Yousef bloomberg sources said this week that saudi aramco earned 68 billion in the first nine months of the year, cementing its position as the worlds most profitable company. That came as a saudi news channel said the aisle the with sharesipo, trading on the local stock is strange. Local Stock Exchange. This is something which has been on the minds of policymakers and Investment Bankers and investors around the world for around three years now. About this delayed once 12, 18 months ago, while aramco was doing the acquisition of a petrochemicals maker in saudi arabia. Two weeks ago, we were expecting aramco was going to announce its intention to kick off this process. That got delayed as the government prepared these numbers you just mentioned, the 68 billion in profit. Now finally, we are expected to see the government and the Company Announced their shale will begin onsale sunday. We are in a tree at we are in riydah where they have some of the worlds biggest investors. There are meetings on the sidelines. Aramco is the biggest topic of discussion in the country right now. Tracy you mentioned the 68 billion figure. What are the financials for aramco imply about the valuation . We know there was a long desired to trillion dollar valuation there. Prince hase crown been very outspoken in saying he wants to see the company achieve a 2 trillion valuation. That would put it about twice the size of the Largest Company in the world at the moment. How much the company will be able to achieve that is still going could well be a bit of a stretch. This is why we have seen the ipo delays. The 68 billion, it demonstrates aramcos ability to generate cash. It is second to none. But in terms of the valuation, the difficulty is huge amounts of this gets swept up through taxes, royalties. Ast is left to be paid out free cash to go out in dividends is a lot lower than you might expect. That a why the valuation lot of analysts are putting on the company is maybe lower, somewhere around 1. 5 trillion, maybe 1. 7 trillion at most. We should find out in the next few weeks as they publish a prospectus and put a number on their shares. Manus i am joined by michael dobson. Asking him about his thoughts on the aramco ipo. Important to get this incredibly important ipo done well. That is what the bankers are working on. Manus do you think it will be difficult to get up to 2 trillion . What are you hearing . Hearing 1. 5 trillion or 2 trillion. That is the range, and finding the right spot on the range. Manus never truer words said. We talk about inclusion. Inclusion for saudi arabia was a defining moment, it is a pivotal moment. Would you agree and is that reflected in your business . Michael that is part of the reform agenda. I think that led to about 20 billion of index rated flows into the markets, which was a positive development. Post aramco, there will be an increase in the index that will be positive. But i would see that were broadly in the context of the major agenda. It is a measure of it. The key thing is the performance being made in this country. Every time you come here, you see development along that road. Manus what does it take to get the active money in . [indiscernible] areael valuations relatively high. Privatizationone in a series. That develops, the Market Investors will become more interested. Manus the top story is the election in the u. K. Give me your assessment of the risk they are in. They warns, use your time wisely. Michael whatever that means. Manus your take this morning on election risk . Michael like Everything Else in Politics Around the world today, we are in uncharted territory. We have had a referendum, so we have had four major votes since 2016. I think johnson had no choice. Stymiede government was by the situation in the house of commons. But there are risks, and i think it is quite unpredictable. Manus what is the biggest risk . What is the biggest risk as you go into this . Michael the biggest risk is he ends up where he was before in parliament. There are 150, which are very hard to protect. Forceddont like being into yet another election. It is unpredictable. It is far too soon to say. Manus everyone says a hard brexit is off the table. It is off the table until the 31st of january. But how is brexit not dead if we are in election mode again . Michael i think it is unlikely. Johnson got a deal. I think that is the deal that will probably get through. Manus from an investment point of view, mark carney was last seen a couple weeks ago at the imf. It will definitely return substantially to the u. K. When you talk to clients, are they trying to reengage capital for the u. K. . Michael absolutely. What i think is really causing a problem is neither in, nor out situation. Can get that or Something Like it over the line, people will be able to look forward, make plans, invest, both in the shortterm term and take a longer term view. I think both in europe and the u. K. , there is a sense of exhaustion, and people want to see it done. Manus and there are other Political Risks coming into bear as we go into an election in the United States of america. He is getting ready for something. They are in a scary place. Thatou getting the sense they are having the flow of money . Michael there is a lot of money on the sidelines. See fiveveryone can major risks. Ising said that, the market at an alltime high. I think we are not looking at recession now. We are looking at low growth, low inflation with this environment continuing. Within that, some companies will do that extremely well. In some cases, negative yields. Investors will still look to equity markets. Yes, there are risks, but our expectation is a low growth, low inflation, low Interest Rate environment. Within that, some companies will continue to do very well and drive growth. Manus we cannot cover everything that happened with a minute,he space of but i want to get a sense from a moment hasning it been for Market Regulation . What have you learned or taken away from the saga this year, in terms of regulation . That woodfordnk was unable he is syncretic event. There are very few daily trades in the u. K. Which have very high proportions of uncredited situations. I think the read across from that is active management is calling the questions, therefore it daily trading is calling the questions. This was a very unfortunate event. As they say, idiosyncratic, and i would not read across from that. Unfortunately, this was allowed to balloon and get too far. But it happened, and one has to learn from that. I dont think active managers are challenged. I would not take that take away from the at all. Dp world says he is optimistic the u. S. And china will