Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

Trillion, far below the target set by the kingdom. We are live from hq. Plus, flying high. Results season continues with ryanair. We are joined this hour. We will also keep an eye on the drivers of uber ahead of results later today. Manus welcome to daybreak europe. Ryanair, guidance. Pretax profit, beating the 41. 5 million, but it is to the future and the outlook i think the market will focus. They are talking about the risks to delivery of the 737, and with the guidance, this is what i can tell you. They see a narrowing of fullyear profit after the tax 809 million. these are the top lines coming through from ryanair. This is certainly comfortably beating fullyear profit. The 737 delivery. That is ryanair. Lets get you to the markets. We are risk off from equities, and the dollar, Michael Oleary shortly, us very, very i saw michael flash on the screen. He is joining me very soon, 6 30, and we will talk about the guidance and the risks with Michael Oleary. To the market, i mentioned the dollar, in here we go. The dollar down for the sixth day in a row, the longest losing streak since the start of september. Citigroup has a cell idea on these currency. This currency. No reason why a deal cannot be had. Momentum, risk on south africa dodged a bullet in terms of a downgrade, so you are seeing a small rally in the rand this morning. And what will they do with their time . What will they do with their time in retreat . Think of new york mellon says there is a risk of capital outflow, and socgen says they are picking up the carry trade in the short term. Ussie is expected to stay on hold. Those are your markets, just a snapshot. Story,heck in on the top with the u. S. And china, the first part of a trade deal, speaking exclusively to bloomberg, one person expressing optimism about phase one of the deal that will be reached next month, adding that licenses would be coming very shortly for American Companies and hugh huawei. And the chinese will have suggestions about china. That should be the easiest to negotiate. So the trade deal will be signed in november . Say that wonderfully definitively. I think we are in good shape. We are making good progress, and there is no natural reason why it could not be, but whether it will slip a little bit, who knows . It is always possible. Are there obstacles . Wilbur not so much obstacles, but making sure each side has a very correct and clear and detailed understanding of what each side has agreed to. Trade deals are very, very complicated. And this one is particularly complicated. It has been months since the huawei ban. Are American Companies confused on whether they can do business with them. With the phase one trade, is there a possibility that huawei could be removed from the list or whether restrictions could be eased . Wilbur first of all, huawei is an enforcement action. Huawei is not part of the trade negotiations. Some 260here have been requests filed for licenses. The way the entity list works is you need a license to sell any controlled product to them. That is a lot of applications. It is, frankly, more than we would have thought, but, remember, too, with entity lists, there is a presumption of denial, so the safe thing for these companies would be to assume denial, even though we will obviously approve quite a few. The special licenses from huawei suppliers based in the u. S. , not dealing with the Security Link components, when do you expect the Trump Administration to issue those licenses . Wilbur though should be coming shortly. When is shortly . Can you quantify . Wilbur it is shortly. [laughs] disappointmentis over two years, and there is the trade pact backed by china. Is there concern within the u. S. Leadership that, perhaps, the economies here might be even more economically dependent on china . Wilbur all, first of all, this is not much of an agreement. It is not a freetrade agreement. Like not anything remotely tpp or anything like our with japanrangements and with south korea, so i do not think you want to blow that out of proportion. Lowgrade treaty. Second, in terms of our participation here, it is very, very fulsome. Manus that was the commerce secretary speaking with our own amin. Da to and lets get to her. I great interview. Sense did you get is the biggest obstacle to getting this deal done . Manus, theyu know, have pretty much dotted the is and crossed the ts. Ago, it was wilbur ross who said the deal did not necessarily have to be signed, and here he is in bangkok saying there is nothing much to stop it, but what he did say is it has been a pretty complicated arrangement, complicated and difficult process, to get here, because both sides to have to ensure that both sides knew what they were getting into, and they have to know precisely what they have to deliver with the phase one agreement. Now, as far as the u. S. Is concerned, wanting china to buy more u. S. Agricultural products. It wants china to assure a and also that china opens up its Financial Services market to u. S. Companies. On the part of china, china wants the u. S. To ditch a plan to impose tariffs in december. Whether or not the u. S. Is willing to do that remains to be seen. I put that question to wilbur ross. He was noncommittal. He set on things like legislation and things like enforcement mechanism, which is pretty absent right now, and with absent, it means you could be just left with a pile of papers, so one of the things to consider as we look into phase two, things like intellectual property come into question. Manus intellectual property is important. I think removal of the december tariffs is critical, some people are saying, but what about on the Technology Side . Because you talked about huawei and the progress. Is that the next incremental step in the supply process for china . Islinda well, huawei interesting, and from my conversation, it seems some progress. It has been five months since the ban was imposed, and it was not just huawei, companies in companies that u. S. Companies are not allowed to supply components to, but trump did indicate recently that he is willing to issue special licenses to these companies to supply these components, and wilbur ross suggested it is going to happen pretty