Markets. It has been a wild ride this week. There was rotation on the back of positive news when it came to trade and then we saw stocks retrenching. A lot of the focus is on u. S. Tariffs in europe. Jeanclaude juncker says that is not so. A lot of focus on data out of germany. You can see the u. S. 10 year yield at 1. 91. Coming up, the intesa sao paulo chief executive joins us for an exclusive interview in a couple of minutes. We focus on earnings and the Banking Sector. First, lets get first word news. The u. S. And china agreed tariff rollbacks will be a key part of any agreement, the big question, is a deal any closer to being done . Donald trumps advisors dont sound certain. Yet to be decided, the time and place for signing this potential packed. Donald trump wanted ukraine to investigate joe biden, that was the message and it was clear according to one official. He says the words being pushed by the administration our investigation, biden, and clinton. Special visashere for doctors and notice and nurses. It would be introduced after the u. K. Leaves the eu. Health care is set to be a key battleground in the Election Campaign. Has repeatedly accused johnson of trying to sell out the nhs. India had its Credit Rating outlook cut i moodys. ,hey cited many problems including a prolonged slowdown and rising public debt. Lowesthe second Investment Grade score and his metrics continue to deteriorate. To hong kong, a student who fell at a car park has died. The hospital said was a 22yearold boy, or man, i should say. He was a secondyear student at the Hong Kong University of science and technology. Police say he fell from the third to the second floor of the car park. Global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine intesa sao paulo relied on trading income and lower provisions for posting profits above analyst expectations. Thats as negative Interest Rates and a sluggish economy weighs onng lending. As always, thank you so much for joining us. You showed pretty resilient results. If you look at gross net income, 42 from Wealth Management. Is this your best area for the future . Carlo absolutely. And in this environment, we will have an increase in the speed of Wealth Management areas. Italian clients coming back to Wealth Management and we are in the unique position to have the opportunity to grow. In nine months, we increased our management assets by 52 billion euros, an amount equivalent to the fineco. Francine how much are you increasing your focus on Wealth Management . Model we have a business that is focused on Wealth Management. We owned 100 Asset Management and insurgents and Financial Advisory firms. So we are in eight unique position to have a good possibility to convert assets under management and it is typical of the situation in which this spread is trending down. Francine what is your number one concern . If you want to get bigger, what kind of people are you targeting . Part the most important will be in italy, because we have more than 250 Million Euros of wealth that can be converted into assets under management. It is a unique proposition. If you look at side of italy, there is the matter of goodwill embedded in possible targets. So it is very difficult to say that it is possible to grow outside of italy. We will be focused on delivering on our client base in italy. Francine he said the bank is not considering passing on negative Interest Rates to clients. How do you mitigate the impact . That, if you consider compared to the current situation, we will have another 50 or 20 basis points, we are not talking about something dramatically different. Today the perfect Business Model is to work on Wealth Management. If you have a friendly approach with your clients, it is easy to ask for conversion. It is what is happening in our figures. In three months we converted 2. 5 billion euros of assets. , we havee time being been focused on the conversion into assets under management. Francine if negative rates keep on getting negative, what does that mean for the Business Models . Carlo there are two Business Models today in europe. One is Corporate Investment banking or paneuropean Business Models without the property of factories. This model can be affected in a significant way by low Interest Rates. Modelis another business of Wealth Management owning the factories in which you can invest. In this environment, with this level of low Interest Rates, it can be very positive for this kind of player and Intesa Sanpaolo is one of the best in the situation. Francine what is your take on the Banking Union . Scholz,nroads from olaf saying we are talking on guarantees for possible issuance. What does it mean for how you work . For consolidation . Carlo the first point is the cost of equity. It is a reduction of uncertainty and negative perception of the Banking Sector, so it will be positive. On the other side, there could be some crossborder consolidation but the real point of attention are the conditions. If youre talking about the weighting of bonds, in any case, it is important to start the negotiations. From an Italian Point of view, it is important to add a level two or three assets in this area of analysis to be sure to have the Banking Unions. The evidence is it is not only nonperforming loan is the problem, but in some country, level two assets countries, level two assets. These negotiations have the right condition to become a real negotiations so i think it is positive. Francine how do you describe the european Banking Sector . Carlo if you compared with the usa, it is something unbelievable. Togethernsider you put paribas, para bob all the banks in europe with a good market cap, you have the market cap of jp morgan. Playerou want to be a from a geopolitical point of , there should be for sure consolidation. But it is difficult because there are no conditions. We seell bc the difference between winners and losers . Carlo a Business Model with a common equity above 30 , minimum conditions to be a player in europe. Francine how would you describe the italian Banking Sector . Have intesaaly, you sanpaolo. It is something different. Appears to be this paneuropean a bank at is another part of the story. Then you have mediumsized banks. We need to look for an acceleration in consolidation on medium banks. Otherwise, there will not be the Critical Mass to invest in our country. Inncine your main pr mediobanca has seen a change in shareholders. Is intesa willing to be involved . Carlo there is a lot of Media Attention on this point. Changed fromhey the frenchman to the top reputational italian guy. He is delivering good results in the market cap is increasing. That is the defense for the ceo of mediobanca and generali. There is a lot of emphasis, but it is a media saga. Francine the media is asking if this will lead to governance change. Carlo they are thinking about what could be the next step there could be some acquisition or aggregation. The evidence is that market cap is increasing in these companies. End, market cap is the best defense for a ceo. , he is a topime reputational man in italy, so positive. Francine carlo, thank you so much. He is the chief executive of Intesa Sanpaolo and we will talk more about europe. Stay with us, plenty coming up. Disney prepares to make its debut after securing a deal with amazon and samsung. Ther, we be speaking to chief officer of Credit Agricole. This is bloomberg. Francine this is bloomberg surveillance. Rates, Rising Capital requirements, geopolitics trade uncertainty. Italian banks have a lot to contend with. Carlo, Intesa Sanpaolos chief executive is still with us. What would you do with elva right now . Carlo it is a complex situation in our country. We have one of the best investors in the world that wants to invest in our country. The situation of making a decision to give some shield from a judicial point of view to decide not to give and to get to get has put the situation in a difficult situation from a negotiation point of view. My expectation is there could be a negotiation. Do not forget, it is a Strategic Asset for italy. Or only a metal of health jobs, but there are a lot of items related to employment. It is a Strategic Asset. Fundamental to find an agreement, that is my personal view. But if that is not possible, government should consider the possibility of nationalization. Francine what message with that send to investors . Would that send to investors . Carlo option one is to find an agreement. Way, their other reputation means italy is a country you can invest in. There is complications in the today, if you are not able to reach plan a, you have to move on plan b. Otherwise, you will lose a Strategic Asset. I dont know how much time you spent figuring out what investors want, but europe is stuck in the middle. As a fairly small export in country come italy is as well country, italy is as well. Carlo that is part of the story related to what is europe in a geopolitical situation. Have do not work to enforcement of the governance of europe, we will lose the game with the usa and china. They are, in my view, close to an agreement. Close to something that can exportrelated countries like germany or italy, which is the strongest in the world in terms of diversification of exports. Sodas a country that can have the most important benefit from an agreement. At the end, they will work to have an agreement, and for italy, this would be very positive. And italy, we have a lot of companies that are postponing investments. Francine what if it lasts for 10 years . Carlo [laughter] in the past, we had such an incredible growth for exportrelated companies. In the next years, they will and theket share exportrelated items will be strategic. Then there is also something that could be related more to Artificial Intelligence and cybersecurity. That is between trump and china. Francine we talk a lot about a wall of worries, is there anything you see that is positive . Are we focused too much on the negatives . , with theany case negatives, we will continue to grow at 3 . There is a lot of emphasis on negative, but if you look at fundamentals, they are not so negative. You could look at the reductions of growth, but we are not talking in terms of recession at a global level so i continue to be positive. , theine Carlo Messina chief executive of Intesa Sanpaolo joining us this morning. Coming up, disney readies to take on netflix, amazon, and apple. But is the house of mouse too late to the game . We discuss that next. This is bluebird bloomberg. Francine this is bloomberg surveillance. After shares are rising quarterly profits top estimates, but that is thanks strong numbers of the film unit. But losses at the directorconsumer unit widened, reflecting the cost of the disney plus streaming service. It launches tuesday as it prepares to do battle with netflix. Disney also reached an agreement to put its new service on amazon devices, ensuring access to more online viewers. Joining us is our Bloomberg Intelligence analyst covering space and gmt. What is helping disney consistently letter deliver . You have got an incredible platform of amazing content this incredible readership team and amazing Execution Leadership Team and amazing execution across the studios, businesses, and theme parks. They have got amazing franchises and have been effectively monetizing across all of these different platforms. It is a combination of those factors and that huge heritage. Francine in our cover story, we love the graphics and it is quite poignant. Disney plus and netflix, can we see . What can we see . It is not disney plus on its own, but a combination of the three platforms. Huluy plus, espn plus, and , this huge platforms platform of content they can monetize across the platforms. As a combination, they are potentially a big threat to netflix. Netflix has to evolve to make itself standout. Broadave to have a appeal, spending billions on content to redefine itself. Francine where does apple tv fit in . Mark as a bit of a question mark with a narrow set of content. Most people get that service for free. And if you dont, its only four dollars 99, so is not a huge investment. Apple will not really match disney at a necklace. Match disney and netflix. Francine coming up, we speak to the cfo of Credit Agricole. He joins us for an exclusive interview after the french point Bank Reported a rise in profits. We ask him about negative Interest Rates and consolidation in the sector. A banking update after we spoke to Carlo Messina. Thats coming up next. 