Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Look at how we are doing on the sector picture. It looks fairly split. To theng of a bias downside. Materials and the Energy Business look in the red. We will look at the bp share price in a moment. Financials, industrials and health care mixed. No clear picture coming through. Many of these sectors look fairly mixed. Matt we see more stocks losing than winning. Down, 250 gaining right now. If you look at the moves to the upside, you see Louis Vuitton rising, only 0. 5 . Bp up 0. 4 after putting out earnings. You see a lot of metals and minors stocks to the upside. Hsbc down 0. 75 . , a lot ofvartis drugmakers and consumer staples, Household Goods coming down. Diageo also declining. Down about 0. 4 . Lets focus on the fed ahead of tomorrows fmoc meeting. A Third Straight rate cut is expected, but the focus will be guidance aspowells far as policy to come. Powell has said the economy is in good shape, but gdp growth is expected to slow further in the Third Quarter. Peterg us now is, Peter Oppenheimer, chief Global Equity strategist, Goldman Sachs. What do you expect . Peter we expect rate cuts of course. Our view is that would represent a pause, and there would be no rate cuts through next year. Remainser economy robust, and Inflation Expectations have stabilized. The labor market is strong alongside the consumer. We do not think there will be rate cuts next year, and that is different from what the market is pricing. Chartlet me show you a that the team and i are putting together. This is the s p 500 against the equal weight s p 500, and the point it makes there are five companies that have lifted the s p 500 to the new highs by some analysis. How much are we reliant and vulnerable to disappointment from a handful of companies in the u. S. . Perhaps less than those charts would suggest. The important thing is earnings are still growing. They are growing on a broad basis, not just a few companies seeing earnings rising. We do think Earnings Growth will be slow through the course of next year, not just in the u. S. But globally. For does limit the upside the border market itself. At the moment, you have concentration, b rotation in markets towards areas left behind, particular in value and cyclical spaces. The market snuffs out the possibility sniffs out the possibility of week activity. Matt what do you mean by that . Do you think the economy is at an Inflection Point . Ism inwe have seen the the u. S. Decline for six months straight in a row. We will find out if that is the case this week. In europe with the manufacturing data has been weak for one of the longest periods since the 1990s over the last course of the week, the pmi base of the data in germany has stabilized at a week level. I do not think it is continuing to deteriorate. The market is sensing that in the rally we have seen over the last six to eight weeks, and in partly the stronger tone you see in cyclical parts of the market. Anna does that come at the same time we have seen a truce in the trade tensions . Is there a link there . Is that why manufacturing has been able to plateau . Peter there has been an interesting gap between the hard and soft data, and in recent months the survey data has been weaker. We have seen that happen a few times previously in the last decade. Often a soft data overstates the reality because it is based on surveys, and confidence has been weak because of the uncertainty relating to the trade war. The rally we have seen and risk assets reflects a bit of renewed optimism, but from a low base. As you say, there are other factors, risk amy adams have been coming down across credit and equity markets because of a brexit. Ore trade and it is a combination of these things. Backdrop of low risk ownership, we have seen record outflows from mutual funds and. Tfs we are seeing a selloff in bonds, yields have come up 40 to 50 basis points in the last couple months on the 10 year. Where do you see what do you see as far as a good mix . Even if equity markets do not have much further to run, it does not look like bonds will appreciate much either, or could they . Good i think you raise a point. We have seen bond yields picking. P from their lows in some sense that is meaningful, we have gone from 30,basis points in bunds to but these are still incredibly low. Particularly across japan and europe. I do not think they will rise byh given they are anchored supportive policy. Limit to how is a much bond yields will rise, and a limit to how much growth improves. We are probably talking about things not getting worse. That Second Derivative is quite important for risk assets as they start to price, less deterioration and some improvement. But i do not think we are talking about the prospect for a global synchronized recovery in Economic Activity or in profits, and alongside that in rising bond yields. What we are seeing is a modest shift up, but there is a limit to how far that goes and how high returns will be over assets next year. Anna thank you Peter Oppenheimer, chief Global Equity strategist, Goldman Sachs. He stays with us on the program. Up next, stocks on the move, including commerzbank with a surprise jump in Third Quarter profit. We will get analysis next. This is bloomberg. Matt welcome back to Bloomberg Markets european open. 12 minutes into the trading day, and looking at red arrows, the. Tse down about 0. 25 lets get our top stock stories. Rie one of the biggest louvers in the stoxx 600, down more than 4 . They will and their Clinical Development trial, and that is pushing down shares. , amerzbank is up by 1 surprise jump in Third Quarter income as well as operating profit increase. And a good month for the ceo, last month they unveiled a plan that many said was not ambitious enough. 2 . Bank down more than they are considering sanctions that have to do with their probe into munar laundering. Money laundering. Byy said many observations the authority are made by the bank itself. Boris johnson will try for a fourth time to secure a general election today. Todays vote needs to do percent of mps to pass, but lawmakers will be able to change the draft law if they can find a majority in parliament. The risks might be higher. Thats talk to Peter Oppenheimer , chief Global Equity strategist, Goldman Sachs, our guest host. I was reading your notes ahead of the conversation, and you are making points about people thinking of the risks involved with brexit, but you were talking about the buyback combined with dividends am a that makes for a healthy return in the u. K. Yields looking better than the 10 year gilt yield. Peter if you look at buybacks in the u. K. Market, they rose to 3. 6 billion pounds, the biggest size of buybacks since 2007. The equity market supply shrunk by 3 in the u. K. Last year. Made thenation has supplydemand balance attractive, and if you add the buyback yield to the dividend yield, you get around 6 in the u. K. , higher than the rest of the europe or the u. S. To your point, that is compared with the 10 year gilt yield, so the gap is huge and reflects uncertainty. Y some can moderate, and we have seen that happening over recent weeks as our domestic exposed thatthings combination has been one of the fastest relative appreciations in baskets we cover. It are starting to see that risk priced out. There is value, but you do have high payout ratios in the u. K. Relative to the industries that represent the index. Matt much higher than the average, you say in your notes , the average since 1953 is 54 . Why have u. K. Stocks underperformed . If they are this attractive now, how come they are only up 8 compared to 21 on the other european indexes . Peter i think a lot of this does reflect two factors, one is the risk premium, the cost of the uncertainty over brexit. Also to some extent the makeup of the index, which is more value oriented given the high exposure of things like mining , compared toanks some other indices. Generally speaking, value has lagged behind most equity markets not just in the last year, but since the financial crisis. Once again, there does seem to be a bit of an inflection, because when we look at the slices of the u. K. Equity market, the most sensitive to , theisk premium domestically exposed stocks which have been particularly week have underperformed the ftse 100, they have rallied quite a lot over the last several weeks, and they have outperformed the internationally exposed companies which are beneficiaries of sterling weakness. Wonder about the sterling weakness. I am looking at a chart, and you do not have to look at a chart to know that sterling is at an historically low level, this is only going back five years. Is this one of the reasons, because investors do not want to pounds for priced in that underperformance . It looks like there is almost nowhere to go but up. Peter we know you have seen significant outflows from u. K. Internationalfrom investors. That has been true to a large ,xtent for all European Assets or risk assets, but especially in the u. K. Reflects weak sterling and uncertainty about where sterling will go. To some degree the ftse 100, where the stocks sell on average around 70 of the revenues outside of the u. K. , they have been protected a little bit because sterling has fallen, the sterling volume value of those assets has gone up because of the currency translation. The more domestically oriented stocks have been ones that have borne the brunt of the risk premium. They have started to recover. If sterling picks up further in light of a deal being agreed, elastic stocks which have lagged behind could do better. We will see where we election watch. Up next, earnings opportunities, how european reporting season is shaping up so far. This is bloomberg. Anna welcome back to Bloomberg Markets european open. 21 minutes into the trading day, a little sluggish, down by 0. 3 on the stoxx 600. U. S. Futures look entirely flat. Talk about the oil sector, shares of saudi aramco will start trading on december 11 according to the Television News channel. It says a subscription for shares will start a week before on december 4. This and other revelations have things moving around in riyadh. And reporter has been watching developments on saudi aramco for some time. Annmarie it looks like they are saying, according to local state tv, they will have this listing on december 11, but this has been delayed time and time again. We have seen multiple delays, the most recent this month. The Sticking Point is the valuation. Mohammed bill salmon announced a 2 trillion valuation, and wall street banks to do the ipo are investorey cannot get appetite for 2 trillion. If you look at exxon, they are giving yield to investors, and a valuation of 1. 