soon, so that is an improvement. When that will happen, he refused to say. Great interview, haslinda, working in bangkok for us to bring us the news exclusively on the u. S. Trade deal with china. Guest host this morning is head of fx strategy at a company. Good to see you. What do you make of this . My last guest said phase one is nothing but a masquerade and that you need the removal of the tariffs to be assured of demonstrable progress. What do you make of that . We are much more aligned with that view. This is phase one. There are things not talked about, and we heard about intellectual property rights. That is part of it. Again, if we look at washington and some of the comments we have seen from washington over the last few months, looking at the democrats, what nancy pelosi has to say, she is saying they have to stand up more to china. We have not heard in the last few weeks is anything particularly. We know in washington, there is suspicion. We know there is a lot of suspicion about Chinese Military bases in africa, for instance, and what china would like to achieve. So we are talking about i think much more deeprooted suspicions, and i think while we are focusing very much on phase one, there is an awful lot to be discussed about phase two, and i think it is really important right now to just put a break between the near term and the medium or longerterm, and right now, we have a lot of Risk Appetite coming back. I think the Central Banks have a lot to do with that, as well as the trade talks, but i think six months down the road, again, we could be looking at a much more tense situation, a deterioration in Risk Appetite, again. Manus ok. I am going to circle back to the comments. A lovely piece of research. About currency, something that you have a pretty strong view on, this is the yuan, the first time below the 100day line. The tradeit take with below seven with conviction, because what you have just said to me, like a seven bid lady. Jane absolutely not. In fact, not really with the y uan and with the dollar and some currencies, what we are seeing is a boost of Risk Appetite that moneye the dollar flowing back out of the dollar, but whether or not that will be the thing to continue, in six months time, talking about the flows going the same way, i would be quite surprised, because i do think that Risk Appetite will deteriorate again, and i think what we have got now is we have got opportunity, but i do not think that is going to last a significant amount of time. Manus you are playing into my hand here. Library, we do miss nejra when she is not here to help with the charts. This is on a fiveweek ending streak. Dose ofave a healthy skepticism, do i sell these on the fx . Jane not yet. I would not say you sell them just yet. I think what we have got now, and we talked about phase one, phase one of the trade deal, and the market is relieved about that, but we have also got interesting things with the Central Banks. Looking at the fed, we have the fed signaling it doesnt have to cut Interest Rates again for now. ,e had the u. S. Job status obviously not the ism number, interestingly, but when we look at the other Central Banks, new zealand, they do not need to cut to get to the end of the year. The japanese, they have got pretty good domestic demand now. They did not need to cut Interest Rates last week. The rba will not have to cut Interest Rates tomorrow. So we are in this phase where actually maybe Central Banks are signaling things may not be as bad as we thought. Top of phase one and the trade deal means things look brighter now than they did a few months ago, but crucial here is that i do not think that is going to last. Look at the ism from the u. S. I think that was the third consecutive number below the 50 level. If we look again at the issues about phase two of the u. S. Trade deal, which is going to be much more difficult to find ampromises on, i think in sixmonth period, again, looking at a lot of tension in the world, and i think we see that so iappetite coming back, think we can see a time where we would be. Manus ok. Jane. We will dig into the rba very shortly. Jane is my guest host in london hq. For first word news, annabelle droulers. Elle thanks, manus. In the u. K. , Prime Minister Boris Johnson has apologized for theing to deliver brexit by october 31 deadline. Speaking to sky news, he blamed parliament for failing to back his accelerated timetable. And now, they are looking for a new speaker to replace john bercow. Protests withacy clashes with authorities with tear gas and Water Cannons fired androtesters in the streets the subway stations with over 70 people sent to the hospital for treatment in hong kong, two in critical condition. Warren buffett still has not found any deals. Berkshire hathaway is cash going to record billions. Fourthquarter profit gain. For the year, they have a staggering net income of 52 billion. He will continue to face questions about whether he is being aggressive enough with his massive hoard of cash. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Manus . Manus annabelle. We will be hearing from Michael Oleary who joins me shortly. Fullyear Profit Guidance at ryanair. Ichael joins me this is bloomberg. Manus it is bloomberg daybreak europe, and i am manus cranny. Potential investors. A longawaited ipo. Well below a 2 trillion target that was set by his excellency, they arebin salman, struggling to find a valuation. Saudi aramco. Matthew martin is tracking the aramco story. Thisew, good to see you morning. So what do you think the main takeaway is from yesterdays press conference for you . Good morning. Good morning, manus. Well, as you said, yesterday, saudi aramco formally announced what they had been building up to for the last years, so the train has left the station now, i guess, but these of the things that came out of yesterday, and there are still questions that are not answered. All we really know is that there will be a listing on the saudi stock exchange, so it has been talked about. We still have a lot of unanswered questions. There is no sign of how big a stake in the company the saudi government plans to float. Clarity no real clear around the valuation, as you say. The government is not talking about what kind of