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. Francine the u. S. And china agreeing on tariff rollbacks. Only if a preliminary trade deal is reached. A luxury line reaches estimates as hong kong braces for another weekend of unrest. European banks in focus, we are. Oined by rome green good afternoon, good evening. I am Francine Lacqua. The biggest gain on the stock, 600, up 8 . This list for november reviews of stocks that could be added to the global standard index. It is getting a big boost today. Reach mont is down 5 . Mont is down 5 . That has to do with the protest. Aually, watches can be bit cheaper than you would find in mainland china. Credit agricole is down 3 . Potentially, we could see a weakness in the french retail which missed expectations. Francine thank you. Lets go straight to the bloomberg. In new york city, here is viviana hurtado. President donald trump wants to investigate joe biden. That was according to one Senior State Department official. Last month, he spoke for house committees. Next week, the u. S. Will not impose tariffs on e. U. Cars. That is according to the European Commission president. Speaking to a german newspaper, he said donald trump will not follow through on the threat if th. Through, russell has threatened to retaliate. Saudi arabia is buying stock in aramcos public offerings. Some people who were approached were detained at the ritzcarlton hotel. It is not clear if they would invest their personal fortunes. 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. Revenue rose 4. 8 . The french bank, which is a top performer of the large bank stocks in europe has shares up 33 this year. Joineddelighted to be exclusive conversation by jerome. You beat on a number of metrics. Your share numbers are down. What do you think investors are worried about . I think investors are not worried at all. I think that, as you say, our stock price increased by more than 30 since the beginning of this year. A bigk that is probably part of the good news we are seeing today. I think what is important is to note the evolution of the share price on the long term. Toncine will you be able boost the dividend ratio next year . Set. E dividend has been three years ago, it was a 50 payout in cash. We will continue with the same policy over the course of the plan. The way that we have to boost the dividend Going Forward is to continue to increase the net profit, which is what we did this quarter. Francine if you look at the unitsgs today, you have that are doing better than others. Do you expect this to be a similar trend for the quarters to come . Is that what you will be focusing on . Quarter, allthis business divisions improved. It is true that it was in a differentiated manner. All business lines increased. Francine how will you deal with negative rates . You are doing pretty well and so many of your competitors are doing badly. What are you doing differently and how will you deal with negative rates . I think that negative rates is much more a problem for the household that tried to save a little money for their retirement and pensions. For banks, we are going to adapt to negative rates within the last quarter and we will continue to do so. The problem of negative rates is much more a global problem than one of financial institutions. Retail. Continue in and insurance. We will continue to adapt to the rate environment. Besides, we are talking about negative rates. In the last six weeks, rates have significantly increased. Year rate is above zero. How much more negative can rates go without european banks suffering compared to u. S. Banks . Banks are able to adapt to the rate situation. What is important from the macro viewpoint is to assess the impact of the rates on the household and globally on the economy. Bad for rates are good favors. Financial institutions, we adapt our pricing on both sides of our balance sheet. For banks, i think that what is important is to be in a positive in bullion environment buoyant environment. Willine do you think we get a Banking Union sooner than we thought . See crossborder consolidation . I think that crossborder consolidation is not only a matter of regulation, it is also a matter of whether there is an economic interest in merging banks between two different countries. For the time being, even if the Banking Union continues to be big within europe, there is no acrossnking Market Europe in the different countries. Customer behaviors are different. Tax regimes are different. I think that consolidation may continue, much more on the basis of Specialized Business clients like Asset Management of activity, than on retail and commercial. We are taking part in this consolidation. Francine given the uncertainty surrounding of the acquisition. I want to talk to you on brexit. Given the new deadline of january 31 and the uncertainty of the u. K. Election, how is the bank dealing with this . I have no crystal ball. I dont know exactly when and how brexit will take place. What i could tell you is into. 5 years, we have been preparing for any kind of in 2. 5 years, we have been preparing for any kind of brexit. And whatever form it takes. We have 1000 people working in the u. K. We have a civil branch for different activities in the u. K. We have been applying to the new sub Country Branch with the pra. We are ready to operate in this current environment, whenever it takes place. Francine thank you so much for a great conversation. Jerome, the chief financial officer, joining us from paris this morning. Banks, we the central speak with the president of the atlanta fed. You can catch that exclusive interview at 1 30 p. M. This is bloomberg. Francine this is bloomberg surveillance. I am francine in london. Thats get straight to the Bloomberg Business flash. Here is viviana hurtado. For up to is looking 15 billion. This is in hong kong shares sale. Bloomberg learned that companies will hold a hearing. Largest be the citys first time Stock Offering in nearly a decade. Alibaba declining to come in. A Company Reported weaker than expected earnings. Sales falling more than 10 . It is also sickening signaling it will not start a bidding war. In the Third Quarter, the Asset Management unit attracted 24 billion for clients. Assets rising to a record near 1. 7 trillion euros. The termination of art comes after years of struggle for the retailer. His turnaround efforts failed to reignite sales growth. They want to bring back a member of the founding family to lead the company. That is your Bloomberg Business flash. Francine the u. S. And china have agreed that rolling back tariffs will be a key part of any agreement. Is a deal any closer to being done . President trump loss advisors do not sound trumps advisors do not sound certain. Here to talk about this is mark connors. Us. K you for joining when you look at some of the concerns that markets should be focusing on, the trade is epicenter. Are you worried about the mechanism of the actual markets . Yes. In september, we got a window on the declining efficacy of the market. One of our analysts wrote about this in august. He said there are 800 billion bills coming down to fund this deficit in the u. S. It will not be a deficit just be a deficit issue. Tax related declining chaos. They reduced liquidity. Deficitsn and funding are declining and rates go higher. That is going to be a problem for the fed. It goes to how do you keep rates lower while keeping bond issuance up. Francine this is basically a plumbing problem. No one looks at this until it goes badly. Pop could happen. You bring up a good point. Is it going to be a problem . The answer is yes. If someone cannot fund at year end, they will have to sell. They basically may have to raise their hands and go to one of the Central Banks and say i need help. When you do that, that is a red flag. That is a concern. , in a in liquidity moment, it could cause a problem. Francine given what happened in september, the fed should be looking at this and fixing it. The fed did market operations. They said they will help the primary dealers. We will give you access to a facility. That does not go out to the broader economy. We thank the banks think the banks will get liquidity. Their interest in extending that to the broader banking system, we will see if that happens. They dont have the ability necessarily to handle this themselves. They need to have the banks extend liquidity. Francine would it be a financial crisis moment if it were to turn ugly . A 5050 chance of happening in greater proportion. Urn could be the thing to focus on. Francine are we relying too much on Central Banks . Yes. Central banks are trying to make things cost less to get the velocity money up and it is not happening. Francine i know that was a probing question. The real question is what does it mean to the markets . Can we handle the situation we are in . We all talk about the problems. Unless they get fixed, how bad does it get . Mark we are at a bank. Regulatory relief is what banks are asking for. The repo player is saying they need to have that. The markets are going to be ok. I think you can expect spiky volatility. Our clients have a tough time trading for that moment. Will stocks go up or is it Something Else . Trade, to me, provides in the market 2 place. The headline is about, in europe, that is the thing to address. You talked about banking in the previous call. Volatility source of for the markets. It is about growth. If we cannot get rates higher, you are not going to have a fiscal engagement. Central banks only feed people who have access. Lower rates mean asset prices are higher. The growth trajectory continues to go lower. Ofncine coming up, the fall the berlin wall. How the unification of the east and west shaped germanys economy. This is bloomberg. 