Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

These are your markets we are getting some data. Manufacturing pmi coming in better than expected. Little bit ofa optimism when it comes to the stoxx series the stoxx 600. Treasuries falling with the bonds. U. S. Looking daughters holding dollars holding pretty steady. Coming up tomorrow we speak to the Goldman Sachs chief executive, david solomon. Meantime we will speak about euro markets. As get to the bloomberg first word news in new york city. Viviana Prime Minister Boris Johnson has apologized for failing to deliver brexit by the deadline. Speaking to sky news he took responsibility for the failure but blamed parliament for refusing to back his timetable. One concern for his riot one concern for ryanairs ceo is the upcoming election may not decide a thing. My fear is this election would result in more delay. That could be good in that it means it means the transition to continue on ad infinitum. The economy needs to see in into this uncertainty. Viviana over to hong kong where 200 people were arrested this weekend. As protesters clashed again with authorities. Police firing tear gas and Water Cannons at demonstrators who barricaded streets and set fire to subway stations. More than 70 people sent to hospitals for treatment. Two are in critical condition. Warren buffett has not found any mega deals to tempt him. Third quarter profits climbed 14 . Berkshire has racked up an income of 52 billion. Buffett continues to face questions whether he is being aggressive enough. Over to south africa, the country may be celebrating victory. It can also celebrate about being about avoiding ratings downgrade. That follows previous cuts to junk by s p. Global news, 24 hours a day, powered by 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine think you so much. Saudi aramco that is according to Research Involved in the companies ipo. Target set by the kingdom. Likelys it will start trading. For more on all of this lets get to aramcos reporter. He joins us. What are the Key Takeaways . Well, what we saw yesterday was a combination of three years of work that has gone into preparing aramco for an ipo with a formal announcement. As you mentioned in the introduction, when this was announced, then solomon said he wanted to see the country reach a 200 trillion valuation. What we saw yesterday in a press Conference Announcing the intention that a lot of these details are still not being determined. They said the valuation is going to be determined by the building process. What they sell will be determined by the process. Untilt start to see that the building process starts. But it is looking unlikely now that we are going to see it hitting as high as the 200 trillion valuation. Francine why has this been so difficult . Is it royalties . There seems to be so much going and coming. Do any of the previous make you any more nervous about this one . Have seen at we aramco do over the past year is that they have made various inks to the dividend regime order to try and encourage investors into the company and try to make aramco look ok better yielding story. It is around that yield question is where the valuation is found. If ram is set to pay dividends of around 75 billion next year or a few years afterwards, and if it hits the true trillion dollar number 2 trillion number, that is not enough to attract Global Investors. Even a 2 stake would raise around 40 billion and make it one of the biggest ipos ever. Ist we are expected to see the valuation will come in slower come in lower than that. That will start to make it look more attractive when you look at it against some of its global peers. There is a huge amount of liquidity around in saudi arabia that is looking for a home. Aramco looks like an attractive opportunity for them. International investors are going to be much more focused on the yield question. Francine thank you so much. He is matthew martin. Joining me for the hour is stefano aversa. The turnaround space, one of the biggest chapter 11 negotiations. First of all, thank you for joining us. Stefano thank you for having me. Francine what does this valuation mean . Stefano i think saudi arabia has been playing the long game and is still playing the long game. When i worked there, they had been extremely cautious about or atting any valuation precise date on the ipo. It is goingion is to happen and now confirmed within the end of the year. 5 . Ably below as i said, it is a long game. That is by far the most Profitable Company in the world. Oil have the largest of in the world, something that is unique. Moment. Eing a defining it is a way to say, our main asset, the most important. Thirdly, secretive asset. Francine what does the invitation mean that they are missing at home . So far, stefano it is a statement that we are open for business, and we want saudi arabia to be in the International Investment community. Aaning they have organized future investment. Innovation investment. Addresstended to investors all over the world. That is a not a big statement, the largest ipo is going to happen first. I am sure it is going to be extended somewhere else in the world. Rancine thank you so much he stays with us and we will talk about a lot of other things happening in the markets. In the meantime, this is the share prices premarket. Mcdonalds fired the chief executive. You should see it in the share price right now. There you go. Down 1. 7 . On the i4 the goebel stocks climb. A trade deal with china this month. We will talk about that next. This is bloomberg. Francine economics, finance, politics. This is bloomberg surveillance. The countdown to the president ial election is on. Vote. Ys until the as it stands, the betting market has money on the democratic president coming in. But what about one of Trumps Campaign promises, increasing jobs on the strength of the u. S. Economy. The steps out of Employment Office since trump took 2017 shows gains, especially in agricultural and natural resources. Of course, we will get a better idea in the general election in february. The democratic primary is held in iowa. The u. S. And china say they are close to agreeing on the first part of a trade deal. Optimism of a phase i deal be reached this month. I think he suggested iowa. There was a suggestion about alaska. There was a suggestion about hawaii. I am sure the chinese will have some suggestions in china. That should be the easiest part to negotiate. A trade deal will be signed . Well, you say it wonderfully, definitively. I think we are in good shape. We are making good progress. There is no natural reason why it couldnt be. What will slip a little bit, who knows . . Are there still obstacles not so much obstacles but making sure the inside has a very correct and clear, detailed understanding of what each side has agreed to. Trade deals are very complicated. This one is particular lee particularly complicated. Francine that was wilbur ross speaking to bloomberg exclusively. Still what this is stefano aversa. We have had some pretty great on theto insiders chinese side that makes us understand what happens after phase one. How likely is it that we get phase i this month . It is sounding increasingly likely. What is in it is still a is still up in the air. As you heard from wilbur ross, they think they can do this. He did add the caveat that there are a few details to work out and those can be the things that blow deals up ultimately. We will have to see what happens, but we are getting nothing but positive signals. Somease one will involve chinese pledges of agricultural purchases, maybe a commitment on the currency to not manipulate their currency and perhaps some gestures toward protecting American Intellectual property. U. S. Is going to forgo some of the tariff escalation. Maybe, as you mentioned, give huawei a break. This all needs to be hammered out still. Francine what does this mean for Global Business . Thatthat be enough to say intentions are getting closer . Stefano it signals that we are moving in the right direction but far from satisfying the market. Investors and managers are looking for stability which is clearly not there. The second is having some type of change. Neither one are there at the moment because changes happen fairly quickly. The two things need to go into that order. First, give a bit of clarity about the future. Second, give some time to adjust. Phase two is much more important for trade. Francine there is no indication we will get phase two. Brendan the Trump Administration would like to keep tariffs as a threat to force a phase two. Phase ii two is going to involve much more difficult structural changes to the chinese economy, the types of things china is not willing to give up on, the subsidies for industry and basic state control of the economy. China is not going to give that up easily. There is not a whole lot of talk about phase two yet but we will see what we get out of phase i. Francine can businesses live with things as they are . Yes, i think they can there are adjustments already happening. Theres been some repatriation of production in not only the u. S. But europe. China. Extent, also in is a reduction of globalization. Globallya reduction of evaluation. We can see that we are looking at globalization in Different Countries other than china, also anymorechina is not a lowcost country for many items and products. Francine how much do we know what a democratic president would do on trade . Brendan they talk a tough game. They would probably do it in a ,ore predictable way, perhaps then outbursts on twitter. But it is a fine line the president will have to walk in being the dealmaker that he says he is, and also being tough on china as a strategic rival. Francine do people go to vote in the u. S. And think about trade . Brendan if your job has been taken by the globalization, the sort of reason that the Trump Administration says they are waging this trade war, is to bring manufacturing jobs back home, sure. If you are manufacturing worker in ohio, this is definitely one of the reasons you go to the polls and pull the lever that you pull. Francine does the u. S. Election change the outcome for a lot of businesses that need to be restructured in the u. S. . Stefano not necessarily. It depends on the strategy that the next administration will pick. We can maybe talk about specific sectors, like automotives. It is not necessarily they are not some involuntary extra burdenof because, for example, if you look at the german reduction, the vast majority of cash is produced in u. S. And exported in china from south carolina, north carolina. Effect is theet production of gdp so we have to be careful because we have a fully connected interconnected economy. Closing the market might create potentially reduction of gdp and not liquidity. Francine thank you very much. Murray and stefano versus stays with us. Under armour discloses that officials have been probing its practices for more than two years. It also prepares for a chief executive transition. This is bloomberg. Francine this is bloomberg surveillance. I am Francine Lacqua. Turning to tech, another firm that is trying to convince the market of its growth potential, uber. The firm lost 5. 