u. K. You take canada for instance, people want to know the situation in Continental Europe and they are looking for the paris region also because we have a very strong r d system and we are seeing many investment in artificial intelligence. So here we have all of the talents compared to other european cities. I think we are really the best place to attract these people. People are still waiting for the decision to be made. Francine this goes to a lot of sayes come here and they france is that attractive on a competitive level, and we will go to more to the local taxation and a lot of people dont hear speak french, but overall have they completed the things that they needed to say i can invest in france and that people will not be employed for life . If you look at what they have been doing for the past couple of years, they have been proactive in trying to get thernational companies, and taxing system was a key issue for some aspects of the industry. We see some progress for , so i think we need to understand that if the u. K. Become harder to do business with, you will not find u. K. 2. 0 the same economic model. Francine is there something to be done about local taxation, could it be lower to help attract more people . As what was just being said, a lot is being done by the french government to work on these aspects, and we want many times to explain these changes to all of the companies while perhaps thinking of moving to somewhere else in europe. I think there is momentum right now in france and things are changing, and we have also attractive recent tax Credit System that everybody knows. I think people are seeing in the numbers, the ones i quoted earlier, shows that things are changing and thats why many are in the investment, Foreign Investment are being located right now and the parents paris region. There aret reasons for this. Thank you. Were just getting breaking news out of the middle east for the national irani and Tanker Company now says missiles that hit its tanks are not from the saudis. This will have a huge significance on how the market will take to that. We are trying to figure out exactly what is being said. Just moments ago, the and itc saying missiles that hit its tanker are not from saudi arabia. This is bloomberg. This is bloomberg surveillance. The no region Noble Committee will award the peace prize today at 10 00, seven minutes from now. More than three hundred nominees are in the running. Lets take a look at the contenders. She would be the youngest ever winner. The Prime Minister is strongly placed he brought an end to the longrunning conflict between ethiopia and its neighbor, and we have these people also in the running. Trump has received relatively low odds, but he has received the highest number of bets. We will find out the winner in just a few minutes. We are also getting a lot of breaking news first from ren ceo, so iing its dont know if that is impacting enault, andrice of r then just moments ago, a Significant Development in oil. Nitc saying the missiles that hit the tanker or not from saudi. I dont know if we can get a check on oil, if we have that price. It was gaining from both brent back lets get straight to our guests as the price of oil is fluctuating. I think we can get that board up for you. They are gaining some one. 6 . As this broke, you were telling me we have to find out who was behind the attack. Does this change the dynamic for oil . Comment ingerous to realtime, but the big issue with it coming from saudi which reaction froml saying, wew they are dont think its saudi, you could interpret this as possibly theyre willing to reduce a little bit of the tension and make things a bit less confrontational between those two major powers. Are probably that we reacting in real time a slight policy the positive, anything that would reduce the tension between these players would be positive. Then the question lies, if it is not saudi, who was it by . Francine if you look at the massive attack on the infrastructure that took out 5 of the oil market around the world, and yet they were able to be put back on track quickly. Does that give us an idea of the elasticity of the oil price . Becauseto some extent if you think 5 of the entirety of it at that time, when expectations of Global Growth were going down, its hard to pinpoint the actual contribution. Strait ofout the hormuz, then we would hit 20 , so the reaction of oil prices to losing 20 not seem to be proportional to what has happened with this oil field . Francine we are also getting more breaking news saying that u. K. Has not come forward with a realistic plan. They are also saying that Boris Johnson has promised a brexit solution that would work for all, and he said he has received signals from dublin that a deal is possible, but i think that suggest that he doesnt have anything concrete. Whatever happens with brexit, do thathink that will have we will have an idea by the 18th at the 19th . Its the last moment where we can probably get some good news. We need some sort of workable arrangement in the next few hours. Will havenow, we plenty more from new york and i will be joined by scarlet. 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. Francine tensions rise in the middle east after a tanker was damaged, the incident comes aramco was attacked. The irish premier can see a way forward on brexit, he says, will the positivity extent to brussels . President trump says china trade talks are going very well. He meets with the Prime Minister today. Good morning. This is bloomberg surveillance. Scarlet, i am fascinating with what is going on with this oil tanker that was hit by missiles off the red sea coast. Initially when it happened they said the missiles came from saudi arabia, but now it ran saying they dont think that. Where does do they come from . I know the price of oil is pared down because it doesnt seem that i guess the two powers in the middle east, that tensions are escalating. You wondered what happened to we will watch this especially as we try to get more this. Y on what is behind francine we are just getting we had aeace prize four or five names, and it is actually the ethiopian Prime Minister that gets the prize. He was crucial and very important in doing peace, so we will have plenty more on that. Scarlet we will check in with viviana. Viviana we begin with the breaking story of the tanking tanker explosion. Today the price of oil jumping after missiles hit that tanker in the red sea. It ran saying the missiles probably came from saudi arabia. Now they say the attack did not come from there. Several weeks ago, the saudis an on one of its major facilities. Trump says day one went very well, and later he meets with on of the chinese top negotiator. They are trying to end an 18 month trade dispute that has hurt the Global Economy and u. S. Manufacturing. In hopes for the brexit deal arising after what was described as a constructive meeting between the british Prime Minister and his irish counterpart. The big s that the biggest doubling lock is still the land border between ireland and the u. K. Global news 24 hours a day on air and on tictoc powered by more than 27 journalists in more than 100 countries. This is bloomberg. Francine this is what is happening to the european markets prayed you can see they are gaining some one point two percent. A lot of the focuses on oil. Earlier it was gaining a little bit more, but i ran just retracted saying they do not think that the missiles that attacked at tanker in the middle east in the red sea action came from saudi arabia for that is significant. The pound is edging higher rate it seems like the u. K. And irish leaders both said there may be a pathway for a brexit deal. Similar i am looking at numbers, the pound is higher, crude oil also. There was the biggest oneday rally in hong kong in weeks. Because they have gotten so beaten down and there are also signs that protesters may consideress aggressive tactics. , and it would