30 years ago, the berlin wall comes down. Germany unified for the First Time Since world war ii. The cost of integrating the former soviet satellite state does not come cheap. Growth picks up, Industrial Production takes off and germany becomes the dominant economy of europe and in some sectors, the world. Asf are a few. Theeuro is born with European Central bank headquartered in frankfurt. Berlin loses its deutschmark. As german economic might grows, problems are emerging. The euro reached debt crisis. An increasingly hostile russia, brexit, and of course, the u. S. China trade war, sapping germanys export dominates. Germany teeters on the edge of its first recession. Inc. Struggles. Pressure builds. The question is even if the fiscal paps are open, will it be enough to bribe the one time in be of europe . Francine that was matt miller, marking the 30th anniversary of the berlin wall and talking about germany. Lets focus on geopolitical risks. Still with us is mark connors. Geopolitics, it push pressures puts pressures on markets. Youre dealing with lower field. There is a consummate of factors that leads to consolidation. It is consolidation for a number of reasons. We have seen trade interest central bank actions, the unexpected reversals in policies that we have seen have sapped alpha. There is very little meat left on the alpha bone for hedge funds. Investment and scale is important. Qe3ou look at returns since , on average, they are almost flat. The vital few have aggregated assets and the talent to put top core returns of 10 to 14 . There are achievers out there and they are doing it. They are doing it on scale. Consolidation is happening anause it really is opportunity. You have to accelerate your profit. Francine how much more acceleration will we get . Mark i think consolidation will continue, as long as we are late cycle. Where we are dealing with low rates and high spreads. In that, there is little opportunity for alternative assets. To run theou need mothership to get resources. Francine is this a bad type of consolidation . It could be for brokerages and for banks. When you are forced to consolidate, what are the chances of it going wrong . Mark whenever we hear of a annsaction, whether it be asset manager that went to an insurance company, the question is will they push or will they jump . This transaction, they jumped into the arms of the insurer because they saw that their business was going away and that they were going to a lower business. They needed the scale of the insurance arm. In the hedge fund, they are aggregating it. On the banking side, the fortunes are also the same. We are seeing small transactions, consolidation. Would you rather see people you would rather see people jump into the arms than be forced. Francine what would that do . A brokerage dealer having to rebuild out . What does that mean for market anxiety . See, in anyally wed of on expected moment, inally see a one to 3 rally the 10 year. Of three to 5 decline in the market. I dont think it is a 10 decline. Francine thank you so much. Bloomberg surveillance continues in the next hour, dont miss our exclusive conversation. Dax and the about u. S. Economy and the consumer. We had great conversations with the chief financial officer. We had an exclusive conversation with the chief executive. Both were talking about negative rates. We will have a full round of the banking earnings and what it means for you. It was clear that the risk permeates the Global Financial departments this week. European stocks are on the way down. This is bloomberg. U. S. Ine priced in, the and china agree on a tariff rollback, but only if a preliminary trade deal is reached. Stocks slip. Hong kong protests hit revenue. The city braces for another weekend of unrest. European banks, we will bring you exclusive conversations with the chief executive. Good morning, good afternoon, good evening. I am Francine Lacqua in london. Tom keene in new york. We saw a risk on mood this week. It is slowly petering out when you look at european stocks. Looking at whether the banking schulzuminary talks that kicked off will lead to consolidation in europe. Pushingoticed italy back against what germany said earlier this week. I was thunderstruck by charles ofgaulle macron, the head the government in france on nato. Those were strong comments. Andcine really strong, kremlin said it is not up to them whether nato is dead or not. Lets get to first word news. Both sides agree the first phase of a u. S. China trade deal would include a rollback of tariffs. That would pave the way for a deescalation in the global trade dispute. The white house saying donald trump is anxious to find a deal. Talks are still going on. Last month, chinas export declining less than expected, but in the last year exports to the u. S. Have fallen 11 . Chinese imports shrinking for six months in a row. Over to the u. K. Where Prime Minister Boris Johnson is promising more visas for doctors and nurses after brexit. The National Health service the set is part of a new points based Immigration Service. Health care is expected to be a key battleground issue in the Election Campaign. In the u. S. , alabama, Jeff Sessions will run for the u. S. Senate seat he gave up to become attorney general. He says he remains a strong trump supporter despite ups and downs. Last year he resigned from the cabinet after months of insults from the president. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Tom thank you so much. Lets dive into the data. We will get through the events of friday after a tumultuous thursday. Look how close to 3100 on spx. That is stunning if you look back to january of last year. The vix still under 13 even with a pullback. Yemen, i am watching very carefully. It certainly confirms risk on. 5, questions about that 109. 3 weaker yen through the weekend. I am looking at european stocks. It is quite indicative because what we saw in asia was a little bit of a mixed bag. The risk on mood that was , they areobal markets a little worried about trade. They are worried about some of the data. They are trying to figure out what Banking Union means. I want to look at gold because i showed you yesterday, this is a clear haven. 0. 1 . Currently down tom lets go to the bond market. This goes to Michael Mckees question to mr. Powell to begin that press conference on a declarative discussion. Tendss not the twos and spread. This is the threemonth tbill 10year spread. 2016 and trump, you have a real tangible breakout above two standard deviations. It is the end of the curve flattening cycle. That is a raging debate. Francine i love your chart. I am jealous of your chart. Mine is more simple. It is a thing. Chart jealousy. It is fomo, actually. Tom nice. Francine basically all year. Tom it has got elements of poochie to it. I know poochie is on your mind. Francine thank you to hillary clark. I get a lot of help. Lets get straight to china and trade. Miranda carr, thank you for trying to get your crystal ball out to figure out what happens with trade. Who wants a deal . If we are talking about what the chinese wanted, was getting some and theariffs removed u. S. Saying yes, does it mean we are closer to a deal . Is interesting is the phase one deal is basically what china would have signed last year. It can have more soybeans and more lng and get the tariffs rollback, and this would be a good deal for china and effectively use it what it wants without having to concede too much to the u. S. In terms of technology or state interference. This is what china would want. Whether the u. S. Is going to be quite so happy, particularly some of the more hardcore , it does nothina answer a lot of the questions they have been pushing for it. Francine i know you are not a markets man, but what is priced in . Is investment on hold . Moment,nk at the highlight what was just said, this is a deal that is getting closer to what the chinese want. The u. S. Seems more in need of a deal. I think markets have largely priced this in if you look at equity markets. If you look at proper investment in china, there is a lot to be done when you look at financial markets. There could be more coming. Tom into this friday of november, i want to take a bigger view. He is 83 years old. He is a giant of chinese analysis, Jonathan Spence of yale. What would Jonathan Spence say . Wouldnt he say that the chinese will just wait us out . Yes. The interesting thing with the trade war is that china has gone , we are going to have a hit. This is going to be maybe one percentage point hit to gdp, but we can cope with this because this is part of making china a leading figure in technology, the next generation, 5g, and gaining chinas position in the global picture. A little bit of pain on the trade and economy is a price worth paying to get that Global Status back. That is the bigger picture. Usingets move forward, Jonathan Spence again, what do we get wrong in our cultural analysis of all that is going on in china right now . Wronghave got quite a lot over the past 20 years assuming china is going to become more like a western economy. Rules,aking its own making its own future is very different. You have to strip away a lot of the assumptions you make about how the economy works and how the Government Works to understand the china mentality. That is a step a lot of people have not made. Tom what is the run rate of china gdp . As you look at the stories, what is your run rate of china gdp . At 5, 6, orain seven percent . This is an excellent point. It is clear from a political perspective that china can take that view. China is not without domestic pressures either. Slowing ofntinuous what you call the run rate, the trend rate of china. It has been a trend downward since 2011. We expect them to grow 5. 5 next year. China ishe first time growing below 6 . You have a trade war is putting you on the exports and dents manufacturing confidence, that becomes more difficult. Remember, they still want to make that transition to a high income economy. For that they need a growth rate of 6 or more. That is difficult to achieve. Without that, they get stuck in that middle income track. Francine what was the biggest concern be in this mastic tension . China in some ways is wanting structurally, the working age population is going down about 1 every year, so you have that structural shift. You have that shift to consumption, which is not leveraged. If you would down to a structural growth, and this is one of the reasons china is not ceding torowth, not ac a lot of the trade war stuff, longerterm we want slower 2020, 5 growth after once the 10 year targets have been hit. A lowermove to structural growth because you dont have the pressure on the population and you are changing your economic structure. That is probably going to be a good thing for china longerterm rather than desperately trying to chase ridiculous gdp targets. Francine i have a chart i will bring up in a second. What does room nimby do from here . It is no longer a psychological sticking point. It depends on what happens with the trade war. Question marks over whether that is really going to get signed. Clearly holding to stabilize expectations and stabilize markets. We expect it to keep that level of stability. They have had the depreciation you needed to offset the tariffs. Tom away from the big cities of beijing and shanghai and the ones that i cannot pronounce, is china in recession . It really depends on where you look. Obviously, you have issues in the northern regions. You have structural changes from the old economy to the new economy. You cannot change someone who works in a call my into a driver. That is a structural shift. You are seeing population shrink in those areas. In some of the other areas where we think the consumption growth is when to come from is the lower tier cities. A lot of people in the upper tier cities have already spend huge amounts of money and have started borrowing. Wherewer tier cities are the likes of alibaba and others are getting in Online Shopping where you are seeing consumption growth. You could see more growth into the western and central areas rather than just the big cities. Intervenewould pboc in that outcome to balance things out . I think the whole issue about the currency would probably be part of that trade deal as well. I think there is an issue about transparency instability that is probably being negotiated as well. We saw today the first time fixing below seven. I think the currency will tend to still depreciate from here with the economy slowing. Willie intervene . They haveearly indicated they want a more flexible currency and that it is flexible to both sides. I think this is