2 billion in the second quarter. Uber is set to report thirdquarter earnings later today. As you say, it has been a tough ride for uber. Shares are down 30 since its ipo back in may but after lyft beat it because it a beacon of hope and that is a big question for the ridehailing firm. Will it win back the confidence of the Investment Community that is focused on profit versus growth . The focus on that includes food delivery and how fast that has been expanding. Some of these major cities and how this months recent round of job cuts will impact profit ability. One company tied up in uber is softbank. Goobers will uber was once a star in the portfolio but now labeled as one of its biggest underperformers. It recently unveiled a 9. 5 billion rescue package for the at one time high flyer. Given the latest drama, will they offer some relief . We will have to see those results after the closing in new york. Francine thank you so much. Coming up tomorrow, we will speak exclusively to the Goldman Sachs chief executive. That is coming up tomorrow at 7 38 a. M. About expecting news brexit and i am looking at stocks. Overall, treasury yields writing on optimism. More details on what phase i actually entails. Phase i actually entails. This is bloomberg. The game doesnt end after that insane buzzer beater. Because with Nba League Pass on xfinity you can watch the out of market games you want all season long. And with the allnew xfinity sports zone, you get everything nba all in one place even notifications about your favorite teams. Watch the dropped dimes, monster blocks, and showstopping dunks. Plus get instant access to your teams with the power of your voice. Thats simple, easy, awesome. Say Nba League Pass into your voice remote to upgrade for a great low price or go online today. The ipo is finally on. They may have to settle. Rade optimism arches, mcdonalds fires what will this mean in the future . Good afternoon if youre watching fo from asia. I am Francine Lacqua. We will talk about the election coming up in the u. K. On december 12. We are getting a little bit of data. Thursday, we have mark carney. This is what we are seeing. A little bit better than i expected. Anything below 15 means it is in contraction. Lets check in on the biggest stock movers. There are a lot of to keep an eye on. The autos are up nearly 3 this morning. That phase one deal could be signed this month. On top of that, he said the u. S. May not add tariffs on european imports. That is good for the autos in europe. Ryanair is up 7 . One thing that is working is you can buy extra speedy boarding, reserve seating and that is helping to offset the costs they have. Siemens is up as well. Over the nextth three years. I want to show you what is going on in the u. S. Premarket. We had two bombshell announcements. One from under armour, which is down nearly 14 at premarket trading. They announced they are having an accounting probe from u. S. Federal officials. Mcdonalds is down nearly 2. 5 . Another bombshell announcement over the weekend. They are firing their ceo over a consensual relationship he had with an employee. It goes against Company Policy. Lets get straight to the bloomberg first reviews in new york city. Aramcoi arabia is taking public. It is now looking at between 1. 6 and 1. 8 trillion. Getting that valuation may be tough. Be worth 1. 5 trillion or less. It will probably start trading in september. In hong kong, at least 200 were arrested as prodemocracy protesters clashed with authorities. Police firing tear gas and Water Cannons at demonstrators who barricaded seats and set fire to subway stations. More than 70 people were sent to the hospital for treatment too. Two are incredible condition. Is optimistic of april ameritrade deal with china. Where will the finding take place . Alaska and hawaii are potential places. It is more than we would have thought. Entity lists, there is a presumption of denial. The save thing for these companies would be to assume denial, even though we approved quite a few of them. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado, this is bloomberg. Francine thank you. The Trump Administration tends to review the merger of Fiat Chrysler because it would give chinese carmakers a stake in the combined company. That is according to larry kudlow. Who comes out the winner . Is someone who worked on g. M. In 2009 and is a veteran in the auto space. We will get your insight on something we have been covering white extensively. How does this new entityhow doe . I think it will be as close as it can be of a natural recall. I think the two companies are the only ones that have been extremely successful in mergers. Bought General Motors and made it profitable. Better shape when he took it. He made it positive. Obviously, cf merged with chrysler. Something that was not easy. , and made iten successful. Both companies have a similar culture. They are not arrogant. They are pragmatic. I think that they will fit very well together. If i would think of two companies that would fit well, they are two of them. They have been collaborating for almost 40 years on a number of. Lants very successfully so. One of the most profitable segments. They produced in france and in italy. Think there is a high probability of success. Francine what can they do for electric cars in europe . Can they be the number one player to push this in europe . The Number One Company in the world is volkswagen. Maybe because of the diesel scandal, maybe because they just wanted to make a point. They are investing alone, about twice the second one. They will be the leader. Cf has been more on the waiting mode. Dont need toyou be a pioneer in every technology. You need to come into the market at the right time. He was waiting and now he is coming in with the new electric car. Maserati will be fully electrified. They invest a bit more because they have a fully so they have a fully hybrid platform. The synergy there will be that the two companies are very strong in different areas. Geographic areas, psa is strong in europe. And to some extent in china. In north and south america, they make more than 100 of the profit. They are struggling in europe and are very small in asia. Y are very complement complement ary. Francine is he the right guy for this . Stefano yes. I had the chance to be close with him. Ands absolutely ruthless has a very strategic mind. What he did and i think will continue to do, he went for a reduction of the range, concentrated on the products the client wants and reduced the cost on those. The developing costs are huge in the market industry. Now, what he will do is, looking at all of the brands together, more than 10, and look at synergy. I think that will be the strategy. Billion ofced 3. 7 synergies is reasonable. It could be conservative. That is a good way of managing. I think between now and the closing, which could be seven months from now, there is a lot to be passed. I think that strategically and culturally, they are on the right path. Francine they wouldnt have a big presence in china, right . Do they need to get it to get praise around the world . Stefano they dont need to. Together, they would have 8. 7 million cars. Place,ts them at fourth just above General Motors. Not too far away from the victory. Toyota, nissan, on the top three. I think china is important. I think they will invest more. Is better positioned. 13 market about share. We will see what they will decide to do. The inside road to china, which they can use. Francine thank you so much. We have many more questions on the car sector. Coming up, inflation. How you will have to readjust after brexit has been pushed back once again. We are also getting news out of plans to trade on the futures market. We will have more on that shortly. This is bloomberg. Francine this is bloomberg surveillance. Lets get straight to the Bloomberg Business flash. Heres viviana hurtado. Warren buffett has not found any mega deals to tempt him. Berkshire hathaways cash pile grew to 125 128 billion. Third quarter profits climbed to 14 . They have racked up a staggering net income of 52 billion. Buffett continues to face questions as he is being if he is being aggressive enough with his massive board of cash. Federal officials started probing into practices. This federal investigation coming as the company prepares for a change in ceo. In january, the Company Plans to hand over the reins. Under armour says it is cooperating with the investigation but says they do not think they did anything wrong. Airbnb is banning party houses and cracking down on unauthorized aids. Rates. Ves. That is after shooting in california. They are advancing their screen for highrisk reservations. The companys ceo tweeted we must do better and we will. That is the Bloomberg Business flash. Francine thank you so much. Mcdonalds has fired their chief executive for having a consensual relationship with an employee. The relationship violates the worker change policy. Policy. s is benedict. Big for shareholders. What do they lose when he departs . They lose quite a lot of