Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

European stocks are down a little bit, a lot of focuses on trade. A lot of focus on what happens next. We heard from donald trump saying hes not ready to roll back tariffs, some and we heard from his advisors last week. The focus is on alibaba as a litmus test of the strength of the chinese economy for a single day and the numbers are staggering. China approving new loans coming it 661 billion yuan. Pound at 1. 2805. We will be speaking to u. K. Chancellor, that interview was later today. Lets getntime straight to bloomberg first word news here in london. Spain has left more ungovernable than ever. Their leader now has fewer lawmakers than before, he now faces torturous negotiations to form a government. Australia is bracing for another week of devastating bushfires, flames in the eastern seaboard and even areas of great sydney are facing catastrophic threat. More people have died and than 150 homes destroyed as fires rip through areas hit by a two year drought. Chinas consumer inflation could hit a slight dissent in january according to economists. Cpi rose to a sevenyear high of 3. 8 in october due to soaring prices. Late january is expected to push the gauge up even further. South americas longestserving president has resigned. The bolivian leader announced his departure after election irregularities triggered weeks of violent clashes and an intervention from the armed forces and in his resignation speech he claimed to be a victim of a coup and implored for the International Community to intervene. 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. This is bloomberg. Francine bring tom. Francine,s get tom. The city of hong kong is grinding to a halt as local operator suspended lines, Bank Branches closed and universities canceled classes. Get to our editor who is in hong kong. What is the atmosphere like at the moment . Its very tense, we have mo only seen these big chaotic clashes on the weekend and today it came to the central part of the city right in the heart of the financial district where police fired tear gas after protesters were basically right in the central part of the city and had a flash mob rally. After there had been a shooting early this morning. There had been calls for general strike to shut down the city and that is now what is happening. There are still people in the streets, still riot police in the streets as well. It is been a chaotic day. What was supposed to be just a regular monday is a financial hold. Francine they were expected to hold a pressure shortly, presser shortly, what can she do . Its unclear. Weve heard from her on days like this in the past it hasnt seemed to satisfy protesters. She will likely call for calm and most people in the city want calm, but the two sides seem intractable at this point. We saw another weekend of violence and chaotic clashes after the first death of a protester had occurred. A student fell omitted Police Dispersal operation. That led to a flash mob rally is all over the city. Vandalism and increasing violence on the part of the police. Francine thanks so much. Lets talk trash trade talks now. President trump says talks with trade trade talks with china are going well. The president also calls reports about his willingness to roll back tariffs on incorrect. Incorrect. I havent agreed to anything. China would like to get some of a rollback. They know i wont do it, but they are getting we are getting along well. They want to make a deal a lot more than i do. Francine joining us is the investment director at Fidelity International. When you look at the goings and comings of trade tensions. We have a deal, we have a rollback, we dont have a deal, what exactly is priced in the markets . Do we get a rally if we get a deal . If there is no deal, given some challenges to a deal that have come up, you would expect some correction in the market, if you look at both risky assets but also what greater yields have been doing, it safe to say a lot of the moves we are seeing and have it we have seen high yields priced in. Have come out of easing of tensions on the trade front. So if there is a fall back on that front, there will be a pullback on risky assets. There is going to be some form of deal going into 2020. Both parties have an incentive to come to an agreement. Is it a tariff rollback . Does it benefit Certain Industries more than others . Depends on the details as always. Dealven just a phase one initial deal would be really good news. Obviously a rollback of tariffs will be even better news for markets, but as weve seen from this, a lot of this is still to be seen and decided. It will be a bumpy ride for the next few weeks and months. What do you worry about . Do you need to look at dollars. It seems like the moon mute mood music is shifting. Liquidity is something we look at very carefully and in cash in fixed income markets and in market more broadly. Investors today have to find the right balance between finding income, which is missing on the departments and the risk they are taking for the incumbent and in certain areas we have we obviously want to make sure we get compensated for those risks. And that makes compared to the past, we are starting to see that the markets are moving in different directions. We get some dispersion. This allows us to price risk better compared to a year or two ago. Francine thanks so much. Coming up we will get an update on u. K. Gdp and bring that number as it breaks, plus a little bit later we will speak to the chancellor, dont miss that interview. This is bloomberg. Francine this is bloomberg surveillance. Alibabas singles day promotion resolved with fine start. More than 16 billion in purchases in less than 19 been 90 minutes. Customers are expected to swarm the ecommerce giant site to scoop up everything from iphones and refrigerators. Selena has the details. This is alibaba plus 11th annual shopping bonanza. Investors see these blowout numbers as an important indicator of alibaba is a company as well as the health of Consumer Sentiment in the country. So far the strong numbers combined with alibabas betterthanexpected earnings underscore the resilience of the Consumer Sector in china. Alibaba has been able to outpace the overall Consumer Sector growth in china by expanding its lower tier cities as well as investing in adjacent markets. There was a lot of concern leading up to the event that there could be some boycotting of u. S. Goods as a result of souring u. S. China trade tensions, but the numbers dont show any evidence of that. The u. S. Is one of the top markets selling into china on singles day with brands like apples some of the top sellers on the day. At alibaba headquarters, im selina wang, Bloomberg Television. Francine lets get back to andre. I dont know how much of the focus should be on singles day as a litmus test of the strength of the economy. Or whether we look at some of the factory workers and some of the things china belt. There are two things you can gather from the data points from china. The single day clearly shows that domestic demand part of the equations of the chinese economys concern, its clearly growing. There are going to be nonchinese buyers there, but the majority of those 16 billion are coming from domestic consumers. Thats the good news for us and towards a moreft demand driven economy in china. On the other hand you also see ppi that has come out weaker than expected and this is another evidence of the fact that the chinese Manufacturing Sector continues to operate but wraps that satisfy some of the Strong Demand coming from the consumers and a lot will depend Going Forward on how obvious of the trade tensions shape up and what the impact will be. Francine do you worry about that in china . We are not too concerned about that. There are pockets in the market carefullyhave to look at what you are buying or what kind of companies you are lending to. From a debt standpoint however, its important to note the authorities are very aware of not wanting to have a bubble in any area of the economy. Weve seen last year the shadow Banking Sector being deflated by expecthorities and we that careful management to continue. Have a great chart which looks at Online Retail and impact on singles day and how they are growing. Does that mean its a more mature economy which is a different economy . I would say its a sign it is and even its evolving if halep other locate allocation we continue to Favor Companies that you have an advantage in terms of exposure to the domestic sector, those that have a combination of physical and Online Presence are doing better or in a better position. Francine if you come out with earnings but dont have exposure to china, is that a good or bad thing . I would say today it depends on which sector. Today some areas of the sector you probably dont want to be exposed because of the headwinds we are seeing on the trade front and the uncertainty around global growth. Continuedly, services to be a bright spot across the economy and its something of the sectors we continue to favor. Francine thanks so much. Coming up, oil retreated from a sevenweek high. Aggressor in mixed signals on trade talks. This is bloomberg. Francine this is bloomberg surveillance. We are getting a bit of breaking news. Police in hong kong are updating reporters on what happened. Hong kong seeing one of the most violent days of protests, we saw clashes involving protesters indowntime paralyzed downtown. Hong kong police confirming three live rounds have been fired today. We will bring you the latest, especially on the two men that have been severely injured. Lets focus on the worlds most important commodity. Wti crude oil is retreating from a sevenweek high. That is perspective contains a forecast the Global Oil Demand may peak within the next 20 years. Joining us now is the founder and president of Rapidan Energy group. Aroundou for sticking and welcome to surveillance. Peak oil, 2035, is that expected . Weve always heard its around the 30s or 2040. Is. I think aramco is just citing the consensus. If you look at the agencies, they see a leveling off between 2030 and 2040. So i think they are playing a pretty safe i think. And not picking a fight with the consensus that says due to rapid mass takeup of electric vehicles, oil demand and total oil demand will start to level off in about 15 years. Francine so what is moving the price at the moment . Is it some of these predictions or is it just the fact that the trade war will decide whether we will be in a recession or not . In my view its largely trade war. There is uncertainty about when President Trump and president xi will meet to sign this many trade deal. The killings in hong kong are also the shootings in hong kong are also a concern. Day today i think its the trade deal. Also looking into early next year and seeing and oversupplied market and there are questions about whether opec will rise to the challenge. The minister said no need to cut , but if you look at the first half i think folks are seeing some oversupply and that may be playing a role as well. Francine how important is it that no matter where you do work which is fixed income for you but it could be equity for others, you get the price right or the range right. Its very important for various reasons. Share companies are a big of the market in the United States. So we have seen in the past wherever theres been in oil slump, the pickup and defaults and volatilities in the market and so its very important bear well bellwether for us. The second is inflation, leading from a macro standpoint, Inflation Expectations, do take their cues from the commodity from the commodities as well and inflationthis point, expectations are pretty low. When you think about fiveyear Inflation Expectations now with around 1. 