the trend of where room nimby is going. Mnimbi is still going. Francine we are live from hong kong next. This is bloomberg. Is is bloomberg. Francine this is bloomberg surveillance. The death of a hong kong student is fueling anger ahead of more protests scheduled for the weekend. He suffered a head injury as police dispersed the crowd he was in. It is the first reported death resulting directly from a clash between protesters and the government. A sad death. How does this change protests . The thing people are the most concerned about is how this could inflame protests that had in recent weeks dropped off a bit. People are worried this is going to recharge that activity. We are already seeing people come out earlier in the day. They are coming out now as we talk. There are already protests that have been planned throughout the city over the weekend. Those are expected to be a bit bigger and more chaotic with people venting anger at police. That has been one of the main themes of protests, this anger towards police and distrust of the government. Francine what happens . How does this end . What do the protesters still want now . The thing we are looking at is district elections, which are coming up in the next few weeks on november 24. Those are going to be a lot more important this year. They come after five months of protests. The opposition is going to be looking to take back as much power as they can during those elections. Whether this is going to inflame protests and violence where those elections are delayed or canceled or jeopardized in any way. Really just looking at whether this is going to be something that is good to make people come out in greater numbers than they have been. Tom im glad you bring that up. Is it possible to have democracy in hong kong right now . Is it so supercharged into this weekend that you push aside that hong kong distinction . That has been one of the major questions. I think what people are going to be looking at is whether or not these protests sustained. Answer thato question. Whether people are still motivated to come out and fight for that is what people look at, not just this weekend and for elections but as we had towards the end of the year. People are looking at whether they dwindle a bit and then something inflames them or they peter out. Tom thank you very much. Stay with us for our coverage throughout the weekend of any unrest in hong kong. Coming up on bloomberg television, Michael Mckee, the rafaelerson to speak to bostick of atlantic. This is bloomberg. This is bloomberg. This is bloomberg. You are watching bloomberg surveillance. Kongs biggest first time Share Offering since 2010. Alibaba hopes to raise up to 15 billion in share sales in the city next year. Art pass, ceo disappointing Third Quarter growth sent shares falling. Executive chairman Robert Fisher will serve as interim ceo. That is the Bloomberg Business flash. Tom thank you so much. Every week there are a number of statistics that stick out like a sore thumb. A brilliant essay with one number in it. Lets go to the bloomberg and look at that number. That number is global gdp tracker 2. 4 . A little hard to read, you know under 3 is a big deal. Are we in a global recession . Will have to be nerdy and asked whether that is one on the imf methodology that is on ppg, where we should be just about 3 . Imf methodology, less than 2. 5 they defined as a global recession. From that perspective, we would be if that is the number he refers to. I would say overall if we look thought weynamics, i just had the news that recession a little less than we thought a few months ago. In particular if you look at what has happened in the u. S. With the labor market. The limited signs of the manufacturing recession, which is a recession spilling over into the service sector. One final question, if that is the case, and with Interest Rates coming up, do we have a globally restrictive policy even without centralbank action to cut rates . It is interesting that we have the phenomenon that over the last few years central bankers have continuously dropped the equilibrium rate. , that think in the u. S. Is between zero and 50 basis points, you realize the rates you have may not be as accommodative as you may think historically. We have this adjustment around the world in rates, and i think it does mean that policies are no longer perceived to be as aggressively accommodative. That means we are far away from any rate hikes and banks considering normalizing again. If anything, the bank of england and possibly even the u. S. At some point would be cutting and hiking. Francine thank you. You stay with us. Secretary of state mike pompeo is delivering a speech in berlin. It is the 30 Year Anniversary of alling of the berlin wall. You can see mike pompeo talking transatlantic ties in berlin. We will bring you the very latest on the u. S. Secretary of state. This is bloomberg. Tom bloomberg surveillance, we welcome all of you worldwide. Tom keene in new york. For an eventful december. Certainly lots of news flow. We just saw the secretary of state in berlin for this anniversary of history in germany. Right now, friday briefing, your first word news. President donald trump will not impose tariffs on european cars next week as threatened. Said there juncker will not be any automobile tariffs. If mr. Trump carries out his threats, the eu has threatened to carry out its own tariffs on american goods. A Senior State Department fficial says the information is now clear. Last month, a state Department Official testified before u. S. House committees, and it is the latest in a long string of democratic plans to make wealthy americans pay more in taxes. Supporters say this one has a better chance of becoming law. The proposal coming from senator Chris Van Hollen of maryland. It would place a 10 levy on revenue above 2 million. Timeedian age of first homebuyers has decreased to 33. That is the oldest and record dating back to 1981. Mountains of student debt are keeping some potential buyers out of this market. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you so much. There is a feeling out there, the end of the year is beginning early. Maybe it is november 15. Maybe it is december 5 people are beginning to refrain. We actually see a pickup in risk appetite. What is happening around the world in terms of injecting more liquidity into the system has helped. I think the ultralow Interest Rates, rates of zero and below have warped a lot of calculations. Of course, in the small picture sense, it makes sense that companies have taken on more debt because it is so cheap. Tom this is a great theme we have, this idea of the experiment of negative Interest Rates. Will touch on this with Michael Mckee later this morning. Learnedn, what have you about negative rates and their efficacy for society . I think what was said earlier is correct. We can talk a lot about the potential reversal of rates and the negative impact on the system over time. Japan is a case in point where it is weighing on the financial system. Mario draghi,with who pointed out that negative rates, if you think of them as a package with qe and other measures, it has worked in europe. Unemployment has been falling significantly. Growth is not stellar, but we never know where it would have been if they had not done all of these measures. There needs to be a rethinking of the side effects. For now i think the evidence is that the unorthodox Monetary Policy has worked. Francine go ahead. Tom please, francine, go ahead. Francine i was going to ask about the impact between negative rates and the Banking Union . There are so many guarantees and conditions attached to it, i dont know whether it will ever see the light. It is an excellent question in light of what we saw yesterday coming out from germany from the minister of finance. I think it is an important moment. It represents an attitude change in berlin. We will need to see whether it has a broader backing from the cabinet. Obviously, there are conditions attached. Insurance thatt the germans are now willing to back would have to come with certain other measures that would reduce the risk associated with it. The fact that a german finance minister has come out and said they are now open to this european deposit insurance is a significant step. I would never expect everyone to jump and say great, and now the italians have obviously voiced concerns about risk rating government bonds, but i think it is a significant step. Right now we have headlines from the secretary of state. The secretary wants to go tariff free. That is one of the great desires away from nato and the discussions of the syrian and turkish border. World . A of a tariff free who is to blame on the atlantic, a tariff sensitive europe or President Trump . I think in europe we know the attitudes are different between the various countries. I am pretty sure the german Manufacturing Industry would be relatively comfortable with zero tariffs. The french Agricultural Industry not so much. Question about the european Agricultural Policy that relies on tariffs and which countries do not seem to be willing to give up. Francine what is the biggest headache for the fed right now . I dont know if it is to mistake or domestic influenced by international. The fed went through several transition phases rather quickly. They had to make a significant turn in january. The biggest threat would be that they could be wrong again and have to reverse again as data comes in worse than expected. That we aren is going to shift from external uncertainty after the china deal is done to domestic uncertainty. There is a lot coming with the elections and very large differences from the different candidate programs. Believe the you consumer will stay strong in america . Far so far he has continued to hold up strong. Business investment is quite weak. It is a question whether we turn orund after the china deal whether ceos and other corporations will look at the Upcoming Elections and say there is a lot of uncertainty, i would rather hold back. Tom Christian Keller with us. Thank you so much. We are continuing to monitor the secretary of states comments on this very emotional anniversary of the following of the berlin wall. The secretary of state saying on the u. S. Presence in northern syria, we are there. In the last 24 hours, some really interesting discussions of the linkage of the pentagon to 1600 pennsylvania avenue on that definition of we are there. Im sure there will be much more about that through the u. S. Political day. It is an interesting market with onand on a friday a churn a friday. This is bloomberg. Is is bloomberg. 