Rp much flat are the much flat. S p futures reporting today. Credit suisses thirdquarter results bringing relief to the banks reputation that was dented by a spying scandal. Bloombergs Francine Lacqua spoke to the ceo. Negative Interest Rates are not helpful to the banking sector. Everyone can see that. It will have to change at some point. Alix joining us from zurich is Francine Lacqua. Walk us through some of the highlights of the interview. Francine first of all, the numbers topline werent bad at all, but if you double down and look at the detail, some investors were maybe a little disappointed on the margin when it comes to wealth. The Global Markets did extremely well. This was a problem for Credit Suisse in the past. Youre seeing a bit of a muted reaction. Share price was down 2. 5 a short while ago because they are focusing on betterthanexpected results in some divisions, but the guidance disappointed. The other big question i tried to press on was the spying scandal. A couple of weeks ago, he was exonerated after one of his employees left for another bank and was spied on. Me basically he was not happy with what had happened, that he had not ordered this surveillance, but that the people who had did it for the benefit of the bank. He doesnt see any huge consequent its of this any huge consequences of this. I think we will have to see in the next couple of weeks how this pans out. Alix at the same time, a lot of other european names reporting. Deutsche bank as well. Turnaround efforts really help by some really hurt by some of the trading revenue. Walk us through the other numbers. Francine its really different if you look at european banks. If you are a spanish bank like santander, you are very exposed to the foreign markets. If you are Deutsche Bank, you are struggling with the German Economy because negative rates are hitting you. Theres one thing thats very clear. The difference between the ones that did well, for example, standard chartered, is how much they will able to cut costs. The ones who didnt perform well where the ones who let costs bloom, thing of hsbc. The milliondollar question is can these european banks still compete with the u. S. . They are dealing with negative rates. Are wequestion, when going to have consolidation, even crossborder or domestic . Of investors have been waiting for this for two or three years. I wonder whether 2020 or the end of 2019 may be a good time to start looking at this again. Alix i think many investors would say yes. Francine lacqua, thank you very much for joining us. We turn now to milan, where Fiat Chrysler confirmed it is in talks with french rival psa group. It is fiats second bid this year to reshape the Auto Industry. Bloombergsow is milan bureau chief. How far along are these conversations . What do we know so far . Reporter we know that the talks between Fiat Chrysler and. Eugeot are advanced it may be as early as tomorrow an offer on the table for fiat. The agreement would include a merger between the two companies. It is the second attempt this year for fiat to merge with a french partner. It didnt went well with renault in early june, following too much pressure with the french government. Maybe fiat has found a real successor who can complete the dream to create one of the worlds biggest automakers. Alix thank you very much. Volkswageneurope, faces bigger than expected decline in the auto market. The markets has been quite challenging. Thats the reason why we lowered to outlook for deliveries customers. Markets around the globe are becoming more and more competitive, and we are a bit more cautious in terms of bubble yield forecasts. Alix joining in terms of global yield forecasts. Alix joining me is michael dean. Walk us through the general malaise. What about the macroenvironment did we learn . Well, the outlook for the Fourth Quarter is very difficult for automakers, with many markets still deteriorating , including china, europe, and the u. S. Results for volkswagen was very strong. Bid againstent consensus. The underlying of Free Cash Flow is still very strong. They generated over 3 billion euros of free cash and the Third Quarter, which means even after nine months, theyve met a target for free cash for the full year of over 9 billion euros. On the margins side of things, they reported 7. 9 , which means they are in a good position, even if they are in a slower Fourth Quarter, to meet the top end of their ebit target. Alix thank you. We want to stay in london now. A day has been set to break the brexit deadlock. The u. K. Will hold an emergency election december 12. The pound gaining following that confirmation. 20 me with the latest is bloombergs emma chandra. What happens until the election . What happens after the election . Emma both of those very good questions. Boris johnson finally winning approval for an early general election from mps and parliament yesterday. Still has to be approved by the house of lords, but that is expected to be a formality. Elections will be held the summer 12th. Parliament will be dissolved held the december 12. Parliament will be dissolved for one week. Brexit is expected to dominate the campaigning, Boris Johnson leading the conservative party on the slogan of getting brexit done. Left wing leader Jeremy Corbyn has a more nuanced approach to brexit, perhaps wanting another referendum, but also important in this election is some small opposition parties, the likes of the liberal democrats, the Scottish National party, and the brexit party as well. They could take votes away from those main parties in the u. K. , and that could tip the balance when it comes to the final result. When we do have the result, if it is a win for Boris Johnson and the conservatives, we should see them go ahead with getting the brexit deal passed in the u. K. Parliament ahead of the new deadline, which is january 31. A quick note on polling, currently the conservatives are expected to take about 36 of the vote, labour 23 , but posters have been wrong in the past. Alix thank you so much. Shares of General Electric climbing higher after the Company Raised 2019 cash flow forecasts for the second consecutive quarter. Brooke sutherland is here with more. Is the worst actually over . Brooke the key thing is that raised key fresh that raised , eliminating the possibility we might see a negative number out of ge. This is a huge shift. They are now predicting better Free Cash Flow performance, which has been a big problem spot for them. You saw better numbers in aviation, which had an uncharacteristically disappointing quarter in july. This is a big positive for ge, but i have some questions about how exactly they get to this improved Free Cash Flow guidance. Some of it is banking on restructuring to get ge to the point of a turnaround. It is unclear how much of this is kicking the can down the road and how much is just that a red performance is just better performance. Alix finally, it is the much watched fed decision today. Markets anticipating a third street rate cut. Joining me is michael mckee. December is the one in question. Where were looking at today . Michael the fed is going to cut rates today because of the markets. There is may be reason for a rate cut. We are looking at slowing growth in looking at rates that are quiescent, but we see the Unemployment Rate the lowest since 1969. The markets have priced in a rate cut, so that is what the fed will do. Its been a long time since theyve surprise the markets. You can see the fed was cutting rates as insurance three times each time. Today we get the third of this cycle, so that is what they look at. Look at growth in 1988. Thirdquarter gdp expected to be a disappointment. The atlanta fed looking at a one point 7 rate. The Bloomberg Economic consensus, 1. 6 percent. That is not 1998. It is going to come up not just for the fed, but during the political campaigns as well, no doubt. Alix thank you very much. We have our special coverage of the fed decides. 