Sluggish, not just for the foreseeable future but through the holidays. Guy we are watching what is with the pound. The pound is not reacting to mr. Macrons with the pound. Statements. It is more about earnings than anything else. 7 , the dollar is down. 7 on news of that brief truce in syria. Union the european looking for titfortat tariffs with the u. S. Over dispute about illegal aid to aircraft manufacturers. 7. 5 billion worth of e. U. Goods ranging from planes and lots more. He is coming to us from washington, d. C. , where he is attending the world bank meetings. Today is the latest round in tariffs ongoing throughout the world. We also have data out of china suggesting tariffs are impacting growth. What is your outlook for how things progress in the next quarter . Mark i think investors around the world and certainly here at the meeting are focused on this trade issue. We are seeing the tariffs come through into slower Economic Growth. In our global strategy, we are looking more for getting yield from a portfolio than further equity gains. We think the s p 500 is in something of a trading range. Vonnie how do you do that in a portfolio . Are you taking out as much as you can out of the stock market and looking for other opportunities . Are you playing the stock market differently . Mark we are not taking everything we can out of the stock market. Portfolios that are measured against the benchmark and we would go underweight in equities globally but play things regionally. Overweight in the United States versus underweight in europe. The impact of tariffs in the manufacturing slow down his felt more strongly. Is guy inmorning, it london. Do u. K. Assets look cheap going into the weekend . Mark we have been long the pound because we believe a note brexit was getting priced in and we still think there is further upside in the pound. Node is completely taken off the table. To call exactly what will happen with this vote and everyone in the world will be watching. Factyou talked about the maybe you were underweighting european stocks at the moment because of the wider trade narrative, but if brexit was taken off the table, would there be a discount from the german auto sector . Would that help make europe look more attractive . Mark absolutely. I think it could help. Exposure and you want to be diversified to equities around the world. I think some of the factors that are likely to keep europe european gains muted is the earnings season where we think expectations remain high. We are also seeing in our clients, many of whom run private businesses, some reluctance to invest until we get more definitive statements about what is happening with the trait situation. Investment is just not there. Vonnie china is having a big problem boosting capital investment. 1 on gdpe missed by growth in china has people comparing that to the 1980s. Is that a bit disingenuous seeing how it had 30 years of strong growth in china . Is there any point in comparing now to the 1980s . Mark Walking Around the streets of d. C. , maybe you see some 1980s fashions coming back but i would not compare that to the chinese economy in the sense that chinese has many levers to control its economy and try to help. I dont think a slight below expectation gdp number is enough to say china has lost controls over the levers it has. Over the long term, it needs to do things like more aggressively control its expansion of debt and more aggressively move the economy toward a consumer led economy. Those are strong policy goals. It is balancing those forces against a deceleration and Economic Growth but not a collapse. Vonnie exactly. How important is it for china and the u. S. Economy to get these trade deals dicken care of . Mark as i travel to both regions vonnie get these trade deals taken care of . Mark i dont think that is a successful starting point to necessarily come to a resolution. Dont know what this first leg of the deal is supposed to look like. For us to see meaningful difference in the direction of travel for trade, we need those u. S. Tariffs to come in december to please put off to be put off indefinitely. Deescalationneed rather than status quote to improve the economy . The manufacturing date was a result of tariffs that are already on. The Global Manufacturing sector is slowly because of tariffs that are already on. Dont we need the ones we have on removed to see a significant turn in the data . Mark i think we are more optimistic about the resilience of growth given what Central Banks are doing to stimulate the Global Economy. If you just had a status quo, then very gradually, the World Economy could come back from that as supply chains are adjusted and goods are rerouted to the most efficient way of minimizing tariffs around the world. Not an ideal situation, but one that probably would, in combination with centralbank action, prevent Something Like a global recession or a u. S. Recession. Here, more tariffs onto even for the