We will hear from the erickson ceo. Manus very warm welcome. There is a nonveteran. Is a bond there veteran. Says, we are in for a rough slowdown in the u. S. Andof his fund is in cash his buyers are getting worried. The beige book tells me there is only a slight modest pace of growth. Good morning. Not fixedsaid it is income investment, it is fixed lawson testing. He does expect a recession in europe and a slowdown in the u. S. Some signs ofaybe concern with the retail sales but lets get back to erickson. In earnings season in europe. Ericsson is telling us, six. 5 billion swedish krona. Net sales, a eight on the estimate of a beat on the estimate. The third adjusted gross margin also beat with 36. 6. We have some guidance as well. 2020. 240 billion for the numbersg like are beating and so is the guidance. A boost from 5g upgrades among other things. Manus on the commercial side, the troubled asset manager in switzerland, they are saying they will reiterate the 2019 guidance. Net outflows in this quarter have been net outflows from the management side have been 1. 4 billion swiss franc. They continue to see volatility. We have that denial that they were in any talks with generali. That is the guidance from gam. Lets get straight to the markets. We have started the day with 10 year Government Bond yields. Insipid retail sales. Wasly what you saw here line from jpthat morgan. There is the potential for that and a nervousness in buyers. Dollar you one at the Bottom Dollar yuan at the bottom of your screen. They warn, be careful. Still 715 by the end of the year. Growth sinceest 1992. Rising. Ie dollar on that u. S. Data, it came as a surprise but also interesting that a lot of Bank Earnings have showed the strength of the u. S. Consumer. S p 500 falling, futures pretty much flat today. Bloomberg dollar index. It did drop below its 100 Day Moving Average for the First Time Since july. We get topic, as brexit, european leaders. Despite determination to put the divorce saga to bed, issues over the divorce saga remain. Anna, really great to see you. Positive signals out of brussels but, ultimately, that will not be the problem here. Ultimately it is what happens in westminster. Anna we do get positive signals but then remember yesterday. The last 24 hours have been marked by positive and negative signals. We are close to a deal but there is no deal as of yet. There is a feeling in brussels that people want to get a deal done. Of course, the devil is in the details and some of that detail dup in Northern Ireland. Manus and i talked about this in the past, i know, the way the Irish Assembly will be involved here. The dup, it looks like they have come along more to the eu 27 way of thinking. The Northern Ireland assembly to vote on the arrangement. Left the, they have details of how that happens to Northern Ireland. Another incentive perhaps to get bill around the tables in Northern Ireland. One crucial Sticking Point that seems to have come out of nowhere, vat on either side of the Northern Irish border. Manus Angela Merkel says apparently we are in the final meters. When you speak to people in the north of ireland, the motivation has more to do with many social issues and the problem rather than brent issues in the province rather than perhaps political. Bea deal gets done, it will what drives that tacit except from the back benches of the tories and elsewhere. The erg, the spartans, the diehard brexiteers, they have always followed the leader of the dup. If the dup holds out here, we are already starting to hear slightly more positive signs from those diehard exit tears. Steve baker just yesterday saying this could be a tolerable deal. That is good news for Boris Johnson in terms of the math. Of votes he needs to get in favor of his deal to get it through if there is a deal. We havent quite got there yet. This is perhaps a conversation we will continue to have. In terms of various groups to watch, yes, it is the erg or the spartans, also tories thrown out of the party, how many of them are looking for a way back into the party. It is also labor rebels, seeking leave seats. Keep an eye on jeremy corbyn, leader of the labour party. The Times Newspaper reporting that he will put a condition on approving the deal, and it will be a second referendum. Things could still take some unexpected twists and turns before the weekend. Manus quick correction for you want gam. 1. 1 billion. Were at the time of breaking the news, i said it was 1. 4 billion. Correction on the terminal nejra joining us for the hour, head of equities and our clues. You just at barclays. You have just changed your call. Improving flow on brexit. In the past, quite narrow. But we think there is a case for shiftsm and risk reward, while domestic exposure is getting more interesting. The u. K. Asset and in particular, we are seeing that there is a case for u. K. Domestic companies a lot of uncertainty and conflicting headlines over the next few days, but we are seeing positioning, valuation, domestic stocks. Hopefully, if we get a resolution, a could improve sentiment and provide a little bit of relief to these parts of the markets. Manus very good morning to you. I want to talk steve about the valuation of the ftse 100, which you obviously decided to move away from. Relative to europe, it is the lowest in a decade. If brexit is passed, how with fare in that situation . Thatuel it is the case valuations are looking very cheap u. K. , primarily because there is a lot of waiting and commodities. Ing in commodities. Coming fromts are the rest of the world. A stronger currency in the face of a positive outcome for brexit would somewhat hurt the u. K. Equity