things. They lose somebody who is a trusted hand at mcdonalds. He was rising through the ranks. Of ana brit so a bit outsider. He managed to take the top job prices, g by the stock prices, a wonderful job. That is a loss for shareholders. Steve is credited with making mcdonalds relevant again in an oatmealale, salads and and fake meat. And sort of where does mcdonalds offering fit in with that . He made them more digital. He brought back home made breakfast. He introduced different menus. All of that helps to revive the brand. Now, he is out, literally overnight because of his relationship, which he himself called a mistake. He said it is right for the board to remove me and it is time to move on. Is in the hands of chris, who joined in 2016. Francine how much pressure is he under and what can he do differently or what can he continue doing to get it right . Benedikt the pressure for him will be to continue on the path that the ceo set out when he took over. He has not been around for too as part ofe came steves rejuvenation policy. A lot of what he used to push through was rather expensive for the restaurant owners. This is a franchise model. They had to bear a lot of the costs. There was some grumbling among them that what he wanted to see and the way he wanted it to be transformed, they had to foot the bill. That might be run of the areas where the new ceo may want to rethink how we move quickly and who is going to pay for all of this. He will want to continue on the road that steve sent out. Francine thanks so much. As the u. K. Gears up for the election, england will have to overhaul its inflation reports. They should make a model based on brexit being pushed back to the 31st of january. Michael lewis spoke about this this morning. Electionr is that this will result in another Hung Parliament and more delay and more did there. That could be good. It would just mean that the transition of the discussion would continue on. Business, the economy needs to see this uncertainty. . What does this mean is there more uncertainty . Will they be restructuring u. K. Firms . Do assets only go up from here . You have for you that to talk about brexit almost every day. I dont have to. I need to think about it from time to time. And our partners are dealing with it. Uncertainty is the name of the game and continues to be that way. Consequences is the pound to be denormalized over time. At the same time, the expectation is that the rational thinking will avail. British people tend to be pragmatic. Brexit willat happen. We are not sure but it might happen. If it happens, it will look like today minus something. Some inefficiency at the border. Aucus, but not measured change. It will be similar to what it is today. That is the expectation if. Include the fact that we are leaving in a relatively positive environment. Europe is the underdog in the world. Anybody wantsink to increase the problem that europe already has as an economy. Francine they were restructuring business. I dont know whether it is geographical. There are certain geographies that are under more pressure than others. Or if it is because of industries. Industries will be wiped out or reduced. Industryit is more related than a region related. It is related to the cycle. The cycle continues to be positive. There are expectations that this cycle might not end or it might soften a bit but it might not go into a real recession. And you dont need to. There are some sector like here, youave bee have travel. What we follow is the disruption. This is what we really look very carefully about. Some sectors are more disruptive than others. We are working with and i think this is the main subject for management and for investors, to force companies to be a bit bolder and disrupt themselves. Not too much ahead of the game but enough not to be taken by unwanted tsunamis. Francine thank you so much. Coming up, and south africa, the country may be celebrating a victory in rugby. We will talk markets next. This is bloomberg. Francine economics, finance, politics. Is bloomberg surveillance. Is bloomberg surveillance. Lets talk emerging markets. South africa has clung onto its lost Investment Grade ratings. That follows previous cuts. A different story for turkey. They cited an improvement in the current account balance and continued economic growth. Joining us is paul wallace. Great to have you on the program. South africa just barely escaping. What is the latest they are . Paul yes. It got a reprieve. The market has taken that well. It was up 1. 8 percent today against the dollar. There is a great increase of chances of a downgrade happening. Bank of America Thanks that might happen as soon as wereary, after the budgets presented. In the short term, markets are taking the reprieve well. Bonds are also up today. The longerterm, this raises the possibility of a downgrade, which would see south africa kicked out of the ftse world government fund. That would lead to pressure on iran. Francine thank you so much. Paul wallace from dubai. We will get a lot more on turkey as well. Bloomberg surveillance continues in the next hour. Dont miss our big exclusive interview with the chief executive, david solomon. This is bloomberg. The aramco ipo is finally on. Saudi arabia may have to settle. As the u. S. Is confident they will reach a phase one trade deal with china. Golden arches loses its star chief executive. They fired him over a relationship with a subordinate. What will this mean for the passthrough food giants future. Morning, good afternoon and good evening if youre watching from asia. Lisa abramowicz is in new york. We have quite a lot going on. We look at the saudi aramco ipo and we look at the trades and the optimism we saw and what that means for the markets and we have brexit that we are keeping an island. Lisa it almost refreshing that the details of companies are taking the front and center. We are going to get into some of the specific stories that are driving the action today. Francine we certainly will. Lets get straight to the bloomberg. With news in new york city, here is viviana hurtado. Firingnalds filing Steve Easterbrook. This were having a consensual relationship with an employee. Burgerated the berger chains policy. He will be succeeded by chris. Saudi arabia is offering a number of incentives to make sure aramco is a success. They cut taxes on the oil giant for a third time. It may lose dividends again. They will reward investors for holding onto shares longer. Aramco reporting nine month profits fell 18 . Lower oil prices hurting sales. The u. S. Commerce secretary is optimistic the u. S. And china will agree on a phase one trade deal. Saying there is no natural they cannot agree. He met with chinas premier. The u. S. May not need to put tariffs on european cars. He said the u. S. Has had good conversations with european carmakers. This is about their investment plans. Last month, the u. S. Struck a deal with japan. It averted the auto terror. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine thank you so much. Lets get to your markets. This is what i am looking out for european stocks. Under a little bit of pressure. We saw optimism over the last hour or so because of the trade deal. I am also looking at china and america moving closer to a trade deal. What that means for treasury yields. Lisa we are seeing very much risk on ahead of the u. S. , nasdaq futures are up. See ongoing strength there. Copper futures indicate higher. Are going away from some of the haven assets because it seems like today, we are getting more of a positive tone. Francine what i am looking at is the pmis. This is my chart of the day. You look up a sources Sector Holding up in europe as there is more pressure manufacturing. It gives us a good snapshot of what is going on in europe. Lisa . Lisa yes. I was looking at something similar. If you take a look at pmis in poland, it is the Czech Republic , you see they are not getting worse. This is the bar that is being set. In the next week, we will see pmi data from nine major developing nations including brazil, india and russia. So, the key question here is about whether or not we will see sustained stabilization in pmis. In the meantime, saudi aramco may be worth 1. 5 trillion or less. That is according to research from intentional investors. That is well below the 2 trillion target set by the kingdom. It suggests a struggle to pinpoint a precise evaluation. Will lift theey Stock Exchange in riyadh and start trading next month. Joining us is yusuf. Why are they going now even though the valuation will be far below the 2 trillion target that was initially set . Well, lisa, this process has taken far longer than most would have anticipated, three years fraught with delays. Symbolic significance of the saudi aramco ipo cannot be stated understated. This is the crown jewel. A very key part and component about of the saudi crown vision. Princes the kingdom making a decision to put out a statement intending to float the company, we do not have the perspective yet. That will come in due course. I want to speak quickly on valuation. Some of the banks putting out some of the numbers. The range is very wide. Perhaps shockingly wide. It starts at 1. 5 trillion and goes up to 2. 3 showing trillion. The folks were very specific. 1. 424me out with trillion. What do we know about the valuation . Why is it so difficult to evaluate . Te . Valua where can we get independent research on the ipo . It has been a struggle. It has been a learning process not just for the brink bank but also saudi aramco. It has in terms of exports, production and inventory. And then, the detailed accounting mechanism has to be put in place. A lot of audits and so forth. We understand that these ranges are out there. We also understand that the saudi government is going to be looking to give incentives to some of the local investors to try and bump up the valuation more. There will be focus on foreign participation. Even though this is domestic a domestic ipo, it will be interesting to see what they can draw from outside of borders. If youre looking for nonbank valuations, Sanford Bernstein said 1. 