2 00. Egins at one other thing we are looking muilenburgceo dennis told a Congressional Committee he cannot commit to a date when the revamped max will get flying again. The aircraft will return to service when it is safe. This is not going to be timeline driven. We are committed to answering every question that regulators have, i airplane will fly when everyone regulators have, and the airplane will fly when everyone is convinced it is safe. That is the most important thing here. Alix airbus has cut its fullyear delivery target and says cash flow will be lower than expected. Still, airbus says through forember, it won orders over 300 planes, versus 170 at boeing. Coming up, it is our exclusive lease with the mana with the Mondelez International ceo and chairman. This is bloomberg. Alix consumer giant mondelez reported earnings after the bell yesterday, beating on the top and bottom line and boosting organic revenue forecasts for the year. Caroline hyde is joined by the mondelez ceo for an exclusive interview. Caroline yes, we are joined by none other than dirk van de put. Wonderful to have you with us. Thank you for your time. Raising forecasts, growing revenue profits. What is the key driver for growth in the Third Quarter . Dirk good morning, and the key for having me. I would say it is a number of things going well for us. We launched our new strategy about a year ago, and we tried to switch from having more of a cost focus to go towards our top line focus. That meant that we started to invest more in our brands, started to pay attention. We have a number of Global Brands and local brands that are both doing quite well. We have a number of developed markets and emerging markets. We were able to have them both growing quite nicely. We started to enter into a number of new channels, launched some innovations. It is a wide spectrum of topline Growth Initiative that we kicked off a year ago, and so far we seem very good results from that. Caroline that strategy of less cost focused, more topline growth focused, is interesting at the moment given the backlash to wework. In no way am i trying to compare or contrast your two businesses, but there is an element that investors focus more on cost discipline then topline growth. We do both, obviously, but i would say in the past, we were focused more on how to drive our bottom line to our cost focused. Drive are trying to to more of a topline growth, which is a healthier equation. A business like ours needs to grow around the world, needs to sell more volumes every year. That is what i would call a virtuous circle. We invest more in our brands. We get volume growth, net revenue growth. That translates into more margin. Part of that goes into bottom line. The other part gets reinvested. The cost model is not such a virtuous cycle, i would say. On the longer term, it is not sustainable. Caroline emerging markets has been a real area of growth for you, and clear significance within the previous quarter, more than 6 . Are you going to be able to sustain that . Where in emerging markets are you seeing your local brands doing particularly well . Markets that big are really humming for us are china and india. In both places, we see very good growth from our Global Brands, but also see our local brands do quite well. Both places, we are investing more in our brands. We are finding ways to connect to the local consumer. Weve tweaked some of our recipes. Weve tweaked some of the flavors of our products. For instance, oreo and china is less sweet than the rest of the world. The flavors are a little bit isferent oreo in china less sweet than the rest of the world. The flavors are a little bit different. Markets, these offer an Incredible Opportunity to put our product in more stores, so in china, we now have biscuit products in about 1. 5 million stores. Our gum rand, stride, is in about one million stores, but we can do a lot more. The same goes for india. We also see very good growth in southeast asia, and some of the middle east and african countries, and the region where it is probably a little more difficult at the moment is latin america. But it is a wide range of emerging markets doing well for us. Caroline to economic headwinds affect you . We talk a lot about the fact that we have headwinds in latin america, political instability. You have that effect in china, not to mention u. K. And brexit. Does that sort of environment affect you from the consumers perspective from their desire to indulge . Dirk in fact, no. Almost the opposite, i would say. I know it sums a bit strange, but china had one of its best quarters ever. The same in the u. K. , doubledigit growth. In latin america, yes. I think there, the consumer is clearly more affected, and we see a little bit of the effect of the economy. I would say the more obvious ones, the chinese, the u. K. , we are not really affected by at the moment. I think the reason for that is if you are i think to buy brexit and you dont feel so great, whats better than a nice dbury to help you through the day . Caroline to help ease the pain. Has been goingoa up. Is that something you are able to swallow and ensure that youre still able to preserve the bottom line as you see Commodity Prices go higher . Dirk yes. The overall commodity pressure we see is about the same, maybe 2019,le higher, then in so we need to do our normal way of dealing which it of dealing with it, which is pricing gradually to get that behind us. We have a number of productivity initiatives that help with that. And yes, we do see cocoa going up, and we expect that that will in price, but we dont feel the current pressure is much bigger than in the last two years. Caroline for innovation, how are you staying ahead of the competition . , try to befast agile. Try things very quickly, learn from it very quickly, and then rolled it out. It is a very fastmoving space at the moment. A lot of people doing new things. For a big company like ours, speed is everything. Weve been gradually changing our way we do things. Weve pushed the accountability toward the countries. They have received a lot more freedom and how they want to compete and connect to their consumers, and that is working out quite well for us. We are going to keep doing that. It is a very different model from the past, with big innovations, years of preparation. These days, it is a tight speed you need to drive to do things. Caroline we thank you so much for your time. Chief executive chairman of Mondelez Dirk Van de put joining us. Course, we are all indulging in the secret flavor of oreos. My guess goes to ginger. Alix thank you. More than half of companies out with earnings so far. We will break it down with liz young, bny mellon Investment Management director of market strategy. This is bloomberg. Alix big day for earnings season. At the end of the day you get apple, facebook. Liz young of bny mellon Investment Management market strategy. The like how earnings are looking do you like how earnings are looking . Checked,last time i 70 of companies are beating, so we are definitely beating more than expected. This is probably the bottom in earnings growth. Fourth quarter we see a bit of recovery, but you have to remember, Fourth Quarter is the easiest to come from 2018. 2020, still expect in double digits hopefully. Alix is this plus a relatively steeper yield curve enough for you to want to buy value . The growthvalue rotation is something i struggle with almost intellectually. I think value is a play on financials and energy, and growth is a play on technology and parts of health care, maybe some other sectors. A steepening yield curve is something that gets less attention then an inverted yield curve, and a time when financials quietly run, which is a nice thing to see. Throughout the year, ive been pretty bullish on financials. You have to own them. They are the biggest sector in the equities. I dont know that i would be jumping into value right now. Alix fair point. Liz young will be sticking with me. We will have much more on the news, the morning trade. Urinalysis coming up in first take. This is bloomberg your analysis coming up in first take. 