30 years ago, the berlin wall comes down. Germany unified for the First Time Since world war ii. The cost of integrating the former soviet satellite state does not come cheap. Growth picks up, Industrial Production takes off, in germany becomes the dominant economy of europe and in some sectors the world. Bmw, to name a few at the heart of the machine. Generally first, 1999, the euro is born with the European Central bank headquartered in berlin. Germany becomes the chief visionary of the common currency. Economic mike grows, problems are emerging. The euro reaching debt crisis. Increasingly hostile russia. Dieselgate, brexit, and the u. S. China trade war sapping germanys export dominance. Germanyslide, and teeters on the edge of its first recession in more than six years. With Angela Merkel in the twilight of her power, pressure builds on the government to spend its way out of the economic malaise. Even if the fiscal taps are opened, is it enough to prime the onetime engine of europe . Tom extraordinary package by matthew miller. Light touch on an extraordinary topic. The history of 1989 and the sequence of it, poland, hungary, the stunning shock of the collapse of the berlin wall and then onto romania and other key moments was just extraordinary. For those of you who havent seen it, i cannot say enough about the common effort, the bridge of spies on the tension we all live. Kristian haller is with us. He and his family im sure know this tension from years ago. Give us one vignette of that great divide we lived years ago. Obviously with regard to east and west germany. I remember going to checkpoint itrlie, the last year before was basically closed down. I did not go, my american friend went. I have to go to a different part. It was 30 years ago, but it is still vivid. Looking at the situation now, i think germany still has a lot of challenges uniting the country. You look at recent developments, and there still seems to be some divide between the Eastern States and the western states. It is time to celebrate. Some work still needs to be done. Tom within all of this is a single idea of bringing germany together for european strength. Is germany as a nation, are they still focused on reunification 30 years on, or can they begin to walk away from that and look across a Greater Europe . I think you have both. , not putting too much emphasis on it, but that issue of the Banking Union that came out of berlin shows you there is a significant force in germany that wants to look at a Greater Europe and wants to continue with that project. There has been a lot of inward looking voices as well. Wheree developments pockets in the center have been losing massively in the east. Homogeneouss of a fabric with germany as a country. At the same time, realizing they need to push for the european project. Francine what does germany face . If there is no extra stimulus and no sharing of burden with the rest of europe, will it hurt germany longerterm . I think germany has come to a point where it clearly needs to rethink its economic model. Germany has been writing very well on the euro and on the whole globalization theme. It has been a great exporter to markets, emerging rising china, and a great beneficiary of the expanded car sales. Probably not on top when it comes to the service economy. There needs to be a lot of rethinking. Francine does the ecb need to rethink . Christine lagarde took over, how does she need to do with respect to mario draghi . I think she does not have to do anything in the near term. She needs to rebuild a consensus. I think the strategic view the ecb will undertake in the coming months will be important. People have to be clear, do they want to stick with the current centralbank target of 2 or below . Do they want to have a range . These sorts of things the government needs to be clear about. She is probably great in forging this consensus, and i think she will continue to work on those governments to say fiscal policy has the play a part. She is in quite a position to do that given the role she had at the imf. Thank you very much. We will continue this discussion , particularly those comments on the culture and society and politics of germany. This is joy. You will see this on bloomberg television. A conversation with david booth of chicago. This is bloomberg. This is bloomberg surveillance. Assure thatying to it will have access to tens of millions of online viewers for its new streaming service. The company reaching an agreement to put it on amazon, samsung, and lg devices. Next week, disney plus debuts. Earnings missed estimates. Doubledigit sales slumped and hong kong. Months of protests have battered retailers. Operating margins shrank because investments in ecommerce are sapping profitability. Honda is cutting its annual profit forecast. Supply problems are weighing on the japanese automaker. Hondas profits beating estimates. It announced a 950 million share buyback. That is the Bloomberg Business flash. Tom in my childhood, it was the union bank of switzerland. Always spoke to those of a higher net worth. Ubs has continued that with a spectacular new report on the dynamics of billionaires and what they do worldwide. We are thrilled to have joining ubs,is morning joseph of and Christian Keller continues with us from barclays. Congratulations on a report, and what i love about it is the acuity of the global billionaire. Tell us about the little chart in the back of the chinese billionaire. Are they less billionairelike with a slower china and a trade war . There are two effects that created a little bit of a dip. One is the stronger dollar. If you look at the currency effect, 60 of the story is currency driven. You are right, china has slowed down, and the trade war has not helped. The dip is mainly in china, where we only had 56 entrants and about 100 billionaires exited the cohort. Tom obviously you are doing this within ubs, ultrahigh net worth, but the stereotype is jetting around and going to conferences and all that. Forget about that. Interiorinterio confidence to sustain and enrich business . The billionaires we know, they are human beings like you and me and driven by entrepreneurial efforts. These are very hardworking people taking huge risks, not being afraid of failures, more afraid of missed opportunities so to speak. Their confidence is driven by their vision. That confidence is continuing as we speak. If you look at the average billionaire in china in tech, we have more unicorns in china then we have in the united states. Dip, not a trend. Francine are there Less Investments because of negative risks . Do they worry like investors across the spectrum . That is a good question. The negative Interest Rate environment that hit japan and is now hitting europe will most likely hit the u. S. , or that is the concern of big money. The negative Interest Rate environment, if it is longterm, it has never been there before. Unsureare starting to be about the future good longterm investments of the average entrepreneur is slowing down, but the longevity and divisions of the billionaire are slightly different. For the billionaire, that negative Interest Rate problem is less of a problem than for the average millionaire. Francine talk to me about investments overall. Is there a pool of money that wants to be deployed but that is too shy to go into investments because of gel politics geopolitics . I think that must be the case. The direction was clear. There was more globalization. It was the diversification of the supply chain. You created global value chains. That was a successful concept whether it was by doors or old German Companies that played this quite well. Now you have question marks around this model. Will we continue to live in this world where wto rules it all . Will there be tariff and nontariff systems . Investors probably holdback for now. You have a u. S. Where probably future policy could go very much the other way from what we have seen under the Trump Administration depending on the democrat candidate. Tom nicely said. How do you and your study of the ultrahigh net worth, how do they assume the new populism . Is it here to stay . It is most probably here to stay. That is one of the big concerns bigmoney operators have. They are concerned the media and government and officials are not necessarily telling a balanced story, but just looking at the inequality and a question about how they created wealth and the number of jobs they created and the value that is flowing back to society. 97 of a technological breakthrough is flowing back to society. Only 5 is staying with the inventor. The 9. 5 . Ook also at hamper entrepreneurial spirit, i have not seen it yet. Andcine thank you to joe christian. Tom, we have 20 more coming up on bloomberg surveillance. We will be joined by Stephen Stanley for a look at china, trade, and markets. Tom this morning, the fed fighting the last war. Stanley onr, stephen your solid American Economy. Its rollback friday. Clarity needed will tariff rollbacks to be sequential, or the 1 friday. Lets count the reasons that you and i need to stay in cash. Good morning, everyone. This is bloomberg surveillance. From new york. From london, Francine Lacqua. Secretary of state in berlin and Bruno Le Maire speaking right now. Francine hes speaking in brussels with the euro group. We had some pretty punchy headlines from this box. President macron was talking about emigration, nato, and the fact that he wants more power to a european army. Bruno le maire all fired up in brussels. I think he is answering one or two questions about the Banking Union. After that piece by olaf scholz, lets see how much support internally gets. A lot of countries it said we want a Banking Union but may be a not under those terms. Tom really amazing rhetoric into the weekend that we are seeing. This headline from the new york times. The president of france says nato is experiencing brain death because of the president of the united states. We begin with the u. S. China trade deal. Both sides agreed the first phase of the deal would include a rollback of tariffs. That would pave the way for a deescalation in the global war. The white house says President Donald Trump is anxious to sign a deal but talks are still ongoing. A time and place for the siding has not been determined. Last month, chinas exports declined less than expected, but in the last year, exports to the u. S. Have now fallen more than 11 . Chinese imports shrinking for the six month in a row. That points to a slowing domestic economy. Over to the u. K. , where Prime Minister Boris Johnson is promising more visas for doctors and nurses after brexit. A National Health service aveda is part of a new points based Immigration Service service visa is part of a new points based Immigration Service. Health care is set to be a key battleground issue. Jeff sessions will run for the u. S. Senate seat he gave up to become President Trumps first attorney general. In a video, sessions says he remains a strong trump supporter downs our ups and last year after months of insults from the president , he resigned from the cabinet. Most had to do with session recusal from the investigation into the 2016 president ial election. Global news 24 hours a day, onair and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is uber. Tom thanks so much bloomberg. Tom thanks so much. Right now, a data check. I want to focus on the Interest Rates. Equities finally pause but anything over 3100 xps is extraordinary. There has been curve steepening over the last few days. On to the next screen, if we would. The vix sustained under 13. 