finish the week higher. Francine the top story, that tanker hit by missiles off the red sea coast. We were just hearing that it did not come from saudi arabia. That just happened moments ago so thats get straight to the person who oversees all of our coverage on oil and commodities, stuart wallace. This feels like a big shift because iran said the missiles came from saudi arabia which would point to a escalation between the two countries, but if its not them behind the attacks, who is it . Its been confusing this morning. It ran already seeing saying that theks saying missiles came from probably saudi arabia, and then they walk that back. The oil markets come up a little bit, but you have to think about the context paid we had lots of saudi infrastructure, so its within the theme of the escalation on the attacks that has that premium on the price. As you mentioned earlier, if you look at the manned picture for oil, we probably should be substantially lower than where we are. I would argue that these tensions are still being seen in the oil price. Every time one of these incidents happen, if you are an oil trader, you have to be thinking about what happens next. Francine even though all sides have said they want to avoid justis the wider conflict more of a risk to disruption . Does the range of the price widen significantly . I think so. I think that rhetoric that we are getting is not terrific, but you have to think about it in those terms, both sides clearly dont want to go to war. But when you have a big military buildup in the region and then you have these smallscale attacks on pipelines and refineries, centers, the risk of something going wrong, one of those muscles somehow hitting the wrong target, that increases the risk of things escalating much more dramatically than they are now. Howcine francine mentioned oil prices have come off the high, and opec says it will do whatever it takes to prevent another slump in prices. They canlly isnt much do when it comes to a second assessing the demand picture, is there . Dark out to some extent its connected to the price, the same way when we were short on nothing thats fixes that problem more than higher prices. When the people in the market are looking at this, they cant really control either side of this equation, but as far as opec is concerned, the most important thing is to try to maintain that perception of discipline and unity and that should underpin confidence that they will adjust supply to the demand picture. Joining us now for the hour, david, we have been looking forward to this all week. Backs alk about the the banks but your first reaction to Something Like this, another tanker being attacked. It seems like its difficult to put a price on this, but i wonder how you model this . I think this means and it started with the first attack and maybe even before that, but all else equal, it means that oil should be higher than what should be the equilibrium supply demanding price. As ad be a risk premium result of the instability. Francine do you need to think disruptionble big which could tilt the economy downwards globally, or is that would it be more of a black swan event . David i think a big disruption, we are becoming less and less dependent, with the u. S. Being nearly selfsufficient, the impact of a big shock i think would be significantly less then say in the 70s, but it seems even though we have these trends, they still seem to trade around through various back channels. I dont know how that happens, but it would have an impact, but i dont think nearly the impact that it had perhaps a couple of decades ago. Francine if you are a u. S. Oil producer or driller, how do you interpret what happened in iran this morning. How do you go forward from here . David you would be happy are the recall, these two biggest areas of competition for the u. S. Oil producer, so if andsee major instability between the two bigger producers, then youre kind of rubbing your hands and smiling because its relatively stable. The producers in the u. S. And the canadian producer, for that matter, are immune to this instability, so i think youd be relatively happy because of the positive influence at may have on oil price. , ancine some breaking news noncash charge of two to three billion dollars in the third quarter, and i think this is related to the fact that it had decided in june to sell some of their interests in the Oil Concessions in egypt, so they had been divesting off some of the alaskan assets. I dont know whether this is the full thing. I know the share price isnt reacting that much, so certainly market. Ka the we will have plenty more on that, and plenty more with david as he stays with desperate coming at next, we talk trade and negotiations between china and the u. S. And we also talk negotiations between the u. K. And ireland. We talk brexit. This is bloomberg. Sounding a positive note after the trade talks day one. Skinny deal could lead to a temporary truce and the talks are scheduled to continue today with trump set to meet with the vice premier liu he. David, typically the present direct involvement in a meeting will help move things or its, thats conventional wisdom. This president is anything but typical, he could walk out of the last minute. Thats only what could happen on the u. S. Side are investors at risk of using this outdated playbook when they tried to price in outcomes . Difficult because of the inconsistencies in the use of bargaining ploys to try to get the best deal, but i do think that it does its beneficial to both parties to get this deal done, to get some sort of deal done and to start allowing more of the free flow of goods and services between the other countries. Its economically beneficial for both and i think especially with some of the noise going on in washington, perhaps this is the type of thing the president needs. Who knows whats going to happen . Weve had so many false starts and punishments and changes, changes of mind and backtracking. Its very hard to handicap this, but i think from a fundamental reason, there is a reason to hope in that it is beneficial for both parties to resolve this. Kindet so we do get some of a partial deal, will that allow a breakout of the recent ranges, the 10 year yield moved within this as well . David there is clearly certain sectors that have been significantly oversold and if financials,the extremely oversold, unusual valuation splits between that and proceed to safety. So i do believe that any hope of stability will move some of the money back into these areas which have been fleshed out. So i think there is room for significant upside, but the market is looking for some sort of disability stability, but of course the market doesnt always get what it wants. Tradet if we have a deal, currency pack or whatever you want to call it, does it change your portfolio at all . China said it will remove the or set the timetable to remove the ownership cap on some of it services. Waiting patiently. We dont try to trade around macro events at all because in that medium and long term, the macro events, though they impact share price, often if not more often than not, they have very low impact on Intrinsic Value of a business itself. They might impact a shortterm cash flow stream, but they tend to have very low impact over medium and long flow streams and to us it is these dreams that determine the value of businesses. So these things are all interesting and as a result of this noise we may be able to acquire quality at a low price, it doesnt change instantly how we position our portfolio. Scarlet co. Scarlet if you believe a u. S. Bank and come in and she get a big chunk of their banking services, that must be a golden opportunity. David this would be beneficial for the western companies, because the Financial Services area has been closed off to the west. The west is pretty good at Financial Services. You have to be careful because in china you have a closed capital account, so