come to a trade deal. Company had its Expansion Plan put on hold after uncertainties over brexit. He spoke with me in riyadh. Whatever you want to call to it has given concern financial institutions, which is a big problem. Thanks today dont banks today dont know. Going [indiscernible] confident that the United States and china will eventually make an agreement. We see it happening. But we have to understand and accept, china is a big country, and the chinese are known to have reservations. He is a negotiator. Manus you see a substantial trade deal coming to bear. Do you think you will see an immediate turn in volumes if a deal is done . Sultan bin sulayem if a deal is done, we will see a lot of equity in the market. Manus you have had six straight quarters of where you see volume decline. Is that what will turn the key for you . Sultan bin sulayem all the results show improvement. Marginal, but better than many places. We have diversified. We dont get fixed in one place. Deal,cipate if we get a china is using their exports. Something could happen. Confident they will come out of it. Manus brexit is one of the hottest political topics in the world. How important to the world is it that a brexit deal is agreed and run smoothly for the u. K. . Sultan bin sulayem very, very important. We are investors in u. K. We invested over 100 billion pounds. From the the problem is no one will make a decision. Well respected stock market, wellrespected system. Everything is going so well for them. If there is a deal, would you put more money to work in the u. K. , if it was the right opportunity . Would you put more money in the u. K. . Sultan bin sulayem i have a deal at home already. Manus you have a deal on hold . Sultan bin sulayem i have a deal that is on hold. If you go to any bank in the u. K. , they dont know, are we going to be out or in . Are we going to have a deal or not . This is the question that is put by the banks. Manus how important is a good freetrade agreement for the u. K. , which is the next stage of the discussions . Sultan bin sulayem i am telling you, any deal, as long as they decide. The problem with the u. K. Today, nobody is deciding. They want to go with a deal, without a deal. These are all options. Il they decide [indiscernible] i have a major investment in the u. K. , and we are waiting. News. T hope to hear the then it is not done, then again it is done. Manus do you think it is disturbing other Global Investors from putting money into the u. K. . Sultan bin sulayem absolutely. Up next, lebanons finance minister resigns after two weeks of antigovernment protests turned violent. Will that be enough to stop demonstrations . This is bloomberg. Yousef welcome back to the best of daybreak middle east. Lebanons Prime MinisterSaad Alhariri resign this week, after protests turned violent. It has been 13 days and the lebanese people are waiting for a decision about the political decision to stop the escalation. Anried all this time to find exit and listen to the voices of the people and protect the country from the economic dangers. Today, to be honest with you, i have hit a dead end, and it is time for a big shock. Ousef we got more he has been trying for the past two weeks to forge a new government or come up with a new lineup about leaving applicable vacuum, but they were not able to reach an agreement in a lineup. Tookthe violence that place yesterday, he decided that andad no choice but to go force a change in the government there. What happened yesterday basically is that i lies and supporters of hezbollah attacked the peaceful antigovernment sticks and with rocks. What does this actually mean for the rest of the region . We all remember the arab spring. We remember the middle east getting nervous about that post fact. What does this say about the outlook for regional stability as a whole . Lin the situation is quite dangerous. Crisis isn political not likely to spill over into anywhere right now, but it comes in a time when we are all facing mass protests in iraq, which has turned very violent. Turkishseen the offensive in northeastern syria. There is a lot going on, political instability also in israel, where they are still struggling to form a government. The entire region is on edge, and lebanons latest crisis is just adding to a region that is very unstable right now. Tracy what is likely to be the Market Reaction here . There is some discussion of the need for capital controls. We know that lebanese banks have already been shot for about two weeks now. How are investors and International Financial markets likely to react to the latest developments . Lin yesterday after hariris resignation, the bonds extended losses. The yields were still at record highs, nearly 35 . I think that reflects the going into,that nobody knows what will happen next. No one knows what will replace hariris government. The banks have been closed. Increasingly, people are worried. They are wondering how the banks are going to deal with that. Will there be a run on the banks . That is why we see more and more evenist saying privately are saying the and the banks will have to impose much tighter limits on the transfer of money outside the country. Manus up next, the fed reduces rates for the third time in 2019. But the chair, jay powell, signals a pause in further cuts, unless the Economic Outlook changes. This is bloomberg. Yousef welcome back to the best of daybreak middle east. Reducingas cut again, Interest Rates by a quarter of a percent for the third time this year. Jerome powell signaled a pause in further cuts unless the Economic Outlook materially changes. Powell we see it likely to remain appropriate, as long as incoming information about the economy remains broadly consistent with our outlook. , a modern Economic Growth strong labor market, and inflation near our symmetric 2 objective. Manus we got more with martin gilbert. Istin i think the economy probably slightly stronger than they predicted with the last quarters figures. The labor market is strong. So i think they are just pausing at the moment. I think we are unlikely to see another rate cut this year. And i think we are unlikely to rate rise as well. I think it is a pause and i think they will hold at this level for the rest of the year. Yousef what does that mean for u. S. 10 year yields . You look at the gtv for additional context. Thatis a story of yields have been relatively resilient in the last couple of weeks. But Going Forward, given the indications we got from the fed, would you agree with the folks saying to percent by the end of the year . For theg 2 endoftheyear . Martin i think so. I am not sure why you would want to invest in the 10 year bond at the moment in any case, apart from it is better than european sovereigns. Witheah, i would agree that sort of level. 