market. Getting inflows, in the case of positive outcomes. In particular to euro zone, we have seen the markets have been constrained. Nejra i was wondering how much you think euro zone equities would benefit from positive news on brexit. I think there are a lot of issues with europe. Impacted byery trade. In the last couple of years, brexit if you look at the positioning, it is underway to see pretty much a year of outflows from europe in an equity cents. Relative valuation. On the brexitt front, some kind of improvement over the next weeks. I think it would basically benefit. The u. K. Market is constrained by the prospect of a stronger currency. However, the euro zone market could benefit from a feelgood factor. Manus i love some of the titles in your notes, mystic bliss with regards to some of the positions. We may have a deal, that may come to this parliament, then the assumption is we still have election risk. The title of your polling is that there is no clear outcome election, that conservatives still lead in the battle. Would it embolden your call for the domestic market or make you a little bit more cautious . First, we need to get a deal approved and fully implemented here, then anything would have to be approved by the house on saturday. It is not sure that we have a majority for that. Assuming there is a deal, but would probably have an election in the next few months. Uncertain uncertainty for u. K. Invictus u. K. Investors. Outcome, the binary deal or no deal. The main concern of the market is the u. K. Crashing out of the eu by the end of the month, which would have a Significant Impact on the economy. I think the market will be able to shrug off basically lower uncertainty. A very straightforward, easy trade, but we are seeing the medium term reward is getting at her even though we need to go a further step. Nejra just briefly, i know it is the domestic stocks you are getting more positive on. Any second is you prefer more . If you think about sectors that have been hurt the thanks, retailers, asia. Market, looking very cheap on the valuations. Any prospect of reducing uncertainty and eventually improving macro expectations. Manus lets get your first word news with Annabelle Droulers in hong kong. Belle President Trump defending his decision to pull u. S. Forces from Northern Syria and he also says he is fine with letting russia fill the void. The u. S. House of representatives took a different view. Secretary of state mike pompeo blaming turkeys president for the crisis. U. S. Senators are pressing ahead for a bill in support of hong kongs prodemocracy movement. The legislation would subject the citys special trading status to annual review. It would punish china for any crackdowns. Ecb policy makers are calling for a change in strategy after years of monetary stimulus. It has left the euro zone stock with inflation. President week before mario draghi holds the final policy meeting of his eight year term. Bank of England Governor Mark carney says negative rates are not a policy option for the u. K. But he doesnt think the move has hurt the euro zone banks. He has added to the chorus of calls for more fiscal policy. Carney says it is now time for governments to expand their budgets. Global news 24 hours a day on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Nejra Annabelle Droulers in hong kong. Manus thank you very much for that round up. Lets bring you some breaking news on nestle. Organic revenue, 3. 7 . That is pretty much in line with what the market had expected. Here is a big line, nestle to distribute 20 billion in buybacks between 2020 and 2022. That is going to be the monster headline that really drives this market. Pricing, and this is where it gets interesting. The estimate was for a rise of 1 . On one side, you have got the buyback, 20 billion. On the others, you have the pressure on pricing, the rise versus the market expecting 1 . The real internal rate of growth is 3 . The market pencils in 2 . Coming up on the show, it is all about the consumer. Retail sales unexpectedly fell. We will discuss what that means for the fed and rates. This is bloomberg. Nejra this is bloomberg daybreak europe. Manus lets get you up to speed with the rest of the asian market action. Juliette pretty muted here. Gains have taken a lead from the down take you saw on wall street. The aussie dollar striking harder. A little breathing space. Anothertching the month of falling exports. Tolly backing the decision ease monetary policy. A lot of focus on hong kong, which is performing quite well, particularly the property stocks a day after carrie lams address. Lets have a look at the property sector in more detail. That is where you are seeing a lot of positivity coming through in the hong kong index, but about 2. 3 yesterday, another 1. 5 gain today. Saying this is going to be one beneficiary of what you are seeing in the downturn. When you look at this chart, it shows that the Property Index has been falling on and earnings per share basis and the uptick we have seen in the last couple of sessions is really a little bit of a gain compared to what weakness we have been seeing in this sector. One area affected by negative sentiment due to the ongoing protests in hong kong. Unexpectede was an decline in september u. S. Retail sales. The first fall in seven months could indicate that consumers are becoming shaky as a driver of Economic Growth and it could bolster the case for a Third Straight cut to Interest Rates for growth. Feds meanwhile, the beige book last night. The forecast on the health of the u. S. Economy. On business, expect the expansion to continue but they have tempered the outlook for growth in