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 this is bloomberg daybreak. Its your fed day. Its an earnings day. Nothing really moving. The dax one of the underperformers in europe as unemployment actually rose. It is a mixed dollar space. Eurodollar now flat. It was a little higher earlier. The ecb is back. It starts buying more bonds today. The big beneficiary supposedly, france and italy. Calm as we head into 2 00 p. M. It is time now for our bloomberg first take. Joining me now from our inhouse team of wall street veterans and insiders, Vincent Cignarella, voice of bloomberg audio squawk and former trader, ira jersey, who i learned was a journalism young, and liz bny mellon Investment Management director of market strategy. What the markets are looking for is this hawkish cut. Theres really no such thing, but they are going to look for the language to be a bit hawkish. I think what traders will do, they will ticket they will take it regardless of whether it is there. You fade that blip in the dollar and the jump in yields. Ira i think it is hawkish relative to expectations. We are not expecting the fed to be raising rates anytime soon, but i think the market is set up for basically the fed saying we are going now, and then we are going to pause. When you look at whats priced into the rights market, we are saying in october cut, and the not until may or june of next year. I think the bigger question is not necessarily the hawkish tone, but do they make a case that we are going to have to do more, maybe go in december or january . That could reprice markets quite a lot. Liz i think that would actually be a negative. If the fed singles theres not more cuts to come, this is not the middle of a cutting cycle, and just wants to wait and see if they data holds out or starts to weaken, that would be a positive for the market. If the fed says there might be more cuts to come, i think it is a negative because then it is assumption that theres a bigger crack in the pavement we dont know about or a new crack in the pavement that we havent figured out yet. Ira i think your base case has to be the fed is going to say we are data dependent. If the data continues to soften, we will act appropriately. Improves, we will act appropriately. Andre going to hear long lags. Weve done some insurance cuts. How long will it take to feed into the system . I think that is what you will hear out of jay powell. Vincent personal consumption is what everyone is going to be looking at. If they were to come out and say we are not done yet, theres something on the horizon, that is going to scare everyone because they see something we dont see. That is the danger with the trade situation seemingly on the back burner. That fear is taken out of the mix, at least temporarily for the fed. They cant lean on that right now. The fed has always been data dependent. Data has been good and theyve been smoothing things along, but weve you know, we are not back to qt, not qe. We are right in the middle. We will watch the data and see how it comes. Liz the pieces of data we should be watching are important because we cant fight a manufacturing slowdown with rate thats. It hasnt been a problem for ceos to get money. Its not because rates are too high. Manufacturing slowdown is a result of trade. Even though we are at a summer with trade and there hasnt at a simmer with trade and there hasnt been a lot of movement, we cant solve of the problems around the world with a fed cut. Refis, bute a lot of the consumer overall leverage has kept up. Thats an area where you can get an extra boost, right . Althoughcan try to, even now, the retail sales data slipped a little bit, too, primarily because there is a lot of uncertainty. What is helping the consumer is the fact that jobs are still relatively plentiful, wages, even though they are not growing gangbusters, they are still growing, so there is still Consumer Spending. The consumer cant do it by themselves. Vincent i think the key going into the Fourth Quarter, we continue to see Rising Consumer credit. Is that being used to pay for previous retail sales growth, or is it being built up for the Fourth Quarter, perhaps spending into the holiday season, to keep the ball rolling . When the consumer stops, everything stops. Alix that also raises the question for me, and im going to tie it into all of the car stuff we got for today. You cant help a manufacturing recession. Stumbles, volkswagen a potential auto merger. That does have a trickledown into europe, and that does sort of spread out. Liz and there has also been an uptick in auto delinquencies. If there is a slowdown in that part of the market, im hesitant to really call it a huge issue because it is not real estate. Somebody being delinquent on an auto loan is different than losing their home. It is less of an issue. I do think that from a consumer standpoint, we are fickle people as consumers. It doesnt take much to change our minds. It doesnt take much to get us to hit that pause button. Alix exactly. Liz but it doesnt take much to change consumers minds. Those pieces of the market like autos and durable goods are going to suffer. Im not surprised to see, as we see uncertainty, a bit of a drag there. We do need a macro catalyst, some kind of positive surprise for the market to have it break out. Vincent another part of that, going back to the consumer, israel average earnings have been slipping the consumer, is real average earnings have been slipping. Unlike hours earned, this is where the real red and butter is. Consumer power is higher. For the last few periods, it has been dropping. It is going into the Fourth Quarter, which is not a great time. For a few more months. I think thats where the fed sits back and says, we really dont know a lot. There are a lot of questions unanswered. That data dependency take us straight through march. Alix european banks talked about how they didnt like negative rates. Hiam of credit t suisse saying just that. Negative rates are not helpful to the banking sector. I think everyone can see that. It is something that will have to change at some point. Alix i did love that unicredit at some point was like, guys, we all hate negative rates. We are a business. Come on. What more can they do . It feels like we are looking at things like lending out etfs to provide liquidity for the market. Are we really on this third tier Monetary Policy track . Ira the problem is Monetary Policy can only go so far. That is true globally. You need some kind of fiscal response, and you need changes in generational types of activities like demographics. Europe and japan have similar demographic profiles in many ways, and that cant be helped by Monetary Policy. It is not going to force people to spend. It is not going to convince banks to make loans. That is the goal of lowering Interest Rates, to basically jazz up economic activity, and negative rates arent doing it. Im not sure that the boj or the ecb or anyone else who has negative Interest Rates globally is going to see this. I think thats one reason why even here in the u. S. , people have said, could we cut to zero and maybe even go negative . You have a couple of papers out from regional said banks saying maybe, but it might not get inflation expeditions up. Alix but that San Francisco paper said the same thing, that it could actually reduce financial conditions, which could be a good thing. Ira but in the same breath, they said it wont help everything. Vincent if the Central Banks keep lowering rates to zero, the psychological effect on consumers, whats the price of something next month that is going to be cheaper today . When you talk about the social dynamics with an aging population, lower Interest Rates, lower pensions. They are on fixed income. They are not going to spend if there expose disposable if their disposable income goes down. Liz all of this Monetary Policy has taken longterm Inflation Expectations and adjusted them permanently downward, and that is the issue. In order to get them back up, we need spending not only on the consumer side, but in the private sector. That has been whats lagging. A lot of this policy has put so much money into the system, and then we wanted company to spend it a certain way. Raiseted that to hire, to wages, and what they did is buy back stock and raise dividends. So we probably do need fiscal policy to come in and close that gap a little bit. I dont think Monetary Policy is going to do it anymore. Ira when we say fiscal policy, we are talking about not only pumping money and significantly higher deficits, but how do we change tax policy to make it better for companies to invest as opposed to buy back shares . Alix didnt we do that already . It was a transient. [laughter] vincent look what happened the last time the fed cut reserves on banks. The first thing they did was buyback stocks and increased dividends. It is not going into the economy. We need some sort of privatepublic partnership in an infrastructure to move things in this economy because we do have a 23 trillion deficit. You are not going to see straight out public spending in the u. S. Its just not there. Alix so do we see new highs on the s p based on all of this . Liz i think we could grind higher through the end of the year. This is hopefully not anything like last years Fourth Quarter. I think we could grind higher, and in 2020, if we get a positive catalyst, meaning a tangible trade deal or indication that the Economic Data actually bottomed, we could see new highs. Alix really great conversation. Enjoyed that a lot. Bloombergs Vincent Cignarella, ira jersey, and liz young of bny mellon, thank you. Now to an update on what is nicking headlines outside the business world. Viviana hurtado is here with first word news. Viviana Boris Johnson got the early election he wanted. The u. K. Parliament acting the call for an early vote in an attempt to unlock the deadlock over brexit, set for december 12. Jeremy corbyn calling the election a chance to build the country for the many, not the few. President trump and his lawyer will be invited to any impeachment hearings by the u. S. House judiciary committee, according to procedures released by the rules panel. President s lawyer will be allowed to question witnesses. The rules do not apply to the ongoing closeddoor depositions. Over to california, where wildfires are raging and deliberate power cuts have left more than 1. 