10 year paper does not whet your appetite, you are part of emerging markets. Clear, if the fed is on pause, it sets up e. M. On one side for a good bid. But you also have the china slowdown to contend with. What are you seeing in terms of flow into some of the e. M. Space you look after at the moment . Think the fund that is getting the most flows is the chinaasia fund at the moment. We are fortunate enough to have one of the biggest in the world, and we are seeing a large percentage of the flows into that fund. I thinkd to you before, the chinaasia markets are interesting. There are some very good markets very Good Companies there, and we like a lot of the companies there. We are certainly seeing flows into that at the moment. And i think as for china, we dont really foresee a huge slowdown there. I think the domestic market is holding up growth there. Meritshink it shows the of having switched the economy more towards internal growth rather than export led growth. Yousef let me follow up on that because we have the china pmi that came out just a few hours ago, and it showed again a surprise to the downside. Is the pressure now higher on both china and the u. S. To make this space one deal happen . Convinced wenot are going to see any big movement in the trade war. I just think it is more deeprooted in the u. S. Than people perceive it to be. And i think it is going to take if at all in the short term for any big movement, i think there will be some tokenism, some small movements. But i dont really see it improving in the shortterm. As i say, i think it is deep rooted in the u. S. And popular on both sides of the political divide. Manus up next, the outgoing u. S. Energy secretary tells this show he does not think President Trump will be impeached. Our interview with rick perry. Manus looking back to the best stuff daybreak middle east. The outgoing u. S. Energy secretary said this week he does not think President Trump will be impeached. Rick perry, who has insisted his decision to leave Donald Trumps cabinet is not tied to dealings with ukraine, as a heightened impeachment inquiry scrutinizes his role in the decision to withhold aid amid pressure to investigate the president s political foes. I asked perry about the situation on sunday. Mr. Perry it did not come up in any sense. I will not say that joe bidens name was not in a conversation somewhere outside of the president of the United States, outside of ukraine. This guy is running for the presidency of the United States. I went for a broad sweep. Mr. Perry you went for some severe terms. Let for your viewers and the general public, here is what is important. I worked in ukraine. They came to the headquarters of the doe in 2018. I went to ukraine to visit with him well before the election. The message was always the same, whether it was for cinco or zelensky. You have to have the rule of law addressed here. You have to have transparency. You have got to have the sanctity of contracts. You have to unbundle this nationalized Gas Transmission company, if you want American Companies to feel confident they can come. You have to get rid of the corruption that we hear about day in and day out. That was the message, both with porchenko and solon ski. And zelensky. We felt confident they were totally committed to that concept. He had talked about corruption. Their reliance upon russian gas was very negative for that country. This gave them the option. To go toe poles ready ukraine. This was a very positive story from my perspective, having the president call zelensky and say, we understand you are doing what you said you would do on the corruption side of it, lets go forward. Manus you have said that time and time again, but do you feel somehow hung out to dry by the president . He said he told the republicans the july 25 call with the ukrainian president , it was your idea. Mr. Perry i dont feel hung out to dry. It has the added benefit of being true. I did call the president. I said, mr. President , you need to make this call. Everybody wants to talk to the president of the United States. Everybody wants to be in the white house with a photo op with the president of the United States. Manus but you dont feel hung out to dry . Mr. Perry not at all. My job is to sell american lng all over the world. I think we have the opportunity to do that still. I think there is a distraction with all of this going on, i get that. But the point is this is a very important part of europe, and ukraine is the buffer. If the russians have the ability to come in and really put the squeeze on ukraine, it could impact the rest of your in a negative way. Manus do you think he is going to be impeached . Mr. Perry no, not at all. Manus what makes you so sure . Mr. Perry because i know the truth, and the truth of this is we were working toward Getting Energy in the ukraine and never, not once, did i hear the word biden, did i hear paris is did did i hear burisma. I hear military aid. Stand up and give your testimony, but i did not see anything that tells me the president of the United States has done anything that even approaches the concept of impeachment. Manus you said you were not prepared to testify. You talked about the illegality of what is going on. What has happened what would happen to get you to agree to testify . Mr. Perry the first thing is the house needs to follow their rules and do what their rules require. Their rules are in essence law. It says, here is how you conduct an impeachment inquiry. And what that requires is a public vote. Comere asking people to and say, here is what happened, but you are not willing to stand up and say, i am for impeachment . Then that on its face tells you there is a lot of politics being played here. Manus can i ask you about a telephone call . I talked it through with our folks in washington. They said one of the countrys top diplomats testified that on june 28, on a call with ambassador volker, volker said he planned to be explicit with president zelensky about president solon skis n president zelenskys need, with cooperation on investigations to get to the bottom of things. What is your interpretation of that . Mr. Perry here is my interpretation of it. From the first conversation i ever had with anyone as i was being brought up to speed on ukraine, the previous president coming in to see me at the headquarters of the doe, the issue of corruption, the issue of oligarchs and their extraordinary impact on the country, particularly in this midstream company, that is what we talked about. That is how i read that. This country had a massive amount of corruption, and the president of the country, the new president of the country, was going to have to deal with it, and deal with it in a way that clearly started eliminating it, and that is what the guy ran on. Zelensky talked about it as a candidate. Manus in the briefing yesterday, you described the attacks on aramco to iran. Have you gotten new evidence that confirms it is iran that launched these attacks . Mr. Perry i dont need any new evidence. The previous evidence clearly showed that it was iran. This is not questionable. Manus did we get a reality check when you woke up and saw these pictures . Did the world get a reality check in terms of what can happen, in terms of terrorist attacks excuse me, in terms of attacks on oil . 