5 trillion. You are seeing a mix of 1. 1 to possibly 1. 5 maybe, and the familyn is has the royal accepted a lower valuation, or has the bank then able to push it up to the 2 trillion mark. Dude i wonder what it will to the market when they come in, because everyone will want or to aramco. E exposure Fund Managers will have to buy shares, and they will have to sell other shares. Right,e that is exactly and why you see every aramco headline move the local Stock Exchange. Today it is off given the fact that local investors, and this is only a local listing, they initially wanted to go international, but they are looking at 2 locally to raise 40 billion. Anytime you cities headlines, you see the local Stock Exchange take a hit. People want to take these funds and possibly put it into the crown jewel. Talk about the earnings picture, it has been building up gradually. Peter oppenheimer, chief Global Equity strategist, Goldman Sachs is still with us. The earnings story, we have had 14 stocks in europe reporting. Where have you seen the best performance coming through . Peter it is important to say it has been an ok season so far, better than expected. The overall size of the average on anas been around 2 equally weighted basis, around 2. 5 , so the Larger Companies are doing slightly better. That is in line with the average scale of bidding. Anna does that give you comfort despite the fact we have witnessed some companies guiding a little lower ahead of the earnings . Peter that is right, and this is in line with what we would tend to see with average beats. On the Positive Side, i would say companies that are beating are doing well, companies that are not being punished as much as we have seen in the past, particularly last quarter. That is what we were discussing earlier about some Inflection Points in risk, people are more to passto give companies that are missing. Companiessome of the missing for the right reasons . Megatechs, tex amazon missing the taking market share for the future, or google missing but investing in its thed business more than market anticipated. These must be a good sign for the underlying economy because they are spending money to invest, or for the future of the company that they gain market share in the future. Peter a very good point, there is no wants in all of these things. There is nenuance in these things. Some of the companies you mentioned can fit in that category. Has been weak, in line with the depressed manufacturing cycle for a number of months now. Investors are tolerant to some extent to companies that start to ramp up investment a little bit, so long as there is a convincing case and competitive opportunity. One thing i would say, earnings revisions are coming down for this year. We are getting closer to the end of the year, but we are starting to see earnings coming down for next year as well. Although the season is reasonably ok, we are looking at modest traffic growth. Matt Peter Oppenheimer, chief Global Equity strategist, Goldman Sachs, thank you very much. When it comes to using data, everyone is different. Which is why Xfinity Mobile is a different kind of Wireless Network that lets you design your own data. Choose unlimited, shared data, or mix lines of each and switch any line, anytime. Giving you more choice and control compared to other top wireless carriers. Save up to 400 a year when you switch. Plus, get 50 off when you buy any new lg phone. Xfinity mobile. Click, call or visit a store today. Matt 30 minuteses into the trading day. Top headlines for you off the bloomberg terminal. B. P. Beats. Profit that is above estimates but the stock drops as an increase in geering takes the shine off. Johnson tries again. The u. K. Prime minister tries a fourth attempt forcing a general election. Can he persuade reluctant lawmakers to help him go to the polls . Heavy investment in google cloud. Business shares fall in extended trading. Good morning. Im matt miller alongside anna edwards at our European Headquarters in london. Anna i am inside. I am not freezing. I have full use of all of my fingers. Lets talk about what is going on in the stoxx 600. We do see a downside. Were in the middle of earning season. That is one of the preoccupations of the market. Also addressing a big move in the u. S. Conversation around the s p. Oppenheimers. In terms of the balance, we do see 480 stocks moving to the downside. There is quite a lot of breadth to the european market. We heard some earnings news out of this German Health business. The stock higher because the company beat estimates. Beat the top of the analyst estimates. That is helping to lift that one. Ryanair. Some upgradedown grade news. Up by. 8 . The balance of moves across the markets is to the ownside. They came through with numbers early on. Elsewhere, we see continuing to fall. We saw weakness in sessions coming through. Lets go to bloomberg first word news. To the u. S. , the u. S. Army operative raised red flags about President Trumps ukraine call. He works for the House National Security Council. Speaker nancy pelosi said the house will take its first vote on the impeachment inquiry and that will happen this week. Intendo is back. Z easily it has beaten its previous record. It has already raised 37 million in revenue. B. P. Is falling this morning despite a report of profit beating expectations. He finance chief said it was helped by strong oil trading. 65 a aging 55 to barrel. There are clearly u. S. China tensions. Pretty stable at the moment. The teams have been making ome pretty good calls. And sweden is considering sanctions against swedbank. The nations oldest lender is being investigated amid allegations it may have handled over 100 billion of suspicious transactions last week. It is being probed by a number of u. S. Authorities but didnt provide any authorities. Global news 24 hours a day, on air, on tictoc and twitter, more than 120 countries. This is bloomberg. Anna . Matt . Matt thanks very much. Your first word news. Lets focus in on the fed ahead of tomorrows fomc meeting. A Third Straight rate cut is widely anticipated. The real focus will be chairman powells guidance for the future. Is he ready to hit the pause button on moves he has made . Powell said repeatedly the wider u. S. Economy is still in good shape but g. D. P. Growth is expected to have slowed further in the Third Quarter. Hawks and and doves may be appeased by a compromise position. Officials will adopt a meeting by meeting approach on further timulus. Let me ask you about what youre expecting from this week . Will we see a change in the narrative from the fed . We have seen this drip feed of cuts to the market. Will this time be different on the messaging . Last time we got more u. S. Data showing the economy is indeed slowing. It is not just the Manufacturing Sector. We see evidence this weakness is spilling over to the Services Sector and the employment there as well. They are all flowing down. I think the fed will be looking at this data and tell themselves this may warn of more rate cuts in the future. We think the fed will cut this week and possible further rate cuts next year. Matt you think this is it for 2019 . That they will have to reconsider their outlook in 2020 . Obviously a lot of uncertainty still hangs around with the u. S. China trade front and with the slowing economy. We may see a pretty weak Fourth Quarter u. S. G. D. P. Number and i think that may really prompt the fact to worry about the u. S. For example in a Fourth Quarter what we see is potentially weaker Consumer Spending because of the tax hike on consumers an we may see some rundown by businesses because they have built up inventory ahead of these tariff rises. We may see 0 of g. D. P. Growth. Tier one next year is usually hampered by bad weather. We may see a weak quarter in the First Quarter. I do think there are reasons the fed needs to worry about. We still do not see a recession coming. Anna you dont dont see a recession. What saves the u. S. Economy from recession . Is it the rate cuts that we have already seen from the fed or is it a change in the tone on trade . What is the story . We think that the rate cuts by the fed helped with business confidence. At least i know the fed is going to support liquidity. It will help with financial conditions. Why we dont see a recession is they are triggered by private sector imbalances and at this cycle we dont really see that. G. D. P. Is at the lowest since the 2000s and the real rates at the moment are at zero percent. And the fed has cut. As a result we dont see of course if there is some resolution on the u. S. China trade front, that will be quite helpful as well. Matt do you see any spending, any investment, we were talking with Peter Oppenheimer from goldman satches. Goldman sachs. They were doing a lot more spending on the cloud. Amazon doing a lot more spending on same day delivery. In general, he has been disappointed with capital expenditures. What we see is spending has slowed significantly over the past year already. If you look at the leading indicators shes the one he tracked is the confidence in the u. S. And it clearly suggests a downward trend and weakness ahead. Triggered by the trade war obviously. We have the fed cutting rates. Generally a strong labor market. What is holding the investment up is really the trade tensions. We do see investment being quite disappointing unless we have some sort of resolution. Anna thank you very much. Joining us this morning. Great to get her insights on what is going on in the fed. You can join the debate and reach out to us at bloomberg tv. Thanks to janet for joining us. Up next, skyhigh spending. Alphabet earnings are dented by heavy investment in googles Cloud Business. Well bring you that story next. This is bloomberg. Sloomberg. Matt welcome back to Bloomberg Markets. This is the european open. We are looking at red arrows across European Equity indexes here with the ftse down. 4 43 minutes into the session. Beyond meat is slumping in the u. S. Premarket trade as the lockup period is set to end for key investors. Annamarie thats right. It looks like beyond meat is for breakfast this morning in the u. S. Down 9 in premarket trading. Reports yesterday were very strong. As you say, investors were expecting a selloff today given the fact that early backers can finally cash out and it looks already the start of a day in new york is going