61 1. 6 or 1. 7. At the time, we know inflation in the u. S. Continues to rise. Francine bob, what have we learned about the oil price with oil markets in the last eight months. The fact that saudi aramco now acknowledges Climate Change is it significant or that the russia saudi accord is or that saudi aramco after this got on its feet . I think that was the important thing. The quick recovery from the attacks. I think that was due to the fact the iranians chose to inflict light and reversible damage. We wanted to demonstrate their capabilities and send a signal. There is a concern they could revisit and do more damage. In terms of dodging a bullet, but a cannonball, the Global Economy did that on september 14. Francine where does this peak first . They had some interesting things about when it peaks. I dont see a peak any time soon. I think the idea that oil demand will peak soon is itself going to peak. Look at chinese ev sales. Thats after 34 down in september. China is cutting subsidies, President Trump is about to ease the United States. China and the United States were supposed to march us into this world. I think its wishful thinking. I think demand for oil will be a lot stronger. Francine 2035 is nearterm . Ori dont see a peak in 2035 2040. Lithium battery ev i dont think will be able to stand a peak in demand at that point. We look more at core. Arguably an aspect we need to think about when it comes to ev is if governments for example start switching fiscal policy in a very targeted way targeting specific sectors, targeting specific areas, we may see some money being put to work to stimulate don oil like demand. Thats perhaps a question we will need to look at. Does a war and presidency mean for oil demand . Stop will not be able to the raging thirst for oil and transportation. However, it is a disaster for u. S. Oil and Gas Companies that will try to meet that demand. Almost anyt democrat will ban new drilling on federal lands onshore and offshore and by interfering with permitting for midstream and exports, make life difficult. I dont think she will ban fracking altogether, but it will be a bad today. Francine thank you so much, bob mcnally. We will be back. Francine violence escalates in hong kong, where protesters were shot by police, and a man set on fire is in Critical Condition. The city grinds to a halt during the unrest. Spains socialists lose a seat as an election gamble but Pedro Sanchez fails to payspains off. And saudi aramcos ipo perspective says oil demand 2025, whicht in does leave crucial questions unanswered. Good afternoon if you are watching from asia, this is bloomberg surveillance. I am Francine Lacqua in london. Judy d figures falling 0. 1 in september gdp figures. The estimate was . 03 judy perc. Lets get back to Andrea Iannelli from Fidelity International. Andrea, i dont know if this has a correlation to what we are seeing on december 12. Andrea ultimately, the is much moregilts driven by politics than growth or fundamentals. Looking at it in terms of the december 12 election and the brexit, arguably, you have seen an improvement in the backdrop and Political Risk in the u. K. Have reacted accordingly, and we think in general, they have more room to go. As far as gilts are concerned, we have reduced our exposure to gilts in the last month or so because of the lower need of a safe haven in an environment where arguably the probability of the Nodeal Brexit has fallen quite a lot. Francine thank you so much, Andrea Iannelli. He stays with us. Lets switch and focus on what could be the biggest ipo ever. Saudi aramco is to allow investors to start reading for shares in the worlds most profitable company. Bust potential buyers have been left in the dark on plans that the saudi government plans to sell on a certain range. Mark carney is that the abu exhibition and has a special guest for us manus cranny. Manus my guest is the vicechairman. Good to see you. A couple of weeks of the summer are going to be crunch. We have opecs, and the pricing of the ipo. Guest and we will also have the madrid,vate meeting in where they may or may not have a government. And on top of that, you have brexit going on. But for oil and energy, it will be an important time. Manus how important is it that opec must really governor rises in terms of the cuts they are doing . Do they need more cuts . Guest the view going into it is that they need the countries are above the levels getting back down to their levels. That will. Fortify it. Going into the ipo, they would like to have a price that is showing promise. The cuts of have 1. 2 Million Barrels a day, and supply gets better, what does that do to the valuation . 1. 5 trillion on this ipo. Dan this wide range, i think right now we are and that we are in not period of eliciting as people are making assessments. That is the recognized that was saudi aramco comes out and lists, it will be a unique asset. There will be nothing like saudi aramco in the world. Manus what does it do to the oil market . We go from private to public. What is the biggest consequence . Villagesink it and what aramco is, how it works it acknowledges what aramco is, how it works. This year scale of it, when that became apparent, people still apparent, people still did a double take. I think that is what will be in the mind of investors. Manus in you Commodity Exchange and a new contract. What is that going to do to a brent crude . Dan i think it will challenge brent. It has a lot of firepower behind it. It represents a varied set of opinions. To be a bigs going effort, and i think it will make remember, the Growth Markets of the future are in the east. Manus you said that brent contracts would fade. Dan because the volumes of behind it are fading. I have to say, in our numbers, by nexty struck year and after we are seeing a tapering down of shale. The growth coming from . Brazil, the north sea, which is having a rejuvenation, coming. Rom canada, and from guayana see one million see barrels of nonopec oil coming from these other countries. More on that next. This is bloomberg. Francine this is bloomberg surveillance,i am Francine Lacqua here in london. Lets get to the first word news. Good morning. Alibabas singles day promotion alibabas singles day promotion is off to a flying start. The shopping bonanza saw 16 billion of purchases in less than 19 minutes, equivalent to more than last years record haul for a 24 hour event. An estimated half a billion shoppers are expected to storm the ecommerce giants website. Global oil demand could peak within the next 20 years, according to an assessment in the prospectus for saudi aramcos ipo. The forecast comes from consultants who see demand peaking in 2035. Saudi officials had previously dismissed the notion as overblown. Tagram is getting likes ditching likes for some users, in an attempt to remove social, pressure following similar experiments in other countries. Speaking exclusively to bloomberg. Breaking up big turk Instagram Ceo said it would impact user safety. I dont think it is likely. It is certainly a possibility. I think it would be really bad forbreaking up big instagram. I think it would make it difficult for us to keep people safe, to build and innovate, since a lot of the work we are doing on instagram shopping is built on the infrastructure built through facebook the last few years. You have to take these types of things seriously, so we do. Japans disaster struck investing 2. 75 billion in both wind and solar farms on Agricultural Land tainted by radiation from the 2011 at nuclear meltdown. The project is scheduled for completion in 2024, but the first solar form is expected to start in january. That is the Bloomberg Business flash now an update from spain. A gamble by acting Prime Minister Pedro Sanchez looks to have backfired, with yesterdays election returning fewer seats for his socialist party. The early poll, six months after the last one, also saw a wipeout. Of that leads to the path of the Spanish Government again looking to uncertainty. Maria, this hasnt really ended the deadlock. What happens next . Maria good morning. It hasnt ended the deadlock, and this is supposed to be the election, the fourth in four years, that would do just about. That was the only reason it was called, to come up with a stable majority. He won the election, but he lost seats. Crucially, there is no obvious way to form a government. Perhaps we are headed to a grand coalition, but the leader of the coalition, the pp, appears to be ruling that out today. The question is economically, how much damage is this doing to the spanish economy . We know that there was a spectacular rebound after the theis, but when you look at new indicators, you do see that steam. Ntry is losing that is quite frankly because the government is unable to approve any legislation. There hasnt been any meaningful reforms in the country for the past four years, and we have not had a budget in two years because the government is not able to do anything. The election yesterday does not do anything, and if anything, it makes things worse for the spanish Prime Minister maria tadeo in madrid, thank you. We stay in spain. Joining us from madrid is closing one of the about us closing one of adverse joining us is jose manuel albarres. How will the Prime Minister negotiates a coalition . Guest he had a clear victory. The fourth victory in the last four elections, two general elections, a local election, and the european election. The spaniards have clearly said they want Pedro Sanchez and the socialist party in front of the government. But he will need to the support of all the constitutional forces, so it is up to pp and to podemos. All will have to unblock this situation to move forward. Francine i dont know if this is a winner, this is something that has backfired against mr. Sanchez. Was kind of government can come out of this election if any . Guest backfire probably is not the word. The spaniards have spoken, and they are the ones of that have to decide which majority they want. They have pointed very clearly was again to mr. Sanchez, and the socialist party. This is the fourth time since april. At the same time, there is a new threat. We had the separatist, and now to the this extreme pull extreme right. Nothing solid can come out of those forces. We will need a socialist government but we will need a partner in everyday legislation and in order to get a budget, and these must come from those the say that support constitution. So far that is pp, ciudadanos, and podemos. It is