theres still a lot of managed Interest Rates, at cetera, so the amount of Financial Services allowed im sure will still be limited. The trend in china has been to slowly open. You cannot open the valve all at once, but to slowly open it. As long as they keep doing that, if they allow western companies to come in, it will be beneficial. Scarlet david from heros associates, and he stays with that. The pound is touching the highest point in two weeks. This is quite significant. Boris johnson saying there may be a possible pathway for a brexit deal. We will see what that pathway is. This is bloomberg. Francine youre watching bloomberg surveillance pray lets get your bloombergs nest flash. Actor make steps down as ceo of s. A. P. He will be replaced by Jensen Morgan and Kristin Klein paid we are about a decade, mcdermott led the Largest Company and through s. A. P. Acquisitions and revamped products. It is a sign, these companies are working in sync. The french automaker naming an thisim ceo after ousting man. Before he took over in january, he took over as number two. Repair to replay or their troubled alliance. The british maker of vacuum cleaners and hairdryers dyson is scrapping its electric car project. James dyson told the staff the company could not find a way to make the project commercial. Vehicle salesc plunged. That is the Bloomberg Business flash. Scarlet and francine. Today, overining partial trade deal ahead of talks with china and u. S. Negotiators a little bit later on. David, what do we do with glencore right now . By right is screaming now and thats because you have a company that produces all the necessary commodities needed for us migrating to more alternative copout, copper, cobalt, and these are things that we will need to have electric vehicle systems. At the same time you have a repaired Balance Sheet and a cashrong clash for flow stream, this is using normal profitability, and the best use the company is saying to use this cash flow is to buy back their own stock. To us even at low commodity prices, which we are currently experiencing, which i expect not to be permanent because of what i said about the need for these commodities to go into electrification, despite these low prices, they are generating free cash. Own ofe how much do you glencore . David coaches probably over 5 of the company. So its off from what we owed a couple of years ago, because the stock price went from its low in 2015 and it has tripled, but it has come off that high, and as that has done that, we have rebuilt some of our position back. Francine we heard from viviana earlier about how dyson decided to scrap this vision. Thats a reality check or this industry. Dyson really could not find a way to make it commercially viable. I know youve said longerterm glencore will benefit from this that is taking place. Are we seeing the bursting of the bubble here . E i dont think the ed v bubble will burst. I think thats what happened when you have a regulator mandating a technology thats not quite ready yet. Hardhas been pushed quite by technology that im sure in five years be better, so who knows, there may be hydrogen or other things better and more efficient than electric vehicles. At some point it will play a it willd at some point be economical, and that will probably be within the next few years, but its not quite today. What is happening today is that governments who needed to subsidize the purchase of electronic vehicles, and that tells you something. The market is not calling for them. The government is mandating it. Member the last time the e. U. Push something was d cell a decade or so ago, when they push d cell and look how that worked out. Not very well. Scarlet david is sticking with us as we hit the halfway mark here of the first hour of surveillance. I want to show you how futures are at. We could look at a third day of gains for u. S. Stocks. This is bloomberg. Scarlet i am scarlet fu in new londonrancine lacqua in viviana . Viviana the price of oil jumping after missiles hit an Iranian Oil Tanker that probably came from saudi arabia. Several weeks ago, the saudis blaming iran on a devastating attack. The Nobel Peace Prize was awarded to the Prime Minister of ethiopia. He was recognized for his work ofend almost two decades conflict with neighboring rich rea. Ea. Eritr it is day two of trade talks between the u. S. And china. Says day donald trump one went very well and today he meets with the head of the chinese delegation. Day news 24 hours a 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 a pathway to a potential deal, sterling rising after a positive meeting between Boris Johnson and his counterpart in ireland. The had a good meeting with Prime Minister and our teams together, very positive and promising. Be an agreement that is in the interest of ireland, the u. K. , and the European Union as a whole, and we see a pathway toward an agreement. Francine joining us from. Russels is maria tadeo when you look at the warmth, or what the two leaders said yesterday, it seems like a deal as possible. Will we really get a deal before the e. U. Summit next week . Maria this is significant because it is pretty much the wayt time in a public, open that the u. K. And Irish Government appeared to be on the same page. , we just the optimism heard from the head of the European Council that the deal is not quite there yet, but there are positive signals coming out of london. If you remember the start of the week, it was a very different story. The United Kingdom was saying the europeans had almost given then negotiations, but europeans were blaming the u. K. , saying they were not treating the negotiations seriously. That is reflected in poundsterling. Scarlet really paving the way and tusks comments bashing the optimism. How convincing is the u. K. And ireland to go along with forever enters with parameters of the deal they have agreed upon . Toia it is no exaggeration say the Irish Government really holds the key to getting this deal done. The europeans and e. U. 27 have made it clear they will not throw a member state under the bus. Whatever deal we get has to be okd by the Irish Government. The europeans will not move until they make sure the irish are ok with it. For the first time, we have the Prime Minister and the irish saying they have a tunnel to a deal. We are not seeing any of the details or the technicalities. Today was seen as the deadline for the technical deal to come out. Michel barnier met with Mitchell Barclay of the u. K. And we are waiting to see what comes out of that. Francine we are back with david herro. What do you do with u. K. Assets at the moment . Banks are exposed to the emerging markets. David lloyds bank had a huge brexit discount, and if you look at how it was priced, huge brexit discount and probably continues the rally. This is something that is significantly undervalued, same with rbs. Lloyds is more local and rbs is more to commercial interests. Both of them had a huge brexit discount. Francine do you own either . David we own both. A healthy 7 ,ng 8 dividend with lloyds that continued despite some of the conduct charges of the ppi, continued to generate capital ball capital above what has been required, so this low valuation is about brexit. Francine does that mean you are adding to your portfolio . The concern is if we do not have a deal, we will likely get elections which could open the door to Jeremy Corbyn with his nationalization talks. David we had to price our u. K. Businesses with a probability of no deal brexit and a corbyn government. These underprice what could happen, and when we do the business for those scenarios, they were still significantly undervalued. The banks are affected directly, but what about banks in other markets . Are you ready to make a move on those if there is the outline of a brexit deal in place . David we were already significantly overweight european financials. This is a sector that has been misunderstood by the market. The markets belief was as a result of the low and negative Interest Rates, you would see earnings get crushed of the typical european financial. Last year, you saw the prices get crushed but we are not seeing the earnings hugely negatively impacted, thereby opening a value possibility. Credit suisse and elians, even though it has been harmful, it has not been completely destructive and detrimental to their earning streams. Most of these businesses have been able to earn albeit at a slow rate, and now that they are at their capital levels they can pay the capital to their shareholders. 