to be a rough one for the faux meat and Sausage Company beyond meat. Anna cloud spending is weighing on alphabets earnings. They missed estimates after costs jumped. Shares fell in extended trading after hitting a record high in mondays session. Nate, good morning to you. What has been driving alphabets spending spree . They are spending on the cloud trying to catch up with some of the bigger players, i guess. Thats it. Google is spending a huge amount of money building out its Cloud Computing business a. W. S. ,ng with am zon microsoft. Azure. They need to compete and diversify away from its pure ad business. A lot of money has gone on that. Matt is there any indication the Company Plans to reduce spending . Is this a blip or is this going on the to be a sustained offensive . I think we can see it sustained but the other thing that is going to be interesting to look at this the next quarter is google is pushing into consumer hardware again. It released the google pixel that competes with the iphone and Samsung Galaxy phones. That is going to be a very big push ahead of the holiday period. It is going to be Marketing Sales as well there. There is very little evidence that spending is going to slow down, at least for the next few months. Anna when they talk about big tech, remind us of the nature to have regulatory scrutiny that google is under. Tell us about this and how that impacted on the earnings. The first is that google is a massive player. It has come under a lot of scrutiny for giving unfair prominence to some of its own services. That is something regulators are always looking at and have been looking at this year. As to whether it had an impact on earnings, it is hard to say. Revenue was up a lot. It could have been up more but they were still up. Mobile is a key driver to some of those things as well. We havent seen a massive impact from the regulatory side tuscaloosa. Matt nate, thanks very much. Our European Tech editor talking to us about google earnings, about alphabet earnings, the Parent Company of google. Up next, u. S. Stocks hit a record high. Omeone is betting on volatility levels not seen since the financial crisis. We have that next. This is bloomberg. Anna welcome back to european open. 49 minutes into the trading day. Lets talk about what is going on in volatility this morning. Someone is betting big that the u. S. Stock market is on track for the kind of turbulence not seen since the Global Financial crisis. American equities clocked new highs. What is going on . The consensus trade we have seen is to short volatility. S p closing at a record yesterday. You can see that when you look into the futures this might be the calm before the storm. Looking at the futures, the last level we got was the most net short from these noncommercial managers from earlier this year. Earlier this year this was the lowest level in terms of net short on record. Investors saying there is going to be more calm to come. However, we saw one investor on friday or throast one investor make this really big block trade, 50,000 calls betting that the vix index 65 being 60 the level here. This call would expire april. Traders said by april volatility in u. S. Stocks is going to surge to levels we last saw in the great financial crisis. This is just more evidence that were seeing some global mark row hedge funds that like to make contrarian bets, think that u. S. Stocks are getting overbought. It is time to take some hedges and buy volatility. Matt . Anna . Matt thanks very much. Bets. Alking about the ive lost all hearing but they are going to dial back in. Joining me, we have the nigerian oil minister. He joins me onset. Great to have you with us. Thank you for joining us. Ere here in saudi arabia. One of the conversations nigeria and saudi arabia are aving at the moment . Is around at the were discussing with the saudi arabia about supply were uct and also discussing the development of he oil and gas industrial the secretary said you are on a mission recently. What was the purpose of that . What did you achieve . It was to develop production the production costs. When are you going to get we are at that level now. The production for october . 1. 74. Were on track. We have more time to talk to ur neighbors at the company. I thoith angola was complying. Thought that angola was complying. We need to create that relationship with our neighbors. Do you think he is doing a booed job bringing people together . Yes, he is doing a good job. Is there a consensus to ake deeper cuts . A willingness. Hats all i can say. Are they saudis, areow that they are they ready to do deeper cuts . Yes. Yesterday i spoke to yesterday and they assured me that they are ready to what kind of level did he indicate . We didnt discuss levels. He said russia said it is oo early to talk about cuts. Russia and ommitment to opec. Thank you very much. We have one person in the back. Thank you as always for giving us your time this morning. Joining me here from the futures investment summit. Anna. Anna thank you. Thank you very much, manus ranny. Lets talk about the first hour of trading then just to tell you that European Equity markets are down by. 4 this morning. This is the g. R. R. Function that we have on the bloomberg now. You can see any one sector in positive territory. That being listed by ryanair. The share price benefiting from an upgrade. Thats it for the european open. Up next, it is surveillance. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Francine new records as s p 500 hits an alltime high as President Trump says the u. S. Is ahead of schedule. Focus turns to the fed and corporates. Expect an expenses jump. Earnings from googles Parent Company alphabet are hit by the cost of running business and Boris Johnson fails for a third time for a snap general election. He is not giving up. Good morning, everyone. Good afternoon if youre watching from asia. This is bloomberg surveillance. Im Francine Lacqua. Tom keene in new york. Tom, here in europe, there is a little bit more focus on earnings and what the fed will do next. Tom we will see the british story and the constitutional crisis continues. What i will focus on is a huge calendar ahead. Fed day tomorrow. Apple and the american jobs report. U. S. House democrats will try to nullify republican complaints in the impeach identical inquiry process is llegitimate. Boris johnson wont give up. The Prime Minister losing a house of commons vote to call an early election in december. He tice again today with a oneline bill. Johnson only needs a simple majority. The economic downturn in china now rolling into the Fourth Quarter. Bloomberg economics crunching the early data. The chinese economy falling off for the sixth straight month. China is in the midst of the weakest pace of expansion in almost 30 years. In the Third Quarter, alphabets earnings taking a hit. Google runs a distant third in this market behind amazon and microsoft. Lphabet expenses rising 25 . Onbal news 24 hours a day, tictoc and twitter. This is bloomberg. Tom equities bounce, currencies, commodities. It is an interesting market. It is not dead but it is churning after the two big days, friday and monday that we saw. Futures steepening over the last number of days. Oil not part of the story. The vix 13. 27 with a nice 12 handle earlier. There is the close on x. P. S. Yen correlates outs with weaker yen. We get closer to that 109 level. I didnt know what else to do. Francine . Francine tom, im actually also looking at japan but not the yen like you are. Im looking at the yields on japanese 10year bonds hitting the highest since june. It brings me to german bundes which intent a little time on yesterday currently holding steady. European stocks are slipping. There is a lot of focus on corporates. Lets go on to bloomberg. Tom i have a great chart here. I mentioned it yesterday. Didnt have time to show it. I have shown it many times before. Within a quiet day on the brexit front, francine, is there a vote today . Francine yeah, there is a vote. We know that Boris Johnson will try to get an election by every mean that he can. He is trying to pass a bill that would allow a simple majority. Tom how about the shot of john major, the cloops sterling. We go down to the lehman low. Were in this range granted with the Boris Johnson lift that we have seen over the last number of weeks and months as well. Right now, extraordinary equity markets. Linking them to a Central Bank Meeting of the united states. Peter, good morning. Our record highs in the stock market enough to derail the tone of the press conference or even the fed decision tomorrow . Peter no, tom. It is the decisions but it is making life more difficult for powell in interprets of communication. The rate cuts have been a precautionary measure against any downturn. The stock market is the opposite. Things are looking great. I dont think it will change the nature of the decision because i think a rate cut is pretty much baked in but after, it is going to be more difficult. He will be caught between what the market is doing and what the president wants him to do. Tom folding it into the equity markets as well, im sure in your Commerce Bank daytoday, youll run into somebody who is gloomy. What do you say to the gloom crew . My initial reaction is i have a lot of sympathy with them. I have to say that the one thing which i tend to say, a lot of the things which we talk about in our daytoday fundamental analysis of markets no longer apply. We really have Interest Rate where is they are now. Companies like making pretty decent profits over the course of the last two years. I think it is telling us there are fundamental changes in markets which means some of the old metrics just dont apply. This is the real tech evolution. Fundamentally, there were lots of negatives but equally you have to look on the fundamental Positive Side as well. Francine what kind of earnings season are we seeing . How much is focused on cost cuts and visibility for the future . Peter it has been pretty good terms of the headline numbers. It depends sector to sector. Primarily cost cutting. In a lot of other areas, we have decent top line growth. Another feature we should take account of is the fact that the guidance in the Fourth Quarter hasnt been particularly stellar. That is telling us were a little bit cautious about the prospects for the Global Economy going depaurd and we have seen the i. M. F. Downgrading their estimates about g. D. P. Growth. And where the u. S. And china are going despite the fact going to a re trade. I continue to like