u. S. , that, im not saying it would lead to a recession, but he could create more of a risk for recession, even for the United States. Guy the dollar has weakened significantly. Do you think that will continue . Mark we do believe the dollar is overvalued on a purchasing power. Against many currencies globally. Longertermver the could continue. I think that what is balancing that to a degree is the Interest Rates in the United States, which still a compelling for many investors around the world. Guy mark, thank you for stopping by. Global cio andhe Global Investment committee chair. We will try to keep you uptodate with every twist and turn in the Brexit Process over the weekend. And edwards will lead our sunday. On lets get you to the International Story coming out of the Banking Sector. The International Finance meeting in washington. Thank you. Thank you for joining us today. It is such a treat to have you on the heels of brexit. About your changing planning . Jose it is a pleasure to be with you today. Agreementve now is in between the u. K. Government and the european union, which still needs to go through both the u. K. Parliament and the european parliament. I think what has happened is encouraging. If this deal goes through, it will be much of an improvement over the alternative of a node deal brexit. No deal brexit. Important clients in the United States and europe. We are less affected by brexit than other u. K. Banks. What we have done is create a subsidiary in frankfurt before we had a branch and then the other european subsidiaries in the european branches we have would be part of that subsidiary. We could provide service to our clients. Our Frankfurt Bank started to operate over the last few months and has been doing so in a smooth manner. For us, regardless of the final outcome of the process, we are operating under the new regime and doing well. You have negative Interest Rates in some parts of europe and japan, wondering how the negative Interest Rate environment, what are the longterm ramifications of that . Jose we have gone about speaking some people are speaking about it forever. This is something that is quite remarkable. 10 years after the Global Financial crisis, there is a need for Monetary Policy have Interest Rates in negative territory and have 70 trillion of bonds in negative territory. This is something that is quite remarkable. I think that is the consequence of the fact. We are seeing the loss of momentum of the Global Economy in the last few quarters. Inflatione time, that has been below the targeted objectives of Central Banks. That i think is what has prompted the Interest Rate policy. Lets not forget one thing. These very low Interest Rates are also a reflection of the fact there is too little investment. We do have that combination, real Interest Rates drop and then Monetary Policy accommodates. The question is, what do we need to do to improve investment . That comes from structural policies. T comes from it takes much more than Monetary Policy, Monetary Policy is not enough. Given that somebody banks around europe right now are shrinking their footprint in light of global tensions and the larger economic outlook. Do you think that is the right strategy . Do you see more costcutting moves are what is the bank supposed to look like . Jose i will not comment on what other people are doing. I will comment on what we are doing. Keeping costs under control is very fundamental. Announced we will do so over time and we have been doing so and at our last results we have shown it was happening. It is important to show you positivity between the growth of revenues being higher than the growth of costs. Cost control is important. It is important to that you grow , safe andn a strong sustainable manner. That requires appropriate Risk Management policies, how to define opportunities and where they exist and that is what we are doing. Digital is a big part of this. Digital innovation today is critical for banks to be able to serve their clients and the customers. I think that is fundamental. Do you think m a is a requirement for banks across europe . What is your outlook . Jose it depends. If you look at the european environment, you have large players, medium and small, they come in all sizes. You have thousands of banks that are medium and small. The question is whether europe has too many banks. How many of these have a viable future in a context where liquidity is not given for free. There is aeans is structural issue about the fundamental european Banking Sector that needs to be addressed and that requires significant consolidation. I think a lot of attrition at the medium and small level, as well. Thank you for joining us. Jose my pleasure. Vonnie the imf continues its annual meeting in washington, as well. We are glad to be joined by the commissioner. Thank you for joining us. The topic in the markets for the last three years. Certain we wont get a no deal . I am not a what if