the next six to 12 months. The fed may want to cut rates again according to chicago fed chief charles evans. Ably in policy was prob a good place right now but he sees the argument for barclays is from our guest. The silver bullet, they say there is a marginal impact of easing. It would absorb the left tail risk but it would not be enough to make the economy accelerate. Would that go through to the earnings turning negative as we would expect in u. S. Equities . Emmanuel there is no doubt the u. S. Economy is slowing. I guess most of the pressure is coming from the top, the business sector, which i think has a lot to do with uncertainty. Of course, if the fed cut Interest Rates a lifeline to the economy. You dont need to fully mitigate drag from uncertainties. It is hard to see the case of strong pickup without trade and break that pressure going away. And brexit pressure going away. Earnings are expected to contract. Toking for 3 or 4 compared a year ago. We do expect earnings to be fairly mixed. It is hard to see the shape with earnings and less the activity improves. Is very our forecast much of the earnings into the end of the year, and the potential for recovery in earnings is very much contingent on this uncertainty reducing with hopefully trade and brexit being sorted at some point. Nejra i was looking at the equity risk premium for europe versus the u. S. Does your expectation for what the fed does from here and how it might impact bond yields change how you see those going . Emmanuel the case to cut Interest Rates at the end of the month, that is what the market is pricing in the. Even though the fed will probably deliver the expected cuts, the market expects a lot from the fed to the end of the year. I think the bond market is very much about whether we could see a combination of easing in the fed but more importantly reducing trade and uncertainty. I think if we have a fed providing support, at the same time. Looking quite compelling. It is much more attractive on evaluation compared to the u. S. There is a lot of negativity priced in and the bond market. Away. E of that goes is the where negativity most nejra lots more to discuss with the relation for european earnings. Sends up, booming growth netflix stocks storing after hours. This is bloomberg. This is bloomberg daybreak europe. I am nejra change in london. Manus lets check in on the rest of the markets around the world. We have Juliette Saly excuse me. Annmarie hordern in london. How do we stand . At least as far as the markets are going currently, looking at flattish move. We havent seen much in terms of movement, especially volume have been especially low. We are seeing a lot of traction in the consumer space as well as some of the auto names. Index again is marginally in the green. Our back, resting in markets. We have seen advances for the benchmark. The difference, can we expect to maintain this gain . Nejra we are seeing a little bit of muted trading because of a little bit of concern. When i am looking across assets, one stand is the australian dollar, trading higher. That is trimming this outlook that they have to have more easing in australia. I head of the open, european futures looking softer. That came unexpected and forced wall street to close down in the red. Under pressure, down 8 10 of a percent. That is just adding to the growth of the supply side of the story. The question is demand, the fact that demand keeps waiting. Had the largest u. S. Aluminum producer report earnings and they were very much downbeat on global demand. Assets toncore become leaner. When it comes to noncore demand, they expect to see a contraction through next summer. In july, they were showing a growth of one and a quarter percent. I want to show you how alcoa has been trading on the terminal. It has been a downward trend the entire year. Producers have been caught in the crossfire of the trade war. Of course, we cant forget the weakening we are seeing in manufacturing data around the world. Nejra weve got numbers coming through from tsmc, taiwan semiconductor. Thirdquarter net income, 101 billion. That is a very clear beat on the thirdquarter net income. The gross margin coming in a little stronger as well. Yesterday, the company that supplies them and other chipmakers also beat estimates. Blog on theliv bloomberg. I want to draw your attention to a comment that says the revenue beat expectations. Obviously good news but one quarter isnt enough to prove there is a recovery. Inventory built as a part of new product launches or a sustained rebound in enduser demand. Nejra manus thank you very much. First European Telecom to report firstquarter earnings. Slower. Orted beat the highest of analyst estimates in the third quarter. The active president and ceo of telia joins us now. We have been seeing a lot of consolidation in your marketplace. Is that during fruit for you you . At bearing fruit for we have consolidated by going on the fixed mobile side together. We are focused on the baltics and nordics and we will stay there. Think it is good and necessary for Getting Better strength of the industry. The fact that you have decided not to execute on the remaining 5 billion of buybacks might cause the market some concern. What reasoning will you give . Nvestors to ensure them i think we should separate the dividend from the buyback. That is something that is very important for the board and company. Then we had a threeyear program and we have already returned in and 6 of ourlion shareholders. A company that has always wanted to be in a strong position. Propose not to the shareholders to go for the last 5 billion. So really flexibility Going Forward. Manus ok, so flexibility, we get that. It is going to be a disappointment, but what are you going to do on the counterbalance of that on costs . Are you going to deliver higher and more substantial cost cuts where the shareholder can say, i understand why he is pulling back on the Share Buyback . Absolutely, we believe it is better for us to use this money for a better return than to give them back. Otherwise, we wouldnt have done it. We have been driving now a cost it willt leaves continue into the first half of next year. One of the main things we are doing, i. T. And product management. It is a tough journey but we believe in that. Nejra Telecom Carriers generally are struggling with revenue. What might drive that for you . Christian we have a similar problem as we have 1. 