tech. Even though i think it is probably going to, you know, turn over at some point. It is a wave you can ride for a short period of time. Some of the numbers last week were not fantastic but i think there is still more to come there. Francine thank you so much. Peter stays with us. Lets get a check on alphabet shares. Company dented by heavy spending on their Cloud Business. For the moment unchanged but ell keep a close eye on alphabet. This is bloomberg. Youre watching bloomberg surveillance. Aramco will start trade on the Saudi Exchange. The government owned oil giant netot commenting on their come for 2018. It is the most profitable business on the planet. B. P. Beat estimates. A Strong Performance at its refining division. Kurbed production. B. P. Cut costs and boosts in the cash it generates. They post toed their First Quarterly profit. Today investors are bracing for a selloff. Investors will final will by allowed to cash out. Francine thank you so much. Alphabets profit took a hit from heavy spending on its Cloud Business. Net income for the quarter was just over 7 billion down from over 9 billion a year earlier and below expectations. Expenses jumped sop 25 on the year. Joining me now is alex webb and peter dixon is still with us from commerzbank. What do we do with alphabet . Not too bad in terms of advertising spending. They are spending so much on clouds. Will they actually make on cloud, will they actually make a dent . Amazon increasing their spending on cloud. Google is attacking that space. They have a new c. E. O. At the Cloud Business who was pinted in the past year. We saw microsoft with a contract in this space. We can see that the tension is heating up. They do invest heavily in this space and accelerate the growth there. Isause of the heat, google overly dependent on search and the and advertising for its revenue then it accuracy huge issue when regulators really do crack the whip and say it needs to be looked at more carefully. Francine we keep saying alphabet, the Parent Company of google says we are going to keep spending because we can grow market share. How much time do we have to show they are doing the right thing . I think that has already happened. You think about the fact that google has annual cloud revenue of 8 billion. They are lagging significantly. Thats why google is investing now. Thats why they are making acquisitions. They did a 3 billion acquisition last quarter in the cloud space. Investors already are impatient. It is a high margin business and to that end, investors may be cutting a bit of slack but they are already being quite critical on demanding change in that place. Tom youre going to see me make a chart here in realtime use i have alex webb im going to do this chart in realtime. What you just said is so, so important which is to compare and contrast to amazon and to apple as well. They are already contrasted. The purple line is amazon. Apple is the red line and google aint happening versus the x. P. X. As well. What is the pressure daily at google to catch up to amazon . To catch up with apple . It has to be immense. Right . Look, google is still a growing stock but it is overly dependent on one part of its business. What we have seen from amazon almost by accidents, they have diversified into this cloud space and realize it is a huge cash cow. Meanwhile with apple, they realize they are too dependent on the iphone. Rever knewof their at one stage. They have diversified into services. Now they are away from search and into cloud and also device. Lets remember the devices are there to feed the core business, feeding them more data which gives them a better picture of you as a consumer and better ability to target ads at you. That is closing that loop is what google is working on and they have a long way to go. Tom the secretive nessor google. They seem to be not nearly as transparent as what well see from apple tomorrow. The iron ji look, on the data front, they are pretty irony is look, on the data front, they dont give a huge amount of visibility to investors on what they are doing. On the product side, when it comes to announcing what is in the next cycle, they are very transparent. They have block posts before the next phone is unveiled, he opposite of amazon. They have apple is starting to give less data and looking at what the opposition is doing. And they are asking why are we giving investors as much visibility. They are not releasing anymore how many iphones they sell. Tom congratulations on your terse essay on the future of the telegram. Well continue on the economy wrapped around the recordized stock prices. Coming up later today, the chief Financial Officer of General Motors this will be an extraordinary story. This is bloomberg. Bloomberg. Tom bloomberg surveillance. Good morning, everyone. Francine lacqua in london. Im tom keene in new york. Fed day tomorrow. It will be sporting. Lets go to the wall now. This is really, really cool. It is always an immense debates. Bloomberg economics has done a photo montage of the beautiful nd the handsome it is im told the fed speck tropical ter. Spectrometer. Raging debate. Dovish. Raging debate. On and on. Ill take the point. Esther george of kansas city. There is your debate. This is maleableover time. John joining us on the desk with peter dixon. They dont do this at the bank of england, do they . Is the bank of england more civil in its process of raising and lowering Interest Rates . I dont think they are as bad as the fed. The fed they have much more kind of public displays of views being done. People making speeches or indeed being interviewed by you. Tom Charles Evans with me. Francine, save me here from the editor in chief, please. Francine we want to talk about u. S. Politics actually and the crossover between what the fed can or cant do, with interference, President Trump continuing to talk about the fed not doing enough and the impeachment process. What will drive markets in the next couple of months . I think at the moment, the markets dont seem overly worried by impeachment. They seem more concerned about trade and frankly more about brexit than they are really about impeachment. However if impeachment becomes serious then you could see that will make a big difference. If something worse were to that would ump, cause the markets to change. Francine in 2020, there could be a president Elizabeth Warren. That would mean a very different u. S. Economy. It would. It would mean the kind of economy which would be more problematic for the better off almosts of u. S. Society. We have heard stories over the past few days of analysts suggesting we could see a collapse of 25 in the u. S. Stock market if we got her as president. That sounds to me like a bit of a stretch. If we were to get a warren presidency, it would be a slow process and take an awful long ime to turn things around. It would pose risks for the markets but there is a lot of things to disentangle there. The economy is what we are looking at. The interesting thing about warren is the china relationship. I saw a chinese official and they think she could be tougher on them on trump, certainly on human rights which doesnt seem to be particularly at the front of his mentality. Any bit they gain with warren they think is pribblettability. Om does the election affect fed policy . 2020 . Go into does fed politics adapt to those meetings . Welling it shouldnt but that is how it works these days. To an extent, i look at the way trump has been banging on with the fed about wanting to ease policy as part of the 2020 preelection strategy anyway. In that sense the fed is being brought into the game and to the extents Interest Rates are cut significantly, it already has been influenced. It is going to become more difficult as we go into 2020. Unless economy tanks, my guess is that a move for the fed cut is difficult. That is going to make life interesting if mr. Trump continues down this track of bashing the fed to cut Interest Rates further even though the economy is holding up. Francine if they think actually they are going to get it more difficult under Elizabeth Warren if she becomes the democratic candidate and becomes president , does it mean they are desperate for a deal with trump . I think it means they have changed really, a few a couple of years ago they tended to think all of their problems were just to trump. Now they have faced the fact that mo democrat is running on the ticket of be nicer to china. Therefore they are likely to at least get the same from the democrats. Their basic strategy is to try to do a deal over agriculture, this initial phase that were talking about. The truth is none of the underlying issues are resolved. It has to do with the way they are a companies are treated and the way the world is splitting into two systems at the moment. Very quickly. Francine thank you so much. Both of our guests stay with us. Coming up, manus cranny will be speaking with the chairman of mahindra. Catch that interview coming up in the next hour of surveillance. They will talk trade and supply chains. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. Netion of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Good morning, everyone. Surveillance, lets go to the first word news in new york. Viviana a u. S. Army officer raised flags about president Donald Trumps call to the president. He testifies before house committees leading the impeachment committee. He says he reported his concerns to the Security Council lawyer. In california, wildfires burn bright and hundreds of thousands are in the dark. Manywill cut power to as as 1. 8 million people. The biggest of the fires is in northern californias wine country and has destroyed almost 100 buildings. The ceo of boeing will tell two congressional committees they made mistakes on the 737 max 8. He is the First Company official to publicly testify on boeings role in the crashes that killed 346 people. Congress alleges they withheld key Safety Information before the crash. Of coins minted to brexit will be melted down. The chancellor of the exchequer announced plans to engrave the date on the coins but put it on hold when it became clear there would probably be a delay. 