guy. It is a reasonable deal. The best deal that could have been achieved. It was a tough job done by negotiators. That view is much better than a no deal. We never wanted a no deal. The first thing is to wait on the British Parliament to vote tomorrow and to hope the deal will be approved. The markets are very much what is markets. I would like to know what the plan b is if tomorrow does not go the way you want. Pierre if you Start Talking about plan b, it means you dont believe in your plan a. If the agreement is not approved, we will be in a complicated situation and this situation and this should be addressed. Lets move stepbystep. We know there are several possibilities. First and foremost, lets hope the deal convinces it is in mutual interest. It is by far preferable to a no deal. Im the ugly american here. I have done a lot of reading and you are the one guy who can handle this with taxation for europe. How do you see the execution of taxation . Northern ireland to the republic of ireland, do you have a confidence and that mechanism if we get a completion of this . Pierre the mechanism is quite complex but it ensures Northern Ireland is part of the u. K. But also it applies. Everything has been prepared by a joint committee between the u. K. And the e. U. I know this is complex. Convinced that it works. Give us a challenge that your customs commissioner has. What is the challenge . Like theng to be bureaucracy of the ottoman empire. Is we will problem have to distinguish between products and Northern Ireland and the products that go in the general market. Of artistbe the job customs and the joint committee to say which products. , do youfrom brexit worry about the impact it has on banks . Pierre mario draghi said the at the meeting, everybody agreed that monetary on doing it some work. We need to have a fiscal. Esponse to the slowdown especially if it deepens. It is not forcing to happen but it could happen. They need to go on reducing the deficit in other countries, like germany. Will germany spend more . Pierre i think there is a slight change for two reasons. The first is there is a perspective of the slowdown. There is a sense of responsibility. I can see there are some voices in germany. Seeing how it is time for more infrastructure. I am not for ending the culture in germany. That would be silly. Approachcooperative toward the possibility of a slowdown, it is not forecasted for the time being, but we need to think about that and that would be one of the missions of the next commissioner, the one that would succeed me. As oute is a fabulous about how populism will play out in europe. Predict populism and its different forms will play out in europe . Europe, eastern , how will thatt all end up in five years . Pierre if we have to deal with the u. K. , it is a form of defeat. Johnson makes some concessions. That is very important. We need to address all of them. Inequality innst europe is important for the future. Unemployment, more stability. We are creating jobs. But inequalities are there. We have fragmented people in the country. We need to address that through a constructive approach. Italian budget plan pass as is or does it need changing . Pierre i received it two days ago, i am in washington. On monday, i will answer. So we will interview him on tuesday. [laughter] pierre i appreciate the efforts made by this government to respect the proeuropean stance. Crisis coming in italy. That does not mean that some adjustments or efforts are further on can be avoided. We will discuss that constructively. No crisis to be seen. We will have to adjust. Expecting to ask for flexibility from the european commission. Is is alle problem this adding up. Is it compliant. I dont have the answer yet. Generally speaking, i would say we are moving in a good direction. They understand the rules. To look at the details. Family has an authentic understanding of the iron curtain of decades and decades and decades ago. Significance of bulgaria taking over the imf . Someone from behind the iron curtain will run the show. Explain the significance to france and the rest of the world. Pierre i wouldnt focus too much of that. The iron curtain fell 30 years ago. Ancient history. Pierre to me, i dont care. Dont good friends, i care if he is from bulgaria, spain or france. She has a lot of experience. She is also more carrying. You dont need to come from a certain country. You dont need to be german, french, a spaniard or italian. Those elites coming from eastern europe. Talk to me about tariffs. These trump tariffs that are meant to come into effect now. There are certain European Countries that are trying to get exemptions with the u. S. Does that undermine the power of europe as a whole . Pierre our measure of european it isseems to start dealt with by the commission. Think tradeay is i sanctions are never the right answer. Slowdown, ut a lets avoid sanctions as much as possible. Sanctions are never the right answer. Thank