10 year yield, i am am i on the 2 watch . Maybe. Who knows. Yen confirming this new risk on feel that we have. Gold a surprise, well under 1500 per ounce. Francine if you look at treasuries, they are nudging upwards after sliding yesterday. Gold fluctuating after slipping on thursday. The risk on mood that we had for most of the week is actually showing signs of abating. We have to figure out what happened in the next trade chapter, tom. Tom very good. Setting up your weekend reading into november before the Holiday Season begins, Stephen Stanley with us of amherst pierpont. He has been extraordinary at gaming the Economic Growth of the united states. Tom orlik is with us. He was so good at are china coverage that we had to demote him to head of all of our economics worldwide. We congratulate him on his recent the motion. The headaches of all economics and bloomberg. Set up tom orlik for a discussion on china. Is a u. S. Gdp right now affected by china . The key question is, by how much . Stephen it definitely is but not so much the tariffs themselves. The consumer continues to fly right along. It is more the uncertainty of the trade policy has created that has sent businesses to sideline. We have seen a significant weakness weakening in business. Tom have a percent . A percent . Half that is a substantial number. Give us the mood that you see. The synthesis that Bloomberg Economics sees of the mood in beijing. Is there an urgency to move forward into the second or third week of november or could they sort of wait until 2020 . I think both sides now want to reduce some of that uncertainty which is undoubtedly a drag on growth in the u. S. And in china. I think the difference for the chinese is a couple of things. Firstly, they have stimulus tools more firmly under their control. Tom tom they have a fiscal space ready to go . Exactly. Could donald run a fiscal stimulus, probably not. Could xi jinping do it, probably yes. President trump has an election looming over him in november 2020. President xi most deftly does not. I think that means there is more pressure on the u. S. Side to get something done. Francine if you look at chinas growth, under 6 . A lot of western countries would kill for that kind of rating. In china, how difficult will it be to sell it internally . I think the thing to think about is the growth rate of course, that is symbolically important for china. More substantially important is whats happening to wages and whats happening to unemployment. What china has had some success in doing is engineering a rebalancing of the economy away from a capitalintensive Manufacturing Sector towards a laborintensive services sector. Yes, we think growth is going year 6 by the end of the but wen doo not see surging unemployment, we dont see wage growth falling very sharply. Reason why china has some comfort that they have time on their side in these trade negotiations. Francine Stephen Stanley, what does this all mean for markets and investors . Stephen we have seen this week about the trade situation is kind of right in the front of peoples minds. It has affected the markets every day. I think with the fed on hold for the time being, it makes it even more important. I think the president does seem to have some urgency to get a deal done so that he could get the economy spruced up for next november. I think what we have seen lately is that most of the rhetoric at least has been positive. Tom what is the character of the consumer . Research been a great on this. If it is going to be a shift in china to a more traditional consumption driven gdp, where are they in that path . Story. Me tell you a yesterday, i had a conversation with a group of senior chinese economists. I said to them, how is the chinese economy doing . They said to me and i find this to be remarkable, dont worry about chinas growth. The consumer is in play. Tom what does that mean . If we think of chinas record over the last 10, 20, 30 years, worry always, dont about chinas growth, the Capital Spending is there, the exports are strong. This time, it is the consumer. I think that speaks to the speed with which chinas economy has rebalanced. Yes, the consumer is not the force in china then they are in the u. S. Is consumerns, it spending driving gdp numbers. Tom explain their social safety net . There is overt savings, because they dont have one, or do we misjudge it . Do they misjudge a more modern social safety net in china . I think a couple of things have happened. The first is that chinese governments have worked diligently to rebuild the social safety net. It is not what it was when everyone worked in a state owned enterprise but better than it was 10 years ago. Tom interesting. That reduces the need for saving. I think more important is the rise of the millennial. We have a young generation in china coming into the workplace. They are not savers like their parents were. They are spenders, more like consumers we have in the united states. That is driving chinas rebalancing story. Francine we are just seeing pictures here in the u. K. Of Nicola Sturgeon lodging the Scottish National partys general Election Campaign in scotland. We will keep an ion that because we are in election mode here in the u. K. Given what tom orlik was just explaining, we talk a lot about the u. S. Economy. We talk a lot about the chinese economy. Are the big losers in this u. S. China trade war small, open exporting economies like the u. K. , italy and some of the periphery European Countries . Stephen i think that is a great point. I would just say germany, which should be an innocent bystander in all of this, right . They are not directly involved in the u. S. China negotiations. Because trade volumes around the world have diminished with the trade tensions, the germany, has really suffered and on the export side. I think that every economy around the world is highly leveraged to global trade that is highly leveraged to global trade has definitely taken a hit from the tensions. Francine if you look at the way china is going, how different is to some ofal china the big, big cities that we are looking at . A i think there is definitely regional story, francine. What we see is that the coastal provinces, these other provinces which are being whacked by the trade war. They are also the provinces which are relatively resilient. They have a thriving private sector, low debt levels. If we look further inland, some of those rural provinces you are talking about, the northeast, lessdeveloped western hinterland, they are less exposed to the trade war. The big problem they have is a moribund estate sector and very high levels of debt, which they took on in the course of that big financial crisis stimulus. Tom tom orlik, i have to rip up the script as we go to break. Miss sturgeon speaking in scotland and the Short Campaign by u. S. Standards as we dash t december 12. What is the disparity of the scottish economy versus the britain, england economy . As she speaks, what is that distinction of the might of scotland versus that of a more complex england . It would not be an appearance on your show if you did not rip up the script at some point. Tom maybe i will do it with both of you. I think one of the oddities about the whole Scottish Independence campaign is that inotlands economy remains i important senses depended on the u. K. Economy. Tom interesting. The Immediate Impact on scotland of independence i think will be negative on the economy. Tom interesting. We have to talk more about that as we move towards december told. Steve stelly and i this guiding decide Stephen Stanley and i deciding whether which want to get. Miss sturgeon speaks on s ps future. Snps future. We will be listening to mr. In conversation with Michael Mckee. This is bloomberg. Good morning. You are watching bloomberg surveillance. I am viviana hurtado. Lets get your Bloomberg Business flash. It will be hong kongs biggest first timeShare Offering since 2010. Alibaba hopes to raise up to 15 billion as the share sale in the city. Next week, there will be a listing hearing in hong kong. Pets ng ceo our firing the ceo. Disappointing thirdquarter growth sent shares falling. The company includes Banana Republic and old navy. The executive chairman will serve as interim ceo. Italian bank and business is focused on growing negative Interest Rates and the of italian bonds are driving investments. In this negative rate environment, we will have an increasing speed of wealth because witheas the deduction of the spread, we have a lot of italian clients, italian families that are coming back for Wealth Management. We are in a unique position to have this opportunity to grow. Mussina also said it is hard to grow without acquisition out of italy. That is your Bloomberg Business flash. Tom thank you so much. Greatly appreciate it. Stephen stanley with dust with with us with amherst pierpont. Even stanley measures gdp like no one else. Where in the equation matters right now . Stephen we talked a bit before about business investment. I think that is the key point. With some improvement in the tone of the trade talks, our business is going to come to the table and start investing again or continue to sit on the sidelines . Tom lets look at this chart. This is without question the chart of early november. This is the difference in yield between the 10 year and three month treasury bill. It has come up. Off the trumpet disinflation coming off of his election, we have really broken out nicely, pushing three standard deviations. This is a dangerous question. Think of the economists that have gone down in flames on this. Can you say end of the great disinflation . I busted your chops. Stephen i like id like to. Exactly. I do think the inflation is going to move a little higher year. I do think that the landscaper inflation is still low. We are not talking about 1970s by any means. Francine what if inflation picks up all of a sudden . Is that a possibility if we have a trade you . Would it need an allencompassing trade deal or would phase i be enough . Stephen i think the big question economists have been grappling with for a long time. You have 3. 5 Unemployment Rate and everybody has their old that phillips curve model are telling them that is supposed to be with a lot of inflation and we are not seeing it. Is it just because the effect has been delayed . If the economy totally changed structure has the economy totally change its structure . Francine changed its structure to something that could a surprise investors . Stephen thats what we will see. I think investors are very sanguine about inflation. I think most investors feel like the Inflation Numbers are stuck below 2 and there is not really much the fed can do to get them higher. We will see. I do think the economy has been growing at an above trend pace. Labor markets are tight. Wages have been accelerating a bit. I think we will get a little more inflation next year than what we have had over the past couple of years. Francine Stephen Stanley of amherst pierpont stays with us. We will get back to some of the inflation worldwide. We will also get back to europe. Bruno le maire briefing reporters in brussels at the euro group. This is after french president Emmanuel Macron yesterday through fire first thing the North Atlantic Treaty Organization was brain dead. He is talking Banking Union now. This is bloomberg. On the nato issue, how is that helping i dont want to say any word about nato, since i am not in charge of that. As far as the deficit is concerned, i wanted to make some very quick points. The first one is that we are sticking to the 3 deficit holes. We are abiding by the european rules. That is the first time in many years that france is abiding by the european rules, as far as public finances are concerned. Minister,nch finance i am doing my best to ensure that france will be under the 3 rule thatwhich is the has been adopted by all european member states. The pointed that we want to make clear is that we will not build the 21st century and the future of the eu under the basis of the 3 rule. That is not the debate. We are willing to stick to the european rules but we are also willing to open a debate on the key challenges for the eu on the 21st century and for us, for Emmanuel Macron and are majority, there are two key points for the 21st century which would define the future of europe and the place that europe will have on the international stage. First of all, new technologies, and second, Climate Change. How do we address the two challenges . How do we ensure that the european continent remains in , onrace of new technologies storage on digital storage we are at the highest world level and able to face competition