3 negative on development on revenue in quarter three. If you look under the hood a little bit, the market is improving a little bit. We have 20 increase in the iot sales and that helps the other core sales as well. And we have ae billion every year. That i am not that that we have a path to go to a positive journey. I dont think telecom will ever be a super positive journey but i think the industry, if it actually understands how to meet the customer in a value created way. Manus next year will be a big year for telecom up there, for 5g in sweden, isnt it . For you, will leap customer will the customer be prepared to upgrade . Will you be able to command a premium for 5g and if so how will that translate in revenue . I want cost cuts, i want a premium for 5g. Premium for 5g, i think we should not make the mistake that we did with 4g that we didnt go as well for that. It is not an exciting year only for sweden, it is an exciting year for the world for 5g in 2020. In sweden in particular, we are one of the last countries to get the spectrum that we need to build out 5g. On your pricing, i think there will behings that important. One is how the handset manufacturers will come out with something you can use that is affordable. Second, how we figure out how to use both the data usage and the speed, and may be speed will be more important than in the past. Nejra the eu still reviewing your accusation of broadcasting. How confident are you that you will get approval for that deal . Christian i am very confident that we will have a good result by the end of the year. What we are waiting for now is the final report from the commission how they look at this. It is more for us all to look at the potential remedies that the commission suggests and what that means rather than i think it is not going to be a deal. Is a very that sustained dancer. Thank you very much, christian luiga. A quick piece of breaking news. A little bit of whiskey. Two things have driven the numbers. Estimate for sales, 2. 8 sales, 2. 8, the estimate was for 2. 5. Thekey takeaways confirming organic growth for this year and firstquarter sales missed. The guidance of the fx is interesting in terms of how that plays out to european equities. There is a buyback, 150 million euros. Lets get back to our guest host, emmanuel cau from barclays. As we talk about europe, we have had pricing guidance from nestle, a little bit of an. Nsight a little bit of guidance for this quarter, what is going to be important for you . Emmanuel i think expectations are very low for earnings. Europe,tion is financials, domestic plays, will keep it like last few quarters or not. I think there is little reason to expect a great quarter. Into the end of the year, we could see some improvement of the domestic sector years. Financials in the u. S. Have been starting on a very strong note. Value expectations as well. Nejra we were looking a little while ago about how there has not been much dispersion between equities. Our earnings going to matter more for european equities beyond this quarter . Emmanuel i would think so. I would think the Valuation Case for europe is very clear. Earnings have been subdued compared to the u. S. Much has been heard by politics, weaker metro weaker macro. Next year, the case for european earnings. If you have improvement on the pmi, front, china, chinese if you see it starting to pick up again . At the same time, if some of the negativity around briggs it or domestic politics goes away, i think the natural sentiment could improve. Nejra emmanuel cau from barclays stays with us. Netflix, lets get to that because it delivered enough news on wednesday to delay concerns over the looming competition from disney and apple. Earnings topped expectations. Joining us is emmanuel cau, still with us, but also a Bloomberg Intelligence analyst on set. It looks like the market decided to focus on the positives. I think they came into this with low expectations after a week q2. The numbers and subscriber growth pretty much in line with expectations. Q4 was a little bit behind where the market was, still showing the decent growth. Even though more competition is coming, we feel relatively confident that we can continue to grow the base. Disney, this next wave of disruption on pricing and, i suppose, competition for content. How does netflix power through that . Have they got the dominant brand . What is their usp . They are kind of really focusing on the breadth of their content. They are not shying away from the fact that it is going to cost them a lot of money. They will continue to spend more. In the shortterm, they pointed to a strong q4 with some really big hollywood a listers and some of the movers. That should really help shortterm growth. Longerterm to have that mass appeal, having to invest really aggressively in content with more local language stuff in europe and elsewhere to sustain against this