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. Hurtado. Ana this is bloomberg. Francine thank you so much. That is what you call collectible. I wanted to get it for you for christmas, but they are no longer in production and they are melting the old ones. To u. K. Government is open an amendment for a december 11 election. The date we were 12th was. Old was the 12th or the ninth Boris Johnson lost that vote in parliament. There is another way of going around it, only requiring a simple majority. Lets get back to peter dixon of commerzbank and John Mickelthwait, to talk about brexit. Tom has great charts looking at sterling volatility and cash yields in u. K. Assets, but what does it mean for voting in december . John very unusual. Francine if you go too close to christmas, there are christmas plays in the schools where we vote. John things to do with schools and colleges, but the liberal democrats want to do it well there kids in college so they can round them up. On the one hand, the liberals wanted the ninth, the conservatives wanted the 12th, and they might compromise on the 11th. There is schoolyard bravado about it with both sides saying, i do not i want to fight and when they get the chance they are going, maybe not. They each have good reason to be nervous. Extension,e have an january 31. At looks like the only way out of this for Boris Johnson is to change the arithmetic in parliament which means a general election. Peter it appears that way. On oneument as he was side when he came into the process and now he is not. There are risks on both sides. It appears from running the numbers through a spreadsheet, basically, the conservatives will come out of this election as the largest single party. Whether they can gain a majority is the question. We may well get back to where we were in 2017, which was nothing. Tom the headline coming out with what sterling has done, 1. 2814. A little drop in sterling as well. When we look at this election, i am thunderstruck by the collapse of the labour party, the Sharp Division of the leaders below mr. Corbyn. For the five plan weeks forward . John many would say if the labour party was led by anyone else other than Jeremy Corbyn, they would be on the cusp of a landslide because the conservatives by any measure have not been a particularly efficient party in government. Jeremy corbyn is very far to the left. If you took all the things Elizabeth Warren talks about, you would be halfway towards Jeremy Corbyn. He is a tougher ask for the british people. Part of the gamble going on on the labour side as they are worried that he is not electable. The liberals think he can take votes away from the conservatives. Boris johnson has a big risk that he is likely to lose a lot of seats in scotland and in the south, the liberals, because a lot of people i have known all my life who have voted conservative this time say they will not vote for him. It is a difficult gamble. Tom this is a delicate question and i say this with Great Respect for your heritage in the United Kingdom. There conservative party, is an understanding there are newspapers that can guide the conversation. Is there an equivalent for the labour party, and institutional zeitgeist that can move them forward over the next five weeks . John i think there isnt. The conservative papers, you tend to have the daily mail and the daily telegraph. You normally have the sun, although that famously went towards blair. You have the guardian and the areor, and both of those somewhat supportive of Jeremy Corbyn. There is no real sign of institutions. Isthe end, Jeremy Corbyn driven by the members. It is working troops of the labour party, members of the labour party to explain why he is still there because the mps who would dearly love to get rid of him know that if there was another election he would likely rob home the labour leader. Francine the market was wearing him out with a no deal brexit. Could it potentially on january 31 . Hasr and no deal brexit not been taken off the table, just postponed. We have rolling cliff edges. The markets will remain cautious. Rightly so. For the moment, they are taking their cue from what is happening elsewhere, perhaps in the united states. January, we could go through this again and again. Francine do people around the world ask about brexit . John weary fatigue. Even in europe, things have changed. Obviously britain is part of europe, but in the mainland, there used to be a time you went there and saw people who really cared about written staying inside the European Union. Britain staying inside the European Union. Now there is fatigue. Element atthe the element of, lets get this sorted. Francine a little fact for international viewers, if you get a new passport, if you renew a passport, you do not get the European Union on your british passport. Saudi aramco telling its bankers, ipo bankers, it made 68 billion first nine months of the year. That would cement its position as the most Profitable Oil company. We had some news around aramco saying they would start listing in the Saudi Exchange on december 11. I dont think i came from aramco. Of 68get the idea billion nine months forward, but there is no ratio analysis. The size of aramco, what those profit ratios are, that is a mystery. Francine we will keep on top of it and try to figure out who will buy it or not. Would you be looking out aramco . Peter we have been waiting for a long time and we are edging toward it. It is still a very opaque company. It will do fine. Road,a long and winding which hasnt led anywhere so far. , the main worries issue of how much the government will take of the revenue. There is not much doubt aramco is a wellrun oil company, but the issue is where does the cash go . Francine we will have plenty more on aramco. Peter dixon and John Mickelthwait stay with us. Up, the ubs Wealth Management Global Investment at 11 30 a. M. London. This is bloomberg. Surveillance, a headline out on a december 11 maybe election in the United Kingdom. Fed day tomorrow, jobs report on friday. If you have an article, you better have pretty pictures with it. The team at Bloomberg Economics deliver the goods, looking at disruption into 2020 by generating the pictures that tell the story. Scott, good morning. What is the one photograph or image out of your disruption report that matters . Scott good morning. I think if you look at the main scatterplot, drivers and disruptors. It is good to step back from that. , the about the old rules old assumptions of economic development. Countries might go from poor to trade, improving the business climate, invest in infrastructure and education. All of that is still important, but it is not enough. Policymakers need to have good response, really an early response to some of the Disruptive Forces shaping the Global Economy. What we have done with this report is highlighted looked across 114 economies, benchmarked them on traditional markers of growth as well as Disruptive Forces like autumns asian and autumn strange word technology, we look at it what is the new gizmo on the iphone. 10 emerging markets catch up on technology, or is the developed world too far ahead . John that is a hard question to answer, and that is what this report does. What is interesting about it is the first work i have had very little to do it is the first work i think looks at these new things, not just digitization but protectionism and events like that. Some countries do very well, emerging countries were doing very well under some old world ideas which scott was just talking about, now do not do as well under the new ones, like china. There is the big issue where emerging countries can do a leapfrog. You saw it in african countries with mobile phones. You may be seeing a little bit with china and climate change. Francine it is a great piece of work with many graphics. I am pulling it up, and it is interactive. It is across the bloomberg terminal and bloomberg website. How much does this play in the trade war . How much is this President Trump saying these countries are rising and threatening america and i cannot let that happen . Scott protectionism is one of our five Disruptive Forces, and this is an area where you look at the averages, a lot of countries might look good and be wellpositioned on traditional drivers of growth. Protectionism for many economies was a big source of risk and the one that pops out for may is vietnam. They have a trade surplus. Many thought vietnam might follow in the path of china, and that could still be true. With rising protectionism, there is a risk that trade flows could be blocked and vietnam will have to find another way of developing. Francine what does this mean for the new global order . Are we realizing massive shifts . John the new global order is really getting complicated. A the old days if you are manufacturing company, you could count on the global world where you could make things in china and export to america. I was in indonesia a couple of weeks ago. Indonesian Business People are saying,ng up by people vietnam as full, can we come to indonesia . One good thing is asia is beginning to make things for asia, which is very interesting. They are no longer seeing themselves as a feeder for the west. The bad thing is any sensible big company is looking hard at an economy in which the manufacturing system relies on things to get from asia to the americas, and there is too much protectionism for that to make sense. Thank you both, scott johnson. Our editorinchief, john, stays with us. A great week of banking interviews. Do not miss the Credit Suisse Ceo Tidjane Thiam and the cfo ceo asered well. We will have an exclusive interview with the Santander Ceo cfo. This is bloomberg. Viviana this is bloomberg surveillance. Bloomberg conducted the biggest survey ever of tesla drivers and found the electric car maker finally figured out how to deliver cars with fewer problems. Tesla cut the rate of defects nearly in half. The most common complaint dealt with pain paint and gas. At t unveiled its at t max training service. They announced a collection of old and new programming, but there is one detail missing how much hbo maxwell cost. Well itl determine how does against other rivals. Tom cannot wait for the next season of game of thrones. Chart, John Mickelthwait with us. This is a really cool chart and the way this happens is the mickelthwait world staves me. Justin carrigan in dubai yesterday. There is the argentinian peso with log weakness out 15 years. The blue line is the black market. That is an approximation of the black market, so what you have got his actual, quotable peso, and in the kershner regime you have a black market that takes off as it did yesterday and lifts up nicely. It is a question of populism worldwide in a world turned upside down. Is it just because of tepid Economic Growth . Do we go back to a terminal value of Economic Growth that is simply politically not acceptable . John that is some of the more frightening words in the bloomberg. Tom keene will show you a chart. That is an interesting chart and it says a lot about the problems to do with the kirchners and what happens to populism in argentina. There is Something Interesting going on in the world, something odd to do with little bits of populism in latin america, latin america attending to be in the head. There are people going in the streets and getting cross about things. It is a bit due to the tepid due to and probably more the sense of unfairness and inequality, which plays heavily in the developing world elections. We were talking about the british elections. That too could be a factor. From aohnson comes privileged background. Places like chile, we never thought it would be like this. Argentina has had a checkered history. Francine does it matter to economies if it is a hard left or hard right . John at the moment, the difference is very little often. It must matter in the end. In the end, there is the difference between one group tends to be very authoritarian and populist in terms of trade, but in the front has a probusiness agenda. The other side is coming more against business. Francine will argentina be a poster tidal for latin america poster child for latin america . John it is something the rest of latin america has gradually learned to avoid. Argentina is the great tragedy of latin america. It was one of the most developed and prosperous countries in 1908 and now it has sunk to where it is, largely due to different routes of populism. Populism. F argentina is a poster child of disastrous. Can be. In, john from milan emails can you ask about liverpool. Do you just give the trophy to liverpool . John leicester still has the momentum. Tom thank you so much, John Mickelthwait with us, in celebration of a new report from bloomberg. It is a terrific report with spdr charts that show some of the dynamics nation to nation with technology and innovation. Congratulations to our team on that. The u. S. Date calendar, extraordinary. Earnings and a fed day tomorrow. On to the jobs report, scarlet fu leading our coverage at 2 00 p. M. Tomorrow as well. We have moved forward the conversation, a perfect time to speak to russ costa rich of blackrock russ costa rich blackrock. Of london, a potential election december 11. Good morning. Tom this morning, what will the fed do . Pricedes into equities at record highs . Why not save the gun power . What will apple do . Earnings tomorrow, technology dominates the market. Technology dominates our lives. What will mr. Corbyn do . Talk about the loan. It alone. A constitutional crisis in britain. This is bloomberg. December 11, is it a done deal or under debate . Francine it is far from being a done deal. It could be december 9, december 12. Practically, i dont think the u. K. Has ever voted in december. Practically, you vote in schools and the closer you get to , you do not have schools available. Support for aet general election so we will see if he pushes for a simple majority. Tom this is about the school break, get the election in until the kids go home. Centrists andor liberals. Onuge day of news, jobs day friday. Decides, we will do that tomorrow. You need a tuesday briefing with our first word news. Willna House Democrats try to nullify republican complaints the inquiry process is illegitimate. Aey will mark a transition to more public phase of the investigation, including public hearings and the release of information gathered in private. Boris johnson will not give up trying to force a british election. He lost a house of commons vote for an early election in december. He would change the date to december 12. Johnson only needs a simple majority. The economic slowdown in china rolling into the Fourth Quarter. Bloomberg economics reveals the economy cooling off for the sixth straight month. Ore, andrices, iron copper are all getting worse. They are in the midst of the weakest expansion in almost 30 years. Alphabets earnings taking a hit, dented by heavy investment in googles Cloud Computing. Google runs a distant third behind alphabet and microsoft. 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. That was perfect on the revenue dynamic versus investment dynamic from google. Tomorrow, we will see that from apple. Equities, bonds, currencies, commodities, pull after friday and monday, big days, curve steepening. Oil does not play. Handle, 13. 37 on the morning pullback. Grinding,ting slowly, grudgingly out twoway 109 level level. To a 109 i want to show a bloomberg and the relative basis of the United Kingdom. This is john major 1992, the lehman moment, and the weakness of pound sterling. It is extraordinary to see we are in that range. We have seen Boris Johnson with a little bit of a lift over the last weeks and months, but the heritage of a britain economically and on the currency basis, besieged. Francine i have a great chart looking at cash yield in the u. K. , which has risen. An interesting dynamic if you put it against brexit. European markets are down a touch. I am looking at pound because pound is the one that will move if we get early election. Highest thank you to hilary clark, u. K. Equities slightly above 6 . This is higher than the european or u. K. U. S. Cash yields which stand around 4. 5 . If you look at brexit and what that means for investors, interesting. Tom geopolitics, international economics, everyones head is spinning. It is an unusual time and time to go with the gentleman with one of the most interesting resumes, with history in the law, and mba, and cfa as well. Russ koesterich is with blackrock. Why are stocks higher . Russ because the economy is in decent shape. Earnings are still doing relatively well. With 15,no competition 16, 17 trillion of the global bond market trading in a negative rate. Tom in the last 90 days i have seen a new understanding of an inertial force to a terminal assetthat rstar, across classes, of lower rates, lower gdp, flip the reciprocal, up go equities. What is the downside . Russ eventually the valuation can get away from you. One of the reasons Growth Stocks have led so consistently this recovery is these are longduration assets. We keep taking the discount rate lower and lower. Francine what will change . If you look at earnings going forward, is that when we hit a snag . Will they continue cutting costs or will the economy hold steady . Russ i think it will hold steady. We have talked about earnings taking a pickup hiccup. Some of the things people were worried about, margin compression, there has been a bit of that but not as much as people thought. Secularn ability of the worlds and health care on the consumer side to keep growing cash flow even in a modest growing economy. Francine where do you see value, sectors or countries . Russ in the Global Equity market, stocks are fairly valued. If you look at a broad measure, europe, japan, emerging markets, stocks do not look that expensive against bonds. In the u. S. Market, a premium, absolutely, but you have a different sector composition and better Earnings Growth. Of somewhere in my pile newspapers is the guy on the death star, from pimco. And pimcoyield down, is scared stiff. A two, three standard deviation decline in price. I dont sense that from blackrock. You guys are not worried about getting boom, a price lower in fixed income. A bond market selloff. Russ can the u. S. Tenyear back at 2 . Absolutely. We are in this place because of low nominal gdp, secular demand of bonds for bonds in an aging population, and putting a cap on longterm Interest Rates. That of those conditions has changed. Tom there is the fear price will move, equities will go down. How do you sustain confidence to clip a coupon, to wait for the next Dividend Growth round . Down,p because of another growh scare. Policy,it is because of stocks and bonds have been negative court negatively correlated. The question is where is it coming from . Is it coming from inflation . Is it coming from a pivot in Central Bank Policy . Central banks have pivoted towards greater easing, so i would ask the people of the death star, where is that bond market crash coming from . Francine there you go, personality. We will get back to Russ Koesterich of blackrock. We are live at the teacher where manus cranny will speak to anand mahindra. This is bloomberg. Viviana aramco will start trading on the saudi arabia next change on december 11 according to their Television News channel. In the first nine months of the year, they earned 68 billion dollars. That cements its place as the most Profitable Oil company. Shares of beyond meat falling in premarket trading. Today, investors are bracing for a selloff, when early backers of beyond meat will be able to cash out. That is the Bloomberg Business flash. Francine we turn to saudi arabia where manus cranny is standing by with anand mahindra. Thank you so much. Future Investment Initiative 2019, capital, politicians, businessmen coming together in riyadh. Anand mahindra, welcome to bloomberg. Another one of your countrymen described the slow down in india as something which is slight. How would you describe the state of the Indian Economy . Anand i am the terminal optimist, so i will say there was a slowdown but happily, sales are picking up and consumption is picking up. We have a major festival coming up. Think about christmas. Two weeks ago, i would say ask me later. Good. Sales have been very we are up and double digits. Manus talk about what you do with production on the car side. Have you had to cut production aggressively over the space of the last 10 months . Anand we did have more nonworking days, as we call them, and we were cutting excess inventory. Companies now have in a sense sanitized their pipelines, and a great deal of hope about the season from now on. Manus we talk about the global slowdown and the imf says it is growing at the slowest pace since 2008. Has that become a reality in your business . Anand it is almost like the tale of two cities. Our domestic businesses are fairly insulated from the Global Economy. The global slowdown causes a drop in commodity prices. Most Car Companies could possibly gain from a reduction in commodity prices, but a lot of our businesses are now global. We own a korean car company, Tractor Company in turkey. We are not completely insulated from a slowdown, but it is different. India has its own set of challenges. The global slowdown has affected our international businesses, but it is a different story in different models. Manus do you need to see a trade deal between