3 Million People in the dark. Pg e turning off the power in Northern California to prevent more fires from starting. In southern california, utilities are warning they may cut service to 345,000 customers. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Tonto imour Viviana Hurtado. This is bloomberg. Alix coming up, Credit Suisse gives a downbeat outlook while it moves on from the spying scandal. Plus, if you have a bloomberg terminal, check out tv. You can check out the charts and graphics, interact with us directly, and scroll through to check something out if you missed it. This is bloomberg. Viviana this is bloomberg daybreak. Coming up later today on bloomberg markets, bank of canada governor. Now to your Bloomberg Business flash. Citigroup reportedly will slash the number of foreignexchange platforms it uses by 2 3. Save citi billions of dollars a year. Alan howard now plans to spend more time trading at the hedge fund he cofounded. Howard relinquished his role at Brevan Howard. Over the last six years, Brevan Howard has struggled. At one point, the firm managed 40 billion. Now it is down to 7 billion. 1. 3eo of norways trillion Sovereign Wealth Fund is stepping down. He is overseeing a transformation at the funds portfolio into real estate. Im Viviana Hurtado. That is your Bloomberg Business flash. Alix thanks so much. We turn now to wall street beach. First up, Deutsche Bank. Germanys largest lender still shrinking, even after getting rid of unwanted businesses like equity trading, reporting 13 decline from trading fixed income and securities. We talked to the cfo. We are comfortable that weve seen momentum rebuild in that business since the repositioning, but indeed, that was the main driver of the decline in our revenues. Alix Deutsche Bank has announced plans to cut 1 5 of its workforce. Credit suisse is trying to move past its spying scandal. Ceo Tidjane Thiam says it has not impacted the business. Up abouty dalio opened next years president ial election and what that will mean for fiscal policy on the latest episode of the David Rubenstein show. On fiscal policy, theres no cuts,or additional tax or do you not agree with that . In terms of spending, probably there will be increases in spending. Probably, they will not be wellfunded. When you ask about that, i think we have a political question relevant to the markets. Between now and the elections, we are probably going to have very different policies. Policies may be more of the left, may more of the right. Great are poorly ready greater polarity. Alix you can watch that entire interview tonight at 9 00 p. M. New york time on bloomberg tv. Lots of alts street lots of wall streeters talking about the election. Vasek is incinelli bloombergs sonali basak is in las vegas. What is everyone talking about . Courtney sonali its really interesting. The whole conference started off with strike, the thirdmost valuable startup in america as of september, behind juul and wework, but obviously wework has been repriced and juul has had problems of its own. Still nothing interested in the prospect of an ipo. That is very different than airbnb, which is very excited to go public. Alix i also wonder what the competition is like. Uberard the headline that money is coming out. Sonali exactly. Players new fintech paypal,ipe, but uber, they were here. Uber is starting a new division called uber money, and they are new hires. Looking at the wall street journal did the math. Jfk at 203,d to thats 11 in your pocket with the 5 uber card. Someone likened it to one of the. Irlines getting into cards it is ancillary to their business, so we will see how successful it is. Alix what are some of the big risks everyone is talking about . You talked about wework. What is the risk . Sonali first of all, its valuation. I met four unicorn ceos in the last when he for hours, right . So valuations is one thing. But the other thing that is a big topic here is regulation and Financial Crime and monitoring how people move money digitally, safe it is and regulators how safe it is and how regulators get a handle on it. Mind,tely on the regulators come up venture capitalists. Alix do you get the sense there needs to be some kind of consolidation in this space . Sonali thats a great question. In the last 24 hours, it came up a lot. We had investors of companies with stakes in things Like Lending Club being like, all right, when is this over . Stripesuse valuation has soared, there are other companies that have not seen a good time. After Morgan Stanley acquired acquired cartas competitor, people were wondering whether there would be a buyer. Superhigh,ons are but with that said, the banks are really worried about it. The banks dont like watching uber and facebook get into big businesses like this. All of these upstarts are not very capital heavy. These are all very Technology Friendly companies, which the banks can either build themselves and spend billions of dollars jp morgan and bank of america each have 10 billion in expending annually in tech spending annually. Alix thank you very much. Coming up, we will look at the component of the cpi that the fed does not measure, but that should matter to investors. Thats today on traders take. If you are jumping into your car, tune into Bloomberg Radio, heard across the u. S. On sirius on sirius19 u. S. Xm channel 119 and on the Bloomberg Business at. This is bloomberg. Alix time now for our traders take. Joining me is Vincent Cignarella of the bloomberg audio squawk. You are looking at the cpi ownersrenter equivalent number. Vincent the fed doesnt care about it, but everyone else does. This isnt something you are really going to be trading today. U. S. This is a survey of homeowners by the u. S. They say, if you could rent your home, what do you think you could rent for . The u. S. Consumer continues to see value building in their home. This is the 10 year yield against it. You can generally see the 10 year yield outside of the post financial crisis moves along with it. Weve seen a big disparity in the last year and a half from this space because investors and traders are looking towards the fed for where rates are going. They are not looking at the consumer. I think now is the time to look back to the consumer. If that consumer level stays pretty much level, as it has been, we need to see a pop in 10 year yields to get back to the norm. Yesterday, we saw 10 year yields holding 100 day at 1. 85 . I think we could see them close to 2. 25 by the end of the year. Alix youve been making this call. Vincent cignarella, thanks a lot. Coming up, alessio de longis, Invesco Solutions senior portfolio manager. This is bloomberg. Alix welcome to bloomberg daybreak on this wednesday, october 30th. Heres everything you need to know at this hour. Negative Interest Rates are not helpful to the banking sector. Everybody can see that. Alix a gloomy outlook from european banks. Credit suisse is more downbeat about the future. Francine Deutsche Bank is still struggling with the German Economy because negative rates are hitting you. Alix Deutsche Banks revamp hasnt been able to stop that slumping revenue. Pres. Trump very soonpres. Trump , auto plants and other plants will be opening up all over our country. Alix the Trump White House once direct control over where parts can be made, one of the provisions in a new nafta deal. Markets around the globe are becoming more and more competitive, and we are a bit more cautious in terms of our forecasts. Alix a warning signal from the worlds biggest automaker. Volkswagen has lowered outlook for vehicle deliveries. Series, it all comes down to tonights game. Washington beats houston 72 to set up a winner takes all game 7. Young pitchers. In the meantime, nothing is happening in the markets, all waiting for 2 00 p. M. Today. Ge