3 trade dollars to 1. 5 trillion. There is talk of 2 trillion, that could happen 15 years ago. Francine thank you so much. Is lucy. S now would you buy into the ipo . We will be looking at emerging markets. Range seems toe be right in line with what the oil sector is offering, which could be attractive to some. We need to see where it comes out. Francine rick . We dont comment on individual companies. General,on ipos in the indexing business will buy ipos if they will be in the index with some degree of certainty. From an active perspective, we look at national policy. A growingok awe have seen skepticism as they come from private equity. You have seen turbulence. I think that will be a point that people will focus on when evaluating any new ipo. It is not coming from private equity. It may come in several stages. Francine i am curious. When we i am curious, when we come to disclosures, people complain that they have been in a vacuum. They have not had any comparison from prior years. What would you need to see from saudi aramco leadership that would give you comfort that you have a conference of picture of not only the finances of the oil company but also the obligations to the government . Forant wait from individual comedies. You need data going back as far as you can to provide some measure of comfort as to what the future holds. Whatast you need to know the track record looks like in any ipo and understand the multiyear evolution of the data in its comprehension in as comprehensive a passion as you possibly can. More clarity on the governance issues. Paymentsore from the split between what is the sovereign and what is the company and payments between the two. I think that will be needed to get more comfort. Francine how much exposure do you have on big oil in general . Not very much. We may have mentioned that before. That is a starting point for most of the global funds. Not very much. Of the partly because low overall returns in the industry. No one can fork up the oil price. You have concerns about Climate Emissions and transactions. All of that put together, there are other places where we can find better growth and value. Assets are incredibly interesting. I think im change and the risk change arete being taken seriously by investors worldwide. I think that when you look at a lot of integrated oil companys, the cash is frontloaded. Thou use of value may not be that significant. The out use of value may not be that signet again. Significant. There is a risk of standard assets but it may not be as big as people think. Francine coming up tomorrow on bloomberg tv, david solomon, Goldman Sachs executive. We will talk about trade. This is bloomberg. The u. S. Economy is very resilient. These are good numbers. Both the gdp number and the labor market number surprised a bit on the upside. Been tilted to the downside. We have had a global slowdown. There are some pretty powerful global disinflationary pressures. And september. Y this week, we thought it was appropriate to make adjustment in our policy to provide some insurance or cushion against a softening mobile economy. Francine that was Richard Clarida speaking with tom and jonathan ferro. Rick is with us. Really interesting to see this emphasis on the global slowdown while continuing to reinforce the idea that the u. S. Economy is continuing to gain steam. Lisa i am wondering from whether your point of view, it looks like the fed has engineered a soft landing, here . I dont think they need to cut rates as much as they intended. By thewdown is caused u. S. China trade dispute. If there is light at the end of the tunnel on that, the moderation is that the cutting plan might be the next thing the market starts looking for. Consumer is strong. Balance sheets are strong amongst consumers. Wage is growing 3. 5 . There is moderate inflation but there is a pretty good mix. It is not obvious that people should be screaming for rate cuts at this point. Do you agree that the fed should be on hold for the foreseeable future . Yes. The consumer has continued to hold things up. However, in the short cycle, we have seen quite a lot of pain. A lot of that has already been priced in. It has been consumer versus the industrial. Rick, what makes you feel confident about the future . Deal may only be phase i and nothing after that. Is there something that you feel good about . Not good but not so pessimistic as some have been. Have a lot of divergent, positive stories in the global economy. U. S. Consumer absolutely is a bright spot. The consumption part of the u. S. Economy is a very large economy in its own right. I think other than that, there be there is a lot to be optimistic about. I think growth is going to slowdown but we will not see a reception. We may see more upside in 2020. Francine what is getting through the trade dispute in one piece . Is it more than phase i or will phase i be enough . Some of that has been agreed. We dont think there is much conquering that will come out in this first phase. However, a truce is good to see because this is been the biggest pressure on growth on the industrial side prayed it is a good start. We thought that some sort of agreement would be forthcoming. Confidence level has been waning. That would be a good support to the markets. Lisa there seems to be a shift in narrative. Initially, it was that the trade war would not have much of a problem. Then it was that uncertainty has caused a slowdown that will not be easily reversible. Now, there is more optimism that we have avoided the borst worst of it and that things on the upswing. Do you think that is accurate . Is accurate that people are saying that prayed i dont think it is accurate that there is an upswing on the way. If you listen to the comments, there were lots of double negatives. There is no reason why we cant reach an agreement. There are lots of maybes and could bs on this phase one. On this phase one. Cap x, it has been waning. The consumer has propped things up in the u. S. Thank goodness, they are so large. Francine thank you both. In the meantime, this is what we are looking at with premarket trade. Under armour, shares are plunging after the company disclosed that federal officials have been probing them for more than two years. That brings a fresh headache to investors. Mcdonalds also fired their chief executive officer, Steve Easterbrook. Mcdonalds pretrade is down 2. 3 . This is bloomberg. You are watching bloomberg surveillance. I am viviana hurtado. Lets get your Bloomberg Disney . Shares of under armour are plunging. They disclosed federal officials have been investigating its Accounting Practices for more than two years. The revelation comes as the founder stepped down in january as under armours ceo. A record quarter for berkshire hathaway. The package food giant delayed reports in its first half numbers. That is your Bloomberg Business flash. Lucyine we are back with and rick. We talked about trade and trade concerns. A little bit of optimism on things to come. Lets talk about earnings. Lucy, you watch earnings day in and day out. What does the last season bring . How have the margins held up . Have the margins held up . Overall. Some of that has been trade and some of that has been from wage pressure. Certainly among the consumer end of it, the estimates were fine. Companies made most of the forecast. Down. E basics, it was not really disappointing but weaker. No real surprise. We have been exciting this all year. Investments have been coming down in those areas. Broadly, it has been better than expected. Francine where do you see value . Globally, you can see value in health care. That is an area where the earnings season was positive. That is a good start. In the u. K. ,alue unsurprisingly. That may stay for a little bit longer. And, you can see it still in some areas of the financials. Thereis still some value because of the low term Interest Rate environment. There is some value there. You may get growth as well. You can still find something. Lisa one thing i found interesting is the investor response to some of the earnings results. Shares of companies that Beat Estimates have gained an average of 2 following their belief. Is according to investors. What does that tell you about where investors are right now . It tells you they are desperate for growth in the sense that the hurdle got edged down quite significantly. Is welcome. What may be missing is what the forwardlooking picture is for those come face. At the same time, there has been a downgrading of expectations into 2020. That might be the decisive factor for those companies that have had a price increase post earnings. Interesting toen see companies that dont meet the high hurdle, they have not been punished. Lucy macdonald and richard mikhail, both of you sticking with us. Coming up, volkswagens ceo will talk about the landscape for european automakers. From new york, as well as from london, this is bloomberg. This is berg this is bloomberg surveillance. President donald trump says an interim trade deal with china will be somewhere in the u. S. The president said somewhere in iowa, the largest corn producing state. From products are part of any agreement. Wilbur ross is saying he is optimistic a deal can be reached this month. Hong kong is where the latest protests, 200 people were arrested. Police and demonstrators battling at shopping malls. Police pepper spray. Admits he is partially responsible for not living brexit as promised p or he apologize for not getting it done. As hemised apologized for not adding it done. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Lisa nancy pelosi has offered her review of the impeachment probe today, saying President Trumps phone call with ukraine s leader allowed her clarity. She sat down with david westin on a host of issues. Take a listen. We have decided we are going to support the constitution of the United States. That is the oath of office you take. For a long of time, i resisted weighing the equities of this is a fisa for the country. What the president did with the president of the ukraine was all doubt have to work on it. We are working on a deal with u. S. , mexico, and canada. We do not have assurance on enforcement. I voted for nafta. I had disappointments. A disappointment is if you do not have enforcement, you nice things are listed. You will have enforcement. We can come to a place on this. I am not a big fan of medicare for all. I welcome the debate. I think we should have health care for all. I think the Affordable Care benefit is better than medicare benefit. That was nancy pelosi speaking with david westin. They marks 365 days until u. S. President ial election. Baker. Th us is stephanie lets take off with impeachment. The house has open hearings. What does it mean for President Trump . Jesse rally differently does he rally differently . Stephanie we are moving into a new chapter in the impeachment inquiry. These will be public hearings. They will be conducted in a different way. They will be conducted by staff, congressional staffers, largely lawyers. You will move away from this fiveminute of grandstanding by one representative congressman or woman. It is disjointed, difficult to follow. This will be more coherent, to the point. They will be public. The real test is what is the public at tight public appetite for a nine hour, 10 hour hearing . This is a fairly easy narrative to follow. It is quite complicated. There are different characters. It involves ukraine and ukrainian politicians. It is a risky gambit for the democrats because it is unclear how it will play out. A majority support the impeachment inquiry. It is unclear how it will wrap up. Will it wrap up soon enough ahead of the first primary election in yuri . In february. Lisa we have heard from senior democratic leaders, saying it will impede the democrats chances of defeating President Trump. How fractured is the Democratic Party and how weak is it to wrap up . Stephanie from the vote last week, there were only two democrats that voted against proceedings in this way. The democrats are united. It looks that they will vote to support and pass articles of impeachment when they get there. The question is timing. They want to move quickly. Can they do that . Do they wrap up with articles of impeachment before christmas, which there have been some predictions that is where they want to end up. As it dragged on into january . Does it dragged on into january . It is a determining factor if it will interfere with the democratic primary. Francine thank you, stephanie. President trumps biggest challenge may not be also be the other candidates during a pitchman, but the stake of the economy. The s p 500 gained, but the performance was not recordsetting. Truman. S harry how will the economy continue to fair during the Election Year . What does it mean for the outcome . We are back with Lucy Macdonald and richard lacaille. There are many angles. One could be the president will do things he can to get closer to china. That is the one thing he can actually have a lever on. Dealing with china, there are things you cannot do, because you are never inclined to do them. If you can do some of those, it gives a good starting point. Francine what does that mean for continuing to attack the fed President Trump things it makes a difference to the economy. Does it mean he wants to deal with china as he gets closer to the election . Lucy both of those things. The pause that they dont know tour, the pressure is that they dont know, the pressure is likely to rise. Pressure on both sides with lead to some sort of agreement. That is what we are likely to see. We are seeing deceleration and growth. The solution in growth in growth. Leration has fallfidence, why back. Lisa one of my favorite stories , talking about president ial elections and how people call them every year. They get the trade wrong every year. They call for a meltdown. I am wondering, are you planning to trade at all around the election . Does it matter . Rick it matters a lot. It may not mean we will trade around it. Have no special insight into what will happen. You have the democratic nomination solidified. It could result in significant swings. Onwe want to take risk positions in the u. S. Or should we reserve firepower for things we understand better . The latter will be the case. The possibility of democratic nominations, some of the candidates could have a meaningful impact on the private equity. It would spill into public equities as well. We are setting ourselves up for volatility in 2020. Lisa the direction of it, still uncertain. Lucy macdonald, rick look high rick both of you stay with us. From new york and london, this is bloomberg surveillance. This is bloomberg surveillance. As the u. K. Gears up for an early election, december 12, the bank of england will have to overhaul its inflation reports, due this week. It created a new model due to exit pushback. Due to exit pushback due to brexit pushback. We are with sue mcdonald and with Lucy Macdonald and rick rick lacaille. Nd you can argue everything is in the air or it is undervalued. Lucy it is undervalued in the u. K. It is justified because of the uncertainty. A hard brexit and a hard left. Those are still on the table. We do not know who are assigned to them. Positions in the u. K. Particular as we came up over the last couple of weeks. That is probably on his. People will wait and see. Francine how do you see this going . Rick it could change for people who are value contrarians. Rates take much of the punishment. That is where the opportunity for Global Investors have been. It will remain the case. The risk remain is still there. You case u. K. Currency is still very cheap. You have to soak up volatility between now and when you earn the premium. It may be a better riskadjusted trade than stocks doors stock stories. Lisa i am curious about the uncertainty, whether it is ipos as people wait for more certainty. What kind of lag is that going to be for the economy regardless of what happens and what the bank does . Lucy the uncertainty is pushing down on growth. Particular. Major positions within the corporate sector and consumers being pushed out. That will remain the case. Lisa how much of a drag is that, rick . Is it something you take into investingermining in in a specific company, putting capex on hold . Rick you have to take into the pmi looking at data, the hard data out of germany shows the labor affects our significant labor affects our significant labor affects are significant. It is in the price. Francine talking about what is in the price, our markets going to be nervous when it realizes it could come to a late date, a nomination of a new governor . Will the economy he is leaving january 31. He cannot name anyone. Stability if he is able to stay on over the next couple of months, it would help. We know brag may we know brexit may finish in germany. Of uslucy and rick, both stick with us. Omorrow, chris aleman we are talking from retirement or whether or not we can pay for it as well as Real Estate Investment and how they are increasing among pensions, 1 00 p. M. In new york and 6 00 a. M. In london. This is bloomberg surveillance. This is bloomberg surveillance. Airbus is streaking ahead boeing. It has taken orders for 350 planes in asia. Boeing has received only teen orders. The company has struggled to revive its grounded 737 max. Airwaysnts of british are buying an airline. It will give them further access to the spanish market. Aigdeal will help reestablish itself as the leader in the europe to latin america market. Ryanair posting Quarterly Earnings that Beat Estimates. They got a revenue boost. It outweighed the impact of of the grounding of the 737 max. We spoke with their ceo. Michael the are dragging their heels. Boeing has not been easy to deal with in the last 12 months. The faa it looks like the faa are moving ahead to returning service and north america. Sebastian oleary viviana oleary says it will be challenging for bloomberg air. Lisa thank you. Easterbrook had a consensual relationship with an employee. Say he is perhaps the best ceeo in the restaurant industry. Hares rose analyst scott recommendations on the Company Following sundays announcement. Mcdonalds shares are down more than are down more a little more than 2 . Are you surprised they are not down more . A rejuvenation. Some of it is the new ceo has come out and said, i will continue what he has done with the new technology, the online ordering, delivery, a lot of initiatives easterbrook introduced. Francine how difficult will it be for the percent who takes over for him or the person who takes over for him . Highly difficult. Whoas highly regarded transformed the company. We see the share going up 90 . Obviously, a big transfusion. Reports are getting under armour is facing a probe by u. S. Governmental officials. I am wondering, we have been seeing how there has been increasing focus generally if you take a look on executive behavior, with more executives getting fired for behavior problems than board pressure or financial issues. What does that say to you about tolerance right now for ceo behavior or his behavior . Eric it says there is zero tolerance. Looking at mcdonald, they have had a whole series of questions about harassment down through the ranks earlier this year. Congress was looking into it. This is a company that had to take action. They had to say look, we are not going to tolerate anything, even if it is borderline, even if it is not something directly harassment. We cannot turn a blind eye. Lisa thank you, eric. Lucy and rick still with us. Lucy, i want to talk to you about the point we were discussing, boards have very little tolerance for executives who misbehave. As an investor, is that a good thing or is it a negative thing if it means a disruption in the leadership and plans the company has been making . Lucy governance has been rising the investor section four years. Social issues have been, too. The way that boards are composed, the balance of power within the boards, is of great interest of those who are investing. Of the managers is more transparent these days. On glassdoor seen door on what employees are saying. There is a lot more transparency about behavior than they would have been in the past. With the transparency there