out of a conversation among all those forces that the majority, or that support in the Parliament Must come from, very clearly. Francine what kind of concessions are the socialist actually ready to do to put on possible to form a correlation . Who is a bama what is clear is that Pedro Sanchez has proven that he knows how to engage on a dialogue. Yesterday he said he would act with responsibility and generosity. It is very early to say what he is going to do or how he is going to go, but he sent the message yesterday, generosity and responsibility. We are waiting for all other forces, the other forces, to talk in the same way, then we will see in the next few days how things evolve. Francine would you will out a new vote . Was a fish i think it is not jose i think it is not what the country needs. We must avoid that. A new vote again . What the country needs is not a new vote. What the country needs is sustainable of government that sustainable government, new legislation, and a new vote. If anyone is thinking about a new vote, it is because he or she doesnt really care about spain. Francine thank you, Foreign Affairs advisor to Pedro Sanchez, thank you so much to speaking to bloomberg. Lets get back to Andrea Iannelli from Fidelity International. What does that mean for european bonds, more specifically, spanish bonds . Andrea they have an upanddown movement over the last year or so, but they actually trade , relatively low level of yields compared to german bunds. Doesnt fact that spain have a government impact spanish assets . Recent experience tells us that perhaps, no. But over the last three years, the lack of government in spain has happened at a time where spanish growth was actually very strong. Your colleaguem from madrid, we are now starting to see a little bit of tapering growth in this tapering of growth in spain. That can have an impact on spanish assets. Here. Y have to be careful francine is there anything that the ecb and Christine Lagarde can do . Andrea the warm blanket of the qe will not necessarily prevent volatility from taking place in the market, the it in ancient, or italy, or any other european bond market be in spain, italy, or any other bond market. Comfort, but it does not mean that there are assets willreferral be immune to what happens imagery. Because if you look at the volume of ecb purchases, 20 billion per month, it is not a lot. Scheme ofnd things, it is a cushion, but not a very big one at the moment. Francine Andrea Iannelli from Fidelity International stays with us. Coming up, we also speak to the chancellor of the exchequer here in the u k. Dont miss the interview later today. Up next, final thoughts on fixed income with andrea. This is bloomberg. What i was commenting on is that anything that vilifies people, i just dont like. I think most people are good, them. L of we should vilify nazis, but we should not vilify people who have worked hard. She said the system is working for the wealthy and wellconnected, and jamie dimon, she brings you up, doesnt want that to change. I am not going to comment on anyone in particular. She is commenting on you. You have become a target, whether you want to respond to it or not. You are her target and you are alexandria Ocasio Cortezs target. That understand the person in this seat will be the target of politicians. But the notion that i am not a patriot, that is just dead wrong. My view is, lets all work together. I dont mind if you barbs thrown my way by anybody. You are tough. I am not that tough, but theres nothing i can do about it. Francine that was jamie dimon, jp morgan ceo speaking about elizabeth warrens comments about the mayors. Let us get the final thoughts from Andrea Iannelli. You put a great outlook when it comes to fixed income. It is very well written, congratulations. Simply put, what do you like at the moment . Emerging markets and your look attractive . Andrea yes. Emerging market debt is an area we continue to like. Yes, it is more volatile than other Asset Classes, that at least you get paid for the risk taking. In general in the credit space, we do prefer european credit as credit. Asia , in europe, there are very good fundamentals and a little deposits that need to find a home into something that gives depositors income. In asia, valuations are better attractive, and we do expect further support from chinese authorities in the form of fiscal and Monetary Policy support. One area where perhaps there isnt a lot of focus on investors as an opportunity is perhaps, inflation. Inflation as an asset class has kind of become a bad word. People have tried to pick the bottom of the inflation market loss. While and at a but arguably, some areas of the market, in the u. S. In particular, are underpriced. Inflation expectations are too low, if you take into account core inflation is going to 2. 5 in the u. S. By next year, and the market in the next year has an average extradition of around 1. 7. The gap has really in this wide. Francine what will happen to treasuries . Andrea we are already seeing some backup in treasury yields. We have reduced our exposure at the margin. Although, i would say that with the fed being the only central bank on the developed markets that has room to cut rates, treasuries remain the safe haven by definition, it is an asset class that we continue to favor, and government bonds compared to there. Overnment on out especially in europe, where yields are very low and kurds are probably going to steepen. Francine emerging markets are not all the same and curves are probably going to steepen. Francine emerging markets are not all the same. Andrea we do like the countries that have where we have a really high level of yield, highyield emerging market debt has actually become much more attractive today than it was earlier in the year. In the corporate space, we do like the companies that have stronger Balance Sheets, where there is some value. Although today, we prefer government bonds in dollars in emerging markets because at least you also get exposure to u. S. Rates. Emerging markets, 45 central cuts we have had 45 rate s by Central Banks in emerging markets this year alone. That is something that will continue to provide support to put lowery and funding costs for issuers. Francine Andrea Iannelli, Fidelity International investment director. Tom keene agents may out of new york joins me out of new york. We will also ask our next guest about yields, and the gdp figures in the u. K. Comingout moments ago. We also look at hong kong, we are expecting it to turn around shortly. This is bloomberg. Francine violence escalates in hong kong with protesters shot firelice and demand set on in Critical Condition. Deadlock in madrid, spains socialist seats as an election gamble fails to pay off. In demands could top out 2035. The document leaves crucial questions unanswered. Good afternoon, good evening, good morning. Francine lacqua in london. Tom keene in new york. We have a lot to talk about. With focus on hong kong, the unrest, what is going on with the fed in the u. S. And brexit. Tom a lot of International Relations. In have the almost coup bolivia, not a coup according to mr. Morales. Hong kong front and center. Francine carrie lam will speak shortly. Inice have fired tear gas the citys central area. Police are investigating reports that a man was set on fire in the northeastern area of the city. We are joined by bloombergs Greater China government editor. Ground . Happening on the is this city in complete lockdown . This city is in a fair bit of chaos. This is one of the most violent ins since protests began june. Police firing live rounds at protesters with one person shot. That is something that came after a weekend that saw dozens arrested as these protests kicked off after a student died near a protest last week. Images, teararring gas canisters littering the Central Business district near our office. You often dont see that. Protesters right in the Financial Hub. An unidentified man was set on fire. That video is making the rounds. We are seeing these graphic images and seeing this taking place in places we have not seen before. It does feel like a bit of a new chapter and like these are kicking off in ways we have not seen in a few weeks. Is expectedrrie lam to hold a presser shortly. Can she do anything to call tensions . She often comes out when we had these very intense days of violence, and she tries to urge calm. Occasionally she makes some sort of policy announcement. We dont know what we are expecting her to say. She usually comes out and urges calm, and things tend to go on the way they have. Not sure what to expect. Everyone in the city is waiting to see what she says and what happens tonight, especially people out of on the streets trying to get home. Tom we will continue to monitor we willam speaking, and have the english headlines. Nothing coming out as of yet. Videos is notthe tens of thousands of people, not hundreds of thousands of people. Do the people of hong kong, are they linked to these protesters, or are they evermore separate . This is a city that is really close together. It is so dense. When Something Like this happens in the center across College Campuses like we have seen today, it cannot help but resonate widely. There are Service Disruptions to transportation. A lot of people know people who are involved. It is difficult to find distance from it on a day like this. When you go through the city on the way home, there are areas where it seems like things are normal, and at the same time there is this theory feeling hovering over it. Eerie feeling hovering over it. It is becoming increasingly difficult to get away from it. Francine thank you very much. You can follow anything that , speaking is saying to the press and the people gathered there in hong kong, through the bloomberg terminal. Good morning. Here in the u k, Boris Johnsons conservative party has switched the focus on the Election Campaign to the economy. Conservatives estimate the cost of the labour Party Spending plans at 1. 5 trillion over the next five years. The chancellor says that would plunge the u. K. Into economic crisis. The former u. S. Ambassador to. N. Says they would resist the president , trying to save the country. That is according to her new book. In bolivia, president evo morales has resigned after the army told its support. Election irregularities had triggered weeks of violent clashes. Had been in office for almost 14 years. He called himself the victim of a coup. 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. Much. Hank you so out of hong kong, we are starting to get headlines. They are of a different tone decidedly. Could beays hong kong led to a point of no return. Many are wondering if hong kong is still safe. I think most importantly, at the beginning of her headlines, on a digital basis, she says online calls for strike leads to chaos today. 