5 of Oil Production gone. Mr. Perry i did not get a reality check. I knew that before i went to sleep that night. Manus manus do you think anybody believed this kind of thing what happened . Mr. Perry yes. In the world we live in today, yes i do. If you dont think this can happen, you are not living in the world of reality. You need to be prepared for it. You need to be recognizing that there are individuals in the world that are willing to take extreme steps to disrupt the global economy. Manus do you think america what we want to know in our region is that america is doing enough with saudi to protect saudi. From these kinds of attacks. Mr. Perry i think so, but the other side of it is, i was a governor for 14 years. From time to time, you have an event occur. Somebody will stand up and say, you didnt do enough. Manus do you think america is doing enough . Mr. Perry i do. Manus should they do more . What is more . Mr. Perry explained to me what more is, yeah. Weuld we put well, should put tens of thousands of troops all around a refinery . Is there technology that is available . I would suggest to you that there are conversations going on about defensive technologies that make sense, to put that type of equipment into place and what it is and where it would be put is obviously classified. In a very fluid world. I should say, the saudis and the United States and other allies of saudi arabia are in conversations today about, how do we make sure our Oil Production is as safe as it can be . We have these conversations domestically in the United States, on cybersecurity, on how do we make sure that our pipelines are being protected from a terrorist threat . Manus the one thing that comes to mind, the president s words, it is time to bring them home. Whether that is any middle east conflict we have seen, very clear message. But people in this region are worried there is confidence slipping away about u. S. Backing. Are they wrong . Are they misguided in terms of that . Sense of, yes, in the is america going to walk away from the middle east and kind of say, weir hands off and didnt produce all of this. Not necessarily. That the previous type of approach had not worked very well. So, this president tsai, we are going to take an unconventional approach so this president said, we are going to take an unconventional approach to this area of the world. I will let the critics be out there braying away. But the point is, we are making progress. When you think about albaghdadi, and the elimination of some of the real problems, the peace that is breaking out there at this moment, i happen to think that his movement in the right direction. Perry, tell me, what is going to be the tough issue in this 2020 election . Is it going to be middle east . Is it going to be oil, or is it going to be dollar . What is going to drive this election . Manus all of them, with the exception of impeachment. Manus you dont think impeachment . Mr. Perry no, i dont. I think it will be the russian dossier in six months. It will have gone away because there is no there, there. The economy is going to be what drives this. A the American People feel little jingle in their pocket, if they feel confident about the future, if they have a job, that is what is going to drive the economy. Yousef up next, germanys spy chief says huawei cannot be fully trusted. We speak with them. This is bloomberg. Yousef welcome back to the best of daybreak middle east. Germanys spy chief said this week that huawei cant fully be trusted, secure signaling that hardliners want to keep the chinese tech giant out of the countrys 5g networks. The president of germanys federal Intelligence Service says it is difficult to trust a company that has quote a very high level of confidence in the communist party. The chiefe to Security Officer for the u. S. Aest we have not generated significant amount of revenue from the United States. It is uncertain how much of an impact it will be, the fact that American Companies are not allowed to sell to huawei. The impact on the United States is quite certain. In hundred 30 companies that would like to sell to huawei 130 companies that would like to sell to huawei, we would hate to see that impact. The fact is huawei is going to do fine. Even ifoing to do fine we cannot do substantial business in the United States. Tracy one of the things we have been tracking and investors are squarely focused on is the trade tensions between the u. S. And china. Has the mood music there become more optimistic . Do you see huawei potentially being part of a trade agreement between the u. S. And china . It isrdy frankly, unclear because we are not sure of the nature of the private talks between the u. S. And china. It does appear the cause of the geopolitical situation between china and the u. S. , the u. S. Government has not been willing to talk with us about the traditional kinds of Risk Mitigation measures that, for example, allow nokia and ericsson to do business in the United States, despite their deep ties to china. They can do business in the United States because they are subjected to agreements. We would like to talk to the u. S. Vermette about Lessons Learned from that and our experience in we would like to talk to the u. S. Government about Lessons Learned from that in our experience in germany. Tracy on that note, you used to work for the u. S. Government, i believe in the Bush Administration as a cybersecurity expert. Do you think the Trump Administration has overstated the security threats that huawei poses to the u. S. . Mr. Purdy i think some of the government officials have stated forthrightly that it is not about the company, it is about the country, it is about china. The u. S. Government has concerns. But as the former head of Public Safety and Homeland Security for the fcc that will take that vote, the u. S. Should not be distracted by this conversation. Sophisticated