new wave of competitors. Nejra talk me through your view on tech. We have also been hearing from some of the Semiconductor Makers over the last couple of days. What has changed your view . Very defensive exposure. We think the end of the year could see momentum. Beneficiary ina terms of macro data and macro sentiment. In particular, trade. See the most recent, a good report, needing to add to the sector. The numbers have been fairly supportive so far. Expectations are high. Believe there is the case for tech to keep rebounding and delivering to the end of the year. Manus in terms of differentiating, you have this shift, the preference of software over hardware over semis. Would a trade deal, a many trade deal, deliver something that would reinforce that view . Emmanuel i would think so. Pretty much the remaining part of export in china would be confirmed or not. It to be a case for delayed. A lot of the companies would be hurt. View, comingof the from a delay, but at the same iphone,e apple on thely the demand Software Side is very much in place. And of this is going on should help spending and software. Here is a price to pay it can be supported by ongoing earnings. Back to netflix for a moment, one thing that did not help the market were price increases. Do you expect that to be more of a concern Going Forward . It created a bit of a growth on Customer Growth but it could 2020. E of a concern, the Disney Service will only be about seven dollars. They could push to a little bit more. I would expect next year they could be a little bit more cautious about how they push the prices in those markets. Fund that content investment, they will be looking to drive some of the revenue from price increases. Manus breaking news coming through on brexit. Irelandin the north of could not support the current suggestions on a customs and consent. In other words, where and how you agree to the alignment. This goes back to the core issues that anna and yourself and myself have been talking about. Thenderstand it is about Northern Ireland parliament, the dup want the right of the parliament to say, we want to stay aligned. That doesnt say they are not going to talk anymore, it just sets the current suggestions cant be brought over the line. Nejra all along, the dup have been saying that they dont want to be treated differently to the rest of the u. K. Boris johnson had been trying to find work around. There was talk of them perhaps having a veto every few years. Numbers to get a certain through parliament, 61. He got a poll of 85 to draw upon but the dup vote is so crucial to that. Cable is extending some losses. When we came on the show, we were above it, 127. 71. Thedeal will not support current suggestions. Manus lets get to the twitter page. We have it up on our screen. We have been involved in ongoing discussions with the government. As things stand, we cannot support the suggestion on customs and consent. We will continue to work with protect thent and integrity of the u. K. Lets get back to our guest host, emmanuel cau, from barclays. They will inevitably be bumps in the road with this whole discussion. No one is saying here on a headline that the talks have broken down and walked away. Institutions that are the least invested, u. S. Institutions, u. S. Institutions, or asian institutions, who is the least loving . Look at the you Global Equity allocation, three continues,ars, it even the pound has gone up in the past few days and the market has been extremely short on the. Ound cable i have seen sentiment that is very, very weak. Investment probably hiding in the exports, trying to benefit from the cheapness in the. Urrency no u. K. Exposure. Rocks down a lot of the road, a tricky process to get to a deal. I would expect the negotiations to carry out over the next few days. Even though a deal is getting a bit more likely, if it were to fail, i think an extension is a likely outcome. Moreully, we will get headlines above the next few days, but still a lengthy process. Nejra not long ago, you pay note out about value versus growth. Does that also apply to your view of the u. K. When you are talking about the most unloved stockmarket of the world . Emmanuel there is one part of the market, the value space. Stocksthe growth quality have done extremely well. Because if the markets volatile, a bit more more negativity, if there is more pressure on the markets, expensive and overall, on the other hand, if we were to see improvement in the brexit deal, trade deal, significant upside potential. In the case of the u. K. , if you were to see some good news, similar to the upside of the domestic part of the market. Manus lets get back to our cohost anna edwards in brussels. We have this statement from the dup. What is interesting as they say, we will continue to work with the government to get a sensible deal that works for Northern Ireland. They are not walking way from these talks in a drama close down, showdown. What is your sense on reading the tweet . Anna interesting to see if these are momentary bumps that can be overcome this morning or if this is something that could take longer. For the dup, just in the last few minutes, saying, as things stand, we cannot support what is being suggested on customs and consent issues, and a lack of understanding on vat. We have understood overnight that may be some Common Ground had been found with the dup in terms of consent issues. This is the way Northern Ireland gets to have some say on whether it likes the way that customs arrangements are set and products, regulations are set. You know very well that they are under pressure and Northern Ireland from other unionist groups, not being