60 injured in todays clashes. On the data front, lets look at it right now. Pretty stable data all in all. Futureswith a pullback, negative. Spread widening over the last 48 trading hours. The close on friday, 3800, rounded up. Gold cells. Sells. Francine stocks in europe are sliding. Traders waiting for developments on the trade front. Risk off mood. Im looking at gold climbing. Chart,ts look at the the threemonth and the tens. All of the curve flattening over the years, abrupt hockey stick move up, and it extends over the next three or four or five days. Is it escape velocity . Francine escape velocity, you sound like a central banker. I am looking at china Online Retail transactions. I think this chart is significant. I dont know whether it goes to the maturity of the china market when it comes to retail or something else, if you look at Online Retail transactions, they are going to to three times the pace of overall sales in china. Lets get straight to john longterm Capital Market assumptions, we looked at how to calculate the neutral rate of interest in real terms in china. We would argue at the moment that Interest Rates in china are , if anything, slightly below where it would be natural to see that come in. We gradually see the economy moving to more open markets. That would present a slight bit of upward pressure. On the other side, only 2 of Chinese Government bonds are held by nonchinese investors, which means the demand coming through will present quite a significant block of demand, which will hold Interest Rates lower. We have to allow for the fact that you can calculate where china should be in theoretical terms, but perhaps bigger, china playing a greater role in world Financial Markets as well as the economy and supplydemand dynamic. Are i love that statistic 98 of bonds inside the domestic economy in china. We have seen president xi enumerate the need for a stronger communist party. Does that infiltrate through all of chinese society, or is that verbiage from beijing directed towards the west . Judge the you cannot Chinese Communist party on the. Ormal market whatever he has promised back to speecht famous davos that he wants to implement those reforms. We have a lot of nice rhetoric when it comes to implementation, it is hard to translate on the ground. Tom very good. We will continue. Much going on this morning. True International Relations with bolivia, spain, and what we see in hong kong. Right now speaking in hong kong is ms. Lam, a decidedly different tone than we have heard before. Stopping violence is a priority. Lets listen in in english. Causing major bodily harm to two individuals. They are still in Critical Condition in hospitals. One is the outcome of an open in thecident by Police Course of enforcement operations, the other is a very malicious case of setting an individual on fire in front of many witnesses. This is a blatant breach of peace and the rule of law and is a totally inhumane act that nobody should condone. The third point i want to make is there have been, from time to time, malicious rumors being circulated on social media. I suspect they are motivated by some intentions. The government will spend no time in clarifying those speculations and rumors in order to avoid disorderly incidents from happening. Finally, i want to appeal francine this is bloomberg surveillance. Tom and francine from london and new york. Alibaba singles day got off to a roaring start. More than 16 billion in purchases in less than 90 minutes. An estimated half a billion customers are estimate it to swarm the ecommerce giants site. Eugene, when you look at how much the chinese are consuming and what they are consuming, does this give us a real indication that the chinese economy is changing at a faster pace . I think very much so. They are divided into two categories. One is perishable and the other is nonperishable. In the first five years, they are mostly western brands with big names. Now the chinese consumers are gradually acquiring a taste for more chinese products. It tells you when it comes to the domestic Chinese Market competition, european and american these are facing tough competition from their chinese counterparts. That would certainly help on the trade war and certainly if we are talking about what is the best way to handle the highs and lows of the trade war, it is strengthening chinas domestic economy. Tom do we know the accountability of these Chinese Companies . Do we have confidence in their accounting . I think we have to take what we see in terms of multiple data sources in any economy to be fair. One of the reasons for watching this kind of data set is the validation of longterm trends, and we see an economy that is opening up. Financial market transparency is important for any advanced economy. What we are looking at more broadly when we look at the chinese consumer, we have a country that is shifting its focus to the consumer. We are looking at one of the consumer groups on the planet with one of the highest levels of savings. We have an economy that has a high ecommerce penetration. Years u. S. , the last 20 has seen ecommerce sales outstripped samestore retail sales by nine full. We have an economy with a latent consumer where ecommerce is well entrenched. Variety of put a pieces of data together to validate how the chinese economy is developing and what the Consumer Trends are. Consumer of the modern china, they have a social safety net . It depends on which category you look at. If you are talking about the urban pension provision in china, you have around 76 of urban dwellers who have the state pension. That offers you a standard disposable income. The chinese urban dwellers will be able to consume certain things. When it comes to the rural area, the picture is more met. When it comes to talking about chinas consumer, we have to talk about what age group and whether they live in the rural part of china for the east coast. It is a mixed picture. We cannot say it is one china and one china consumer. They are different categories. Francine thank you very much. You will stay with us. Coming up, we speak to the u. K. Chancellor of the exchequer coming up later today. This is bloomberg. Tom good morning. Bloomberg surveillance. Francine lacqua in london. Im tom keene in new york. Once again, as they trot out a 20 or 30 or 40 page paper, and anothery goes, i know, 20 or 30 page paper, all of interesting merit, and buried in the middle is a longterm view on the foundations, the bricks and mortar, the concrete under the building of how we invest. 40 is the idea of 60 and or maybe even a little cash. To the old formulas work . Thanks. It is 114 pages as it happens. Tom i only got through 40, sorry. And you are still here, great. We think about balance investing. This is clearly in a u. S. Context. The reason we raised the question is we are pretty late in the Economic Cycle, whichever way you cut it. There are returns in absolute terms that are lower than we would hope. Maybe 5. 6 . Over the last 25 years, we have gotten maybe 10 returns for that asset class. We are pushing out along the risk curve, pushing out towards emerging markets and private assets. Of interest point rates is so low that if you want to build in a bond peace, you have an uphill battle. The bond is a tool in your toolbox. It was providing safety and income. Now it is providing you safety, but if you are hoping a negative yielding bond is quick to give you income, forget about it. Cine tom the Dividend Growth is equivalent to yields. Discuss that. Think ultimately what we are seeing is a breaking down of some of the prior assumptions that we have. Some of the other assumptions are that we should have a top positive risk premium. Qe. As been negative since with such huge demand for bonds, aging population, and some regulatory pressure to hold bonds that has increased since the financial crisis and much less inflation, should that assumption hold as well . When we look at this, we are trying to compare those old rules of thumb and how well they apply in the future. When you look at levels of growth and the justified levels of Interest Rates, we are not able to manufacture reasonable returns for bonds over the long haul. As a result, we are looking more at cash, currency, real assets. Francine thank you very much. John bolton stays with us. Coming up, the spanish Prime Ministers socialist party loses seats. That further weakens his power. When it comes to using data, everyone is different. Which is why Xfinity Mobile is a different kind of Wireless Network that lets you design your own data. Choose unlimited, shared data, or mix lines of each and switch any line, anytime. Giving you more choice and control compared to other top wireless carriers. Save up to 400 a year when you switch. Plus, get 50 off when you buy any new lg phone. Xfinity mobile. Click, call or visit a store today. Francine this is bloomberg surveillance. Tom and francine from london and new york. Unrest intensifies in hong kong. Police have fired tear gas. We just heard from hong kong leader carrie lam. Demonstrator shot, another man set on fire, and tear gas launched through luxury shopping malls. Mann. Phone now is yvonne is this a turning point for carrie lam . Is certainly has reached another level of violence we have seen from both sides this morning. The chief executive is still speaking at this press conference right now. For a couple of weeks, we have heard from her urging protesters to remain calm and rational. At this point she still has not offered any solutions. Thesays at this point, violence has to stop before we can move forward. That is the priority of the government. She mentioned these protests could lead hong kong to a point of no return. We have seen the violence escalate this morning when a Police Officer shot a protester point blank. That triggered a flash mob by noon, which happened territory wide. In a separate incident, a shocking video has been spreading on social media of a man being doused with petrol and lit on fire after the man was arguing with protesters. There are fears that things could get worse. Thrilled to have you with us this morning. I want you to talk about the change in the relationship between protests to greater hong kong society. The protests are different now threewo months ago, months ago. I dont see thousands of people. I dont see hundreds of thousands of people. Are these protesters different from the rest of hong kong . You could say they are. These are the radical ones that have come through on the streets. We see some peaceful protests. The divergence of the more radical ones that are doing things like throwing molotov cocktails into subway cars, which we saw this morning. Actionsam mentioned the of these rioters goes far beyond the demands that this movement was hoping for in the first place. Now they are saying that they are treating citizens as enemies. There are a lot of rumors going on. The chief executive urging the community not to believe everything they see on social media. This has certainly seen both sides at an extreme we have not seen in weeks. Francine thank you very much. We are keeping an eye on what the president of china will say. He is speaking in athens on a european tour. We will have more from the protests and continued to keep an eye on those people in Critical Condition in hong kong. Lets get straight to bloomberg first word news in london. In the u. S. , house them democrats will let testify. Esses there are at least two people on the republican lists who will not be invited, joe bidens son hunter and the whistleblower. Global Oil Demand May Peak within the next 20 years. Assessment after saudi aramcos ipo. Want some time with santa claus in london . You will need to spend at least 2500 shopping according to the guardian. The Christmas Grotto is a perk awardsr the stores customers. 