malicious actors with full herbal networks can hack into everybodys equipment. It is necessary to make sure we have transparent measures so there is a basis for trusting. That is one of the reasons we are so impressed with the work withe qatar government, internationally recognized standards and independent valuation. That can address real risks. Tracy i am going to ask you about your involvement in qatar in the middle east region. But before i do, just on the u. S. Strategy, it does feel like the u. S. Is trying to turn multiple countries against huawei. How effective is that strategy, and what do you think it is that actually encourages companies to side with the u. S. Or countries to side with the u. S. , i should say . Mr. Purdy i think it is remarkable given the pressure of u. S. Government has mounted for almost the entire year how few countries have gone along with the u. S. Pressure to simply block huawei because we are based in china. What you see from the european union, you see the recent announcements from germany two weeks ago. The idea of coming up with conference of Risk Mitigation that provides an objective and transparent basis for knowing which products are worthy of trust, that is the way you would trust real Sovereign Security risks and make us all safed are make us all safer. Tracy lets talk about what youre doing in qatar. What are your Business Plans for the region . Again, do you feel there is some tension there, given some of these middle Eastern Countries are u. S. Military allies . Mr. Purdy i think what we have seen in the sessions we have attended so far in the meetings today and tomorrow, the government is rightly concerned about given their growing independence growing dependence of qatar and the region on communication technologies, the necessity to make sure the risk is managed, to make sure resiliency is promoted, to make sure the Telecom Operators and vendors understand what their requirements are in there is a basis for holding them require holding them accountable. See themcited to pursue the potential economic benefits that can flow from 5g, and 5g can be managed in a way that addresses the real Sovereign Security risks so we get the benefits of huge job growth. Tracy we have seen a number of cybersecurity attacks in the region. Someis a region that has very serious infrastructure, particularly in the energy space. How big is the cybersecurity threat for the middle east . Think the Sovereign Security threat throughout the world is great, and it is great in the middle east. You recall the attacks against saudi aramco some years ago, which are a legendary example of using cyberattacks to cause physical consequences. I talked to some people connected with the Munich Security Conference last night that were involved with energy security. It is a major commitment to the government and the private companies here to address the real Sovereign Security risks and protect the flow of energy, to protect the data on which the energy gathering and transmission depends. I think the standards are in place, and the experts recognize what they need to do. I think we have a large degree of confidence moving forward, and the citizens can have the ability to depend on the flow of energy resources. Regarding thee u. S. Situation before you go. We know the u. S. Has granted some temporary licenses for some companies to do business with ofwei, but there is a lot confusion over exactly what that allows and does not allow for. What is your understanding of exactly what u. S. Companies and entities can do with huawei at the moment . Mr. Purdy there is almost nothing that we can purchase, with a couple minor exceptions. The fact is that these companies are forcing huawei, the fact that they cannot sell to us, they are forcing huawei to find alternatives. Our 5g equipment, we are shipping with no u. S. Components. We would like to come back to u. S. Components, but right now we have no choice. Manus up next, we hear from the ceo of a saudi arabia and mining company. This is bloomberg. Manus welcome back to the best of daybreak middle east. The saudi arabia and company known as maaden recorded a narrower loss than expected in the Third Quarter. We went through the numbers with the ceo. Guest i think the second and Third Quarter shows the headwinds are pushing against growth. With headwind growth, we have 2 million of projects under construction. But obviously, we are in a situation where Commodity Prices are dropping and continue to do so. We are fully funded for those projects. What we are looking at is the longerterm growth beyond 2020, making sure we are focused on the right areas. Financing,aking of it appears to be in the pipeline. Are you looking potentially at a cooperation with the pif . How big is it going to be, and when will it happen . Mr. Davis what we have is theed, yousef, exchange. Our company and the aluminum business was overleveraged. We reached an agreement to exchange their loan for around 800 million into equity. We have a Shareholder Meeting next monday, which we will present to the shareholders that transaction. If that gets approved, the exchange would occur very shortly thereafter, during the month of november. Manus what does that mean in terms of i think the story we wrote earlier in the year [indiscernible] can you say now that the issue would be off the cards in the new term . If you look at the capital structure, clearly we have too much debt in the company for a commodity company. We are looking at the future of growth beyond those projects i just talked about. We would have to look at other means of raising capital, or use our equity in more imaginative ways to achieve some of that growth. But at the moment, there is no plans. Yousef you mentioned that there is still some work to do. There is too much debt in the company. What about the subsidiaries . Are you looking at some new refinancing plan . Mr. Davis that has been one of the challenges you have with a structure like we have here, the Holding Company with a lot of debts in jvs with other companies. We dont have the same outlook on leveraging. The market in saudi particularly has been very conducive to making refinancing very attractive, so we have done a number of those in the last two years. We have some more coming up. As long as the markets are as good as they are in with all the Interest Rates dropping, it is a great time to refinance. We will be opportunistic, but we have more debt to refinance coming up in 2020. Manus darren, can i get your perspective. Everyone is having a conversation about the aramco ipo. From the global perspective and the Global Investment perspective, is that good news . The aramco ipo