the u. S. And china to materially change your thinking . Anand i will Say Something controversial. India is a beneficiary of trade tensions around the world. Let me give you an example. Secretary, i remember her visiting us in india and saying if india joins in multilateral trade they will be left out. There was the risk, and when america scrapped the tpp, suddenly we are back in two lay. If we were back in play. India,arge country like which is a market Everyone Wants to get into, we have a tremendous amount of clout in negotiating bilateral deals. I hate to admit it, but the more tension there is outside, the more leverage india gets. Manus if we have a brexit in the United Kingdom, just do brexit and a small snapshot. If we brexit and go to small trade deals, will that be a substantial relationship between india and the United Kingdom . Anand you know the history of india and the United Kingdom. We have forgiven our formal colonial former colonial masters a long time ago. If there is a brexit, what do you think the new u. K. Will do . Reach out to large economies like china and india, an engineer direct, bilateral deals. India benefits. Manus climate change, you talk about it often. What scale have you invested and where is the best opportunity . Anand if any one of the members want records. Manus i do. Anand i have been saying ad n auseum, lets stop whining about the threat and spouting cliches about our grandchildren. Business needs to understand this is the biggest Business Opportunity over the next few decades. I am not saying it because i am callous. I am trying to say it as a better chance of getting cured if you use it as an investment opportunity. Manus where were the best opportunity be . Anand solar ways to energy. Byhave turned water positive buying a micro air gauge and system. It is endless. Find. One wants to go in, we will look at the opportunities and you can come in later. Manus thank you for joining us, anand mahindra. A little bit controversial in terms of, stop talking about climate change, do something. Tom greatly appreciate that. We have much more coming up, not only looking at the markets and economics, but on the pulse of retail. New chief, their executive officer joining on daybreak america, cheryl miller. This is bloomberg. Good morning. In your case, dear mario, these are so well known. I have committed to staff not to say the famous three words. [laughter] francine Mario Draghis successor, Christine Lagarde, who takes the helm at the ecb on friday. For a lot of people who have been following mario draghi, you wonder how Christine Lagarde can do it differently. He had promised to do whatever it takes and in some accounts delivered, but the council is divided and a lot of people are saying with a divided Government Counsel that ecb Monetary Policy is less effective. Tom that bell is for hitting the bundesbank over the head. Lets have a lot more on brexit. Brexit came out in the last couple of minutes with various reports that the bill that will be voted on, the simple majority on december 12 is still the date. There were questions about whether it would be december 9, 12th, or 11th. Still with us is Russ Koesterich. What do you worry about more, the end of monetary tools for the ecb or brexit . Russ the latter. In terms of the ecb, it is a smooth handoff. The big question about europe is much less about Monetary Policy and can europe have a more coordinated fiscal policy . Growth. , that will lift francine what does brexit mean for investment . If we dont have no deal off the table, which we dont because of the elect extension, is there a danger that markets freak out about no deal . Russ there is a danger. The issue with brexit has always been the possibility of the u. K. Crashing out of the e. U. That risk has gone down. Most investors do not expect a hard brexit. If they put it back on the table , that creates a risk off scenario. Tom blackrock has a shop near deutsche bank. What do you see in the city of london . Have we done away with attractive economy and . The question is how will the u. K. Manage the exit . I was in europe last week, and some of the fear about a tail risk, the u. K. Crashing out of europe, there is less concerned about that than a month ago. Tom is it a recession europe . We had a wonderful conversation with aberdeen standard yesterday about these islands of around lousy Economic Growth. Russ i was in germany last week and he said this. The challenges which we found ,ut in 2016, much of europe particularly germany is levered to chinese manufacturing. The slowdown in china creates a headwind for the european economy, particularly the Manufacturing Sector in germany. Francine Russ Koesterich stays with us. Coming up on Bloomberg Markets, hans reddick are will be asked about pound and brexit. Also look at dollar. This is bloomberg. The game doesnt end after that insane buzzer beater. Because with Nba League Pass on xfinity you can watch the out of market games you want all season long. And with the allnew xfinity sports zone, you get everything nba all in one place even notifications about your favorite teams. Watch the dropped dimes, monster blocks, and showstopping dunks. Plus get instant access to your teams with the power of your voice. Thats simple, easy, awesome. Say Nba League Pass into your voice remote to check out a free preview. Dont miss out. Surveillance, Francine Lacqua in london, tom keene in new york. A beyond eventful week. Our fed special tomorrow at 2 00 p. M. , scarlet fu leading our coverage. I think ira jersey will show up. He was terrific on this repo debate. Right now, we trust you will enjoy our first word news with viviana hurtado. Viviana a u. S. Army officer says he raised concern about Donald Trumps call to the president of the ukraine. Today, he testifies before three house committees leading the impeachment inquiry. He says he reported his concerns to the Security Council lawyer. In the state of california, wildfires are bright and hundreds of thousands are in the dark. Pg e will cut the power to as many as 1. 8 million people, the latest in a series of unprecedented power cutoffs. The largest wildfire in wine country has destroyed almost 100 buildings. The ceo of boeing will tell two committees they made mistakes on the 737 max 8. He is the First Company official to publicly testify on their role in the crashes that killed we hundred 46 people. One member of Congress Alleges they withheld key Safety Information before the crash. One of the casualties of the now date,te october 31 brexit coins will be melted down. The chancellor of the exchequer announced plans for millions of coins to be engraved with the date, but production was put on hold when it would be was clear there would be a delay. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom bloomberg surveillance has tried to do the blanket coverage on impeachment or not impeachment as carefully as we can. Part of that process is the daily news flow. This president goes off to chicago, at Andrews Air Force base in the backdrop. Here is the president of the united states. To have timeeem for nancy pelosi. I call them the donothing democrats. They are the donothing democrats and if they put it up, it will win very easily with bipartisan support. I have no idea what they are doing with it. I have no i cannot imagine it takes this long, but they are so busy spoke at busy focusing on a witch hunt. Tom may be this is all that is left that could get done in washington, and this is in doubt. All of this turned on its head by the report of a colonel who was on that phone call. Say this testimony from the lieutenant colonel, the native ukrainian, the it is key because he was on the call . Kevin it is key but it does not change the trajectory of the votes with regards to impeachment. Ultimately, by the end of the year or the First Quarter of next year is where the timeline has moved along, you will see something develop with regards to a vote. Nancy pelosi has said they will hold a house vote on thursday that formalizes the whole entire process, so you will hear or overseas,ngton a lot of impeachment chatter, but that is not a formal impeachment vote. It is a formal step in the process, but by no means articles of impeachment. Tom the process is the houston peaches and moves to the senate. If we get impeachment, what happens the next morning . Kevin all talks are to the senate and mitch mcconnell, and how and when and where the trial to convict would happen in the senate. Candidly, the votes are not there in the senate, which is why so much of the talk in washington is that this is a political matter. Francine what are the polls telling us about the democrats and who they are likely dust there likely nominee is there likely nominee is . Kevin joe biden maintains a inge national lead, but early caucus states like iowa, Elizabeth Warren is well ahead of joe biden who is not second or even third. Mayor Pete Buttigieg has surpassed joe biden in some iowa polls. In new hampshire, Elizabeth Warren also does well. Joe biden will have to wait until South Carolina and that is a tricky political gamble because folks will try to get momentum in early primary states. It is between biden and warren and standards sanders and to some extent, Pete Buttigieg. Tom kevin cirilli, thank you. With us, Russ Koesterich of blackrock. How do you synthesize all this politics into having confidence in the markets . Russ the market is largely ignoring it for a couple of reasons. It is unlikely the senate will vote to convict which even if the house in peaches, this is a political issue, not an economic impe in peaches, aches, this is a political issue, not an economic issue. You have a binary set up next november about the choices we will face and what that will mean for the economy and markets. Thingne what is the one that you would be watching out uneasiness with what the fed does next . I dont know how many insurance cuts the u. S. Economy needs. Russ we think the fed will go this week and from then it will become data dependent. We are seeing some stabilization in the data and arguably, you might got you might not get another cut. I dont think the stock market rally is completely dependent or dependent at all on another cut in december. Tom what do you see in flows at blackrock . Russ we are still seeing a lot of flows into the bond market. Part of this is secular. Tom high yield, high coupon. , a lot ofstment grade flows into generic duration. Looking for a hedge against equity risk. Bonds are doing one thing, not giving you much income but giving