valuation it hopes to see, and we really do not have any firm date on a timeline beyond that we are expecting to see the prospectus coming out on the ninth or 10th of november. So, yes, investors, there are still a lot of questions that they will be asking around this and how big it will be with the valuation. Manus matthew, one of my favorite themes at the moment is about the credibility gap. Company, andng the bank of america, a 1 trillion gap in valuation. It research, or is it pretty darn hard to value the company . There areell, i think a lot of factors at play. On the one hand, the government has been very clear and ambitious about getting this company to reach 2 trillion, so a lot of pressure on the bank to get the valuation up as high as possible. If you look at all of the changes recently in terms of the tax and royalty rates and the dividend policy, that is all key into what is making this attractive and boosting the valuation. But at the same time, you have got a leather act a lot of other factors at play that will pull the valuation down. Oil, the trend away has begun. The Risk Appetite for investing in a massive oil company is probably more muted now than it would have been a few years ago. Manus thank you, matthew martin, tracking the aramco ipo. Either way, some of the twitter thes, like a boy band from reporter. Amco. Ames foley and myself joining me is an fx strategy, jane. The ipo is going to dominate the news flow for the next three to four weeks. Can i pivot to the commodity currency that we look at . How are you looking at the commodity complex at the moment . It is ultimately just driven by the trade . Jane well, i think there is a little bit of a difference between, say, huawei and canada, newif we look at aussie, zealand, they are very much facing china because of their geographical position, and also because of the aussie, for instance, it does export a lot of coal and iron or, and that is a big stomach. We will see Risk Appetite improve, as we are right now, because of the u. S. Trade deal. That takes a little bit of pressure off the currency. And looking at trade of the Australian Dollar as a proxy to china, so things are looking a little better now, and the aussie is likely to see some relief. Some of the data is better. The bank tomorrow is not expected to do anything else for now. Things look a little bit better. Manus jane, can i ask you about that policy meeting . The rba is hitting a reversal rate. Would you agree with that in terms of where they are with rates . Jane i think it is just a pause. Banks have been quite preemptive this year. In fact, it was the new Zealand Central Bank that was the First Central Bank to cut Interest Rates this year. At the beginning of the year, a lot of concern about where brexit was going to go, but the new zealand Central Banks were the first to go. I do not think it is all over, because i think as we go into phase two of the trade talks between the u. S. And china, i think we are going to see some very significant stumbling blocks in phase two, and i do think at that point, the rba may have to cut again. Manus yes. What is it . Jane, we have got a lot more to get to this morning. K strategists is with us strategist is with us. This is bloomberg. Manus daybreak europe. I am manus cranny in dubai. Guidance for range of 800 to 900 million euros. A warning over further delays in the delivery the max 737, Third Quarter profit rose 8 when the revenue was is to from xers like speedy boarding and reserve seats outweighing the impact of lower fares. The ceo of lion air joins me now ceo of ryanair. I helped your numbers this summer. I took a couple of your flights. Give me our sense, michael, of the challenges too,. I have had iag and air france. They are talking about a tough time ahead. How do you see the road ahead in the next quarter and into 2020 . I think this winter will be challenging. In the case of ryanair, this morning reported strong numbers, traffic up 11 . But only on the back of average fare down 5 , which is why i suspect we welcomed you in a couple of flights this year. Even lower prices and salaries continue to be strong. But costs are under control. I would be more optimistic looking out onto the next 12 months. We have seen consolidation in europe we have seen the failure of thomas cook. And other airlines like as your has gone bust. And norwegian arrows teetering. Maxthe delay ins the 737 means there will be less capacity added to the marketplace next summer on the back of lower oil prices. I would be more up to mystic into next year. More i would be optimistic into next year. But the next two quarters in winter will be tough. Pick up on those thomas cook and carriers went belly up last year. Does that mean you will not have to take a capacity fight or take capacity out . Thats right if anything we are looking for more aircraft to keep. We are postponing Aircraft Sales and a lee says. Our subsidiary in austria has secured another three aircraft rising out of the failure of thomas cook to maintain that growth. All of this just counterbalances the fact that originally in our plans with spec to have 60 max aircraft flying in the summer of 2020 and we will only have 20 at best. Next will only grow. Year we planned grow by tenley and passengers from a hundred 53 million to 106 e3 and land now we are probably only grow by half that rate to 157 million. Manus is that a demand slippage or capacity slippage. We just do not have the aircraft. We are seeing that capacity slowing down, which is a slightly better out turn for shareholders in the next 12 months on the fares and yield. The big challenge in europe and the last two years has been too much capacity and to many lossmaking airlines like thomas cook and norwegian, higher oil prices. I get the sense next year we are moving into an era or year of lower oil prices. We are already hedging our oil at 10 a barrel less than last year. Unless capacity growth. So hopefully there will be a better out turn for the airlines. Manus lets go for a headline. Where you recognize oil prices can go to . Like everybody else, i have no clue. But if you look at the amount of political instability in the middle east in the last 12 months and yet oil prices have been resolutely tepid. We are