brings bigger investment an investigation into saudi companies. Is there a tailwind for you from this ipo, if and when it comes . Mr. Davis i am glad you didnt ask me when it comes. I definitely dont know the answer to that question. Manus hold on. Do you know when it is going to come . Have you confirmed when the ipo is going to come, first of all . Then you can answer the question. Mr. Davis [laughter] i really dont know when it is going to come. Even if i did, i wouldnt tell you. But i am not that important. It is such an important transaction for the kingdom. It puts saudi arabia more on the map, yet i think there is a good story to tell about the Stock Exchange in saudi arabia. It is an active exchange, the biggest in the region. I think it is not covered globally. It could become a useful source of capital for companies outside of saudi arabia, now that the listing rules have changed. It puts saudi arabia on the map as an area where the stock market actually exists, is functioning, has a good investor base. I think it could only be positive for us. Yousef remember, you can catch daybreak middle east every sunday through thursday morning here on bloomberg television. That is at eight 00 dubai time. This is bloomberg. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation 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. I am nejra cehic. This is bloomberg daybreak europe, and these are todays top stories. Octobers payrolls are expected to show jobs growth at a five month low that will strike at and a strike at gm will skew the numbers. Renewed fears asian stocks clawback ground after better than expected chinese manufacturing data but concerns over trade negotiations spur demand to havens. President said Boris Johnsons brexit deal will make any pact with the United States harder. Welcome to bloomberg daybreak europe. Asian equities getting a lift from that data coming in better than expected. Is it the official . U. S. Futures on the front foot as well after we saw some weakness on the s p 500 yesterday, pulling back from a record on concern about the longerterm trade negotiations. The 10 year yield edges up to a 170 candle. We have seen the yen bid on renewed concerns. The dollar index heading for its worst month since january 2018 so we have seen some dollar weakness across the board. Is that going to flip . Optimism, we saw that with cable yesterday after we heard in a report that the brexit party might step away from some seats. With that give Boris Johnson a majority . Wti up today but heading for a weekly loss. Set for its biggest weekly loss in a month partly on trade deals but after stockpiles data. We are on jobs watch as october data comes out later. Economists expect the members to show jobs at a low. The survey is well below the figures seen over summer. The survey ranges from an increase of 25,000 all the way to 140,000. Despite the forecast, all of the banks and bloomberg economists cited one particular reason for a skewed figure for october. It is expected to hit payrolls like a rock as 46,000 workers have walked out. Joining us now is jeremy stretch. Show, jeremy. Happy friday. It looks like it could be a noisy jobs report. Jeremy that does make it rather more difficult to read because of the impact of the gm strikes. Automatically, you are going to be taking that and adding it back to what the actual number is. In a sense, its not just about jobs today. We should not lose sight of the fact that it is manufacturing ism. Think about some of the things chairman powell was talking about on wednesday when he cut rates. It was in effect saying look at the data, look at the impact of the manufacturing slowdown and see how that is going to reflect. The forwardlooking survey data take on ever greater importance so it is not just about payrolls today. Nejra one of the Big Questions out there is whether the weakness we are seeing in manufacturing feeding into services and then hitting the labor market, so if you put together jobs and the ism, what signals will you be looking for . Jeremy are we seeing moderation . I think that is inevitable. Is that moderation turning into something more sort of construction we are seeing the fed reacting to that by the three fed rate cuts we have already seen. We are not expecting that sort of slowdown to become all pervasive and really taking sentiments sharply lower. We are looking for a smaller rebound in the manufacturing ism today. Showing some signs that there is a stabilization. That is actually what we are looking for here. Employment has been a stunning Success Story for the u. S. Over the course of the last couple of years so anything get is inevitable we are going to see slowing in the face of jobs growth. We are getting pretty close to full employment anyway. We have to look at the underemployment. We have to see whether there is a little bit of a reversal and there might be something to the labor market which is getting to a point where it is going to be rather more difficult to see significant jobs rest. Nejra will the fed beyond plots for the foreseeable future . Be on pause for the foreseeable future . Jeremy it makes sense to say lets have a look and see how operations are starting to have an impact. I think if we do see a moderation in terms of the trade tensions, so we do not see the trade tensions amplifying, then i think that will also help to put a little bit about floor on the sentiment. We can talk about the chinese pmi, the context of that. It is sensible for the fed to actually step back a little bit for a period to see how the medicine is being taken by the patient, and i think that will probably imply that the Federal Reserve have done enough for now and we are in a pause. Nejra should we be putting the treasury flatten their curves on now . Jeremy if you get to that scenario, it may be well worth looking at those. The other question is what is happening in the longer end story. We have seen the 10 year yield coming off those times we were seeing in the immediate aftermath of the fed. The question is, are we going to start to see those yields moving back up a little bit . Wemay still be some would have a little bit of sympathy with that over time. I am not sure necessarily. Nejra what does all of this dollar . The it has been a painful month for the member dollar index heading for its worst month since january 2018. Does that continue . Jeremy i think it does. We have been looking for a weaker dollar. It has been a painful trade. In a sense, now, we are starting to see the fact that we are seeing a slowing u. S. Economic cycle, so we have seen the sugar rush of the fiscal expansion driving growth higher and it had an impact on the