in is creased focus, there it is going to remain. Managers whichme are thrown out slightly partially . Possibly. Slightly harshly . Possibly. What does it mean for investors . Rick from our perspective, we are on a lot of index funds. The only way we will improve wheremance is a key area you have apples and oranges. Under armour is different from mcdonalds in pathology. It demonstrates a couple of isngs intangible value important in devaluation in companies. You have to keep a close eye on it. Toncine how difficult is it see these things before they are out of the press . Lucy you need to use data sources. Sources so you are aware of issues that are coming out from different sources. That is part of the investment process. It would not have been available 10 years ago. Lisa with mcdonalds in particular, they will continue with Lance Easterbrook with plans easterbrook had in place. Is it a buying opportunity . Lucy it could be. Not oneaurant trade is we have had a lot of exposure. It could be an opportunity, yes. Lisa is it more of an opportunity than under armour, where there are a lot of unknowns about where the investigation is at this point . Is the further decline in those years perhaps appealing to you . Are things you want to stay clear of. Anylity of accounting in stocks we are investing in is high up our criteria. Francine where mostly value . Rick european banks, european industrials, some energy. Not necessarily in the u. S. , bottom up, we are finding values in hairy areas where you get punishment, bond yields dropped. Francine thank you for joining us, lucy and rick. Oming up, mike darda we will talk about treasuries. We also have david westin with a great interview with nancy pelosi. We will look at the 2020 u. S. Elections, 365 days away from that. We will look at phase one of the u. S. China trade war. Will we get a deal . This is bloomberg. Uncertain valuation saudi arabia may have to settle for far less in the 2 trillion. Wilbur ross tells bloomberg he is confident u. S. Will reach a phase one deal with china. Mcdonalds fire Steve Easterbrook over a consensual relationship with a subordinate. Good morning. Good afternoon. Good evening. This is bloomberg surveillance. Lisa is in new york. Tom keene is off. Lisa, Corporate News under armour, mcdonalds. Underlying this is trade, little optimism u. S. And china will find out a deal. About runningalk in a marathon. One of our guest who had a wife who completed it yesterday. Francine there you go. I do not feel inferior as all. Here is viviana hurtado. Viviana mcdonalds fires Steve Easterbrook for having a consensual relationship with an employee. The relationship violated the burger chains policy. He will be replaced by the companys head of u. S. Operations. Saudi arabia is offering a number of incentives to make sure aramcos ipo is a success. The kingdom is cutting taxes on the oil giant or a third time. It may boost dividends again. It will reward investors for holding onto shares longer. Salesported were hurt by oil prices. Over ross is optimistic this month the u. S. And china will agree on a phase one trade deal. He tells bloomberg there is no natural reason and agreement cannot be signed. Bangkok, he met with chinas premier. He says the u. S. May not have to put tariffs on european cars. He says they have had good talks with carmakers. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine, lisa. Lisa thank you. There has been some positive development on the trade front or at least happy dog. Nasdaq futures extend there again. Em currencies at their highest levels. Copper, also getting a bid. The dollar adding a little bit of a lift. Francine if you look at european equities, they are 0. 9 . Bonds are slipping. Optimism between china and america, the dollar edging higher. I am looking at eurodollar to look at the european side. We are a little better than expected. Lisa the bar for the chart i am focusing on, has been lowered when it comes to pmi data. People hearing the fact it is not getting worse. The yellow line is the broad euro zone and you fracturing pmi numbers euro zone fracturing pmi numbers. This week, we are getting pmi host offrom a whole countries. Francine i am looking at your zone manufactured at euro zone manufacturing as well. This is a poor start for the. Inal sales quarter it comes at a time where one took over. ,he Service Sector in europe lagging. Lisa will have more on pmis during the day. Research sent to potential investors by the banks saudi arabias target valuation is between 1. 6 and 1. 8 trillion. The while diverging estimates andco says it will list likely trade next month. Anthony has been covering the sector closely. Anthony, why is it so difficult to evaluate the company . Anthony good afternoon. It has been all over the place in terms of the estimates we have seen from the analysts who have looked at the company and try to get inside of the financials and put a valuation on it. The real issue comes from the tial 2 trillion price tag initial 2 trillion price tag when he announced the ipo intention in 2016. It was a big challenge to get up there. We are dealing with a market where oil prices are fluctuating. Evaluation set your based on what you think the oil price will be moving forward. We are seeing different numbers come based on different assumptions at different price points for crude oil. Plus, a production issue an issue investors are asking about is who is in charge . The saudi government or aramco . How much aramco produces Going Forward will be an issue. You have issues like the security issue involved. In september, tax on major crude september, attacks on major crude. There is a lot of different factors. Not to use an overused term, but a lot of moving parts that are going into the numbers. We are seeing a wide variation. Lisa how much pressure is there on the leadership on saudi aramco to give details and a Firm Structure about the relationship the government, who will be in charge, as well as financials comparable over time . Investors,lot of potential investors would like more clarity on that. Charge, of who is in the company and government have been clear. The government will remain the Majority Shareholder with more than 90, 90 5 of the shares. We do not know how much will be listed. Saudis are a major member of opec. They contribute to setting the policy and they need the total line on policy. The saudi government will continue giving Production Development on saudi aramco. What the management is under pressure for is reinsure the potential investors about the longevity of the reserves, how mco canudi ara produce them, and how they will hold up over the years. There is the issue of pushback against hydrocarbons and climate change. It will potentially shorten the life of the hydrocarbon reserves if we are moving away from it as a world economy. It will be under pressure to explain those questions. Lisa anthony, thank you. Joining us now in new york, mike darda. And gina. Isa, given the fact there some uncertainty around financials of saudi aramco and what control the government have over future revenue, does it surprise you they are Going Forward with the ipo . Are there investors willing to buy in . Ita to some extent, surprises me and it does not. The bar is relatively low. We have had a supply take out on equities for so long. Investors are hungry for exposure in the equity market. Someally, you will have dealmaking going on, some reception by investors. They will only take it so far. We saw it with the work, rejection with wework, rejection. You willion region equilibrium you will reach an equilibrium. We will become a story that we will study in harvard in the Business Review section over time. A bigticipate this is antic part of the oil complex. It is necessarily going to be a public entity. There will be some need for this organization to be owned by public shareholders. It is a matter of what the price is. Lisa and when it is. Of a this is ahead potential price drop in oil that saudi aramco is foreseeing. You buy into it . Mike it is possible. I am thinking about the Business Cycle, how far along are we . For the u. S. In the Business Cycle, the debate of a recession has died down with stock Market Making the wise making new eyes. I am not sure yet. I would like to see how we involve, at least going into the first half of next year. The risks are elevated. Do you want to do an ipo at the tail end of the Business Cycle in the u. S. Economy . That is a big question mark. Francine what would you be looking out, indicators . Consumer figures or Company Earnings . Mike if i could select one, it claimsrobably be jobless in the first half of next year. So far, so good. They have been steady. We are flat. You will see jobless claims starting to shoot up before a recession. We have to recognize jobless claims are a shorterterm leading indicator here they will only give a signal a few months before a downturn. We went through a multimonth period in the u. S. Of an inverted yield curve. 12 month recession peaks this august in the u. S. Lets see how the data evolves as we get to the first half of next year, probably through next summer. The jury is still out. Francine thank you, mike dart and gina. Solomonp tomorrow, even tomorrow, david solomon. This is bloomberg. U. S. Economy is very resilient. These are good numbers, the gdp and the labor and market, surprised a bit on the offside. The balance of risk has been tilted to the downside. Not because of the u. S. Or the global economy, we have had some slowdown. And septemberjuly and this week, we follow what is appropriate to make adjustment in our policy to provide insurance against a softening global economy. Claridaat was rich speaking with tom keene and jonathan ferro. Still with us, mike and gina. Gina, i want to pair the pessimism and focus on the International Landscape with what we are seeing from earnings. We have seen good earnings out of the United States. Does that cohere with the message that vice chair clarity chairthat the vice was giving . Gina when you look at the aggregate bottom line earning results, it is a reflection of two much pessimism. Of too much pessimism. Mike, you talked about recession pricing peaking in august. We see the s p 500 investors positioning for a recession, avoiding multinational companies. They are coming in little more resilient than anyone anticipated. Revenue growth for the multinationals is down, half of what it was expected to be. We are not it is not as bad as many people had been expecting. It is still not great. That is the reality of s p 500 earnings right now. Lisa i am wondering if we have had a time where the Federal Reserve of the United States of america has been focused on what is going on globally in the international slowdown. Mike going back a few years, globald 2016, slowing growth and fears the u. S. Could also be entering a recession here the fed had to bail out on what it anticipate it would be a sustained tightening campaign. It started in the summer 2015. There is parallel to that. It is not just international. Looking at the trend for gdp growth, yearoveryear, they were peaking midyear last year. , relating todp corporate topline growth, growing 6 yearoveryear midyear 2018, we are up 3. 