hedging now at 60 per barrel out into next year in 2020, whereas last year we are hedged over 70 per barrel. Manus can we pick up on the max 737 . Do you think european regulators are dragging their heels or are you satisfied is the ceo about the jurisprudence they are showing . I think are dragging their heels. To be fair, boeing have not been easy to deal with in the last 12 months. I think the faa and boeing. It looks like at this stage the faa are moving ahead that the aircraft will return to service in north america this side of christmas or medially after christmas. Itare struggling to get moving at the same speed. We have a max users group in europe are looking for an early meeting with the asset. Easa needs to move with more pace. Patrick and seema are doing a good job and the safety issues have been identified and are being rectified by boeing. We are very confident this aircraft is safe, it is a brilliant aircraft. I think the regulars need to work with us as an industry to get this aircraft back flying and flying safely. Anus how many do you think. If it is back in the air in the United States before christmas, lets run a positive scenario. How many have boeing said they can get to you, lets say by the middle of next year. If it is flying before christmas i think we will be up to get 30 aircraft in advance of next summers peak. We are limited, we can take about eight aircraft per month, two per week. If he gets delayed till after christmas we are probably looking at only 20 aircraft for next summers peak one way or another we will have considerably less than the 60 we originally planned, which means Slower Growth next summer. In the European Market that is bedeviled by overcapacity for the last year or two that might not be the worst outcome in the world. Finishmichael, just to off of the couple of points. A tough year for variety of reasons. Called off the u. K. Strikes set for last month and are the talks set to recommence, what has been agreed . They did it. They called seven days of strikes in ryanair and had to organize seven days of laughably incompetent strikes that were supported by less than 5 of our u. K. Pilots. We had not won cancellation of our u. K. Flight program during the seven days of strikes. The union had no support among our pilots. We are in continuing dialogue with them but if youre going to come in as they did looking for 100 pay increases when the industry is going to hell in a handcart for what is already the highest paid group of people, do not be surprised if the strikes fail. They called off the day strikes after two days on the ground to be a. ,our continuing our dialogue but the dialogue is not going anywhere very quickly our pilots recognize their very wellpaid. What is interesting in ryanair is that our rate of pilot attrition has dwindled to effectively zero in the last six months and we are over crude. Of the max delivery delay, we are letting pilots go. I think we will reach an wouldent with balpa, i say the next six months there will not be a huge payday far pilots already very wellpaid and have the best rosters in the industry and job security that no the pellegrini industry enjoys. That no other pilot group in the industry enjoys. Manus it looks like we are in election season now. Some would say that risk of hard brexit is off the table and we ultimately will end up with a negotiated deal. What would that mean if we go into a transition. And nobody knows what is going to happen in 2020. But a transition. And deal, what would that mean for you and we have talked about it often . Transition. And the deal would mean effectively no change. The u. K. Consumers can continue to enjoy the lowest airfares of any and europe. My fear isr us and that this election will result in another Hung Parliament and more delay and more debt there. That can be good more did their dither. But business and the economy needs to cnn to the uncertainty. Election may not deliver an end to uncertainty but another Hung Parliament the u. K. Is split almost on the middle. Increasingly, the people who were led tomisled into believing you can leave the e. U. And nothing will change are beginning to realize actually that brexit is a stupid policy. Is not in the best interest of the u. K. Consumers. Or the u. K. Consumers. Michael oleary, ryanair. Thethe next three years, makers of the mri scanners and blood test analyzers reported their earnings and the ceo joins me now. You set a growth target of 5 every year. Montag bernd ceo good morning. How does this target compare with your expectation for the overall market. Is, good morning. We expect after the first successful. More than 5 growth you talked about. This is a mix of on the one hand continuous market share gains but in addition, creating new markets with the offerings we digitalization, in artificial intelligence, in the adoption of robotics. Sharethe combination of gains plus making new markets. Was just looking at the spread of business you have geographically. The americas, europe, asia, in terms of this, can i ask you, if Elizabeth Warren came to power in the United States of america, she has promised to spend 20 trillion on health care. Is that a realistic proposition . Well, i am not sure. I think in the end our business demand, byy patient more and more diagnostic tests, by a growing population by more by more chronic diseases, patients who more and more act as consumers. Politics plays a role. But in the end, the end market is 7 billion people who want to have access to better care. Out, thecally averages u. S. Is an important market. China is our second biggest market. We have a positive also about the prospects in europe. So we are a truly global player. Manus what is your outlook for china. We try to understand what trade meanslowdown, stimulus for everybody. Make it come alive for me with with yourlthineers growth trajectory for china . Emerging markets, if that is the right term, contribute by more than 50 to our growth. China is certainly the most important market here. It is already in some of our business is the biggest market we have. It is very solid growth. Rent very bright vibrant new private segment in the market for private health care providers, or we have strength. Have a lot of strong local footprint