fed late last year. We are in a scenario where the growth trajectory of slowing and we are starting to get to a period where Political Risk will become much more dynamic because we are 12 months away from the president ial election. We also have between deficits in terms of the fiscal shortfall also starting to prove to be a little bit more of an issue. I think it is going to be the case that the dollar is going to cheapen up a little further and that might take a little bit of pressure from the white house away. Nejra if we see a weaker dollar, which currencies benefit the most from that, the euro, the yen coming Something Else again, Something Else . Jeremy we will see the euro and the yen making modest and steady gains over the next 12 months. The boj yesterday, they set the bar relatively high to additional using. That probably sets us fair for a flight moderation Going Forward in terms of dollar. If we are going to see a reduction in the trade tensions, and of course, that is a big if, and if we start to see slightly more optimistic growth trajectories relative 2019 and 2020, then of course that puts it back into play, some of those currencies. The rebound in the aussie and the kiwi i think probably has a little bit further to run as well. Nejra jeremy stays with us for the hour. Barbara first word news in bloomberg first word news. President trump is weighing in on Boris Johnsons brexit deal. He says it will make it more difficult for the u. K. To strike a trade deal with the u. S. After it leaves the european union. , theing to nigel faraj president said the two countries could be doing much bigger numbers when it comes to trade. Pres. Trump under certain aspects of the deal, you cannot do it. You cannot do it. You cannot trade. I mean, we cannot make a trade deal with the u. K. Times the can do many numbers we are doing right now. Saw a chaotic halloween with demonstrations and festivities. Police firing tear gas at. Rotesters communist leaders in beijing signaled tougher security measures for the financial center. It is the highest level comment on the situation but gave no details on what china plans to do. And now to california, where pg e has restored power to essentially all customers hit by the shutoffs. The plan blackouts were to prevent electrical wires from downing and high winds and starting forest fires. There are still weeks to go in californias wildfire season. 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. This is bloomberg. Nejra thank you so much. Donald trumps presidency stands on its most treacherous ground after the house voted yesterday to approve and proceed with its impeachment inquiry. Heres bloombergs white house reporter, Kevin Cirilli, with the details. The house of representatives took the first vote to formalize the impeachment inquiry into President Trump. Upon a largely partyline vote of to196, lawmakers voted advance the impeachment inquiries. There were two democrats who voted with republicans. The next step, likely public hearing, and more calls to testimony from key officials in the Trump White House and state department. Reporting from washington, Kevin Cirilli, bloomberg news. Nejra bloombergs Kevin Cirilli reporting in washington. Today, we are asking the question on mliv, will the trump impeachment inquiry matter to markets . Reach out to us and the mliv team on your bloomberg. Jeremy is still with us. Jeremy, trump becoming just the fourth president to be subject to a formal impeachment effort. He may well become the first president to be impeached and then seek reelection. How do the dynamics of all of this fit into your dollar call . Jeremy we do see great Political Risks as we move ahead into 2020 because of course, we are going into the primary season in the first part of next year, but also of course, President Trumps presidency has been a fairly lively one in terms of the context of Political Risk in terms of the currency. Are we assuming the impeachment process is a major dynamic in terms of the dollar story . We are not, specifically. There are many hurdles along the way. Of course, the negative news flow is one factor which i think will keep some investors on the sidelines and will keep them aside from the u. S. Dollar, but it is integral to our sort of possession of a weaker dollar story. Nejra some of the hurdles you talk about, the senate what implications might this for reelection and also President Trumps approach to the trade negotiations . Jeremy thats quite interesting what we have seen is that when the president appears to have difficulties in his domestic agenda, he often tries to shift the focus elsewhere. In a sense, because of this advancement of the impeachment process, it makes it evermore important that he does get some degree of political success elsewhere. In the context of the trade negotiations, it probably takes away one of the impediments. If he was not suffering from the degree of Collateral Damage domestically, he would probably be quite keen to push the trade story a little bit further and perhaps hold back any resolution until closer to the election process. I think it does play into that narrative. President trump does try and shift the direction of the media. I think the trade story is one way to do that in a positive fashion. Thea we will shift conversation to trade. National director larry kudlow joins us following the release of the latest u. S. Jobs report. Later on, bloombergs Jonathan Ferro and tom keene will be joined by Richard Clarida for an exclusive conversation on bloombergs the open. Do not miss it. This is bloomberg. She i am nejra cehic. Lets get the Bloomberg Business flash. Peugeot and Fiat Chrysler turns to small Advisory Firms for their megamerger, ditching the big banks. The companies are set to split as much as 90 million in advisory fees. It underlines an increasing trend of Big Companies leaning on smaller firms for advice. Firm only has five partners. Saudi arabia is concerned mms aramco ipo could drain liquidity in its financial sector. Some lenders want permission to offer greater leverage. The kingdom is looking at increasing the amount banks can lend to local investors to buy shares. Isork wework is being accused of discrimination. A complaint of antipregnancy buys has been filed. Wework rejects the allegations, saying it has a policy of zero tolerance to bias. And that is your Bloomberg Business flash. Nejra thank you so much. Lets check in on the markets in asia. Rishaad salamat in hong kong has more. We are ending the week on a headline level. You can say we are adding to six months highs at the moment. A bit of a mixed bag earlier but we did turn around. Lets have a look at shenzhen shanghai. A manufacturing service, pmi coming in stronger than expected. 