10 ,ee things yield 7 , and in a world where 10 year treasury securities are trading negative, it seems like a nobrainer to invest in these european financials with good capital positions and high dividend yield. Scarlet the picture is certainly rosy from your point of view. We will get into the particulars later on, but i want to wrap up this conversation and go back to what maria is saying, we dont know the specifics of an agreement between ireland and the u. K. When it comes to an agreement. Would it be a scenario that has apart,oposed and picked or is it something entirely new . David you would think at this stage it would be entirely new because so much has been proposed and picked apart. Four times a bill was rejected in parliament. Clearly, there has to be something new, and i think given that parliament does not want a no deal brexit, they will be hardpressed to turn down a deal that is presented. Either they want a deal or dont, and they seem to think that any deal is better than no deal. It sounds like maybe any deal is being proposed. Who knows what it means. These people have been negotiating for over three years. I often wonder, what do they talk about when they are in the conference rooms, what do they rehash week after week, month after month, year after year . How many different proposals can there be that for three years they are talking about this . Francine the border should be here, lets move it. David it is almost like a bugs bunny cartoon. Francine coming up later today, we speak with john neil, the chief executive of lloyds of london. That will be on bloomberg markets. They announced a couple of weeks ago they will write their First Business electronically next year. They will go online next year. York, 6 30 p. M. London. This. This is bloomberg. This is bloomberg surveillance, scarlet and francine from london and new york. We will talk about banks, Credit Suisse, and we were talking for the last two weeks about the Credit Suisse spying scandal and after investigation, the chief executive was cleared. You had come fighting in support of the chief executive. Is there a cultural problem in swiss banks . David i dont think there was a scandal. We have a leading employee leaving employee, very important leaving employee interviewing with other banks, wanting to leave the company, perhaps take employees and business with him, and i think Credit Suisse had a right to keep an eye on him. The original story was completely exaggerated and brown blown out of proportion. None of it ended up being true. The company had a responsibility to its shareholders and stakeholders to present protect its business. Any employee of our company has low expectation of privacy. Our cell phones, computers are monitored. Keeping an eye on a key employee who was about to leave is not scandalous. For anyone to have left their job, and for someone to have lost their life over this, what i believe was an exaggerated story, is extremely sad. Francine did you speak to other big shareholders and do they share your position . Shareholders,y but Business People in and around europe, and the general theme is this happens on a daytoday basis. If you ask any executive if they use a security form firm to nottor an employee, they do just have one client, Credit Suisse. They exist because they have many clients. To make this a big scandal, that is the real story. Is irresponsible responsible for a company to protect its assets for its stakeholders, and that is what Credit Suisse was doing. For the Mainstream Press to echo a story that was put in the tabloids in zurich as if it were fact, that is the real scandal. Francine whether it is tabloids, this had difficult, negative reaction from news media in switzerland. Is there anything the bank can do to remedy this . David continue to deliver for its client base, continue to provide a Good Environment for its employees, continue to work on what makes the Company Successful. What ultimately makes the Company Successful is delivering a desired good or service to your client base. It is employees and management working together to deliver a good, and that is exactly what has been happening over the last three or four years, and that is done, but it on a path for success for their clients. Scarlet the timing was unfortunate because he had been doing that and this served as a distraction. Should Tidjane Thiam stay on and become chairman of the board . Doing aidjane thiam is good job as the chief executive. The current chairman is expected to stay through 2020, and at this point, there is a lot of m tortunity for mr. Thia take advantage of as ceo. It is too early to discuss who will replace the chairman, ane haslly since tidj done such a relatively good job in the four years he has been there. I propose let him continue what he is doing and when the current chairmans term expires, we will discuss options for chairman. Scarlet tbd on that one. This had a pretty negative impact in terms of perception on Credit Suisse and perhaps swiss banks overall. What could they have done better. Is there any remedy that needs to be taken to improve perception . David clearly, this whole story did put the company in a negative light. One has to clarify the companys purpose and goals and objectives. Maybe what should have been stressed was this type of activity was done to protect the business, and the business as what the employees survive on. , the employees need to thrive on to protect all the stakeholders, the shareholders, and even the clients themselves from perhaps a leaving employee was not leaving on the best of terms, the company has to be protected from one an employee leaves on not the best of terms. That andommunicating being more on the front foot and defending yourself, explaining that what was done was done to protect the business, is how i would have handled it. Francine how difficult is it for these banks to operate in a negative Interest Rate environment . David it is a negative headwind. Banks survive on a lending spread to some degree. A spread is not the only way they make money. There is feebased businesses, commissions. They could make their operating business more efficient by cutting costs. Is negative Interest Rate not at all beneficial, but the negative Interest Rates are not only not permanent, but they are getting a little bit of relief from the tearing of Interest Rates. Ing ofhould help tier Interest Rates. This should help, and i believe negative Interest Rates will go away. A lot of banks and european financials and u. S. Financials are being priced as if these negative rates are here from now into perpetuity, which is not the case. Scarlet david haro seeing opportunities in european financials, adding to its stake of bank of america in the united states. As we take a look at u. S. Futures, they are at session highs. The s p 500 and dow building on two days of gains. This is bloomberg surveillance. You are viviana watching bloomberg surveillance. General motors is losing patience with striking workers. The chief negotiator suggests the United Auto Workers are dragging their heels in response to the contract offer. U. S. G. M. Factories in the the exact array executive who turned around walmart is leaving just before the crucial holiday season, to run the flagship airline. He has been walmarts u. S. Ceo. Sams clubs ceo replaces him. Have surrounding wework gone from