you so much. You inend it back to london. Guy thank. Nice interview. France is not done for the day. Bank ofrnor of the england. You dont want to miss this interview. , 5 30 london time time. England firmly in focus right now. Negative Interest Rates have turned the financial world on its head. What do you do when compounding doesnt work anymore . I am here with howard marks, thecochairman and one of most successful Credit Investors. You are a brave man, you have tried to make sense of negative Interest Rates. Any luck . Howard you tell me. What conclusions did you draw . With a list ofup 12 reasons why they exist and like 20 effects and it is pick your choice. Economics is not a science. We cant tell it how things actually work, we can only look at past behavior. Here, there is no past. You cant say for sure why they exist or what the effect will be. Erik the reality of negative Interest Rates means Different Things to different people. It means one thing if you are a bank, it mean Something Else if you are a depositor or a borrower. What does it mean to a Credit Investor . Howard one of the questions i raised is if a company has a lot of cash and they put it in the bank and they have to pay interest to keep it in the bank, is it a negative . Levered,any is highly which historically has been a negative, that means they owe a lot of money. If they are getting paid on their borrowings, does that make them a better credit . It is confusing. One of the things i said in the memo is whatever without we knew in the past, we know less today if rates are negative. The memo of course of which you which erik the memo of you speak is on the website. Can you make a case for buying a negative yielding asset . Howard there are four reasons that make sense. Ander one, you are afraid what you are actually doing is buying a government bond. You are paying the government to store your money. You are paying a storage fee. Number two, you think Interest Rates will go down. If Interest Rates go down, bond prices go up. If you believe that rates will become more negative, if you expect deflation. You probably want to be in bonds. There are some reasons. They are kind of a reach. Erik kind of a reach. For some, a big reach. Do you by the economic argument for negative rates . Howard which is what . Erik by making it punitive, the banks hold cash to injected into the economy. Cash to injected into the economy. Howard we should make clear these negative rates are in europe and japan. They are not here. Not yet. But the European Central bank decided they wanted to stimulate the economy and one way you do that is by lowering Interest Rates so transactions become cheaper. The other thing is banks put they are required to put money on reserve. If they put more than they are required to have on reserve, and you charge some interest, that you are discouraging them from holding reserves. You are them to make loans. That is why they do it. Erik i know you are not an economist, but you are in economy savvy investor. If you look at what is happening in japan, do you think negative rates are working . Isard one thing i mentioned they can and maybe are in some ways at the Household Level having a counter effect. Erik they make people scared. ,oward the make them scared they seem to connote an economy where the future is negative. They send that signal in the savings rate has gone up in europe. People are hoarding. There is a phenomenon in economics and policy called pushing on a string. If you put a string on the table and you push the back the front does not move. Sometimes you cant get people to spend money. Erik rates are negative here, at least not yet. If we look at the treasury market and the 10 year treasury is trading at 175. Almost 16 . E do you think howard will ever see a riskfree rate . Howard one of the things i always tell you is you should never use the word cant, have to, never, always. 10 years ago, it was six. If you said will it be one i would say you are nuts. I cant tell you it wont be six. Who knows. Erik for most of your lifetime, the greatest risk to a fixed Income Investor was inflation. What is the greatest risk now . Howard number one, we dont know. Believe that the phenomenon of negative rates in europe and japan comes from the lack of economic activity. That low, the extent declining and negative rates fear of a growthless future, i think that is a big risk. Erik one of the byproducts of negative rates is the reach for yield. Do you sense in conversations with oaktree clients a shift in sentiment from it is worth the risk to im not going near that . Howard i dont think so. The people who have been going near that are people who have to. On your show, i have called them handcuff volunteers. A this country for example, Charitable Foundation has to pay out 5 . It does not want to invest at 1 and shrink 4 . Erik that is still happening. Howard that is still happening. There are lots of people what i mean to say is we have