51. 7. Hong kong, we are heading towards the close. Up five. 3 . 3 . By we are looking for retail sales which could show things getting even worse, looking for a 30, a near 30 fall on high street sales. Yen strength not helping exporters. The market shutting upshot with a decline of. 3 , and adding to the gloom in japan, car sales out, falling 26 . Month, we were up 12 . We have a kospi up. 8 . We just closed. Despiteement coming horrible trade members. We have exports and imports, both falling by about 14 . Thats have a look at some of the movers. We have india unchanged. India was looking at six days of gains. A vodafone company. 15 up, as much as 17 . Vodafone moving to the upside after denied reports it was going to exit india and that was for to the huge billiondollar tax bill it is facing on backed taxes. Litendo, its switch beating estimates. A logistics company, what do we have here . Down 5. 6 . It cut its net income. Indeed, its Forward Guidance looking to what is happening here as well. Shares extending losses. This company is an interesting one. This is a land in real estate developer. 9. 4 to the upside. It has been up every day since last friday. News emerged that the company a 50 stake in another firm. The chairman has been advising xi jinping on blockchain. That connection itself has meant ons company is great simply the back of that relationship. That is what we have at the moment. I am shot salamat in hong kong. Rishaad salamat in hong kong. Nejra lets talk more about trade. Rishaad mentioned some of the numbers. Chinese officials are said to have doubts about reaching a trade deal with the u. S. Despite the two sides getting close to signing of phase one agreement. Meanwhile, data from china should manufacturing continued to pick up in october. New orders increased at the quickest case in years. Thatabove the 50 level Market Expansion and betterthanexpected pmi pmis for south korea, japan, malaysia, and indonesia remained in contractionary territory. Great to have you on the show. Data, firstwith the of all. Better than expected. Do you buy into the signals it is sending, especially given its diversions with the official data . Divergence with the official data . I am more suspicious of the pmi indicated. If the official pmi was pretty weak and the weakness was so components, supply demand components, and at the same time, the big firms and small firms, leading indicators all weekend. Weaken. Today, the pmi is indicating otherwise. In the past few months, the official pmi has been tracking the economy better, so in this sense, we are more suspicious. We have to closely watch out for the divergence between the two indicators. Nejra so you are taking your cue from the official data. How much of a q should we take from cue should we take from the fact that hubs are stuck in the doldrums . What does this mean for Monetary Policy given the fed has signaled it is now on policy . Pause . Chang the picture is weakening across the region, and certainly, this is very much affected by the trade war. A flat number of countries had pmis stay below the 59, but there are other countries indicating weakness. China and vietnam. Last month, the pmis were about 50. Just toth, they dropped the 50 point level. All those indications are isgesting the weakness spreading across the region, and if you look more closely, the weakness is mostly driven by the demand side. In particular, the new export orders declined for all the economies. At this point, certainly, the direction of Monetary Policy is easing. A lot of countries have eased their Monetary Policy in october along with more countries easing, cutting Interest Rates, including australia. Including australia, bank of korea. And Going Forward, this is certainly going to continue. Asia chang shu, chief economist for bloomberg economics. Jeremy stretch is still with us. Jeremy, do you agree with what chang just said . Perhaps weaker currencies with the fed on pause . Jeremy it was interesting what she said about the weakness spreading across the region. What we see in china first generally tends to permeate across the other parts of the region. Ultimately, we are in a negative feedback loop from that negative trade dynamic playing across the summer and into the autumn period. We have to assume that the narrative does change and we see and easing in those trade concerns. Some ofl help to ease those downtrends in terms of those new export orders and i think the legacy of some of those monetary easings we have seen will also start to come through. I am not sure necessarily that we will continue to see very aggressive monetary easing. Australia was mentioned. We have seen three rate cuts and the fiscal ease and in the context of australia, where you have got excessive levels of Consumer Debt and leverage, cutting rates would be prudent or would be a beneficial aspect. The negative feedback loop i think has to run its course first. You can see the trade tensions start to dial down. We are in a scenario where Central Banks can pause in a broader context. Nejra how optimistic can we get about trade tensions easing . Phase one might be on track. We are expecting a phone call between officials today. China has cast doubts on a longerterm deal. It is saying it wants tariffs olled back. R could you say markets have priced not in and they were never expecting any longterm deal . Even if we get phase one, risk assets rally and everyone is happy . Jeremy that is a pertinent point. We have seen a lot of noise from the u. S. Side of the equation. We have seen, up until now, almost silence from the chinese side. That almost led you to assume there was an optimistic viewpoint from the chinese perspective. Yes, we may well see that phase i deal, but i dont think we are in a scenario where we will see a substantial rolling back of the tariffs we have already seen. It is more about stabilization from where we are rather than overt moving back towards the levels we were seeing at the beginning of the year. I think we do need to be careful as to how much the rally or the rebound has already priced in. Nejra jeremy stretch stays with us. We speak to hsbcs global head of fixed Income Research at 8 00 a. M. U. K. Time. Jonathan ferro and tom keene will be joined by Richard Claire ptak. This is bloomberg. Nejra european banks have struggled, here with more is dani burger. This is athis week, surprise to the upside. This has more to do with good expectation setting. We saw smartphone makers like apple and samsung Beat Estimates and we saw chipmakers do well this week. Other tech giants, facebook beat expectations as well