with china and the united states. That is the first challenge. The second one is, how do we ensure that we have the necessary funding for the fight against Climate Change . That we have the necessary funding for Renewable Energies, furniture technologies in Renewable Energies and for the storage of noble energys . That is Renewable Energies . That is the two key challenges for the debate of the 21st century. I want to confirm with Emmanuel Macron said. The debate of the 21st century is not around the 3 deficit rule. The debate of the 21st century is about innovation and Climate Change. Do you need to say that to [indiscernible] we do not have to be obsessed by the rules. We just have to abide by the rules. That is what we are doing in france. I just want to recall that in the past, france was may be , butsed by the 3 rules while not abiding with the rules and was above 3 . Now that we are under the 3 , i think that we have the right to debate putt the right debate on the table. The right debate is not around the 3 deficit rule. It is about new technologies, ai, and Climate Change. Francine that was Bruno Le Maire, the french finance minister, speaking to reporters in brussels. Maria tadeo asking him about nato, a question that he would not answer, but also asking him about the deficit rule. He said it should not be a religion. We should not be obsessed, we should just follow the rules. If you are italy or some of the other countries that want to leave austerity to one side to spend more, these are significant comments. Tom i agree with that. Significant 24 hours on nato and the catalyst for this, folks, the 30th anniversary of the filing of the berlin wall. Stephen stanley with us. He is with amherst pierpont as well. Lets take it back to macarthur. America . Tionist is with that statement, how alone is mr. Lemaire in europe . I think some of the best words, a lot of the tension around where nato allies. President trump feels like europe has been a free rider. Tom certainly on nato budgeting. Stephen i think in some ways, i think there is some truth to that. Obviously, the European Defense budget has been pretty skimpy over the years. Can this be negotiated in such a way that we can all still be friends . Tom this is an esoteric question but it is esoteric friday, so lets go with it. Can you execute american exceptionalism in a twopoint 2. 4 great versus rate versus what you and i grew up with . Stephen if you want to scale back your participation in the world, is that something that saves you money or ends up costing you in the long run . We look at the middle east for example, and President Trump clearly would like to get out of the middle east but you pull back, we have seen over the last 10 years several times, you pull back and trouble just starts. So then you have to go right back in. I think that remains to be seen. Can you execute a shrinkage of your Global Presence in such a way that you actually save money in a persistently . I think in a persistent way . I think that question is open. Francine what is holding chief executives back from spending money, from investing . Is that probably the biggest concern if geopolitics is fixed . Stephen yes, i definitely think that is one of the biggest issues for the u. S. Economy and indeed for the global economy. What we are seeing over the last year or two is the potential for a significant restructuring of the Global Supply chain. I think right now, businesses are trying to figure out i mean, so many people are sourced in china. Is that a good idea . Do we need to move that around . People are trying to move that around a little bit. I think there is a hesitance to respond in a way over a 5, 10, restructuring your business when you dont know what the outcome to this trait situation will be. I think that is a big question. If we get some big agreement, is it enough to bring businesses back to the table in the short run . Tom Stephen Stanley with us from amherst pierpont. Much more to talk about. The secretary of state of the u. S. Says nato risks in extinction unless it adapts to reality. Interesting international relations. Raphael bostic later with Michael Mckee this is bloomberg. 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. Tom bloomberg surveillance. Markets flat. We say good morning from new york and london but lots going on on a friday. Your first word news. In new york city, heres viviana hurtado. President donald trump will not impose tariffs on european cars next week, according to European Commission president jeanclaude juncker. He told a german newspaper the president will ruffle a bit but there will not be any automobile tariffs. If mr. Trump carries out his threat, the eu has threatened to impose its own tariffs on american goods. A Senior State Department official says the message from the white house was clear. Ukraines new president needed to announce an investigation son. Joe bidens president also reportedly demanded a probe into a theory about ukraine supporting interference in the u. S. Elections. Last month, george cant testified kent testified. Americans are getting older before buying a home. The median age of firsttime homebuyers has increased to 33. According to the National Association of realtors, that is the oldest dating back to 1981. Higher property taxes and mountains of student debt are keeping some potential buyers out of the market. Global news 24 hours a day, onair and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine, tom . Tom thank you so much. Without on a friday we would not only look to the weekend and we look on china and trade and all thats going on. What about the events inside the beltway . That will be decidedly an presumed. T Emily Wilkins is a student of this. She is Bloomberg Government congressional reporter. Lets start with the parsing of the house and the senate. Am i right that the divide could not get any whiter in terms of the impeachment process . Right now, you are seeing the house go ahead, moving forward with this impeachment inquiry. The other week, you saw a vote taken on the process. You saw but 2 House Democrats support that vote. Lots of senators are holding back at the moment from opinion. G any sort of they are noting that they will be the jurors in this and therefore there just try to focus on the facts. Tom within that, other testimonies next week are the testimonies next week. Which testimony or nontestimony will you be most focused on . To be honest, i think all three of them are going to be particularly interesting. We heard a couple of minutes ago george kent, a state department deputy, that his transcript was released yesterday. Some very interesting stuff in there. He will be on wednesday along with ambassador bill taylor. They will both be giving public hearings. On friday, we will be hearing from former Ukrainian Ambassador marie yovanovitch. Interesting. She is the individual who was sort of forced out of her position and related very much to the concerns about ukraine and they are looking into potentially the bidens. Francine thank you so much. Emily wilkins there, Bloomberg Government congressional reporter. Still with us is Stephen Stanley of Amherst Pierpont Securities. Given what the u. S. Economy is looking at right now, the number of questions we have on what happens with manufacturing and labor market, how many insurance cuts does the American Economy actually need . Stephen we have already gotten three. I certainly do not think we need more than that. It is not clear to me that the economy even ever dipped to below trend growth. Percentgrowing at 2. 5 last year and in the first half of this year. Feels like may be a little above 2 for the second half of the year. I think the fed has taken an abundance of caution in Cutting Three times. At this point, i doubt we will see anything more from the fed on the easing side anytime soon. Francine what kind of dollar level are we looking at . If dollar strengthens from here, how much of a headache would that be for the fed . Stephen i think it depends on the pace and magnitude. As long as the dollar is gradually appreciating, the fed may not love that, given that they are trying to get inflation up and boost growth. Economyity is that our is just stronger than most of the major competitors around the world. Youink all else equal, would expect the dollar to be trending gently higher. Tom im glad you mentioned that, francine. As we pulled up the chart on the bloomberg dollar index, what is en doing one day versus euro. A lot of em in there as well. Stephen stanley, talk about dollar stability, this chart five range bound over four years. Raphael bostic will say that in two hours. Stephen you dont long the currency is moving around too much because it becomes disruptive. Yeah, i dont think the dollar has been a major factor. I think the dollar has been somewhat stronger over the last year or so and has probably contributed to the dragon manufacturing. The trade story i think is a big story. , theecon stanley 101 here president desires a weak at all costs, right . Is that a policy that make sense right now . Stephen not really. If the dollar is strong because the economy is strong, you know, he should be pretty happy about that. Tom exactly. First order, second order, third order condition. You are saying the trade war is the first order condition right now, right . Stephen yes, that in the fact that the u. S. Economy is simply doing better than most of our major competitors. That doesnt always drive currency process, but at the end of the day, that is one of the most important fundamentals. Tom very good. We will continue. Stephen stanley, Amherst Pierpont Securities with us early. Interesting set of discussions. David booth, you may not know that name. He has done better than good in institutional money management. Dimensional Fund Investors and joining him is his colleague, the laureate. This is bloomberg. Tom bloomberg surveillance. Francine lacqua in london. I am tom keene. It is actually a cauldron new york city today, cauldron new york city. New an inch a colder york city today, colder new york city. For scotland to speak now at lineup, what does a weekend of campaigning look like across the United Kingdom . Francine we have seen actually very similar messages from both the conservatives and the labour party. If you look at austerity, level of the pound, this is quite significant. We were just looking at the Scottish National Party Moments ago with Nicola Sturgeon launching her campaign. A lot of what the scots will say will be on brexit. If you look at the supply and demand agreement with the dup in the last government, we were talking with you at the s p could play similar wrote depending on how scotland votes. Do not underestimate the role that Nicola Sturgeon complained this. Tom a fracture was labour party is equivalent to our democratic party. Right now we need to go to a business flash in new york city. Heres viviana hurtado. Disney trying to ensure it will have tens of millions of online viewers for its new streaming service. The company reaching an agreement to put it on amazon, samsung, and lg devices. Next week, disney plus day beads. The swiss parent of cartier reporting halfyear earnings that missed estimates. Doubledigit sales slumped in hong kong, hurting richemont. They also set operating margins shrink because investments in ecommerce are sapping profitability. In france, Credit Agricoles thirdquarter earnings beating expectations. Bankes secondlargest benefited from record inflows at its Asset Management unit. Credit agricoles cfo discussing the impact of negative Interest Rates. I think that negative rates is much more