having a really nice pop in the market, but the s p is pretty much flat. We continue to grind higher. Mixed dollar story. Not a lot happening in the market. Joining me for the hour is alessio de longis, invesco investment Solutions Senior portfolio manager. Such a pleasure to have you here. I asked earlier what we were looking at, and you said economic surprises. What you look at this for direction . Alessio right now, the major disconnect we are seeing is the Market Sentiment is improving, primarily driven by proactive easing by major Central Banks. The market is feeling strongly. There is a disconnect with the ever ongoing deterioration in Economic Data. Has a result. Typically, markets and meant is right Market Sentiment is right. We are now at the cusp where we begin to see some actual improvement in the Economic Data. Looking at the surprise indices is relatively quick to see highfrequency results in the economy. These are the three regions, the most important regions we follow. Alix they are up, u. S. , and china. Europe, u. S. , and emergingmarket more broadly. What is lagging is europe. I think theres a couple of points here. If and when we see emerging markets in europe begin to surprise to the upside, thats when we can really start seeing the light for the next dollar depreciation cycle in the beginning of the outperformance of nonus Asset Classes across the board. Of theh, the money out u. S. Into europe conversation weve been waiting for. Maybe the fed helps with that, maybe it doesnt. Decision day is upon us. Markets are gearing up for another rate cut. Rate cut. Cutting rates another time. Possibly rate cuts next year. Theres a lot of reasons why you could say theres no need to cut rates here again. We think it is premature at this point. The fed is being bullied into a rate cut decision. I think it would be more difficult to say this is not a race to zero. A rate cut is pretty much baked in. The markets would be disappointed if that doesnt happen. Alix joining us from miami is Kathryn Rooney vera, bulltick head of research and strategy. Are you bullying the fed . [laughter] right, the fede is going to cut rates because the market so demands. Anytime the market is pricing more than 60 possibility of a rate cut, the fed has not failed to deliver, so certainly this is a fed that wants to expand this economic expansion, keep the rally going in the markets. They do not want to repeat what happened in december of last 20 top toalmost bottom correction. This is a fed that is loathe to change the direction to the downside. They will risk cutting when they maybe shouldnt just to keep the rally going. Alessio do you think this is a one and done, the final adjustment to the calibration theyve been talking about . Or is it eventually one step towards a prolonged easing cycle . Kathryn well, it should be one more cut and done. Thats what i think should happen, but i think this is a fed that is wholly dependent not just on their dual mandate, which is full employment into percent inflation, but a fed as a mores of itself expensive mandate to bring credit to people that dont otherwise get it. This is a fed that has a more expensive mandate and considers itself a fed not just for the u. S. Come but the globe. How many times have they said they are watching global akamai global Economic Data . Trade really hasnt had an impact on Economic Data in the United States hereto for, so the fed doesnt have to cut an additional three times, which is what the market is currently pricing in. Meeting,from todays any particular words, any particular hint you are focusing or that you think is going focusing on, or do you think it is going to be a rather well telegraphed meeting . Kathryn i expect the fed is going to sound slightly hawkish. Theres going to be some trepidation because we all know what happens when powell speaks offthecuff. The last press conference, he almost completely read from the script. I expect we are going to get some thing very similar. The fed is unlikely to sound exceedingly dovish because, lets face it, the last couple inflation prints have come up to the upside. We havent seen a continued deceleration in the inflation prints. That trend has been broken. I would push back on some earlier comments. I think Economic Data is consistent with an economy that is not on the precipice of recession, which is a longheld view of mine. I think the market is overly discounting recession not happening in the next year. So the fed really should sound somewhat more hawkish. If it goes too far, however, i think the market will react to the downside. Alix i went to bring up what you said earlier, that you dont feel betrayed has any Material Impact on the economy dont feel the trade has any Material Impact on the economy. We are seeing the lowest weve seen in years for the fiveyear breakeven. Years for the fiveyear breakeven. Cfo confidence is super week. We are probably going to get a read on capex with gdp. Why doesnt that have to do with trade . Kathryn certainly, with regard to Capital Expenditures and capital planning, undoubtedly ceos have stated that trade uncertainties have impaired their ability or willingness to come out with additional or plans for the next three to five years. For sure, i agree with that. 8 30,st gdp print we get we did see total investment for the first time in a while come out negative. Im referring basically to inflation numbers. Look at total import prices yearoveryear. Theyve actually been declining. We see real wages rising. That includes inflation. Really, the purchasing power of the u. S. Consumer has not been materially affected to the downside, as was forecast by many. Alix we have a terminal user coming in. I will put this to both of you. The conversation here is, at this point, the problem is the Stock Exchange level. Is the fed basically extending the Stock Exchange, and creating a bubble on the equity side . Is that what this is, the fed is going to be looking at the s p in theory . Alessio it is difficult at this stage to make, and both absolute and relative terms, a case for ,mbalances in Financial Markets and for expensive valuations. When you look at equities compared to global bond yields, the valuations are reasonable, if not even cheap. It is really important as investors to look at it in relative terms. The outperformance we are seeing in equities is just matching the declining global bond yields and the rally and bonds we have seen over the last two years. Over the last two years, the performance of Global Equities is exactly in line with global government bonds, which tells you that equities are not ,utperforming on total returns or leave alone on a riskadjusted basis. If we get a turn in the Economic Data, i think we have room, fundamentally justified, to extend the cycle higher. Alix wrap this into what alessio and i were talking about at the beginning of the show, the catalyst for driving money out of the u. S. On a relative basis. What is going to lead that money to europe, to emerging markets, to the global value trade . Kathryn it is really hard to see that. If we are getting a melt up in the United States, it is hard to expect that money to flow to the emerging markets, with the exception of asia, largely decelerating in Economic Growth, growth,atin and in latin america, are incomplete political upheaval. Europe, which has Economic Growth far inferior to the United States and a wholesale lack of any economic reforms, with Central Banks in negative rates and likely to go even more negative. If i was to pick, i like u. S. Equities. I like them hedged, as i mentioned on your program. You have a pretty strong appreciation, but you need to protect that. I like put options with march expiry just as it form of protection. It gets you through multiple fed meetings, through iowa and new hampshire, through super tuesday. Alix both of you are speaking with me are sticking with me. The fed decides at to a clock p. M. Eastern time. More earnings coming out. 2 00 p. M. Eastern time. More earnings coming out. We are going to have more coming next. This is bloomberg. Alix we are about halfway through earnings season, with 10 of companies on the s p reporting today. Sarah ponczek has the latest. What are some of the standups today . Devicesdvanced micro reported yesterday after the bell. We are seeing shares lower. The numbers came in just below forecast. Earnings came in at . 18 a share. 0. 182. Recast was for atenue per share come in 1. 