7 now. The slowdown alone can explain why bond yields and the curve has dropped. We have had a domestic slowdown. Markets are confident it is a soft landing slowdown. We will see how the first half of next year shapes up. I think we need to see the data in therefore another six to nine another in there for six to nine months because of the weakness of the leading indicators earlier this year. So far, so good in terms of the macro data. Francine how much of the earnings season has been companies not spending, chief executives not spinning for the future . How much of a concern is this . Gina a little bit of it, nothing that is the entire story. Communication companies, which are responsible for spending on the s p 500, they are spending more than investors like to manipulate a margin turnaround. It has been key. Reached offering an expenditure and capex in general. Consistent with this elevation and sales mike mentioned. You have a deceleration in topline growth, sales. Companies cannot maintain sales earnings forecast unless they cut back to a certain extent. They cut that just enough to create a little bit of evidence of operation turnaround here. Not so much to deplete the outlook for jobs growth. As we salon friday, it is steady as we saw on friday, it is steady. A slowdown and the rate of revenue both slows and stabilizes, you see them get more confident in the outlook. Some of it may depend on policy. A lot of this is uncertainty in respect to trade policy. Policy stability on the line, we get ideas of where we are going. They have more than enough capital in order to do so. Francine do you have a phase one between the u. S. Trade on the deal between u. S. And china . Mike the markets are pricing in that prospect, maybe overpricing. As we have seen before, we have been optimistic about a trade deal and the rug gets ripped out from under our feet. We will see if this comes together and what it means. Potentially, we are getting a little ahead of ourselves with some talking about an actual reversal of the tariffs that have been put up. Phase one would mean the december tariffs not taking place. Markets are enthusiastic, hope for about that. Hopeful about that. Trade a long way from a reversal. On the Business Investment side, we are two quarters down. There is a recession underway. It has been offset by strong consumer so far. Francine thank you, mike and gina. Both stay with us. Lets have a look at remark are at premarket numbers. The company came out saying they were investigating share prices are down 60 . Mcdonalds adding rid of their chief down 16 . Mcdonalds, getting rid of their chief exec of officer. This is bloomberg. Lisa i am new york, printing look what is in london Francine Lacqua is in london. We are looking at an earnings season that is getting to the end. We can see companies have been rewarded more than average for being expectations despite the fact expectations have come down quite a bit. Gina, what do you make of this in terms of what it says about pessimism . Broadif you look at the spectrum, companies are being punished more than usual for misses as well. Pessimism, you see a wide distribution of returns for companies that beat or miss during the earnings season. It is consistent with earnings reaction function. It has been going on all year. This year has been one of the most volatile years for earning seasons we have seen on record. It is on both sides. It is reflecting an investor that is nervous. It is an overall nervousness around earnings and what earnings mean. It started last year with trust ororm with form with it has transformed into if we are hitting a recession. But these are getting companies are getting hit as well. Investors are nervous about earnings. Francine were you see most value . Are you a where seeing most value . Is there a sector . Gina the two are health care and communications. Most people initial think it is typical value sectors like energy or financials. When we look at valuation spreads for these, the communication and Health Care Stocks trade well below longterm average. It reflects the policy environment. Francine thank you, Gina Martin Adams from bloomberg intelligence, mike darda. Iess comes up with emissions scandal and trade between the u. S. And china. This is bloomberg. This is bloomberg surveillance. Lets get straight to the bloomberg first word news. Viviana President Donald Trump says an interim trade deal with china will be signed somewhere within the u. S. He previously suggested iowa. It is the u. S. Largest corn producing state. Expected to be a large part of wilbur ross is optimistic a deal will be reached this month. Boris johnson admits he is partially responsible for not delivering exit as promised delivering brexit as promised. This week, the fiveweek Election Campaign kicks off. Shares of under armour plunging in premarket trading. Federal disclosing officials have been investigating its accounting processes for more than two years. The revelation comes as its founder steps down in january as under armours ceo. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Printing, lisa. Francine, lisa. Francine nancy pelosi believes the u. S. Economy needs to work for more americans. Speaker pelosi while we make indications the economy may be itroving, god willing it is, aligns with american workers. They still file stagnation. Stagnation of their wages, opportunity. We have been having i know we have been having some constructive conversations about how we have had an economy that works for everyone. The economy recognizes we are a free market economy. Everyone we want everyone to participate more fully in our success. People a book about a wealth of nations and a book about it was a pragmatic book about how you have to lift everybody up. I wish there was a book to combine those two things. When president bush ran compassionate conservatism, it was a good it resonated well with the american people. Our capitalism has to be more inclusive in terms of its success. Our policies, whether it is taxation or appropriation in terms of budget or policy and how we value the Climate Crisis and a job opportunity that is. People in the higher ranks in we haven our economy, to think more than just trickle down, but buckle up. Look for 2020 what is the democratic equivalent to compassionate conservatism . What is the capitalistic what is the alternative . How Speaker Pelosi working to house Speaker Pelosi working together, every aspect of the federal government in terms of taxation, budget spending, etc. Our agenda in the last election is for the people, to Lower Health Care costs by lowering the cost of perception drugs and guaranteeing there is a in a preexisting condition and not barring you from health care. That addresses not only the health of the american people, but the Health Financial health. They are very concerned about to it is impossible for them succeed. Perception drugs are a big part of that. Lisa it was a phenomenal interview that made headlines throughout the weekend. Today marks we hundred six the five days until the u. S. President ial election marks the u. S. Until president ial election. David westin, congratulations. Nancy pelosi broke new ground. How is she looking at the u. S. Economy . Youd that is the problem are seeing her struggle with. We have unemployment or a 50 year low. To say we will do better for the donomy, the question is what they offer . She comes back to the cost of health care, restriction drugs. Her emphasis, the average working person will benefit from the democrats because they will pay less for health care. Lisa square that with the idea of perhaps the democrats are on the wrong track and it comes to the debates we have seen and main talking points. David specifically, medicare for all, something Elizabeth Warren has been backing. Nancy pelosi says she is not a fan. I asked her, can you when the Electoral College with medicare for all . She said no, i do not think we can. It would work in my own district of sanford cisco, but we do not need it of san francisco, but we do not need it in san francisco. Francine david, great job on getting the how speaker on. What did she say about impeachment . David she clearly said she did not want to do it. She said she is not a fan of it. She does not believe in it. When she saw the modified transcript of the call with the president of ukraine, she said i have no choice. Saying iher hand up, pledge to defend the constitution. She said if the republicans want to defend donald trump over the constitution, that is their choice. Francine did she sound worried about the backlash . She is the most astute politician we have in the country in terms of counting votes, knowing where the votes are. She not there. She will not even talk about the political ramifications. She says this is bigger than that. She says this president thinks he is a monarch. He thinks that she says he thinks article two of the stitution allows him lisa marike. I would mike, i would love to get your opinion on the economy and impeachment. Is there any playbook