been talking about the extent to which Interest Rates of come down, required income needs have not. Oaktree. T about have described oakrees oaktrees posture as cautious. Speaking of relative safety of high rated credit. Howard we are not that crazy about ratings. Ratings dont tell you of something is safe or not. We do analysis. Increased ourime demand for safety. We still have lots of single bs but we think we have vetted them very well. Howard erik the loan market erik the loan market is looking like it did several years ago. Can you tell whether similar conditions are present now . Are we heading for the same kind of Fourth Quarter . Howard there is no reason to think so. These things dont happen spontaneously. Madewere the things the the Fourth Quarter so bad last year . Number one, the thing started on october 4. The yield on the 10 year hit 325. I dont think it will hit 325 disher. There was a big flareup in the trade war. There was a bigi think the trads already flared. I dont know if it will flare more. There is no reason first of all, the fact it happened last year and the Fourth Quarter, it is meaningless to think it will happen this year and the Fourth Quarter. Economyhese days, the will slow down. I believe we will have a recession. I dont think the fed will hold it off forever. We will have a slow down and it is natural. When we do, markets will go down, default will go up, bankruptcies will go up, people will panic. Some things are inevitable. You really should not think you know when. Erik it is always great to have you here. Some things are inevitable. If history is any guide, but when the things howard was tends tobout, oaktree make a lot of money for its clients. Headline, had a softbank is said to be looking at a rescue package that would value it below 8 billion, less than 1 6 of its original value. Softbank looking at a finance package to rescue at that would evaluate below 8 billion. The decision might be made this weekend. Inmorgan has been pitching vesters investors on a 5 billion package. Jp morgan is looking at investor appetite. Is ittest out of softbank is valuing it at below 8 billion. Guy that is an amazing turn of events. We spoke with Roberto Campos neto earlier today at the meeting in washington. Trying toe have been keep coherent speech through the time. We have been looking at three factors. How the reforms are progressing and the local situation in terms of growth and inflation. Is we mentioned there was space and we decided. N every meeting you make sure it also stays within a good limit. How much wiggle room do you have to cut rates further . Roberto we never know that. It will depend on many factors. The first question we ask ourselves is do we think we should have conditions . The second question is how selective should have be . Every meeting you have a debate. We go over the risks. We think we have room for lower rates. What is it in the economy that makes you worry . Roberto i think we are becoming more optimistic. We have had some shocks in the last year and a half. Tragedy and the global deceleration that shaved off a little more than. 25. We had the impact of growth they share. We start to see elements the tell us that people will start to revise growth higher. Sectors that employ a lot of people that were under stress for a long time. Slack in the economy reducing . Roberto we still have a lot of slack. Why is it so slow. Roberto we came out of one of the biggest recessions we ever had. The question we to ask ourselves slack, you say we have a slack is not a homogeneous thing. It depends on what sector you are talking about. Aggregating all of the factors that matter. How do you see the labor market improving . Roberto i think the labor market is showing signs of improvement. We think improvement will continue. We have record highs. The numbers the came out yesterday were the best numbers since 2013. The economy minister was talking about reducing debt. Bank wee central see reserves as an insurance bird as insurance, we need to tell people and is not the reality. It is breaking even over the last 15 years. Is what is the cost . What is the benefit . We think reserves as an insurance has served brazil well. Guy the Brazilian Central Bank president , Roberto Campos neto earlier today. Vonnie lets check u. S. Markets. We are one hour and 15 into friday trade and we are down. The dow is down. 4 . The s p is down. 3 . The nasdaq is down. 6 . Sterling having a quiet day in trading at 129. 