talks to bailout. Upmorgan is putting together financial package for the cash was set start up, who to run out of cash soon. Scarlet david haro is still with us herro is still with us. Jp morgan putting together some sort of rescue package by wewor k. I believe you have a stake in jp morgan. Is this a good move for the bank to plow money into a company where investors could not get on board with its Business Model . Morgan, we are not large shareholders in jp morgan. We do not hold a meaningful position. We work was a troubled situation from the beginning. Valuation,diculous 44 billion. All it did is lose money. Worthieve a business is is determined by cash flow. They were doing business in the shortterm which was not advent asias further Business Model advantageous for their Business Model. A Company Called international workstations group that does the opposite and was priced at a fraction of wework but made a multiple. It was a bubble. Something,was worth never 44 billion. Francine given that you know the Republican Party more than most, what is your take on impeachment . If and when they turn against President Trump, will they have to find a new candidate . Need for impeachment, you high crimes and misdemeanors and there does not appear to be either, so i do not see a republican turning against mr. Trump unless further evidence suggests he committed high crimes and misdemeanors. The democrats have to fear a backlash similar to that republicans when they erroneously impeached president clinton. If you use the tool of impeachment instead of trying to win at the ballot box, you tend to get a revolt at the ballot box. People would rather have a president removed via the ballot box and not some bogus impeachment inquiry. They certainly have not demonstrated high crimes and misdemeanors against the president. Francine how are you feeling about the 2020 election . Well Elizabeth Warren be the democratic candidate . David who knows . If it were today, she probably would be, given the weakness of joe biden and Bernie Sanders, but this is today. We are sitting at a little. In time. Well another centrist take the mantle, like senator booker . Who knows what could happen as the parts move and the dynamic changes. Francine bloomberg surveillance continues. We will talk about oil and the iranian tanker. 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. Francine tensions rise in the middle east. Oil jumps after an iranian tanker is damaged, weeks after saudi arabias aramco was attacked. The potential pathway to pound, jumps as the irish leader sees a pathway forward to brexit. Boost asuities get a President Trump says china talks are going well and he meets with the vice premier today. This is bloomberg surveillance. I am Francine Lacqua with scott scarlet fu. We are looking at oil and the impact of this tanker story, as well as the peace prize awarded to the ethiopian Prime Minister. Scarlet some people were looking for Greta Thornburg to get the award, becoming the youngest winner. You got the announcement the ethiopian Prime Minister has come away with the top prize. We are looking at the rally in u. S. Stocks. If the s p advances half a percent, it could finish out with a gain. All of this on trade optimism. Things have turned around in the last 48 hours. This meeting between President Trump and the vice premier suggests there may be something concrete. Maybe the market is getting ahead of itself. Lets get to bloomberg first word news. Price of oily, the jumping after missiles hit an iranian tanker in the red sea. They probably came from saudi arabia, then did not. Also today, trade talks resume between the u. S. And china. Donald trump day one went well and later said he will meet with chinas top negotiator today. Since july, it was the first meeting between senior officials. They are trying to end in 18 war. Long trade there is a pathway for brexit, according to Boris Johnson and his irish counterpart. The biggest stumbling block is the land border between ireland and the u. K. The Nobel Peace Prize was awarded to the Prime Minister of ethiopia who was recognized for his work in almost two decades of conflict between neighboring eritrea. 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. This is what i am looking at. A lot of folks, on the trade talks. Oil climbing on the back of the iranian tanker being attacked. There are hopes the u. S. And china can negotiate a trade to truce as highlevel talks are advancing in the u. S. 10 year yield at 1. 67 . Scarlet you have the improvement in trade talks lifting hong kong stocks, the best rally in five weeks. You talk about the pound. We want to keep in mind we had seen some pretty big gains yesterday. Richard jones called it giddy gains. Crude oil continuing to climb higher, paring some of its advanced over the last hour or so. With bring in tom orlik more on the u. S. China trade talks. China is setting a timetable to of Foreign Ownership cap Financial Services companies, to possibly pave the way to a trade deal to improve the background as they commence day two of the trade discussions. If anything is announced, would that have a concrete effect on gdp in the mediumterm . Tom i think what we have to do is separate the immediate mini to the impact of tariffs on a standstill. ,he immediate deliverables perhaps something on agriculture of foreignhe path firms into the chinese financial market. No, that will not move the dial of growth. What would move the dial is if we get a standstill of tariffs, do not get the tariffs that would hit cell phones, tablets, and if we get a change in the mood music, something that gives the markets certainty that talks are back on track, that tariffs will not continue spiraling upwards, that will be a big positive impact. Scarlet the thing we have to keep in mind as we have lots of data points coming up, including the trade deficit you out next week. President trump looks at this carefully, talking about trying to rebalance the trade balance. If there is a skinny or partial deal, what a negative trade balance number pull the rug out from under us and cause him to change his stance on trade talks that seem to be going well . Om you are completely right we have absolutely been here before, multiple times. When us aries, the g20 the g20, the market took some assurances they were back on track, and then weeks later there was negative news, a big trade deficit number, and we were back into a trade conflict. We could be there again with positive mood music out of the talks, and a rapid deterioration in the weeks and months ahead. The reason to think it might be different this time is both for china and the u. S. , the economic backdrop is looking more fragile. We have a weaker peso of job creation. Consumer pace of job creation. Consumer confidence is heading down. There is pressure on the white house to maintain the positive tone in a consistent way. Francine when you look at the mood music, it does seem that china is going out of its way to try and give something to the u. S. How much pressure is the chinese economy feeling . Tom and a sense, it is vicekable that chinas premier came here at all. Lets think about the bigger backdrop to these talks. Got u. S. Sanctions on chinese surveillance companies, violations, rights the fight over free speech and the nba, the remarkable bloomberg scoop about pondering dollar flows into china, so the fact that liu he got on the plane is remarkable. The fact that china seems to be packaging some kind of mini positive announcement along with the talks is even more remarkable, and that tells us china is feeling the economic stress. We think growth in china will fall below 6 and will be below 6 in 2020 as well. Perhaps china sees the need to get trade talks back on a positive trajectory. Francine joining us from new york is kathy fisher at bernstein. Doini if we do have a mini agreement or a currency packed, what does that mean for the market . Kathy there will be some relief, but