in china. So that also when it comes to the trade war, we have an impact it has an impact, but in our case is relatively limited. It is about 30 million hits to the bottom line, which we had last year after mitigation. So it is not nice but it is not jeopardizing our profit and a large mate get to test large magnitude. Manus you had your checkbook out in the summer time and did a deal. We want toers, know what is your appetite to do another deal. Is that a top parity or is an organic growth. Is a combination. Out a Clear Strategy since the ipo where we want to go. Medicine,ecision driving the digitalization of health care. All we do, organically or otherwise needs to cater to the strategy. It is not a question of appetite or not, more question of whether it fits to our strategy. I think the tool of larger intositions we have made, robotics and ecg management , there will grow into becoming a hosting partner a holistic partner for health care providers. Calling that strategy. Manus thank you for joining me this morning bernd montag , ceo Siemens Healthineers right here on bloomberg. Saudi arabia is taking aramco public. It will probably start trading in december. The kingdom will except evaluation lower than the much touted 2 trillion. It is now looking at between 1. 6 1. 8 trillion. Banks involved her telling potential investors that aramco may be worth 1. 5 chilly dollars or less. In the u. K. Come up Prime Minister Boris Johnson apologized for failing to deliver brexit by the october 31 deadline. Vicki do sky news he took her spots ability for the failure but blamed parliament for refusing to back his accelerated timetable. The house of commons will today elect a new speaker to replace the former. U. S. Commerce secretary wilbur ross is optimistic of a preliminary trade deal what china this month. Summit ishe apec canceled, where will the signing take place. Ross says alaska, iowa and why are potential locations. Is a lot of applications, more than we would have thought. Remember with entity lists there is a presumption of denial. The safe thing for these companies would be to assume denial. Even though we will obviously approve quite a few of them. Global news 24 hours a day and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Annabelle, thank you. Lets turn our attention to the fed. After the central bank it up pause button after the Third Straight cut this year, stronger than forecast october jobs reports, officials hammering home the message that the fed rate cuts are on hold for now. We caught up with the fed vice chair who spoke exclusively to bloomberg. We have ongoing growth in the economy, of inflation they are our objective. So the economy is in a good place. Growth as we have characterized, growth is moderate right now, the Global Economy has been slowing and that is a factor. But the u. S. Economy is very resilient. These are good numbers. Both the gdp number and the labor market number surprise bit on the upside. Foley is my guest host from rabobank. One thing i was struck with with the fed is the internationally and the Global Deflation risk reference. If Global Deflation is my threat to the fed how do i position for that . If that is your threat, the next move from the central bank is likely to be an Interest Rate cut rather than Interest Rate hike. For the dollar, course, that is the reaction between the currency and the central bank is not as straight line. It is not your normal textbook scenario. This is because the u. S. Dollar is the dominant currency in International Payment systems. There is an a lot of demand for dollars all around the globe. And often when Risk Appetite goes down, you see demand for dollars remaining extremely robust. In that respect it tends to behave a little bit like a safe heaven. So i think what we have here is that if we have a scenario where it looks as if the u. S. Economy is doing well, what you could as is the dollar softening money comes back out of the u. S. , back into riskier assets and she riskier currencies. From that situation i would expect the dollar will for the next x amount of weeks maybe the next three month or so. But further out we need to bear in mind that there are still headwinds. As you mention, global headwinds. And not all the u. S. Data heaven that robust. The ism date at the end of last week which is really quite soft. Manus yes and were going to get quite a bit of data this week. Im putting up the positioning on the dollar. The sixweek enroll, the longest streak since january. Have a look at this positioning data. Where the leased long since june 2018. Are we just Getting Started on this. , with pmi, ifas this begins to showed doubt does this push the dollar lower in the near term for you . The u. S. Data is only part of the story. The trade deal is a significant part of why Risk Appetite is improving. We may get softer data today. Or this week. We may not. On the heels of the trade deal, i think Risk Appetite is going to remain fairly robust. For now. And i think this improvement in Risk Appetite could pan out at least one month, probably three months. I think it is after then we start getting into different territory. We do think that at that point there were be far more signs of a weakening in the u. S. Economy. Foley, head of fx strategy rabobank atrabobank coming up, cover stations at bloomberg. Conversations at bloomberg. Stay with us. This is bloomberg. Is bloomberg daybreak europe. I am manus cranny in dubai. 1053 a. M. In dubai, 6 53 a. M. In london. Up that the u. S. President ial election, the good news for President Trump is that the u. S. Is resilient. A snapshot of the employment numbers is the key since trump took the helm, showing a rise in agricultural jobs as well as those than the natural resources. A more muted picture on the services side. What about the stock markets . The 45th president , how did it perform. The s p 500 during trumps first year, the performance has not exactly been recordsetting. He trails franklin d roosevelt, harry truman, jk and george bush senior over the same. According to the models which track records of projecting who wins the white house and the enduring u. S. Expansion, it puts donald trump on course to win reelection in 2020. That is according to the Yell University Oxford Economics and wheaties analytics. Analytics. s in the u. K. We are gearing up for another general election. The bank of england will have to overhaul its Inflation Report this week. And create a new model based on brexit being pushed back to july of 31st. Jane foley is with me. The pulse have the tories in almost a van glorious position, 38 i read for one labor and 28 . 