unionist enough on this front. We look to having the dup continuing to respond over the next few hours because this will be crucial as to whether a deal and be done on saturday. If the government cannot rely on the 10 members of government from the dup to support them, then getting the deal across the line looks very, very difficult. Nejra we were looking at that yesterday and it kept us both riveted for a little while. In terms of any potential meetings with arlene foster, Boris Johnson of course spoke with her earlier this week. Is there another meeting on the cards . Anna we will have to see what comes up. I know Michel Barnier was presenting some of the conclusions to the most recent talks this morning and that was the way that this would feed into the process for the overall summit. But as we have seen with the dup, when they were negotiating with theresa may on the agreement to support her government, they did not agree to anyone elses timeline. That perhaps is the card they are playing here. Manus this bumps in the road, we will find out. My glass is halffull on this because the dup says it will continue to work with the government to try and find some sort of resolution. Vat and consent seem to be the issues. Cable not taking it too well, extended declines. This is blmb 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. Good morning from Bloomberg European headquarters in the city of london. Manus im manus cranny live from dubai. These are your top stories. Brexit back flies. The pound falls as the dup says it cannot support the current suggestions on customs and consent issues. Were live in brussels. The u. S. Sales boost expectation for a Third Straight fed cut and President Trump aims for a trade deal with china next month. Delivering good. Francs returned to sheryls. The latest iphones proved a hit with the consumer. Anna welcome today break. We got some headlines through from the dup that sent the pound lower. Manus it did indeed. They are still going to talk with the government, nejra, but in all of these discussions we know it goes down to the wire. Nejra they want something that protects the integrity of the united kingdom. You may see a little bit of a lift in u. K. Futures versus elsewhere in europe. Ftse 100 futures up in the green. A little bit to the upside there. We have been seeing a little bit of muted trade elsewhere in equities after the drop in s p yesterday. Earnings season underway in europe too. Manus yes, indeed. Unilever. Everything that is under your kitchen sink and cupboards in the bathroom. Unilever in terms of pricing, 1. 5 raise of pricing in the third quarter. And the company estimate out there was for 1. 7 . I broke the nestle numbers arlier on. Consumer good at the heart of it are finding it tougher to deliver on price rises. Netflix 20 billion dollars of returns on buybacks but the underlying sales, at unilever,. 9 . It is a miss on the headline, underlying sales there. That is what is going to perhaps provoke the error of the market. Lets continue the brexit conversation. In the case of tariffs, on scotch whiskey, one of those things on a whole host of products that could hit these companies, lets get back to anna edwards. Breaking news headlines. The dup have faltered at the last moment. What is the contention . Anna good morning. The life in the dup this morning coming in the last minute really saying they have objections on three areas. Customs. They have issues with the way proposals are made to check customs or not check customs between the island of ireland and great britain. They say these lack clarity. This has been a late entrance into the list of topics. V. A. T. Was not something we were talking about a week or so ago and consent is something that was on the agenda a week ago and still remains on the agenda. How you get the Northern Irish community to buy in to have a say on the buildup of agents and customs. Without that, this would be something putting the agreement in jeopardy. Nobody wants to see that. The result, the asemblirks voting mechanism, the dup it seems this morning as though they are not persuaded or onboard. Nejra it stacks up different listen for Boris Johnson than it did for theresa may. How crucial is it this time around . And how it might affect other m. P. s . Anna the dup voted against theresa mays deal. With that went a number of other tory supporters. They said the dup didnt like it and that was the reason they couldnt back up the deal. Some will probably continue to make that case. Others might fall into line. One of the prominent voices has a cabinet position. He could not vote against the government because other cabinets also voted against the government but found themselves losing their position. Interesting to see whether all those members, the day hard brexiteers will be persuaded entirely. It will be very difficult for Boris Johnson to get this over he hump. It remains a conversation for tomorrow and saturday, if a deal cant be clinched here in brussels. Manus i hope you packed enough in that overnight bag. You could be there for a considerable time. The duchess of brexit in brussels, our anna edwards. Bumper day, another slight in the road in the Brexit Debate but there seems to be a willingness to get Something Back to this parliament. If there is a deal, peter, how would that translate for you in interprets of an underloved, underowned u. K. Market . Peter i think that could be positive for the u. K. Markets nd also for various assets and such as equities and the currency. The way we have looked at this and the way we have addressed this is say the worst outcome is a potential exit from the European Union without a deal and