i would argue that the market knows the trade issues are not the only issues. Fundamental, the views of how an economy works, it is certainly intellectual property, these things are the big issues still out there. While they were be a huge sigh of relief if the tariffs do not come into play, those issues will still be lingering. I think we have to recognize that there are some shortterm benefits that still will not answer the longterm question. Scarlet what would u. S. Investors interpret as a successful partial trade deal . Kathy certainly anything that helps agriculture that is visible and tangible, that takes the pressure off the sectors of the u. S. Economy that have been hurt. Everybody is watching the consumer, so we do not want to see tariffs that directly affect the consumer and start to nap the incredible benefit nip the incredible benefit the Global Economy has gotten. Scarlet you mentioned human rights and the bigger issue of intellectual property rights, which we will probably not get to. Talking to china about their treatment of muslims. Does that add to the trust deficit that is in place, or is it something everyone understands is a negotiating tool . Kathy i think these are big issues. That is why i said they will be a dominant theme, because there is a growing awareness of how different the outlook of china and the u. S. And the western world really are. That is something that will not be fixed quickly and there will be a lot more attention around n aroundic tensio this topic. Francine plenty of breaking from the u. K. Gainnd lloyds shares both over 9 of optimism because of brexit. We had quite a big swing with regard to the pound, after the irish Prime Minister, after meeting with Boris Johnson set a deal is possible. We will go through the details next. This is bloomberg. Bill mcdermott is stepping down as ceo of sep decade he about a led the Largest Software Company and embraced Cloud Computing and transitioned s. A. P. And nissannrenaud are working in sync. The interim ceo was named. The previous ceo served as number two. Scrapping its 2. 5 billion electric car project, james dyson telling staff they could not find a way to make the project commercial. Global electric vehicle sales plunged in a record 23 . That is your Bloomberg Business flash. Francine thank you so much. Two missiles struck an Iranian Oil Tanker in the red sea, causing a jump in crude oil prices. Iran accused saudi arabia but has walked back. Oil analyst, how do you view this. This immediately reflected in the price of oil that this was an escalation, but iran said this might not come from saudi arabia. Amrita i think we dont have any information because there has been a lot of contradictory statements from a ron about whether iran. We have to wait for further explanation from both sides. It is definitely from iran and they need to come out and tell the world. Francine do we just need to get use more disruptions . There has been quite a lot of disruption over the last six weeks. Amrita that is the bit that amazes me about the oil price. It has zero geopolitical risk premium and the market is complacent. There is so much focus on the recession and Global Economy, no one is taking into effect into account there is no extra capacity, and opec production down nearly 4 million valley barrels year to date. Scarlet oil prices seem to be moving around the sentiment of the trade war. Is there any way for opec to make prices more resistant to things like the trade war and more responsive to supply and what they can do on that front . Amrita that is the kind of conundrum a great question. The supply situation is reflected in the differentials and the spreads. Crude is back were dated and we have had that throughout the year. The market is reflecting that so backwardation is something opec desires. It keeps them from hedging significantly. The problem with price, the issue with the trade war is is in the trade war itself with the we have 5 , well tariffs, it changes every hour . Capex andlling back opec cannot do anything about that. Markets cannot deal well with uncertainty. Scarlet we have seen oil prices go from above 80 two as low as 50 in the span of three months in the Fourth Quarter last year. Is that the range oil is destined to be stuck in as we deal with these headwinds . It is a tight range. Picture supplied if the supply picture is what you are looking at, prices should be 75, 80. Production in ecuador is down quite sharply. Demand growth has slowed down and the worry is it could launch into way big recession which leads to demand declines. I dont think we are there, but that is very much the fear. Between aillating five and 10 label. Francine do we have to start factoring in a possible war in the middle east . Saudi arabia and iran said that is not what they want. Amrita i think both want to deescalate, and i dont think the u. S. Wants to get dragged into this. The risk of miscalculation is high where you could see something happening, but other than that, you are likely to get more outages and attacks like the ones we saw today or on the 14th of september. I dont think the probability for war in the middle east is high. Scarlet thank you so much for joining us, giving us your take on the energy market. In new york, we are focused on the move in u. S. Futures higher. Futures, it s p 500 is clear that trade optimism is driving the gains. We are at our best levels of the session. President trump says talks are going really well and he will meet with liu he later today. This is surveillance. I think moving modestly now gives us the best chance to avoid a more severe slowing, and thats why i want to use the ammunition now even though, yes, it means we will have less for later. Scarlet use the ammunition now, that was Robert Kaplan speaking exclusively to michael mckee. Kathy fisher of bernstein is still with us. What are you pricing in, in terms of fed rate cuts . People see one this month and one and december. Kathy the fed is signaling clearly they are watching the data and the data is getting worse. View, has every reason to be preemptive with rates. They want to make sure they dont make a mistake and get ahead of things in terms instead of being too far behind. Scarlet what would a rate cut or two do for businesses and consumers . Kathy that is a good question. There is a greater awareness that a reduction in rates will not have that much actual impact on the economy. Rates have been low for some time, and there is evidence that with consumers, they start to save more rather than spend more when rates are low because they feel they need to. The efficacy of accommodative Monetary Policy is not what it was, and that is well understood. Francine what would it take for the consumer, the labor market to be significantly hit in the u. S. . Kathy the job picture is one we are all watching carefully. There are some signs the job market is slowing down a tiny bit, not dramatically. That is the one thing everyone is watching. Consumer confidence is important and it does hinge upon the very strong labor market we have had, unprecedented. Once you have had such a great market, even small signs of deterioration can affect consumer confidence. Francine is the market almost putting the fed in a corner, that they are asking too many rate cuts . Kathy it is well understood that Interest Rate reductions cannot offset the damage of trade wars. We have a significant decline in manufacturing. That is well understood. Rate cuts will not make that change. Business confidence as affected by the trade situation more than Interest Rates. Many companies are flush with cash. There is not a problem for credit, so the businesses themselves cannot offset the biggest bigger problems, which is trade. Francine kathy fisher from bernstein stays with us. Allre keeping an eye on u. K. Assets that are brexit related. Saying he has received promising signals a brexit detail deal is possible, rbs and lloyds up on the back of it. The two leaders of the u. K. In ireland said they could see a pathway to an agreement, path pound also up. 