12936, does not reflect a 10 point lead in the polls for you does that reflect a 10 point lead in the pulse for you . 120 nine, that was a proximally 6 above where cable was trading a bit slow in october. That is a fairly juicy gain. That is based around i think the market optimism that the johnson government does have a deal and that following the election he will be able to push that deal through. Therefore, i think the market is trading on those perceptions that the chances of a no deal brexit are quite small. And that is worrisome. Because there are risks still for no deal brexit, depended on how this election cans out. If those are the probability of a hard brexit would seem to increase again, then sterling really for another hard time. Then sterling is in for another hard time. Manus as you say the risk about hard brexit is something the meyer kids might wish to reassess. Jane foley rabobank is therabobank at rabobankst. Coming up, we speak with golden sack ceo, Christine Lagardes and aramco ipo. Coming up. This is bloomberg. Manus good morning from bloomberg middle east headquarters in dubai. This is daybreak europe. These are your top stories. As wilbur ross tells bloomberg exclusively his optimist to go for a phase i deal with china this month. I think we are in good shape. We are making good progress. And there is no natural reason why it could not be. Saudi coming to market, aramco finally launches his blockbuster ipo. But it could be worth only 1. 5 trillion, far below the target set by the kingdom. We are live to the groups hq in dhahran. Results season continues. Jump bypost a profit fines guidance. Of ceo addresses the delays the boeing 737 max. I think they are dragging their heels. To be fair, boeing havent been easy to deal with in the past 12 months, the faa and boeing. But it looks like the faa saying that the aircraft will return to service in north america this side of christmas. Manus welcome to daybreak europe. It is the biggest ipo in the world. Numbers, numbers when it comes to assessing the valuation on aramco. Now we have more qualification. 217 billion dollars, the nine 18 thevenue, from an client in the ninemonth number. The ninemonthin number. This is a statement from them as they launch their ipo. The net income last year was 111 billion dollars, the most Profitable Company in the world. If you add up apple, google and alphabet, they trumps all of that together. They of capex surpass all that together. We will get to the numbers with thehew martin in dhahran at aramco ipo headquarters or new slant sentiment. Breaking news in from vw. A much more difficult environment to,. This is about the auto environment. The investment you see being plowed into a variety of electric cars. The transformation that is going on in the auto industry. You think about the peugeot deal. More difficult and buy going into 2020. So there is a redhead line on that. Headline on a red that. I want to talk to about turkish inflation. The lira is strengthening. October inflation 8558 doubt from 9. 26 . The estimate was for a. 6 which validates the rate cut you have seen, the gargantuan rate cuts you have seen from the turkish side. View onhalffull emerging markets. Trial by data is the headline. There you go, strengthening and the layer this morning, down goes the dollar. Let me take you to futures. Theres a consensus about a possibility of a trade deal phase i. London, into futures in paris and berlin. You are seeing that sentiment on a phase i. My guess are skeptical on a phase i and suggest theres a lot more work to be done in phase two. Take your bid wherever it comes. 7301 on the u. K. Futures. Roll it over and have a look at the bonds. I want to focus on bonds because i love when people talk about the 1990s. At with a whole different era than. Jp morgan have reflected on the bond market. It reflects the 1990, the fed have interns cuts, the bond market went on to rally by a hundred basis points in terms of yield and the curve steepen print to that end, you can dance in the clubs but it may be reminiscent of a 100 base basis point move. It is a National Holiday in japan. Cash is closed and futures are trading. To the u. S. And china. They have agreed to the first part of a trade deal. The commerce secretary wilbur ross spoke exclusively to bloomberg expressing optimism on a socalled phase i deal which we reach this months. He added that the licenses would be coming shortly for american cups companies to sell components to huawei. American companies to sell components to huawei. There was a suggestion about alaska, iowa, hawaii. Im sure the chinese will have some suggestions in china. That should be the easiest part of the whole thing to negotiate. A trade deal will be signed in november . See it wonderfully definitively and i wish i could be as definitive. I think we are in good shape. We are making good progress. There is no natural reason why it could not be. Whether it will slip a little bit, who knows, it is noise possible. Who knows,till it is always possible. Are there still obstacles . Making sure each side has a correct and clear detailed understanding of what each side has agreed to. Trade deals are very, very complicated. This one is particularly complicated. Manus commerce secretary wilbur ross speaking exclusively with bloombergs haslinda amin. What you see as the biggest obstacle to a trade deal . My guess are airing skepticism. It is true. Last week when china said this , the u. S. Is precautious. This week the u. S. Is pretty caught up beat. Your guess is as mine. In the words of wilbur ross, there is really standing in the way. But it has been difficult getting here. Because both sides had to ensure they understood what is at stake and what is needed to be done in member though, this the first phase i deal does not include things like ip. It does not include soa reform, which has been standing