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, francine. Francine thank you so much. Lets get an update from spain. A gamble by the spanish Prime Minister seems to have backfired after losing seats for his socialist party. A virtual wipeout of one potential coalition partner. That leaves a path to a stable Spanish Government looking less certain. Over to madrid. Good morning. It is the fourth election in four years that has only not ended the deadlock but has made things worse. I am joined by the Economic Advisor for the party that came in second. The question is how likely do we see a coalition from the socialists, the winners, and your party. It is very difficult right now. The conservative Party Presented 11 points of an agreement in the previous elections, and those were rejected by the socialist party. We need to see a lot more because the reality of these elections is the socialist party has lost seats in parliament and the senate. The parliament is more divided, and the government is more difficult right now than it was in april. A grand coalition . It is very difficult. The concept of a grand coalition, if we think of it the , iswe have seen in germany extremely unlikely with mr. Sanchez and the economic program. The program that has been presented, there are many different options that can happen in the process. The Prime Minister failed at this election. If he resigns, can we do a grand coalition . Obviously the Prime Minister went into the elections thinking or at least with a strategy of increasing seats, getting a stronger majority, and being able to gain a foothold with a larger majority for his program. That has not happened. It is exactly the opposite. We see now that parliament is more divided, you have the inreme left and right different areas, and at the same time, we have the nationalists. It is extremely confident desk obligated even if you make the different combinations of possible paths. I think he really needs to go to the citizens of the country and say, this has been a failure of strategy, and we need to think of the country and the best in an environment in which the economy is not growing as expected, and we need to do more. It is obvious that the country is in a mess. There is no other way to put it. What about a new election . Does this only get solved with another election . I dont think that is a good option. I think it is not something that spain can afford to go out and say we are going to go to another election because, at the end of the day, judging by the results, it would be even worse and probably an even more divided parliament if they do it that way. I think what needs to happen right now is that the party that elections, the socialist party, and the Prime Minister goes to parliament, offers a Solid Program and says to the people that there is going to be a solution. The country feels incredibly polarized. You really sense that in the streets talking to people. Do you think we are seeing the failure of the institutions . Not the failure of the institutions. The institutions have worked very well. I think there has been a very aggressive tactic from the socialist party to try to divide society further by bringing issues that were long forgotten in the memory. Like franco. So many others. The issue in catalonia, the way the catalonia situation has been managed by government, the way all those things have created a lot of tension. What we need to do is forget about all of those things. We need to forget about the past. We need to think about the future and the best for the country. Thank you very much. This is what spain looks like this morning. It is difficult to see where we go from here. There is a lot of political fragmentation. Tom to say the least. You have a visceral understanding of this. Party, thevox conservatives, the nationalists, some would say hearkening to franco, they doubled their vote. Is that a characterization of spain, reaching back to the time of franco . Im not sure if we would say the time of franco. Ghosts the fact that from the past did play a role in vox comingn, but the third means the spanish people have not forgotten the catalan crisis. It is crucial to have a party that guarantees the unity of the country. Portray that you are here to keep the country together, that clearly pays off in the election. Tom thank you very much. Terrific reporting today from madrid. The Peoples Party did better than some of the smaller parties. Observing all this is john bolton from jp morgan asset management. Is populism good . The theory in school is that populism reinvigorates, creative destruction, but is populism good for gdp and Revenue Growth . I think you have got to turn it around and ask what is being created by the rise of populist fringes . That is just greater political uncertainty. What it serves to do is create baseline behind Politics Around the globe, which suggests something much harder to predict fragmentedhave more political leadership, often some of the more extreme angles that certain parties might take are harder to push through if you are unable to form a majority. Lets not lose sight of the fact that what markets and economies are responding to is not what is going on generally in the political sphere, but what is going on in the economic sphere. We have much higher levels of political uncertainty. 1 6 ofstill at 113, where it was at the time of the crisis. We have extremely low Interest Rates. After having had some fairly weak data from the industrial sector, something that has not picked up in factory orders in europe, we are starting to see things begin to stabilize. Markets are not really looking at politics and saying this is the beall and endall of where returns should come from. They are looking at the broader environment, which i think is going to create daytoday gyrations, but it is still the outlook for growth and Interest Rates that will set where markets go. Francine do you find any value in some of the european stocks or fixed income . It is very hard to look at a negative yield in bonds and say i would love to own this for the next 10 years. This for the next 10 years. The reality is perhaps when we get a little more risk off sentiment and headline risk around the globe, bonds will work on days like that. They are still negatively correlated to stocks. In terms of creating dynamic insurance for your poor olio, they do a good job, but they will not give you income. We have slightly downgraded our 2 trendrom 1. 5 to growth, equities are only down a touch. We are seeing forward earnings, forward margins looking relatively unstable. You are still getting around 5 to 6 for most of the countries. As we look at europe more and more, as you are placing a longterm investment on europe, you are placing a longterm investment on countries like france and spain and less on countries like germany, where you have troubling demographics and italy. Interesting view on populism and how it unfolds. For mr. Corbyn in the united kingdom, im sure this is the talk of the papers. To see mr. Morales, who along with a powerful movement has brought so much social progress, forced from office by the military is appalling. I stand with the bolivian people for democracy, social justice, and independence. That is quite a statement from a candidate in the united kingdom. We will talk about that in a bit. Thehat, occupied with election of december 12, the chancellor of theelection of dee chancellor of the exchequer, there will be a conversation with him later on Bloomberg Television today. This is bloomberg. Y. This is bloomberg. Francine this is bloomberg surveillance. Tom and francine from london and new york. Lets go back to john bilton of jpmorgan asset management. We look at trade and brexit. Marketu look at what the is focusing on, a lot of it is geopolitics and the inflation forecast in the u. S. , where do you most see the value . John i think there are a few things that are unloved. When we wrote our longterm Capital Markets report, we see another year where returns looking forward that are going to be like what we have seen the last 10 years. Huge rally in bonds, significant rally in stocks. How much more can you expect that to continue . Not so much. We expect to see somewhere around 5. 4 for a u. S. Dollarbased balance portfolio. That is a pretty low number to be working with. It is not all to get too depressed. Emerging markets are still growing well ahead of where we see developed markets growing. Francine take risk. John if you look at them and adjust the extra return, the lift is commensurate with the additional gains you pick up. Additionally in the area of private equity. Private equity is often seen as being something that gives you a ton of risk and locks you in for years and years. Excess cash on private equity Balance Sheets is more than offset by the demand and growth we are seeing in technology and ecommerce, etc. He one area that i think is really interesting to us with bonds giving no income is real estate. Three quarters of core real estate returns come from real income. It was at the center of the last crisis, but longterm, real estate provides surprisingly stable income. Are not doing that for you, you have to look further afield. Tom part of a balanced portfolio out of a job. They will walk through the door at jpmorgan and say spf is up 24 yeartodate. All of that cash is only going to go into onestock, apple, making a joke, folks. The same old, same old. U. S. Largecap. Do you want to run from u. S. Largecap . What has happened within u. S. Largecap, still one of the most balanced markets out there. It has strong domestic demand growth, reasonable sector mix, and it has been doing the right things for the past decade. You had a very early fixing of the Financial System in the u. S. Post crisis. It has been well geared to technology. We have seen strong domestic demand growth and record levels of employment in the u. S. The u. S. Has done everything right. If you look forward, the u. S. Is still a slight expensive market a slightly expensive market. The idea that the u. S. Is good to continue to grow beyond the 50 that it represents in world equity market capitalization and every other equity market would be left standing is a little bit of a stretch, certainly when we look at levels of margins, earnings, growth, valuations. Over a 10 year horizon certainly make sense. Francine thank you much. John bilton, jpmorgan asset management. Pricing of saudi aramco . We will talk about that next. T. Francine lets talk about what could be the biggest ipo ever, saudi aramco will allow investors to start bidding on december 17. Isning us from london jillian lee, a Bloomberg Oil strategist. Think you for coming on. I want to get to the ipo and a second. We also talk