a problem for the household, especially the household that tries to save a little money for their retirement and pensions. For banks, we are able to adapt to negative rates, as we did in the last quarter. We will continue to do so. Problem of negative rates is much more a global problem than a problem for financial institutions. Shares of Credit Agricole are up about 29 this year. The italian bank in sao paulo is focused on growing its Wealth Management business. Negative Interest Rates and the narrowing spread of italian bonds are driving increased investment. Earlier on surveillance, francine speaking with the ceo, carl mussina messina. We will have an increasing the speed of Wealth Management areas, because with the reduction of spread, b2b bund, we have a lot of italian clients, italian families coming back on Wealth Management. We are in a unique position to have this opportunity to grow. He also said it is hard for intesa to grow by acquisition outside italy. That is the Bloomberg Business flash. Tom, francine . Francine thank you so much. An interesting Business Model. First of all, he talked about one of the biggest investment banks, one of his peers actually, mediobanca. There was a huge change at the top of the shareholder and in terms of governments, he said this is not a bad thing. We will get back to some of the negative right impact on a lot of these european banks. Tom Deutsche Bank under seven euros per share today. Aey are having maybe relatively quiet week as well. The chart is so important, we will redux it from earlier and our. Stephen stanley with us from Amherst Pierpont Securities. I am going to go into it as a kind of charty kind of thing. The curve steepening, some enthusiasm there. Longterm flattening curve flattening on an economic slowdown. As 1, 2 standard deviations we have really exceeded previous moves up in a curve steepening here. An abrupt steepening here. What is the Second Derivative move that this acceleration and steepening continues . Stephen i think it tells you the fed has been successful for the timing. It signals a pause. If you looked at fed fund futures going into the meeting, markets still expecting the fed to ease at some point next year. So far at least, we have gotten some good data, some good news on trade. The markets have kinda of fallen into line with that. I think whereas for the last couple of years, the markets have been expecting easing and probably more aggressive easing then what the fed was signaling, now it seems like that might be starting to turn around. Tom on a symmetric basis, what will move this spread and every other spread out there is how the economy does. 12 months forward, what is your statistic on gdp . Stephen so i think i would say there is a couple of periods here. I think we will have a honeymoon period if we get a trade deal, maybe six months of really nice growth. I think around midyear next year, the election begins to consume people and it is kind of the same dynamic as you seen our businesses are like, i dont know. Tom give me a number, give me a number stephen i think we will be in the high 2s in the first half of next year and slowing down in second tom tom half. That is an outlier. Francine do you care about brexit . December 12 is when we will find out exactly what the u. K. Wants. Does brexit, if it doesnt go to plan, so if there is either a crashing out or Something Else, does it actually impact the World Economy . Stephen well, i certainly think it has an impact for europe and of course for the u. K. I think it is background noise for the u. S. At this point. U. S. Markets are still watching it. I think the one thing in the u. S. That people care most about is avoiding the hard brexit, as you said, the crashing out. It feels like the odds of that have diminished over time as we have continued to kick the ball down the road a couple of months at a time. With the election and then lets see what happens after that, it could become a bigger issue again i think. Francine we have not even talked about the price of oil. Is that something that you worry about, if there is a sudden spike up . Given what we have seen the last three months, which is spikes up but also kind of stuck in a range, it does not have that much of an impact on the markets anymore . Stephen it does feel like it is stuck in a ranger now. I dont have better insight in a range now. I dont have better insight. It seems like the World Oil Market is pretty well supplied. I think the u. S. Continues to ramp up production and that has taken away a lot of the market power that opec had in the past. That might speak to a more stable set of oil prices over time. Tom Stephen Stanley, thank you so much with amherst pierpont. So much to talk about. What you need to know, francine, this is very important this weekend. I am downloading every streaming service. I am going to be paying 400 per month. I am going to watch 47 movies this weekend. Peacock,flix, amazon, acquay , the loo per month. 14. 95 this is bloomberg. Francine this is bloomberg surveillance. Im Francine Lacqua here in london. Tom keene to radio. Blackstone has not lost their appetite for property ccording to a their cohead of real estate. She spoke to Erik Schatzker. K has been an amazing innovation in terms of real estate space and how Office Tenants expect to interface with landlords. I think the lasting thing about wework is the innovation and then nerve they had in terms of offering tenants flexibility and more of a sense of place. Bennett amenities, a sense of community. Almost all real estate landlords have had to respond to whats that done. I think that will be a permanent impact in terms of flexibility people seek in their leases on the quality of the space they are occupying. Erik so forget about the craziness of the valuation on the way up and the valuation on the way down. What they were selling and continue to sell is the real deal . Leaving the valuation aside, which is not something i need to comment on. Obviously, there have been a lot of people spending a lot of time thinking about it. I would say it is more the impact of, what does that tell us about what we can be doing to be better landlords and partners with our tenants . It means offering a sense of flexibility, a product that does not. Sometimes it is offering better amenities in the building. Erik does the implosion of their valuation and the constraints that imposes on Growth Prospects create opportunity for blackstone . I think it always potentially if theres dislocation, theres always opportunity. Wework as big as they were and are and probably will be is a relatively small place in the Overall Office market. Erik they are all about coworking. They were beginning to preach, among their other businesses, the virtues of coliving. Does coliving make sense to you . Kathleen i think coliving is really just trying to offer a product that allows people to live more affordably in really popular locations. I think what it shows is that there are probably people who are willing to make compromise on what is their personalized space in order to live in great locations. Francine that was blackstones Kathy Mccarthy speaking to Erik Schatzker Kathleen Mccarthy speaking to Erik Schatzker. Quarterly profit for disney topped estimates thing to strong numbers from blockbusters. Losses at the direct to consumer unit widens, reflecting the cost of the soon to launch Disney Streaming service. It is preparing to battle netflix. Disney also reach an agreement to put its new streaming service on amazon devices, ensuring it will have access to more online viewers at next weeks launch. Joining us now from princeton is geetha ranganathan, Bloomberg Intelligence u. S. Media analyst. Thank you for joining us. When you look at what is helping disney confidently deliver such good results, what would you point to . Geetha yes, thank you so much, francine. There was really a lot to like in yesterdays results. Disney not only consistently delivering on its traditional businesses. Theme parks stood out, studio was absolutely gangbusters. Operating income was up nearly 80 and we will see continued momentum with the frozen and star wars sequels. It was a streaming first mentality that kind of came throughout the call. As you mentioned, the amazon deal i think is going to be pivotal. Remember, amazon has about a 30 share of all streaming devices. Seemsmazon, roku, disney to be able to hit the ground running when disney comes out in the nex few days. Actually is disney going to be a netflix killer . Geetha there has been a lot of talk and debate about this. Yes, we kind of expected this racese two horse between netflix and disney but i think there is ample room for both services to drive. Netflix has advantages. It has a really broad appeal. It has a broad swath of content, but so does disney. Disney is anchored by some of the best in class brands. It has marvel, pixar, lucas. Yes, i think netflix does movert from a first advantage but disney will give netflix a run for its money. Francine where does apple tv plus fit in this picture . Geetha apple tv plus launched last week. It is interesting, because they are actually having this huge content investment. They recently said they are going to be spending about 6 billion in just their first year along. They are definitely willing to go all in when it comes to content investment. There content at launch was a little bit like. It was only about nine shows or so. I am not really sure how it will play out in the long term. I think we are going to see a little bit more elevated turn on the apple service. Francine what does this content mean . Is there too much content out there . At some point, will we see consolidation of some of these big players . Geetha i think that is definitely going to happen. We are headed for a streaming video shakeout, if you will. Disney is coming out next week. Next year, we are going to see the other 2 major media conglomerates, so at t and comcast nbc coming out with this product. There are a lot of other che players like discovery, via,. Im not sure everybody will be able to have a leading place in the streaming world. I think we will end up seeing consolidation among the smaller players. Francine thank you so much for the update. Geetha ranganathan thereof Bloomberg Intelligence. Coverrse, disney was the start of this weeks Bloomberg Businessweek magazine. I urge everyone to pick it up and read it. Dont forget, coming up on bloomberg tv and radio, the interview of the day, Raphael Bostic, atlanta fed president at 8 30 a. M. In new york, 1 30 p. M. In london. Michael mckee will be doing the interview. The focus will be on inflation. I know he will get a question or two also about trade. This is what market are doing. The rally is abating. It focuses on earnings. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Alix the everything rally. If there is a deal, china and the u. S. Will roll that tariffs. How much perfection is priced in . Safe haven carnage. Suffer bigtrades losses as investors price out fed cuts. And the economics of the south. Atlanta fed president Raphael Bostic joins us to talk wages and inequality. Welcome to bloomberg daybreak on this friday, november 8. Im alix steel. Just a quick check here. In the markets, we are seeing a little bit of a rally. Paring gains from yesterday. Just a pause in the reversal we have seen the last couple of days. Time now for the global exchange, where we bring you todays market moving news from all around the world, from hong kong to brussels, london and new york. We want to kick off with latest in china. Chinas trade
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