therefore you have to say what is the probability of that, leave with a deal, leave, second referendum, etc. , etc. We would argue that the probability to have u. K. Leaving without a deal has been reduced over the last few weeks. That should already leave one to be more optimistic on u. K. Assets. We have moved from neutral positions to taking long positions in sterling for example. Because we still believe yes, there will be volatile tyity and uncertainty volatility and uncertainty. Being willing to look through some of the shortterm but ultimately they are still talking. We think the trajectory is where a deal is done. Nejra would you also be looking to change your view on other assets like for example buying u. K. Domestic stocks or trading the guild curve differently . Peter yes, there are opportunities in those. The ftse 100 because of the negative correlation with sterling but the more domestic market, the mid caps, you should see opportunities emerge there. Another opportunity and we already have positions in this. If you look at the u. K. Inflation market that is pricing currently that inflation even in 0 years relates closely to sterling. If you have a view that sterling downsized its cap from here, you should see that inflation pricing start to change. We think there are less opportunities to be short on the guild side but our viewers, it is probably greater in some of the other markets such as inflation. Market was week the by the end of 2020 in the chooverpbes a hard brecks. I now the market is pricing in at 25 basis point cuts for 2020. What does that do to the banks and the more Interest Rate sensitive exposures in the u. K. , peter . Peter that is positive for banks. Sensitive opportunities. Our view is that this is the u. K. Economy, Interest Rates, currency is being distorted by this huge event, which is brexit, and the reality is lets not forget what were talking about here. A withdrawal agreement. It is like were going to sign the divorce papers. We have to argue about custody of the kids, who is going get the house. All of the finer details. If it is agreed to, negotiations will continue for another four, five, six, even 10 years into the future. So were going to get an opportunity to talk about brexit for the large part of the remainder of our careers. Nejra in terms of how that translates into other parts of the global portfolio, does that encourage you to perhaps take more exposure or go more underweight on treasuries or anything like that . I dont think it will have a Material Impact on the treasury market whereas i think it will have an impact on domestic european equities on the euro and also even potentially in the european Interest Rate markets. Ultimately if you have a chaotic brexit without a deal with your main trading partners, that is going to cause a Ripple Effect within your own economy in europe. I dont think any politician should want to see that happen. If you start to remove that uncertainty, youre going to create an environment plan for the future, that can make investments and reduce uncertainty and ultimately keep you positive. Whether all of that is enough to offset a global macro environment, remains to be seen but it is a positive step. Manus you said that you were long sterling. We have seen some pretty big moves in eurosterling and in cable. It could hit deal, 132, 134 on cable and on sterling, on euro sterling that is a whole ott momentum behind it. Where are your targets peter . Peter i think the targets are going to depend on what your time horizon is. When we look at these opportunities were not saying were going to take a position on sterling within the next few weeks because a deal has to happen. It is going to be a structural change in how that market is going to be perceived. Youre going to go back to the level we saw immediately prior to the brexit referendum. I dont see why a level of 132, 133 should be the limit on our view. On a 1224 month view, you should be looking at a higher level. Nejra it could go to 140. Now lets get to the bloomberg first word news. President trump depending his decision to pull u. S. Forces from Northern Syria. He is also fine with letting russia fill the void saying it is a lot of sand but the house of representatives took a different view passing a cross Party Revolution rebuking the decision. Michael pompeo blaming turkeys president for the crisis. U. S. Senators are pressing ahead th a bill on hong kongs movement. Board agreement showed support for the protesters and punish china for any crackdown. The eurozone stuck with feeble growth and inflation. It comes a week before draghi holds the final policy meeting of his eightyear term. Mark carney said negative rates are not a policy option for the he has called for more fiscal policy. Carney says it is now time for governments to extend their budgets and you now need to earn even more to be rich according to one metric. To get into the top 1 of u. S. Taxpayers you need to earn over 500,000. That has gone up by 1 3. Global news 24 hours a day and on air. Powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra thank you so much. Coming up, well be speaking to the first Deputy Director of the i. M. F. The meeting continues in washington, d. C. Dont miss that interview at 3 30 london time. David lipton, just after 3 30 p. M. London time. This is bloomberg. Note nejra 7 18 a. M. In london. This is bloomberg day break europe. Manus cranny has gone off to an event but he will be back with me on monday. Peter fitzgerald is still with us as guest host. We saw a dip in the u. S. Market yesterday after a surprise drop in u. S. Retail sales. Dollar was slightly weaker. A bit of repricing around the fed. Peter the question you have to ask yourself as an investor, is 2. 