about peak oil in 2035. Is that consensus . It is not a consensus view. There are 70 views out there. So many views out there. Those are based on different assessments of what Global Climate legislation might look like. Forecast, saudi aramco is talking about demand potentially leveling off after 2035, but even if that happens, it sees its own production continued to increase because it is one of the lowest cost producers in the world. They also say that if climate concerns are acted upon, you could see demand start to decrease in the late 20 20s, but even under that scenario, saudi aramco says its production will continue to grow, and not much slower than under its business as usual scenario. What is the one question people want to know . Certainly people want to know the sizing and the price. This is the big thing that has been left out. I think there are a number of worries around this ipo from potential investors, not least the fact that their hands are tied in terms of production policy by the saudi government and by their commitments to opec. Saudi arabia has taken the biggest share of opec out of cuts, meeting a disproportionate burden resting on the shoulders of saudi aramco. Tom thank you so much. I have a lot more to ask you about aramco. Lee is a Bloomberg Oil strategist, which barely discusses his competence in the global oil markets. This is a huge story into the end of the year, the curve flattening that we have seen since the election of the andident, a little after, now finally a true hockey stick, a readjustment, nice move. We will have reports from hong kong. It is the most different monday into Tuesday Morning in hong kong. Please stay with us. This is bloomberg. This morning, confidence, protest in bolivia in spain. And once more in hong kong. The chief executive must react to bullets, tear gas, and a man on fire. She spoke in the last hour. Tit for tat, spreads widen out. And the structural and the cyclical of our Economic Cycles. We do that with the bono market close today, veterans day in america, and with the bond market close today, veterans day in america. Welcome all of you to new york and london. Francine, it will be an extraordinary and emotional day on this november 11. Francine yeah, it always is and it will be more so today. Unrest in hong kong. Carrie lam condemned the violence in a news briefing after a tense day in citywide protest. Protesters shot by police and another man set on fire. Joining us on phone, is karen leigh. Chinas bloombergs china editor. Did anything you hear from carrie lam will it help . Karen the thing that stood out to us the most was carrie lam warning that invites alliance that violence was not going to help them achieve their goal. People were asking whether she is going to be moved to make concessions, whether the protesters are, and today one of the takeaways that the protesters are digging in quite fiercely, and so is the government now, and carrie lam has been in beijing, putting up a united front the whole time. She has said she is in solidarity with the police force. We have not seen anything different. She urged calm, which she often does. She condemned the violence but did not make any real moves to appease the protesters, no. Look at honghen we kong, we look at a china that is 17 miles away, may be miles away. How distant is that border from the people of china, and particularly the hong kong leadership . Karen it is physically very close, and as you have seen, this is a protest that began over people being opposed to extraditions to the mainland. It morse very quickly into a much Wider Movement it morphs very quickly into a much Wider Movement into beijings grip. Know, this has not really changed the tune throughout. People are angry at the government locally, they are angry at factors in beijing, and aging came out earlier this morning and said that only people loyal to it would be hong kong chief executive. Tensions rose and as they went into another day of protests here. Tom thank you so much. To all of our hong kong offices for our coverage in print and media as well. Let me do a data check. Risk off right now, i will show the levels on friday, bond markets closed today with lets move onto the next screen. Gold, weaker, 14. 67 over the last week and a half. Down 27,700. Vix the vix is quite elevated today come on the back of investors trying to figure out what happens on the trade front. Gold and yen are actually up, shares in shanghai record treated retreated. Everywhere in the u. S. , it means there is no treasuries in trading, tom. Tom right now we would like to check in with our guests with a little bit of visibility of where we are. From the Economic Cycle research institute, he joins us in our london offices. And george bory joins us from wells fargo. There has been an adjustment, a hockey stick move in your world. Is the puck in the net . Your scope from the fed standpoint, the puck is in the net. They had two challenges. One, provide an offset against the escalating trade wars. Number two, and this gets overlooked, was really trying to normalize the yield curve. If you think back earlier this summer, the yield curve was deeply inverted from the front end all the way out to the 10year part of the curve. You fastforward to today, and we have a positively shaped yield curve. It is not super steep, but the fact that it is positively sloped, it is steepening and providing a more normal backdrop big to fixed income markets. That is a big victory for the fed and that gets overlooked by markets. Tom we will dip into Equity Research in a bit. Everyone is on recession watch, look at ahere is that partial recession, maybe secular stagnation. What is the economy directly for you out six months the echo out six months is a little tough to see. Tom six hours than. Thinks acknowledge and i the market has been acknowledge has been acknowledging the curve. The slowdown has been going on since the middle of last year and it continues. That is not over. There has been a bit of a freak out last december where the slowdown was all of a sudden thought to be a recession. You had a reflection of that last august and they market priced in these recessionary outcomes. And then now it is banking on a soft landing. All through we have been saying directionally, the vector of growth has been to the downside. Has noteral diagnosis changed yet for the United States. And i think the real concern there needs to be around employment growth. Employment growth has been decelerating. Everybody has finally acknowledge the manufacturing slowdown in the United States, and therefore, the consumer is thought to be offsetting the manufacturing slowdown. I think a lot hinges on employment growth. Francine the vector lakshman we have gone through this three times. The question is, is the fourth time the charm. Do we get another soft landing . I dont think the verdict has been decided on that just yet. So therefore, really, it is in between. We continue with the slowing, is the best guest for now. The best guess for now. Francine what is your take on this . Is it a slowdown that could lead to higher than expected inflation, surprisingly, or not . That is a good point, francine. Our central view is a slowing but growing one. The last quarter looks a little bit better than expected. Growth in the u. S. Is just below 2 , and our expectation is that as the lower term structure yields in the recent cut in Interest Rates kind of take hold, there is a usual six to nine month lag. Our central view is that the soft landing is sort of in progress, and we would expect to see more evidence of that as we go into next year. A slowdown, but the expectation is that it will once again, kind of getting another soft landing. You are seeing it in Financial Markets on the Interest Rate side and on the stoxx side. I think that is something that we will expect to see going through the end of the year. And george bory is with us, laxman are chiffon as well. It is a sunrise and Lakshman Achuthan as well. Washington and arlington cemetery. This is bloomberg. Francine Goldman Sachs planning to shift, the latest headline by reuters on Goldman Sachs. Nations across the world will fall silent shortly to the people who have lost their lives in war. This marks the 100 years since the first silence was observed on Armistice Day on november 11, 1919. Tom good morning, everyone, across the atlantic, in the united kingdom, a moment of silence on november 11. All of the ceremonies across written and the continent of across britain and the continent of europe as well. We welcome Bloomberg Radio worldwide. Francine this is bloomberg surveillance. Lets get the bloomberg first word news. British foreign minister Boris Johnson got an election boost from the economy. The u. K. Avoided another contraction. The economy grew. 3 between july and september. The british economy has little momentum entering the fourth quarter. The former u. S. Ambassador to the u. N. Says extra white house rexf of staff staff and tillerson tried to undermine President Trump. Nikki haley said that when they resisted the president they were trying to save the country that is according to nikki haleys new book. In bolivia, the president has resigned after the army pulled support. Election irregularities had triggered weeks of violent clashes that led to intervention from the armed forces. Marellas had been in Office Almost 14 years. He called himself the victim of a coup. Australia is bracing for another week of devastating brushfires. Three people have died and what than 150 homes have been destroyed. Huge chunks of the eastern seaboard and parts of greater sydney face what is called a catastrophic threat. There is a twoyear drought in those areas. Conditions are expected to be hot and windy this week. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am120 countries, leighann gerrans. This is bloomberg. Francine President Trump says talks with china are going very nicely, and beijing once a deal more than he does. The president also called toorts about his willingness i think you both for staying with us. When you look at trade, the market gets ruffled, and then they kind of rally on the back of a comfortable trade deal. If we only get phase one, what difference does it make to the World Economy . Lakshman not that much. I will go ahead against this kind of reflex reaction that we always see. Stepping back just for a second, the Global Industrial slowdown began before the trade war took hold. The trade war has made the slowdown more extreme, but once you understand that sequence, it kind of becomes clear that the Global Industrial slowdown may end without the trade war ending. And we are starting to pick up signs of that happening in our forwardlooking data. Not the the forwardlooking data is showing signs of the Global Industrial growth bottoming. If we look at the antecedents of where it came from, the spark of it is actually coming from a growth rate cycle upturn that is already taking hold in the euro zone economy. So cycles are not always in sync. This is one where we have europe actually leading the upturn. Francine something i have not heard very often, europe if we focus on the u. S. And china for a second, who needs a trade deal more than the other . George that is a very good question. I think both sides need some sort of settlement. Speaking, it is as if it is impacting the chinese a little bit more than the u. S. , but as you look across u. S. Corporations, there are several profit warnings coming out of the industrial side, certainly on the export side. But looking at the simple math of the aggregate impact relative to the u. S. Economy would suggest that the u. S. Needs needs it less, if you will. Our base case is that a new deal , if one comes through, is really just kind of a hold or a pause. It is not a meaningful shift in a change of the dynamics. You have heard from the president saying that he is not really willing or at least has not agreed to dialing back the tariffs. That is our base Case Scenario right now, that the current tariffs largely stay in place. But importantly, and this is what the market has picked up on, things dont get worse from here. If you look back at the trade, challenges emerged back in july. The market is starting to take out some of the worst fears, if you will, of a major hard landing as it relates to trade. As my colleague just mentioned, this has been in the works for quite some time, and the soft landing sort of story is starting to emerge. That is how we have tried to position our strategies. You saidked the way that, george bory. Laxman actionathon, the reason people laxman asher time, the reason explain in english right now why we are seeing coming out of these manufacturing troubles. I thought that was the heart of our distress. Lakshman well, on Global Industrial cycles that is not countryspecific at all we are seeing, in the forwardlooking data, indicators that have started to move to the upside. The Global Industrial growth cycle seems to be bottoming. Next, ithen see it think, in very short leading indicators of Global Industrial growth, which will include the global pmis, and it will include commodity Price Inflation in industrial commodity price growth. You have not really seen it yet an actual Industrial Production growth. That still is plumbing the bottom, i think, of the cycle. When we dig into where is it showing up first, each cycle is different, and it is hard to predict where it is going to come from. It looks as though it is coming from europe. It looks like that is where the bottoming even in germany, which took it on the chin with all of the car in missions and the china the car emissions and the china exposure that it had, and the exposure to exports, would mean less growth and that seems to be a spreading , asia, x japan, some of the manufacturing even inside of china, even on the industrial site, are firming. To answeru dont want this, i understand lakshman i will try. Tom there is a new terminal value, a new potential gdp, and that is lower. Lakshman that is still the same. I liked your lead in to the segment here. Structurally, we are still headed to slower and slower longterm trend growth, which in within which we will have cycles. And we are, at least in europe, i think very clearly we could say with conviction, we are seeing a global cycle growth upturn. Global industrial growth looks like it will be set to bottom out. The question on u. S. Soft landing or hard landing depends on how those long and variable acts from the earlier hikes remember, the u. S. Fed was hiking, the euro zone central bank was not. And so that may be a story as to why the euro zone is able to bottom first in these cycles. Francine they are also dealing with negative rates. The banks are on their knees. Europe is really in the middle of this u. S. China trade war. Lakshman i dont know how much ammunition they need. You are already starting to see a growth rate cycle upturn present itself in europe during i would look to france first. The protests got us a big fiscal push out of macron. The ecb had its pedal to the metal for all these years while the fed was tightening. And the price of things has fallen. There has been very low inflation. Not onehese things on their own but together have helped in the cyclical upturn in the euro zone. Structurally, nothing has changed, tom. Tom i will go with that. Negative ned the word, negative rates. Within the optimism of stability that we hear from mr. Achuthan, we have to have a bond market that will normalize. Does the bond market normalize or will this continue . George we have had a wild year in fixed income, Asset Classes up 12 on the year. That is about a typical return year for fixed income. The Biggest Challenges sort of what do you do Going Forward . Theds have come up off floor, but are still relatively low. That is when investors are looking at right now, how do i position myself in this market . Normal, the curve is starting to shore to show some degree of normalcy. Bit below 2 . Ttle inflation is still a little bit low. By the beginning of next year, we think inflation could be up to 2 . Trade it b. I. 2 seems like a normal market. In that world you can make some tactical positioning. We have talked about the yield curve. More veryof the technical or part of the fixed income market look to be pretty good values. Bory, the percent yield. Francine . Withine we will be back george. Hank you, Lakshman Achuthan this is bloomberg. Francine this is bloomberg surveillance. Unrest intensifies in hong kong. Leader carrie lam condemned the violence in news briefings, this after a tense day of protests that saw a protester shot by police and another man set on fire. Is thephone now bloomberg asian markets analyst. We have heard at this hour that at least the subway stations will be closing at 9 00 this evening, so about 90 minutes from now. In a sense, you can say this is a defective type of curfew where they are trying to stop protesters from moving from one direction to the other. And certainly when it comes to traffic, and a lot of headaches for a lot of people going to work and back home. We heard from carrie lam, the chief executive, in the last hour, and she spoke for the first time in weeks, urging protesters to stay calm and rational. But at this point, these actions go far beyond demands right now, and that the protesters are treating the system as enemies. You mentioned the two men that were serious cases here, in Critical Condition tonight. This morning, a Police Officer shot a protester point blank which triggered a flash mob by noon, citywide. And shocking video of a man being doused with petrol and lit on fire. He was arguing with protesters. There are fears now that things could get worse. Now five months into these demonstrations. Francine what happens if things get worse . Hi will how will china respond . Yvonne this weekend has been quite dramatic here. Over 90 arrests, dozens injured. Today, 170canceled flights were canceled and disrupted as well. What we have heard from carrie lam, and police, at least this afternoon, a spokesman saying that there is no chance now that the pla will be deployed in the city, but china has reiterated in the last couple of days that it would ensure only people loyal to it will become hong kongs chief executive. Those who are demanding for carrie lam to step down, at this point they said they have not offered any more concessions, the government saying at this point violence will not give us any kind of solution and will not force a concession to any demands. They are saying that what has been the behavior of the police a reasonable at this point, defending the actions of the Police Officers today. Man, what do the wealthy want . The elite of hong kong . What do they desire . What they have always desired, tom, a return to status quo. What we have seen here is a city that is divided now, and what is left of these demonstrations is very radical types of protesters still roaming the streets. Today they set a man on fire. It has reached an extreme where it has divided the city and the elite as well. At this point, it has been shrugged off until today. We saw the markets rebound dramatically in the last couple of weeks or so, but today it has gone down 3 . Property developers are feeling the heat now as they still see no resolution in sight. Tom yvonne man, thank you so much, reporting from hong kong. Many more reports today and no doubt through the week from a most stressed territory. With our first word news in london, here is leighann gerrans. Leighann good morning, tom. In the u. S. Come House Democrats signal they make have some they may let some witnesses they will be limited to those who have knowledge of President Trumps actions there. At least two people who will not be invited, joe bidens son, hunter, and the whistleblower. Iran claims to have made a major oil discovery. The islamic th republic said they found an oilfield, the equivalent of 53 billion barrels as iran overcomes the impact of u. S. Sanctions on its oil industry. The u. S. Intelligence community is facing threats from russia and china. There are concerns about their ability to jam or destroy satellites in orbit. China viewing space is a critical u. S. Military and economic vulnerability. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am120 countries, leighann gerrans. This is bloomberg. Francine . Tom . Tom we are trying to rip up the script. In washington you can do that. Kneedeep in the current congressional malaise. I dont know if you have heard of the but peter king Second District in new york, the last republican standing in the northeast, would say he has announced his retirement. This focuses on the southern shore of long island, out from new york city, and maybe it is safe to say he is a gentleman from jfk. He is an important voice. We now have 20 retired republicans. Explain to our global audience, anna, why 20 republicans are exiting . This is very significant. These are the people that are going to be watching when it comes to the impeachment. They do not have anything to lose. They do not have to worry about the president , his twitter feed, because they are not running for reelection. None of these people voted for that kind of procedural vote that we had a few weeks ago, but that was an easy thing to vote against. The tricky vote is when we get to actual articles of impeachment, and these people are thinking about their eight their legacy, not reelection. Tom this is not a republican leading in the state of texas or in kentucky. Hugely a huge a contentious district. Do you essentially throw this district to the democrats, given the news flow . Risk to thes a big republicans, also throughout the south and suburban areas where people are deciding whether to step aside, if they want to face reelection on the ticket of President Trump. Really interesting voice here it is going to be hard for another republican to fill his shoes and run their competitive annain that district tom edgerton on the retirement of the gentleman from long island. George bory with us as well, from wells fargo securities. You were in hong kong recently. What did you observe in hong kong . We have our reporters there. But if you and i go there, we went to china. Airport, fancy car, fancy hotel. We are in china. That is the way we