03. This is bloomberg. Vonnie live from new york, i am vonnie quinn. Guy i am guy johnson. This is bloomberg markets. Boris johnson is trying to convince spectacle members of parliament to vote for his brexit plan tomorrow. The stakes could not be higher. Delay its exito for a third time. Johnsons conservative party does not have a majority. President said he wont forget the letter he received from president trump. The letter warned him not to be a fool, tough guy or devil concerning the military offensive in. He said the letter was out of line with diplomatic courtesy. The u. S. Is trying to reassure israel the relationship between the two nations remains as strong as ever. Mike pompeo met with Benjamin Netanyahu in jerusalem. Over president trumps desire to get out of endless wars in the middle east makes him an unreliable ally. Security forces captured video of guzman during a patrol. Hundreds of Cartel Members carried out attacks. He is now serving a life sentence. Global news 24 hours a day, on the air at tictoc, on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Vonnie time for a talk of the hour. European carmaker is heading for its worst day since june, down more than 12 . There is more to the story. Kailey leinz is here. The magnitude of the cut is what is disconcerting. They see it falling between 3 and 4 . They said that may not have positive cash flow on the year. It also cut their profit forecast and they think Group Operating margin will only be a 5 , they previously thought 6 . It is partially because of revenue because of slowing growth in europe. They are pointing to weakness in turkey and argentina. One Deutsche Bank analyst said it has to deal with cost. There has been a lot of debate in europe and there is a push toward electrification. That requires spending on research and development. Deutsche bank said that cost will not go away in the future. Helping, there is a 43 stake in that automaker. Their relationship is strained in the fallout from the scandal. A French Company is not having a good day. Kailey it also cut its guidance. The stock is down more than 8 today. One of the bigger underperformers. Strugglingdistiller with weakness in asia. You have some big underperformers there. Down 8. 5 . Ee it is remi is down 1. 5 . It is not a good day for these french companies. Talk to us about the european markets. Guy lets pick up on what she was talking about. The French Market is underperforming significantly. As you can see, the French Market is down by. 9 . The dax is down. 3 . The ftse 100 down. 4 . The dominant driver had been foreignexchange for much of the week and what is happening with brexit. We await tomorrows vote. We are getting underperformance from the cac. European close will be coming up. This is bloomberg. Guy live from london, i am guy johnson. Vonnie from new york, i am vonnie quinn. Wpi trading is that 54 a barrel. It feels like oil trading is of its own dynamics. What happened . There has been a bit of a disconnect. As stocks get better, it looks like we are the tiptop, one good day away from alltime records. I think crude will catch up. Crude has had difficulty getting over the 55 level. Now we come back through. To get some positive momentum, needs to punch through the 55 one more time. Vonnie how much trading is going on during the cme, are we at peak dollar . Alan that is the question. Will the dollar turn . Betweenar was traded. 93 and. 99. 96 is the halfway pivot. We have definitely seen a turn. If we look at what is happening in europe, brexit, we have seen the bounce in the pound where it bounced from 1. 2 to 1. 3. If there is a base in place and it can turn the dollar lower, lets remember the administration has a vested interest in a weaker dollar. They have set it out loud. If that happens, that is obviously going to be positive for commodities and that would give crude oil one more kick. Vonnie this morning, between taking effect of a bunch more tariffs and the news the chinese gdp growth was not as strong as expected, what kind of shivers does that sent to down there . Alan just a little bit of a pause. We still have a positive week. The gdp in china, even though it is multidecade lows for growth, it is at 6 . That is more than double what we have in the u. S. Theyre having a slow down in the acceleration of their gdp but they are still having solid, solid growth. Vonnie thank you today. Coming up, and Investment Management cio will be joining us as we count you down to the european close. European markets are soft today. We see some of the numbers come through. Waiting to see what happens with the brexit saga over the weekend. Does Boris Johnson have the votes to get his brexit deal over the line. Assets look cheap right now . How pivotal a weekend will it be for positioning . We will talk much more about that. This is bloomberg. 320 is the magic number. Can Boris Johnson at the votes needed to get his deal over the line . The market doesnt believe him. China slows. Gdp data comes in soft but it could have been worse. It should investors prepare for beijing to deliver more stimulus . The lira drops. Itsey says it is halted offensive to allow kurdish fighters to withdraw. Are in itlondon we down to the european close on bloomberg markets. It is friday and investors are focused on a lot of things not only the geopolitical buters and there are many also earnings. Lets look at where we stand on the s p 500. We still have not closed throh