an effective hedge with equity markets. Tom that is baloney. What do you mean . Russ you are getting the benefit of having a higher than normal equity weight, but still able to control your risk because you are getting convexity, when bonds go up when stocks go down. That will give more balance to the portfolio when you have cash. Francine when does that would need a change inu the Central Banks reaction function. We would have to go back to early 2018 when the fed was consistently hiking rates. What could change that would be a pickup in inflation. We think inflation firms a little bit but we are not seeing the evidence that it will take off in a way that scares the fed. There are all of these secretary of Secular Forces from technology to changing patterns that are conspiring to keep inflation not only low but very stable. Francine coming up, a great week of bank interviews for you on bloomberg. Wednesday, tidjane thiam. Charteredhe standard ceo. Santander, bnpom paribas, and ing. This is bloomberg. Bloomberg surveillance. Single best chart, Russ Koesterichs with us, telling us about an equity market that will sustain. Talk abouty, we will this in the 9 00 hour at bloomberg radio. There is a difference. We forget about this. I do not agree that you lump the faangs. Amazon with a concerning pendant. These are each and every different company. Paul when people talk about the faang stocks, they talk about the Fastest Growing areas in tech whether it is Cloud Computing or search or social or a disruptor like netflix. Those have been good stories for investors. They are each different companies, different drivers, but what investors like about these names is Topline Revenue growth and they drop it down to the bottom line, which may be some of these erstwhile ipos do not do. 15. 5 oogle has delivered each year for the last 10 years, great, but is there an urgency to catch up with shareholder excellence of amazon and apple . Paul there is, but it comes down to investment. That is why we saw investment and expenses higher than expected in the quarter for google, causing them to miss their expectations estimates. Search,including mobile and the Cloud Business, that is where they are trying to play a catchup game against amazon and microsoft. Amazone how afraid are because of what alphabet is doing, and how much time does alphabet have to make a dent in the market . Otherwise, does it need to give up or scale back . Paul alphabet is the number three player in the Cloud Business, that is the bad news. The big players are amazon and microsoft, wellestablished companies. The good news for alphabet and others is the cloud is a strong secular growth story for the next 10 years. There is expectations that there is room here for several players to generate strong returns in the Cloud Business. Francine what is your take on technology . Russ generally, we like technology. You can generate topline growth and the margins remain. This is an interesting question going back to the questions of policy, potentially the reason apple has done so well this years if you think about what 2021happen in 2020 and when there is regulatory risk, apple seems more immune than facebook or google and that could account for the difference. Total of these 940ploy juggernauts is thousand. Can we say those jobs shifted from the beleaguered parts of the economy to that . Russ what is happening is you have lost jobs and a lot of industries, including manufacturing and retail, and have created jobs that did not exist. Tom do you agree with that . Do you buy that idea . Paul we have seen amazon grow and you think about the warehouses and Fulfillment Centers across the u. S. Those are employing a lot of people. On the technology side, where we see growth in headcount for facebook and google, it is on the High Tech Engineering Computer Science jobs that are driven by immigrants and the h 1b visa folks. Francine what will regulators do with these Big Companies . Tom is right that we cannot lump everyone together, but the faang stocks each have regulatory problems. Paul the regulatory overhang for this sector has really increased. It is probably most problematic for some of the companies that touch consumers on a daily basis like facebook with social media and privacy issues as it relates to the election, a little bit on google, less so on amazon and apple. Tom i want to rip up the script. We will talk about this on bloomberg radio. Kills it. It merck they do the high investment juggernaut thing there. 15 , and sales were up of course that is growth driven by cancer and human health and all that. Even pharmaceuticals giving is better than good numbers. Paul some of the Big Pharma Companies that have the right therapies and drugs and the right sectors of the market, and merck is right there was some of their profits. Strong numbers raise estimates. Tom you and i were weaned where old conservative companies would go out and buy a Biotech Company which they could write off three years later. Are those days over . Is it like the Airline Business where there is a new cadence . Paul it seems like every monday, there is another Big Health Care or biotech deal. Some of these companies play dual tracks. They are still active on the m a front but still invest in r d. Tom this goes back to the original conversation on the gloom and pushing against it. Corporations adjust. X numbersin the tank of years ago and this is extraordinary earnings numbers. Corporations adapt, dont they . I think the one thing you have to say about the corporate sector in the u. S. As they have done a very good job, whatever sector you look at, navigating a slow growth economy and maintaining margins. Tom we are getting the detail out to you on bloomberg television. Russ koesterichs with us of sweeney and il will meet up again at 9 00 to drive through the earnings. Weout a company havean amended earnings report. We will speak to the cfo of General Motors about an interesting quarter in the path forward after a strike is settled. This is bloomberg. Good morning. This is bloomberg surveillance. We begin with breaking news out of south africa, the government unveiling its longawaited plan to save the debt stricken power utility. They will relink their almost centuryold near monopoly of relinquish their almost centuryold monopoly of the energy industry. Bp posting thirdquarter profit that beat estimate. A Strong Performance offsetting low oil and gas prices. Energy traders did a good job too. If you look at where the oil markets are, we are rate bound between 55 and 65 a barrel. Inre are u. S. China tensions terms of where the Oil Price May go. It is fairly steady at the moment, but the teams have been making good calls around the structure of the market. Viviana shares of bp are down about 5 in the last year. Nintendo has a megahit on its hands. The new mario kart smartphone game has been downloaded 124 million times, taking in 37. 4 million. Nintendo needed a big success. That is your Bloomberg Business flash. Francine thank you so much. Bloomberg has conducted the biggest survey ever of tesla drivers and we found they finally figured out how to deliver cars with fewer problems. They cut the rate of defects nearly in half and the most common complaints dealt with charges. Gas between we spoke to 5000 tesla owners. What exactly did we find out . Is tesla on a better path . Like tesla is improving the quality of the cars. It is a great technology. The car is just awesome, but building automobiles and bending metal is a difficult business to do consistently well, so there has been some quality issues historically with the car. Once people get past the cool factor, they have to deal with daytoday issues of owning a car. There has been some quality issues, but it looks like they are making progress, and that is key for tesla as they try to ramp up production and do it on a profitable basis. The company has delivered much better than expected earnings this quarter. The stock is up about 30 , but they have to prove to investors and consumers they can build quality cars consistently and deliver profits consistently. Inncine if quality improves 2019, how can we be sure they will deliver . Paul that is a good point, and a lot of consumers are looking for the consistency and quality come to expecte from automobiles over the years. There has been a lot of competition from asia and europe. As it relates to investors, it is one of consistency, can you consistently generate profits on a per unit basis . There are still a lot of bears who do not think this Country Company can do it. You have to prove you can manufacture automobiles at scale on a profitable basis. Sweeney, Paul Bloomberg surveillance, radio anchor. You can catch tom and paul on the radio. Has saidr party, which they will not back in early election, has finally said they will support an early general election. There are three dates talked about, december 9, 11th, and 12th. Sterling, 1. 2846. We will bring you the very latest. Mover in a significant saying it will back an election when no deal is on the table. That may require extra legislation to make sure the u. K. Does not crash out post january 31 when a new trade deal would be sought out between the u. K. And the e. U. Labour saying the election date will depend on any amendment. We will have plenty more on brexit and the pound. Do not forget thedo not forget , 2 00 p. M. New york. This is bloomberg. Whether youre out here on lte. Or here on a wifi hotspot. Xfinity mobile has more coverage to keep you connected to what matters most. Thats because its the only Wireless Network that automatically connects you to millions of secure wifi hotspots and the best lte everywhere else. Switch now and see how you could save up to 400 a year. And get 50 off when you buy any new lg phone. Xfinity mobile. Click, call or visit a store today. Alix no one likes negative rates. Elites descendents out arabia for a threeday investment summit. Ray dalio warns of a scary situation. S p record rally takes a break. Equities pause after notching another record while momentum flags. Oldschool tech leads the way. Pfizer and merck raise estimates with a slew of earnings on deck. We speak to the ceo of autonation and General Motors cfo later in the program. Welcome to bloomberg daybreak on this tuesday, october 29. Im alix steel. Where do we go from here . We are taking a little bit of a pause. Is it value or growth that will lead the way . Eurodollar a little bit on the back foot. The cable rate is definitely one to watch. Exchange,or global where we bring you today