go. What do you see . George from a personal observation, tourism is down quite a bit, i think down over 40 . Protest is definitely having an impact on the economy. Before we talked a little bit about real estate prices down. Generally there is a lot of tension. We are dealing mostly with corporations and investors. Those are our primary clients, and there is definitely a heightened degree of tension across the city. You go to restaurants, and they are kind of generally a little bit light in terms of attendance. It is pretty easy to kind of walk around because there are not a lot of people out and about. The economy is feeling it and you see it coming through the numbers. You can see it when you were there. I see i assume todays announcements will make it worse, not better. Francine george, what will hong kong become . Will it recover from this, or will it lose space to Something Like semi poor like singapore . George that is a good question. It is still a vibrant hub economically and is still a very meaningful financial center. Assumedly, they should be able serve in a position as a very meaningful Financial Hub in the region. Whether it is offset by singapore or not, that is a highlevel question that will take a long time to ultimately play out. Francine all right, thank you so much, george bory of wells fargo securities. He stays with us. In the meantime, guy johnson has been speaking to the u. K. Chancellor of the exchequer, sajid javid, saying the fundamentals of the u. K. Economy are still strong. This is after the gdp crossed the bloomberg terminal about two hours ago. Also brexit uncertainty has held back the economy. We will have more on that. Do not miss that interview on bloomberg later today. This is bloomberg. Tom bloomberg surveillance. Single best chart right now. It is not my chart of the year, that is on the trade war. But how about a chart in november, or even october . We showed it earlier in the hour. The bond markets closed for veterans day. It is the spread that the pros look at, three months, 10 year spread. The normal spread, the difference in yield between the 10year and the twoyear. This takes the 10year down to the threemonth tbill. George bory is here to interpret it. What does that mean for retirees . George it means the yield has gone up on the long end. It also means the real yield has gotten better. And i think it has also it is also a good indication of a better economic outlook. If you are an investor, you are being encouraged to move out of cash and among the yield curve. Yields are not heroically high. They are around 2 . You could go into Something Like 5. 75 . Eld, at today with a fed funds rate at 1. 5 percent, 5. 75 is not so bad going into next year. Tom i expanded out. I went from a threeyear chart to a 12 year chart. ,ere is what retirees remember which is 300 basis points. That was normal. There is no hope of getting back to normal, so where do you find if you are a stressed institutional Retail Investor . Around 100is really basis points. 25 is not a historically steep chart curve, so we have to gauge the extremes of minus five, minus 10, versus plus 300. At 25 it is tough to find yield. We would say go cautiously a little out the yield curve. Secondly, you would go down in ratings. You would go into corporate credit, maybe into some of the higheryielding parts of the market. As i mentioned before, highyield is an asset class. Year, that into next is not a bad running year, running yields, if you will. You could take individual credits and individual companies. The return expectations for highyield next year will be much lower than this year. That is something that a saver needs to be comfortable with. On a blended basis, could you get a 3 yield . Yes, you can, without taking a tremendous amount of risk. Is that wildly exciting . Not really, but it is about the best you could get. If you are a saver overseas, where yields are negative in many instances, that 3 yield here in the u. S. Looks very attractive. Francine george, what about linked bonds in the u. S. . George they do not look cheap or ily inflation is remaining relatively low. Statistically speaking, at the beginning of next year you might see an uplift in inflation, simply because the effects of last year start to roll off the numbers. So inflation should start to creep up toward that sort of 2 kind of level. That would help linkers. The you look at value on forward basis, they are not wildly inexpensive. It is a nice little hedge, but i dont think it is a big outperform or, if you will, for a fixed income investor. Francine thank you so much for joining us, george bory, head of fixedincome research at wells fargo. Leighann gerrans is here. Callsann jamie dimon income inequality in the u. S. Huge problem, but he also says that americas public deficit wasond was dimon interviewed on 60 minutes. He was upbeat on the economy and downplayed the possibility of a recession. Bloomberg has learned that a wall street big and theyre looking into Goldman Sachs credit card practices, after a tech entrepreneur alleged that algorithms discriminated. Goldman says it is possible for two family members to receive significantly different credit decisions. That is the Bloomberg Business flash. Francine thank you so much. Lets stay with that story ouring us now, correspondent who covers anything financial for us. Is this biased . A tweet was alleging that this algorithm was not right. There is the problem, he you have two major tech tighten saying the algorithm is a problem. One of them being apples own cofounder. So Steve Wozniak is saying that he is getting 10 times the credit his wife is able to get. You have a problem there along with Financial Services along with the department of Financial Services in new york. It tone how easy is change an algorithm if this one discriminates . Time they spend a lot of creating it in the first place. It is a problem that it was a problem in the first place. This apple card launch was what they called the most successful ever, so to now roll back and say there are problems with the algorithm remember, goldman did not say there were any problems yet. There are a bunch of consumers as well as the regulatory probe, but that does not mean that goldman has done any wrong doing with the algorithm. sm i would say this morning headline is a bombshell. This firm has delivered 3. 7 per year shareholder return over the last 10 years. It is a failure compared to jp morgan. Walking they doing by away from revenue guidance . Sonali they did not say they would walk way from revenue guidance, they just said they would add in more. You are right, what are they going to walk away . This implies they are trying to guide investors other places . Tom are they guiding toward a retail bank . Isali that is what january for. A lot of people on wall street had the same question, what are you doing . If there is a drag on return because you are investing so much in the apple card and elsewhere, where do you bring in the money when youre institutional business, a third of your revenue, is in a decline in some ways . Francine thank you so much, sonali basak, covering wall street for us. The head of instagram tells bloomberg the photo sharing service is reaching is attending to remove social pressures. Kurt wegner also weighs in on the debates flanking tech. I dont think it is likely. Certainly it is a possibility. I think it would be bad for instagram. I think it would be difficult to keep people safe. Work that were doing on instagram, on top of , younfrastructure work have to take these types of things seriously. So we do. Can catch the full exclusive interview later today on bloomberg technology. This is bloomberg. Bloomberghis is surveillance. Tom and francine. Lets talk about what could be the biggest ipo ever, saudi aramco allowing investors to start bidding on november 17 at potential buyers have been left in the dark about the size of the space that the saudi government plans to sell and the pricing range. You hadit with us one question that you could ask right now is it the price or the size of the ipo . It certainly would be the size of the ipo right now. I am extremely skeptical on this event occurring. I have been over the last two years. My biggest take away here is thatwe are in a market now has completely shifted. There has been a tectonic shift in the world view on the use of oil, and quite frankly i think aramco is about 10 years too late. This is no longer an oil economy, this is a shift of a shift in a shift toward natural gas. The forecast is for oil to peak around 2035. Is that later or sooner than consensus . Appreciate,o and that is one of my biggest concerns about the issue around the ipo, that aramco is rather is making some rather optimistic views on demand and the price of oil. 2035 is a long time into the future. So i am not going to really of that. N the what but what i will say is, anecdotally, what we have seen over the past two years with regard to the amount of eds coming to the market and the amount of product eds that is, that the governments are demanding, and that the industry is responding to. Every timep in mind, you see a tesla or aps or any other sort of hybrid out on the road or a prius or any sort of other hybrid out on the road, that demand is lost and is never coming back. It is a rapid transformation. If i had to hazard a guess, i demandather say that the would decay sooner rather than the 2035 forecast. Francine what difference does it make, depending on the u. S. President . It seems it all depends whether next year orocrat whether it is still President Trump . Stephen i dont think it has anything to do with who is sitting in the white house. I mean, i think on either side of the aisle, the underlying shift in the markets mentality i am 53 years old. I am a dinosaur and my habits are pretty much set. But that said, i own a plugin electorate hybrid, so i dont ever envision myself buying a gasolineonly car going into the future. And when i look at millennials and the next generation, with the way we are seeing demand shifts with the regard to the use of uber and lyft, driverless technology, with the way our demand patterns are going to shift, that is happening. That is happening organically, regardless of who is in the white house. So we could make all sorts of assumptions. But if we were going to go that way, historically, you want the market to make the choice. Francine thank you so much, stephen schork. This is bloomberg. Alix hong kong violence spreads. One protester shot, another man set on fire, while the Business Community fleas teargas. For saudi aramco, the ipo perspective highlights key issues for investors, from weakening oil demand to Climate Change. And apple cofounder takes on goldman. Regulators probe after accusations that discriminates against women. Welcome to bloomberg daybreak on this monday, november 11. Happy veterans day. Industrials leading the s p higher. Now taking a pause. The bond market is closed. The bond market in europe see in europe seeing a little trading see 27 basiss points. We are bringing your todays market moving news from all around the world, from hong kong to riyadh to abu