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. This is bloomberg surveillance, a live picture of washington, d. C. Where nancy pelosi will speak about the impeachment of President Trump with democrats. Lets go straight to the bloomberg first word news. Viviana that is exactly where we start, trade talks between the u. S. And china taking place in washington. Go she ate hers are trying to end the 18 month long negotiators are trying to end the 18 month long dispute. Donald trump meets with the vice he. Ier lieu he liu they open up the country more to financial firms. Kong, protesters are debating whether to lower the temperature. Some activists are urging others to scale back vandalism. They are worried violence and destructive tactics will alienate moderate supporters. Unprecedented an blackout is coming to an end, pg e returning power to about 31 who lost it. Half a million customers are still in the dark. Pg e turning off its equipment to keep it from igniting wildfires. 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. Scarlet thank you so much. I want to bring us inside the bloomberg because as we look at u. S. Stock futures rally, potentially an up week for stocks, there is evidence that investors are signaling caution because underneath the headline numbers, the market internals are more restrained. The majority of the dow industrials are trading above the 50 day moving average, that is the yellow line. Broader s p of the 500 and Nasdaq Companies are trading below their shortterm trendline. I want to bring in john taft. Still with us is kathy fisher. Builtis a lot of optimism into the gains we have seen the tradewo days in terms of talks, but there is reason to be cautious because a lot can change in a moment. We see how the white house has a habit of moving the goal post when we get closer to a deal. John i think we would caution real moderation in our expectations of what comes out of this latest round of talks with china. This is going to be a long conversation. China has a hundred year timeframe and do not have any elections, so they cannot afford to be patient. We have surveyed our clients and asked, what do you expect will come out . Some kind of trade truce is the best we can hope for, and that is not unimportant. There are a couple of additional ratchets up in tariff hits that will come if we dont get some kind of mini deal or cosmetic deal. One reason investors are worried as they are beginning to realize these tariffs are taking a bite out of the u. S. Economy. Manufacturing, now bleeding over into services. This is a fragile environment. The fed cannot fully offset tariff increases, but we need all the help we can get in order to maintain growth in the economy, and some kind of trade truce is the best we can hope for. Scarlet in looking at the different tariffs that could be in the pipeline, something could be put into place october 15 increasing the tariffs from 25 december on 100 billion of imports. Is the yearend hop aday Holiday Shopping season at risk of being hurt if those go into place . Kathy every industry has a different dynamic, and people have been trying to change quickly when they can. Not everyone can. That is a really important point. Some companies will be more agile than others, and it is not their fault. Look at toys, the vast majority are made in china, so that will have a clear impact over time. You have to think about each industry separately and how quickly they can change their supply chain. John those additional ratchets in tariffs will increase the tariffs from 46 where we are today, and we are at a point where the tariff hit has almost erased the stimulus benefit of the tax cuts this year. This is a serious issue we are facing. Francine when you look at the overall market, the overall direction of the trade talks, and also the repo market, this inversion in the yield curve, things we are not sure where they end, is there too much risk that we are mispricing . Kathy there is no question that uncertainty levels are at historical highs john there is no question that uncertainty levels are at historical highs. You can go down the list of the policy and political issues investors and markets are trying to parse. Net outflows this year in this market, even though we are basically flat yearoveryear, this time last year to today the market is flat. Nevertheless, there have been over 70 billion in net outflows in u. S. Equities this year. That is an indication investors are worried and the uncertainty premium is high. Francine where do you see value . Where are you investing . John we have a number of sectors that are mildly attractive, but we are really staying close to home in terms of our benchmarks. There are a number of unpredictable actors that will move the market. Warren buffett used to say, do not swing at every pitch, wait for the homerun pitch. Now is the time to watch for pitches coming across the pate plate. Watch closely and do not make sudden moves, i think would be our advice to individual investors. Scarlet what is your take on how investors should be positioned as we brace for headlines on trade wars, politics, and things like unexpected attacks on Energy Infrastructure . Clientse encourage our to stay with their allegations allocations. This is not the time to get more conservative or take on risk. People recognize these are selfinflicted wounds and that is why you are getting a sense that maybe there could be political decisions that put things back on track. This cannot be fixed quickly. A lot of damage to trust has occurred. A lot of damage in belief, and a lot of the trends that have driven business for decades have been undone. Even diminishment of the tariff issues that we are fearful of will not put things back into a perfect place. There is much more resignation in the market about how the world has changed. Francine what are you concretely talking about, supply chains that have been moved even and,s. China trade talks they cannot come back . Kathy that will be a headwind to grow for some time. The inefficiency of Many Companies reassessing how they have been operating over the decades is throwing a wrench in and causing companies to rethink things. How peopledded in are doing their longterm planning, so certainly a different outlook, but one that companies are adjusting to. As equity investors, we have to look at how companies are adapting to the forces they have no control over, and that is their job. Scarlet john taft and kathy fisher are staying with us. Shares of s. A. P. In germany are surging after the Company Named Jennifer Morgan and Christian Klein as successors to Bill Mcdermott who is stepping down after leading the Software Company for a decade. This will take effect immediately, although mcdermitt will stay on in an advisory role through the end of the year. This is bloomberg surveillance. This is bloomberg surveillance, scarlet and francine from new york and london. We are talking about the fact that we could be closer to a brexit deal after the u. K. Prime minister met with his irish counterpart and then giving a press conference saying there is something in it. Thes incredible to see impact this has had on the royal bank of scotland and lloyds, both up some 10 . Lets get straight to brussels with maria tadeo to look at whether there is a deal. If you look at the timeline, next thursday and friday where we see the european summit. How likely is it that we will have something concrete . Donald tusk was a lot more careful in his wording than the optimism from leo red car. Maria that is a very good point. The conversation a brown brexit became more optimistic yesterday after the meeting between the iran dutchter and ireland. Dutch ireland. Ireland. The key is the technicalities. There was a meeting between the e. U. And european u. K. And european delegation. Michel barnier, the chief e. U. Negotiator, was