45 the peak for Interest Rates for this cycle or do you think as the fed seems to, at the moment, this is just a number of insurance cuts. Things will then recover and well be able to then start raising Interest Rates again. It is more that 2. 5 is the peak. We think the fed will continue to cut rates. T is not so much of high importance where whether they cut in november or december. Interest rates are going to continue to fall in the u. S. And that is driven by uncertainty which trade has created. Remember, it is not just trade. This is a tech war and it is also a conflict between the u. S. And china which is going much deeper than trade. Trade gets the headlines but export restrictions are causing much more damage to businesses. You have that deterioration in the corporate department. Is this going to filter through to services and filter through to the consumer and our fear is that were seeing Consumer Confidence zart to roll over. Youre seeing some weakness now in retail sales and for you see us that is going to keep the fed on an easing path and create that uncertainty. Nejra translate that uncertainty into corporate earnings and how you would be positioning going into this earnings season. Peter were not taking a directional view on equities. We would prefer to do rell sieve value opportunities and we can talk about specific going long one market and short another but overall going into this current earnings season with the macro backdrop that we have, that is not a position were willing to take. What were seeing with earnings is yes, it is still positive and our view is that you would need to see earnings turn negative to confirm a potential recession in the future. Not our base case yet but getting close. Nejra i was reading earlier you started to go short the swiss market but given you expect more fed rate cuts and youre not upbeat about the global economy, hat is behind that view . Eter that is to some extent a value have vs. Growth and quality. In an environment where you have Interest Rate where is they are, you can hearn relatively high dividend yields in some of these value sectors which allows you to wait for some improvement. The reality is that markets dont always price whats happening in the broader economy so there are opportunities within sectors of the equity market to play these ideas. Nejra if we were to look at Industry Sectors, for example, we have had some consumer good turnings this morning, nestle and unilever. We have been getting positive numbers coming out from the semiconductor as well. Are you changing any positions n terms of Industry Sectors . Peter with the semiconductors is an easy one to answer. We have a long position in semiconductors and have had for the majority of the year. That is a sector that has been penalized because of the market uncertainty. Youre seeing more capital discipline today than in previous cycles. You can also delve a little bit deeper and say within industrials and other businesses where you have companies that have been priced to a high degree of cyclicality, their earnings have changed. They are servicing the good that they are selling rather than just the upfront costs. Within sectors you can find opportunities. Nejra nestle this morning said they are going to distribute up to 20 billion in swiss francs. How does that story pan out for you . Peter it is reasonably supportive for e. T. F. s, particularly in the u. S. We would prefer companies to invest that money because it is giving confidence in the future or returning that money to investors for them to choose where to allocate that capital. Nejra great to have you with us. Peter fitzgerald. Leaders oback party boris y cannot support legislation. Rity bring us up to date with what you have heard from the dup today . They have sent out a number of objections. Some of them are new information and some are conflicting what we heard overnight. What they said is they have objections in three areas. One is customs and the way customs checks take place on the island or between the island and great britain. And then v. A. T. A lack of clarity there. It emerged in the last 48 hours as a Sticking Point in the brexit conversation and consent. Consent is something we thought we made progress on. Overnight our colleagues were talking about how they came onboard with a plan and whether they were happy with arrangements after six years and then again every four years. And then there was a plan in place to allow the status quo to continue. That has been okd by the dup but they still got consent on tweet fromthere is a the dup that it is an area of contention. We are close to a deal but no deal has been achieved. Nejra thank you so much. Coming up tomorrow from the i. M. F. Meeting in washington. An interview with bank of England Governor Mark carney. That is an interview you wont want to miss. That is it for daybreak. We have seen a little bit of dispersion in futures. Cable has taken a hit on what anna was just talking about and what the dup has put forward. Were heading to a nail biting potential end where we might get a deal. That has been the markets take. Cable down at 127. 62. Weaker against the euro. Generally a bit of soft sentment in the market following the u. S. Retail sales data yesterday. 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. Anna good morning and welcome to Bloomberg Markets european open. Alongside mattds miller in berlin. Matt today the market say, third time lucky . Expectations boosted for another rate cut. Futures point lower in europe and america. The cash trade is less than 30 minutes away