89. Their revenue was just in line with estimates. Shares lower, but Advanced Micro Devices is the third best performing stock in the s p 500, up about 80 this year, so very high bar. I also want to point out General Electric. Or, sorry,ss on beat on earnings. They missed on revenue, however. But the focus was on Free Cash Flow. They raised their cash flow 9 for the second time. Power was still an issue. Shares above 7 this morning. Hughes,o mention baker the oil company. We saw a miss on earnings and revenue, and shares are lower today. Alix good set up. Adpnt to point out, we have employment numbers caning out numbers coming out pretty strong. In siri, setting us up for potentially good jobs day friday in theory, setting us up for potential he good jobs day friday. Earnings. With still with me, alessio the longest still with me, alessio de longis of invesco and Kathryn Rooney vera of bulltick. If you took a look at where we are in terms of earnings, have we troughed . If things get worse, what happens next . How do you invest . Alessio we are seeing clear signs of stabilizations in earnings and revision ratios in the u. S. And emerging markets. Maybe emerging markets leading the way somewhat, which is a good bellwether for how much bad news we have priced in with was back to global trade. Is right andtiment earnings begin to stabilize and rebound, i think that could set us up for a potentially powerful , smallervalue capitalization companies, somewhat at the expense of the very overweighted and well owned defensive strategies such as quality or low volatility. Momentum also could suffer. This is more about understanding up. Positioning set there could be some benefits to companies that had very strong operating leverage, such as Value Companies and smaller capitalization companies. This could also be consistent, for example, if a rebound in earnings were to see a modest bearish reese deepening of the yield curve. Nothing crazy. Bearish reese deepening pening of theee yield curve. Nothing crazy. If it starts selling off 2 , that could benefit volume, financials, so on and so forth. Kathryn i tend to agree with alessio. I think he is right on multiple points. One of the things i am cautious about and i think it is important to highlight is that a lot of this rally we have seen has been led by the tech sector. We have apple and facebook both reporting today, and those two combined have been 14 of the 21 rally year to date. These are names that, when a market momentum is led by one sector or three stocks, it is vulnerable to reversal. Lets see how tech earnings come out because, if they come out to the downside like we saw with alphabet, we could get a from applentiment and facebook. Alessio those are some of the risks you highlight in the tech sector. Which other sectors do you tend to favor at this stage . Kathryn i agree with regard to financials. If weve seen the 10 year move from 1. 4 to 1. 8 and change, as weve seen in recent weeks, then that favors financials, specifically at the expense of counterparts in europe. If we are in a stage, as i think we are, of continued economic oransion, lower regulation, less regulation, and either a steepening yield curve where a rising 10 year treasury yield, then of course that favors financials. I would be careful with that, as ive mentioned previously with regard to political risk. I think that could be a downside for the sector. But fundamentally, i would say that is one of the sectors i like. Alessio that raises an interesting question. While we have just built a good narrative in a case for value in the u. S. , when we think about europe and emerging markets, and how much at the aggregate level there is more they value buy, particularly in europe, do we see a disconnect in the way value will trade, given the more fundamental challenges for value in europe . Kathryn thats a good question. For example, european banks are fundamentally weak, and they are trading weak because they are fundamentally weak. We have an ecb with deposit rates at. 5 . Theres a lack of any semblance of change in the near term. I think the ecb is going to continue to follow the same path , as we seen in the last meetings with Christine Lagarde as the new ecb president. So i think you are going to continue to find more value in the counterpart u. S. Than in europe, for example. European banks will, however, really jump once we get an ecb that looks like it might change course and might lift the banks off of that negative deposit rate, where the effectively have to pay the ecb to keep their money with the central bank. Alix good conversation, guys. Both of you are sticking with me. Coming up later today, an exclusive interview with sheryl sandberg, facebook coo, at six clock p. M. Eastern time. Coming up on this part at 6 00 p. M. Eastern time. Coming up on this program, more on volkswagens gloomy Sales Outlook and the revocations. This is and the ramifications. This is bloomberg. Ns. This is bloomberg. Viviana a surgeon lawsuits from people who claim roundup causes cancer. Almost 43,000 u. S. Plaintiffs are suing bayer, more than twice the German Company reported in july. The crisis has cost bayer or than 30 billion in market value. And peugeot psa confirming they are exploring a tie up. Fiat says a deal would create one of the worlds leading mobility groups. Under one proposal, psa would be the acquiring entity. In terms of board seats, the French Company would have an advantage. A sign that the declining auto market has hit volkswagen. The worlds biggest carmaker lowering its outlook this year for vehicle deliveries. Vw says sales will be flat. Markets around the globe are becoming more and more competitive, and we are a bit more cautious in terms of our volume forecast. Did beatviviana vw excitations for thirdquarter earnings. That is your Bloomberg Business flash. Alix still with me, alessio de longis of invesco. I wanted to tie this auto conversation with pmis. If you come inside the bloomberg, this is pmis for china, the u. S. , and the euro zone. How much of that is autos . Do we stabilize . Do we get better . Do we get worse . Alessio i think there is a combination of trade wars, as we talked about, but overall cyclical dynamics getting tired after a very lengthy cycle. This chart really shows what we already know. It just brings it to the forefront, the underperformance highest, which is the in terms of percentage of gdp. It is the most open major region around the world. They are dependent on auto. It is the lagging region. What we are seeing next to the if you were to, take a look at the emerging markets composite, it is where we are seeing the most clear signs of a turnaround, may be premature. But it really seems it makes sense fundamentally this rebound could be led by emerging markets. Insaw this, by the way, back 2016 after the major manufacturing slump of 2014 and 2015, driven also by commodities. China, the way out was emerging markets, and the u. S. Followed. Thats the type of repeat a prettythat we attach hyper ability to. Alix which brings up the whole value trade also. Hang with me. Alessio de longis of invesco will be staying with me. We get a lot of data out in a few moments. We will talk more about repo and look at treasury funding announcements for the quarter at 8 30. This is bloomberg. Alix were just about 30 seconds away from the data jump here. Not a lot happening at all. Not a lot of movement. The currency mask, rates market, equity market, all waiting for the fed. Nasdaq still down. 3 . Some weakness there. And switching up the board, were going nowhere. You have the 19 basis points. Eurodollar going nowhere you name it. Thats where we sit. The data coming out this is the first read of Third Quarter g. D. P. Coming in pretty strong, 1. 9 . So thats much better than estimated. Personal consumption, similar. Stronger than estimated, 2. 9 . If you look at a core p. C. E. On a quarteronquarter bazley, this is not the popular fed model. It feels like the narrative is still solid growth. Solid personal consumption. Better than expected whereas inflation stays pretty tame. I do just want to highlight here that were getting the treasury refunding announcement and they are exploring a oneyear issue and a 20year bond and a 50year bond. Theyre looking into the into the 20year bond for a while and there seems like theyre continuing to explore that and theyre going to continue to keep their coupon debt payment there at a record 84 billion and theyre monitoring what the feds are doing. The feds in the market buying t bills, how theyre going to affect funding for the treasury. So they are also monitoring that. So joining us from washington is Michael Michael michael mckee. 