looking very serious, did not want to take questions or provide details. We are waiting to see whether we get any. The mood is much more cautious than we heard yesterday. Francine if you look at the pound, there is a lot of optimism when it comes to that karting between mr. Varad and Boris Johnson. We are speaking to someone here looking at the markets and said we will this afternoon find out if a deal as possible. Cannot be extended until monday . Do we need to blueprint now if they will sign off on it thursday and friday . Maria today was essentially framed by the europeans as the deadline for Technical Details to come about. When you look at brexit, deadlines do not mean much. If they think they have something to work on, that could be extended. From a european perspective, they do not want to be seen as pushing the u. K. Out and could be open to granting an extension, but what will the Prime Minister do at that point . Takeid do or die, he will the u. K. Out of the European Union on october 31 and that is not negotiable. To price inm trying shifting politics in europe, to shifting politics in the u. S. , it is time was single best chart with john taft and kathy fisher. This chart tracks ford earnings for financial, health care, and industrials relative to the s p 500, all steadily declining. One source of weakness is a fear that Elizabeth Warren could become the democratic nominee. When we saw Bernie Sanders required stents last week, we saw it decline. We based our chart off of this note. Any pain from a warm wind would be temporary because at the end of the day, stocks tend to go up no matter who the president is, even though in the short term there will be wobbles. How are you thinking about positioning under a warren presidency . Warrencertainly, proposals are dramatic and clearly targeted at specifically industries. Historically and america, president ial candidates have tended to moderate after they win, but in the most recent election that did not occur. You can see how some people are concerned that more provocative proposals could gain traction. Having said that, most things would require congressional action, so it is premature to game any of this. Certainly, the market is well aware of the potential for certain industries, in particular health care, that could come under pressure as we get closer to the election. John i think that would be the same group of sectors that we would put in Elizabeth Warrens crosshair, possibly adding technology. What is just as concerning is the overall policy direction when it comes to, what are the views of the Progressive Left towards capitalism, a free market economy . How do they feel about our Current System of economic capitalism . How that plays out i think is just as concerning longterm as specific hits on individual sectors. Werlet that is true, and started to see companies acknowledge a shift in thinking. Announcement that it is no longer shareholder first and everyone else second. What needs to happen for investors to believe there is a shift in strategy . It is easy for chief executives to say this. Is it Just Lip Service . Kathy there has been a shift. The increase and responsible investing as part of this, and there are more demands on companies to explain how they do affects a broader constituency than their shareholders. I would argue shareholders still matter the most and need to. That is the why they have shareholders, but there is a broader sense of responsibility that is building, and companies are increasingly aware of that, which is why you see the broader conversation of how they think of the broader responsibility. The Business Roundtable statement from my perspective merely confirmed what the ceos i hang out with have been doing and believing for years. I have not met one that believed their only constituency was the shareholders. They all feel accountable to clients, customers, employees, suppliers in the communities in which they live. It affirms what is already happening. What kathy said is critical to realize. The single largest and Fastest Growing pool of money in the worlds into socially responsible Investment Strategies that are evaluating bether to buy company a or whether they are demonstrating more holistically good behavior. This is a change from what was reflected in the Business Roundtable statement. Francine kathy fisher from bernstein and john taft from baird stay with us. I am looking at nissans new chief executive, announced about an hour and a half ago. Nissan and battled board seems attlede settled emb board seems to have settled on a leader. We also have a press conference going on. This is bloomberg. You are watching bloomberg surveillance. In the space of a few weeks, the talk surrounding wework has gone from ipo to bailout. A. P. Morgan is putting together a rescue package for the cash arepped start up, as they set to run out of cash. General motors is losing patience with striking workers, suggesting United Auto Workers is dragging its heels and responding to the latest offer. The strike is approaching the onemonth mark and affects 34 g. M. Factories in the u. S. Uprlet next week, we gear for Big Bank Earnings because j. P. Morgan will be reporting results on tuesday. Fargo willlls announce along with goldman sachs. Wednesday, bank of america followed up by morgan stanley. John taft of baird is with us. Interest rate pressure will be a theme this earnings season. Now that rates are falling again , it raises concerns about how you grow revenue. It is hard for investors to get excited about the flip side of that story, which is cost cuts that the ceos will focus on. What will expense control look like this time . How difficult will it be to pull it off and get investors excited . John we are officially neutral on the bank sector for what you are talking about. They did take a hit in october so they are cheaper than previously. We think earnings will be up about 4 , but we do feel we are going to start to see the near term continuing for the foreseeable future affect the net income margins, which you just talked about. The response to that is always to cut costs. Banks seem to cut costs periodically every couple of years. We are worried we might have seen in this last quarter the peak in Bank Earnings for quite some time because of the importance of debt income margins. The banks are like the canary in the economy mine, no signs of recession, loan growth and credit quality will be healthy. Are you looking at banks to see, are we nearing stall speed, i think you will be reassured. Francine will we have more consolidation in the u. S. And the financial space . John going forward, consolidation in many sectors in u. S. Financial Services Industry is given. There are disruptive pressures, cost pressures across the board, and smaller firms will have trouble responding. Francine thank you so much, john taft, baird vice chairman. We will have plenty more on bloomberg radio. Hope intill rallying, the u. S. China trade talks. Keeping an eye on the oil tanker in iran. Oil is still up. Treasuries fluctuating after yesterdays slump. Pres. Trump doing well, i will say. I thick its going really well. Alix President Trump sounds optimistic on day one of official trade talks with china as he prepares to meet with top negotiators. China loosens its rules. The consul he laying the country laying out a timetable years in the making. Iran oil tanker hit by missiles. To checks of oil prices as iranian tankers hit in the red sea. Confusion over whether saudi arabia is responsible. Welcome to bloomberg daybreak on this friday, october 11. Im alix steel. Congratulations, you made it to friday. I feel like weve had three weeks and five days. Optimism on potential trade talks. President trump saying the talks went pretty well. S p futures are up by about 0. 9 . Will we see that kind of followthrough buying . Eurodollar building on gains from yesterday. Cable rate also at a three week high. Broadly weaker dollar