in the way of the bigger trade deal. Phase two is key. That is what everybody is looking out for. What the u. S. Want some china is for china to buy more Agricultural Products to yuan, andu on currency is stable. Nd to open up and to forget about tariffs mid december. Is what china wants. When i asked if wilbur ross was willing to commit to lifting us tariffs, he was noncommittal. He said it depends on legislation and the enforcement mechanism which is not there yet. Without all these things is going to be a pile of papers and an agreement without any substance. That reflects back to some of the reports, that it could be a paper tiger. Amin in bangkok. Host joins me in our london hq. Resurgent yuan on what is assumed as a shoe in for phase i. The reality is that there is a lot more work to do. It is my optimism on seeing the yuan break seven misplaced . How we are taking this trade war is that it is really applicable to all. He is taking me signing to iowa. There are tunings that happen in iowa. Farming and caucusing. If youre applicable strategist, that is where youre going to take a deal. He is getting two important ,hings, him being donald trump from wrangling in the trade tensions. First, it is an exciting space. Second, he is driving interest sites lower from the fed. He does not want that to stop just yets. From thest rates lower fed. He does not want that to stop yet. It is way too early now for him to pull this trigger. Manus ok but lets take the road to success, lets take that track first of all. If there is a removal of the tariffs before christmas, my guest on daybreak middle east earlier said that is enough to take dollar yuan offshore to 6. 66. Could you get that kind of response . You could, you could. But we think of a trade deal standpoint it is way too early. That they are not going, christmas deal. In fact, we are probably not going to see anything before early february 2020. Because tactically it does not make sense for President Trump to sign that deal. He needs that to empower his base, to continue to put pressure on the fed to drive it is rates lower. Signing a deal now tactically does not make sense. I pivot to the fed. Another sentiment that came through the past couple hours, if you get three rate hikes, on good day, strong consumer and strong economy, what can you get if it over the u. S. Next year . Thing to us, we are done and on pause. But if you cut three times on good data, how much closer what we get in 2020 in european on in 2020 on poorer data . Right. While they are cutting Interest Rates the arcs banding their Balance Sheet by 6 billion on a monthly basis. Im not sure they could 60 billion on a multibasis. Im not sure they could go blazing just because the data starts weakening significant lay. Theyre already putting a lot of pressure on easing. That means a lot of their firepower is already out of the market. It starts if we have a sort of adventure catalyst that puts the u. S. On track to a fullblown recession. I think the fed will start moving very aggressively with 50 basis point cuts and sing in quantitative easing. Manus typically theyll put out a note. They saying this is reflective of the 1990s only had a series of cuts i reflected on 199519 98. Jp morgan makes a point it will be fairly indifferent to the dollar. They one thing they talk about is a hundred basis point move up in yields. Could you see, if there is a success lets say at a trade deal level of substance. Brexit goes according to plan. I like this. Manus why no other a lot of efts. To i knowg there are a lot of ifs but im trying to drink the Goldman Sachs koolaid. Could yields right by hundred basis points in that scenario . Not particularly. First you have a massive bulk of rates that are stuck negative rates. That is underpinning the u. S. Rate markets. See needs unwind before we left off in the u. S. Rate curve. It is difficult for me to see a significant rally for u. S. Rate curve while europe is stuck in on a negative side for the short end of the curve. That is really underpinning. That is the distortion we saw with an inverted yield curve in the u. S. We have this problem in europe. That is not going away just because there is a trade deal in the u. S. Isolationde not in just run a single economy, but where they can get value in other places. If it is negative in europe that needs to unwind sing kelly before the u. S. Significantly before the u. S. Goes up higher. Manus peter, the other piece of research done, i think it is only a time since the 1950s we have seen a 20 rally at this stage in the air. On those education since the 1950s we went on to lock and load higher on those eight occasions since the 1950s we went on to lock and load higher. What advice are you giving to equity exposure relative to a beta Currency Exposure as a play into 2020. Riskstorically with the premium of equities over fixed income remains relatively attractive. Despite that valuations are high , and contexts they ultra low side of fixed income, means there is the risk premium that should be picked up. Right now even though it seems very high and looks very bubbly, the alternative and fixed income does not look appealing. So we continue to see the bullish side of the equities story. The other thing is we remain convinced the primary driver for asset appreciation for the last 10 years has been easing monetary policy. Away a lot ofows the other context, it means that while the fed, while the boj while the others continue to ease policy, means asset prices will remain supportive. Manus ok. Peter, stay with us. Your first word. From hong kong. Saudi arabia is taking a ronco public. It will probably start trading in december. Understand the kingdom will accept a lower than the much touted to trillion dollars. It is now looking at between 1. 6 trillion and 1. 8. But getting that my evaluation may be tough. Banks involved in the offering are telling potential investors that aramco may be worth 1. 