2kd michael mckee. Ill give us through some of the details youve noticed. Michael its a relative basis, better than expected but this is still very weak growth around potential. If you think potential is blow 2 and so thats a political problem for the folks at 1600 pennsylvania avenue. The numbers pretty much breaks down as weve seen over the last couple of quarter where is you have strong Consumer Spending and very weak business investment. Nonresidential fixed investment down 3 . Second quarter in a row that we have seen business spending contract. We also see 69 billion in inventories. Thats come off a little bit from the stocking up ahead of tariffs that we saw late last year. And early in the first quarter. But we also see net exports, big subtraction from growth. Almost a full percentage point because trade is really hurting the economy at this point. So growth would have been significantly stronger if not for the trade wars it appears and for the uncertainty that business is facing over all that. Alix yeah, also just highlight on that. Nonresidential fixed investments. So basically structure fell a whopping 15. 3 . Thats the most since the Fourth Quarter of 2015. A large part of that though is oil and gas and cutbacks there, thats not going to be helpful. Thats a broader structural issue. Katherine, youve heard some of the numbers here. Do this does this make you more or less bullish or is it in line . Well it came up surprising to the upside and i would say that its important for the audience and mike to remember that consumption is 70 of the u. S. Economy. So until we get trade wars impacting u. S. Consumer namely from both real wage side, from the unemployment side or the sentiment side, then its a good number. 2 in q 2 q. The consumer remains very strong and thats important to remember. Both Consumer Confidence and Small BusinessBusiness Confidence are at the highest level that weve seen in more than 10 years. I say theyre pretty good, potential growth in the u. S. Is 2 upon 2 . So its 2. 2 . Michael i agree with katherine. What were seeing this report confirms every the narrative of everything we have known for the last few quarters if not years, right . Its a dual speed economy where domestic demand, the consumers doing very well. The challenges to investments and the external sector remain there. But most importantly, it delivers a lack of inflationary pressures. Right . The inflationary numbers continue to be nonexistent which confirms the status quo of a policy environment that has reached an equilibrium. Growth continues to slow down, but not as bad as we feared. So were focus on the Downside Risk and this report has not validated those fears for Downside Risks. Now, lets always keep in mind g. D. P. Data q3 is backward looking. We already have more information on q4 and its more important from a financial standpoint to not look into the Rearview Mirror and keep looking on a go forward basis. Alix mike . Michael yeah, i just want to know that the inflation data isnt all that good. It depends on how you look at it, of course. But when you look at the core p. C. E. Rate for the quarter, up 2. 2 start to look like inflation is creeping into in the economy. Nothing very big, nothing very fast. And the feds target is the headline number. But they are seeing a little bit of what they expected. That inflation pressures would build and were seeing with a shortage of workers and unemployment as low as it is, more wage pressure out there. And so theyre going to look at this and this could come into the discussion as they think about whether they want to signal another rate cut coming or they want to signal a pause and lets see what happens. Because if inflation is building, they dont with a to be too far out on the curve or too far behind the curve, rather. Well get more data on that when we get the p. C. E. Numbers coming out tomorrow. I think that inflation is good. So what you dont want to see is you dont want to see sustained disinflationary pressures so much we ended last year at 1. 9 . Inflation tick lower and lower and lower. So that would incite a response by the fed and the government and everybody to deter us from going into deflation. So some amounts of inflation, i think is good, especially when our target is 2 . So, look, core p. C. E. On a monthly basis is coming up in a couple of days and i think with inflation ticking slightly up and in an economy thats continuing to grow with record high, equity markets, that seems like a pretty good scenario. And in a scenario where the fed shouldnt cut another three times. The feds should cut one more time max and say we did it, guys. Alix great point to sort of button that up. I want to also hit on the treasury refunding announcement because twofold happening here. One is that theyre looking at what the fed buying t bills to affect their issuance. The theory is if the fed are going to buy t bills at lower yield, it makes borrowing more attractive. And theyre looking at new products like 20year bond potentially a 50year bond. Mike, did anything stand out to you in terms of refunding announcement today . Michael the new issues could be important the marks been looking at the fact that rates are so low in saying why doesnt the u. S. Go out on a curve . Theres no appetite for a 100year bond higher. Treasury has been asking and theres been a lot of interesting 20 year. Maybe that theyre finding it little bit more of it. Theyre pushing sulfur, linking a bill to that would be something useful. Alix katherine, unfair question. What you with a 20year bond . Would you care in the market . If the u. S. Issued a 20year bond . Alix yeah. Yeah, i really wouldnt care that much. I think the yields are so low in the United States if were comparing u. S. Versus europe, its 1. 1 or 2 bond. You can find yields elsewhere and with the fed continuing to drop rates and global monetary expansion, the markets and Market Participants like us and others are forced to do. Producing hat is massive distortion at a global level where you get people going out the duration curve, going out the risk curve and taking on an inordinate amount of risk for his or her investment profile. Alix thanks a lot, guys. Bloombergs michael mckee, thank you. Leslie, you will be sticking with me. Katherine rooney vera, thank you. Stay with us, bloomberg television. Our special coverage of the fed decides at 2 00 p. M. Eastern time. Now i want to get an update with Viviana Hurtado with first word news. Viviana he wanted the u. K. Parliament back into prime ministers call for a snap vote. This is in an attempt to break the deadlock over brexit. The election is set for december 12. The campaign pitched johnson against Labor Party LeaderJeremy Corbyn. Corbyn calls the election a chance to build the country for many, not the few. President donald trump and his lawyer will be invited to any impeachment hearings by the u. S. House judiciary committees according to procedures released by the panel. The president s lawyer will be allowed to question witnesses but the rule does not apply to the ongoing closeddoor deposition. And over to the state of california where wildfires continue to rage and power cuts left more than 1. 3 million eople in the park. In southern california, utilities are warning they may cut service to 345,000 customers. Im Viviana Hurtado. This is bloomberg. Alix . Alix another story that were following too. College sports. The ncaa has more or less made a uturn taking a step toward letting student athletes benefit from the use of their name, images and likeness on the organization stopped short of saying players could be paid but it is a real turnaround after californias governor steined a bill that makes it easier for the players to profit from their image. That could be a huge shift within football. As we head to break, you got g. D. P. Coming in a Third Quarter higher than statemented 1. 9 . Personal consumption, 2. 9 p. M. The takeaway, we are slowing but in terms of relative expectation, we did beat. And the inflation data that keeps on coming in solid 2. 