to look at when it comes to impeachment . President recent, bill clinton. It is our. What is the effect of this on the Business Cycle at this point . It is very difficult to reflect that. It is not in the stock market. Things would have to take a significant twist from here, potentially have some severe policy implications for this to have an back have an impact. Francine will the next president be decided on strength of the economy . Hows the economy . Mike that seems to be the most significant factor. The economy at the moment is doing ok. It looks like we are in a soft landing so far. There has been a growth deceleration, as we have talked about. Growth has slowed, but it is still positive. The most recent jobs report was a fairly solid. The numbers have been solid. It is normal and natural for a Business Cycle maturing. The key question is can we get to the first half of next year through next summer without some kind of Inflection Point . , aentioned before multimonth period were the yield curve was inverted in the u. S. It is a long waiting barometer of a potential recession. The leads are very long. It is typically between three and six quarters before an inversion takes place before you see a Business Cycle peak that would push us into mid to late next we are. Running for reelection, probably not great timing. Lisa i love that you fsis the health care issue, david that you emphasized the health care issue, david. David it is ironic. Democrats and nancy pelosi did well in the midterm elections because everyone is afraid of donald trump and what he would do to health care. If anything, it turned around. People are afraid you will take away their insurance. How is that good for you . Lisa gina, quickly, the Health Care Stocks have been on fire recently. That reverse if democrats get traction . Gina probably to a certain extent. They have been on fire after being incredibly suppressed. It peaked in the 26 election process. He has in the 2016 election process. Prospects ifive these risks reserve. Lisa david, thank you and congratulations. We are not gina, letting you go just yet. U. S. That is coming up today. This is bloomberg. This is bloomberg surveillance. A tale of two emerging markets and turkey. Rica afte turkey is fighting an improvement. Unimprovement. South africa has to do with escrow. Do have to deal with it for a while longer . Andt is a glass halffull glass halfempty situation. We are looking at a negative outlook. There is a chance it can be done great. S budgetst week on the glasss half full site, we have been full side, we have been government demonstrated it has plans to cut the deficit. Markets rallied almost 2 . Bond yields fell last year. Turkey, talking about robert, the outlook was from stable to negative. Robert that is a different situation. Year, it was not that long ago. Out of negative, it means it out about it bottomed out. It is slightly stronger this morning. At large, cutting Interest Rates. There could be more coming this year. Issues anycal political issues could change the game in coming months. Lisa thank you, robert. A little bit of pessimism in turkey, not so much in emerging markets. It is time for the single best chart. Take a look at this. The upper performance, the end of september of emerging market equities, stunning. I will channel tom keene. Mdi onon the as compared to a few percent gain compared to a 3 gain. You can see the same with the currency against the dollar, also rallying. He still with us is mike and gina still with us is mike and gina. What do you make of this . Is there datable strength in emerging markets . Is this a kneejerk reversal of what we saw earlier in the year . Gina it is a combination of both. There are pockets of strength they are emerging. Scorecard forr each country, we started to note some emerging markets toward the top of the scorecard. Latin america has shown some improvement that allows for optimism to reemerge. There are pockets of weakness, south america is among them. Some of asia is very weak and relationo week in to autos. It is pretty extreme relative lows. Taking it into broader perspective, e. M. Is lagging, suppressed relative to the u. S. It is a matter of risk tolerance. We need to get our momentum to get more optimistic about its true abilities. Lisa mike . Mike the emerging markets in the asset class is a value sector. Are compressed under relatives of aces. Of basis. One other important thing, the value of the dollar. The dollar is rising. Usually outperforms it if is falling. It is normalizing short rates visavis other economies with shortterm Interest Rates than we do. The dollar holdback in a sustained way, a strong argument for emerging market equities. Goingn the u. S. Market is down and emerging markets can perform, it is the u. S. Dollar. Lisa thank you, mike. Adams, sorry, we are not letting you go yet rate tomorrow, chris. He will talk about from returns expectations to the view on real estate at 1 00 p. M. In new york, 6 00 p. M. In london. This is bloomberg. Francine this is bloomberg surveillance. Tom keene has the day off today. Donald has fired Steve Easterbrook for defying Company Policy by having consensual relationships mcdonalds has fired Steve Easterbrook or defying Company Policy by having consensual relationships. Analysts cut their recommendation on the Company Following sundays announcement. Lets get to eric pfanner. Eric, when you look at what happened at mcdonalds, it be more of a stoplight on if you put a policy in place and you do not do it, then you are going to be taking around be taken around. What happened here . Had this is a company that harassment complaints earlier in the year. They put a new policy in lace. Even with a in place. Even with a consensual relationship, they had to take action quickly, zerotolerance. Francine was he a star ceo . 19 percent is a good record. Eric it is. It was lagging behind rivals here he came in, introducing tech measures, online ordering, new apps, new stuff with drivethrough that revamped the company and got them back on track. See a gain on share price. Tabloidsare seeing the having a field day. Do we have a sense on how quickly the board removed him despite the fact that many details about what happened . Eric we do not know exactly when this was disclosed or when it came to light to the board. They moved over the weekend to do this, suggesting urgency. We do not know when it all started, who found out when, all that kind of thing. We are still thing that we are still trying to get. Lisa there is a policy and mcdonalds of not having any kind of relationship with employees, particularly with subordinates. Thank you, eric. Gina, still with us. I want to get to the governance issue. Price Waterhouse Cooper data say for the first time in 19 years, more ceos were dismissed for for ethicals f lapses. What does that tell you . Gina there is a broad investment mandate to think about and strategies and integrate about in strategies and integrate them more. This is a necessity for companies to think about and comply with governance standards as one component of the broad strategy. 85 trillion is now benchmarked to esg. It is having a real impact from ipo issuance to company performance. If you are not compliant from a governance structure, you will not be included in disease. You will not be included in etfs in indices. You and not be included in etfs. Lisa a social media, backlash with people saying things have changed now. Where are people going to meet people if they cannot meet them at work . Is there evidence that holding these ethical morals, standards and maintaining it, even meaning a disruption in leadership, benefits the company in longterm . Gina there is longterm evidence that holding specific governance standards are beneficial over time. These tend to be Higher Quality stocks. It is not necessarily the perform better in uptrends, it is the are Higher Quality companies. Ofy have an infrastructure high standards. It contributes to a culture that is consistent with highquality performance. That is the broader story. I do not know if you can find the specific issue and how it would impact the stock longterm. It is nitpicky. Inoss the board, Companies Compliance and implement strategies to comply with general operating principles of governance tend to perform better over long periods of time. Francine have boards and shareholders have Higher Standards now . Does that go back to the Metoo Movement . Gina it is across the board, not just metoo. You think back 30, 40, 50 years ago, our bigger requirements were financial metrics. He was about line with financial statements, sec regulation, accounting. It has morphed into disclosure about reader details. The investor is demanding companies commit to sustainability as a scene. That is leaking through across the board. Francine thank you, gina. Lisa, think you as well. Solomon at 2 30 a. M. In new york, 7 30 a. M. In london. Sometimes your small screen is your big screen. And with the Xfinity Stream app, which is free with your service, you can take a spin through on demand shows, or stream live tv. Download your dvrd shows and movies on the fly. Even record from right where you are. Whether youre travelling around the country or around the house, keep what you watch with you. Download the Xfinity Stream app and watch all the shows you love. Trade optimism lifts markets. The secretary of commerce wilber roars sounds optimistic that a trade deal with china will be signed this month and says President Trump might not need to put tariffs on imported cars. The worlds most profit able company with dividends isnt enough. And easter brook walks the plank. Mcdonalds fires its c. E. O. For violating Company Policy. Even though the staff almost doubled since he took over. Welcome to bloomberg daybreak on monday, november 4. You woke up im alix steel. In the markets trade optimism thats seeping through. Particularly in europe where you have auto makers at the highest level in six months. Futures here up by. 5. Building on that record close we saw on friday. A year ago, pretty much slide, a risk on story and currency faces well as the stronger teller