5 trillion or less. In hong kong, at least 200 rest 200 arrests this weekend as democracy protesters clashed with authorities. Police firing tear gas and Water Cannons and demonstrators calm curated streets devastated to barricaded streets. Two people were sent to the hospital in critical condition. In south africa, the country may be celebrating victory in rugby. But theres less to cheer about on the later on the nations finances. Moodys cut its outlook to negative but considered against downgrading the countrys debt to junk. It will cling to its last Investment Grade rating after previous cuts from s p and fish. Arren buffett s p and fitch. Powerire hathaway cash 128 billion as thirdquarter profit climbed. A staggering net income of 52 billion for the air. Buffett continues to face questions as to whether beast being aggressive enough with his massive hoard of cash. Global news 24 hours a day and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. This is bloomberg. Annabelle. Thank you. Hell ice look so happy destiny, warren buffett. We take a look at uber, struggling to be profitable, next. As it reports as thirdquarter results today. ,oming up on the show tomorrow my mistake, i got all excited, it is tomorrow. We will speak exclusively to the Goldman Sachs ceo David Solomon. The conversation at 7 30 a. M. If youre traveling to work, we are with you every step of the way on Digital Radio in the london area. Manus it is 7 20 a. M. In the city of london, 40 minutes away from the start of your trading day. Im cash equities, risk on cash equities, risk and trading markets. To tech now. Another firm struggling to convince the market about its troth potential growth potential. Or that it became become profitable anytime soon. Lost 2. 5ailing firm billion in that second quarter. Looking at the previews. It is about cash as well this company. It has been a tough ride for over this year. Shares are down 30 since the ipo in may. Beat ar rival lyft quarter, one analyst called the beacon of hope for the industry. That has been the question for the industry, will result this quarter be enough to win back confidence of an Investor Community increasingly focused on profit versus growth. Todays focus will be on writer engagement and revenue diversification. A food delivery and expansion in writers growth and headwind such as price increases in major cities. Plus other impacts or probability. One company particularly tied up in uber that could use the news is softbank. Uber was once a star in this portfolio but now labeled among its yours underperformers biggest underperformers. Adding another headache is we a 9. 5ecently unveiling billion rescue package for the onetime high flower. Dust high flyer. For the onetime high flyer. We will have to see those results later today. Manus thank you for the preview on uber. Now Boris Johnson takes her spots ability for failing to deliver break the by halloween he says it was a matter of the progress. Gearsdears up for up for an earlier inflection and the bank of england will have to overhaul its Inflation Report to early this week and creating new model for brexit in pushed back to january 31. My guest host is the head of Market Strategy at swiss quote. Peter, you said it in the break. We are obsessed by singler dates and events. Are we misguided in our expectation . Singular dates and events. I think so. If you look at the options, they are really are pricing in a rogue events on the weekend the 12 coming in on the 13th. That highlights the fact that the market keeps looking for a singler event that is going to wrap up brexit in a single nice package and say now we can move forward. But in reality, regardless of how the 12 goes down, and there is almost a 40 chance of a Hung Parliament, that you go into the passage of the deal and then trade relations and then where does the u. K. Set within the Global Economy afterward, which will take years before it is resolved. We are getting too focused on andimmediate event catalyst not looking at the broader picture and that is negative but it comes to sterling traders. When it comes to sterling traders. Cautions theoley roads to a brexit are not closed. Is it a tail risk, would you play that through options for when your forward or six month forward. How would you play that tail risk of hard brexit and is in a tail risk . I think jane has a very good tap on what is happening in the u. K. , may be better than myself. I think you continue to play the tail risk through options, the longer dated. The longer we dragged the process on, the more likely things are not going to happen as we expect. Therefore that creates an unexpected uncertainty that options or get a pricing. And you do see the volatility around sterling pie compressed considering the enormous see what we are looking at. I think there is a good play, the out of money option. And continuing to look for the rogue event. The rogue event. What is the worst case outcome on december 12. What would be a rogue google outcome for you. Parliament would be probably the worst thing. It just creates a massive level of uncertainty. It is one thing you have decisive win on one side or the other, you can forecast what to expect. But when you have a Hung Parliament, you just sort of throw your hands up and say not have to rethink everything i have thought before. And the met is making it nearly impossible to trade through. Could you see a scenario, you say perhaps a worse outcome on december 12 would be a Hung Parliament. But in the case of a Hung Parliament, it is presumed the tories was still get the majority of the seats in a hung situation and will get first chance on for a government. What would be the scenario with , frost party and a tory party code joined. One of the market risks from that . I think that is probably outside of my breaks expertise when you get to the granularity of this. Is a labor or i do not really know what we can prices and out this point. Thats what we can price this in at at this point. Manus there are so many permutations and combinations. One ceo who will have an opinion on that and christine the isdener first day on the job David Solomon the ceo of Goldman Sachs who will join the uber team tomorrow. You do not want to join the Bloomberg Team tomorrow. You do not want to miss that conversation at 7 30 a. M. This is bloomberg. Matt european up. Phase one. Ng for Global Equities and futures gain on the latest glimmer of a u. S. China trade deal. Europe awaits another earnings and data heavy day. Than 30 trade is less minutes away. A productive meeting. U. S. Commerce