2 was the quarter on quarter basis. Apple already up over 50 this year and that rising stock get a major test when it releases quarterly results. And it had nine upgrades in the last week and a half. Thats coming up on the bottom line. And plus, you want to check out ll the charts, go to gtv go. This is bloomberg. This is bloomberg. Viviana coming up later today, an exclusive interview with heryl sanberg, facebook c. O. O. Alix airbus is struggling to capitalize on the 737 max cutting the delivery target saying cash know will be lower than expected. Airbus says through september, won orders for 303 planes versus 170 at boeing. Jewel is adjusting limits on its ecigarette products. The Company Plans to cut up to 15 of its workforce, as many as 585 workers. He cut is part of julies juuls larger plans in the u. S. And necessarily considering the sale of two chinese unis after years of trying to turn it around the company is seeking more than 1 billion for controlling stakes. The c. E. O. Has been weekend out nestles portfolio. The last two years, he sold about 15 billion worth of businesses. Im Viviana Hurtado and whats your Bloomberg Business flash. Alix time for bottom line. Three Companies Worth watching this morning. Emma, youre willing atrophy , peugeot and walk us through the latest. A hey are in talks for a trade. It would be a hugely complex transatlantic merger but it could create an autogiant worth billions of dollars and catapult both of those companies into the big leagues when it comes to globals. The sub scale compared to the industry leaders. Volkswagen and toyota and scale massive now in the Auto Industry as it grapples for the shift of the high cost associateded with the shift. Neither are they the leaders of that field so the financial burden sharing must be attractive in this deal. One of the twist is the news of this deals come a few month after they abandoned talks to merger with renault. Alix the Second Company is apple reporting earnings after the closing bell. But expectations have been creeping up here. Expectations have been creeping up. You look at apple shares hitting a high just on monday. And we have got in some hints lately that demand for the new slate of iphones have been very strong. But still, if you actually look at what analysts are expecting apple to give as their forecast for the holiday period as it relates to iphone revenue, theyre actually expecting a yearoveryear decline. So if you look at numbers in total, theyre expecting revenue to come in at 86. 5 billion for the holiday period. That would signal a 3 increase yearoveryear, but for iphone alone, its 49. 7 billion which would be a decline of 3 . But still over the past few weeks, we have seen at least 10 analysts raise their price targets on the stock signaling 1 d citing from the iphone 1 demand to strong tv. Alix thanks so much. Nd the Third Company is g. E. So is this the case that it is good or is this the case of not as bad that everyone thought . I think its a little bit of both. Alix ok i do want to give them credit. Theyre singing stabilization in the power unit better than expected, Free Cash Flow they had initially call forward significantly more negative number. And now they expect it to be as negative as it was last year in terms of the cash outflow which was about 2. 3 billion last year. Theres still a long way to go here and its important to keep in mind that at the beginning of the year, aimless work wasnt bracing for g. E. To have negative Free Cash Flow. That was the guidance number put out thereify the c. E. O. And it caught the market by surprise at the time when he did that. So now were level setting back to where expectations were going into january which i think is interesting. And then theres just a lot of work here to do. Theyre cutting back their estimates for how much theyre going to spend on restructuring. Part of that is they say its better than expected and timing. They are all those awesome assets in europe. It was a sensitive deal when they did it. Its even more politically sensitive now that theyre trying to cut jobs and facility and it raises concerns because the power unit did come in with another loss here. Weve seen some positive quarters and now were back to a loss. And now we have the boeing 737 max and also maybe a recession 2020. Its a time management like get it done quickly. If that recession happen, it could hurt the health care and the Aviation Unit which was the source of stability for g. E. Health care did come in much better than expected in this quarter. The c. E. O. Warned us some weakness there in september at a conference. We did not see that play out and the numbers that that is going to be a watch item Going Forward especially if you think about china and demand there for g. E. s equipment. Its not clear how thats going to play out once you get into 2020. Alix so you were talking about making this rotation on a factor level. So what do you do with industrials when youre maybe up against a recession worry in 2020 . Well, first of all, lets start with that premise. We see the chances of the likelihood of a recession or the global level is very low for 020. But not the u. S. , not emerging markets would be arguing that we might be plant the seeds here to extend the cycle for a couple more years. In that context, the industrials then could be in a particularly favorable spot in terms of their ability to have more time and take care of internal restructuring while the Global Markets are more supportive. So thats a good story for value. The stories that we heard today, right, also the automakers mergers there. That is another way in which value manifest itself. So on the contrary, there could be some risk for momentum from a positioning standpoint. Alix so in terms of the boeing issue, what do they say about that . So theyre keeping their estimate farce 1. 4 billion hit cash this year for that aviation division. Their Free Cash Flow improvement does include that hit but this is not great for g. E. They have been shipping more spare engines as a result because all these planes grounded. Youre flying some of the older jets and you do need more replacement engines for that. And the question is how quickly can they make that up . Once you get into 2020, does that all come back . Does some of that go away and thats the focus point for g. E. s Aviation UnitGoing Forward with a forward. Alix thank you for being with us. Coming up on this program, it is one of the stocks that can hit an alltime high today. Were going tell you which one. Ooh, its a quiz, i like it. And thats coming up. And if youre heading out jumping into your car, tune into Bloomberg Radio heard across the radio on and on the Bloomberg Business app. This is bloomberg. This is bloomberg. Alix time for technically speaking. Bill joins me now. Check him out on bloomberg. I got thesed by one stock making record highs. Its not going to be g. E. Its not going to be g. E. But the stocks are acting very well. Up about 8 . Right now, it looks like its going to gap above the 200day moving average. Thats at 956. First resistance is probably around 10 35 which is this gap back in february but the longterm resistance around 1080 that dates back to february. Alix yeah, and the real question is how long will we have that sustainable upward momentum based on the other issues . Lets get on the stock that may make another record high and that is emgeneral. Imogen. They have been an up trepped around july. 212. Tance around alix where do you go after that . Went a stock break out like that, does it go higher . Generally the first test. It takes a while to take out the old highs. I would be surprised if it keeps going. Alix lets go to johnson johnson. Theyve had a lot of overhang when it comes to opioid and etc. What do you see . J j is up about 3 . Halted late yesterday. Did not reopen. Weve talked about this stock before. Youre in a trading range within a trading range. First resistance is around 135. Above that, maybe 137. But as you can see here, just in a massive trading range. And support probably down around 125. Alix its like a trading range range. Ding thanks, range. Thanks, bill. That does it for bloomberg daybreak americas. Ming up, global head of rays strategy. Happy fed day, everybody. Happy wednesday. The g. D. P. Number coming stronger along with personal consumption. We are awaiting for the fed at 2 00 p. M. This is bloomberg. City, ournew york countdown to the open starts right now. Im jonathan ferro. Coming up, the market expecting another rate cut as u. S. Gdp comes in betterthanexpected. Prime minister Boris Johnson hoping that his dissenting vote gives a path forward. A big day for tech, apple and facebook in the closing bell. Good morning, good morning, here is your wednesday morning price action. The week begins right now. Equity futures at 10 in the s p 500, price action foreignexchange with eurodollar north of 111. 182 is the yield on the treasury. The fed decision is just around the corner. Cut. Think the fed will there is no need to cut rates. There is a good deal on uncertainty