Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Investors should prepare for this. What does this mean for the pound, which has been stuck in a range, and for u. K. Stoxx at large . As far as the pound is concerned, the rally you have had reflected a significant reduction in the risk of a no deal brexit, so for the time being that seems to be off the table. We are stuck a bit around 1. 30. We need to know where we are going, and until we get past the election and have a sense of what the majority is, it is impossible to have any assessment about the direction of the pound. We are neutral because we think there is far too much uncertainty and too many permutations to take a significant view. As far as u. K. Equities are concerned, it is an inverse relationship between u. K. Equities and sterling, so when sterling weekends, u. K. Equities outperform. From that point of view, if we get a path that moves us toward a softer brexit or no brexit, that should be good for the pound but worse for the u. K. Equities. Dan morris and Stephanie Kelly, both stay with us. We will bring you some of our conversation with the mayor of istanbul, also seen as a contender in the next president ial race in 2023. This is the turkish lira against the dollar. This is bloomberg. Scarlet i am scarlet fu in new york with Francine Lacqua in london. Friends istanbuls new mayor if you actn against the world of people you claim to represent, you will lose it all. He sat down with guy johnson in london and shared how he has used turkeys relations with the rest of the world. I not want i do not to see turkey who manages issues by conflict. This is something left to us by the Foundation Years of the republic, to achieve peace at home and in the world. Scarlet conflict and cautious is par for the course in emerging markets and global markets. Danny morris and Stephanie Kelly are still with us. I look at the turkish lira and it is a bit weaker because it is the weakest em currency against the dollar, according to bloomberg data. You can see at the very bottom, off by two tens of 1 . 1 . 10 of when we look at emerging markets and think about populism, i think about what is going on in chile with the protests in october, which was stunning for many because it is latin americas most prosperous and stable country. What is your thinking . What are investors thinking on how markets catch a cold from other markets, especially in em . When are they at risk of contagion and shielded from uncertainty and instability . Is one of the key things whether you see the contagion passing through the currency. One reason that we are at a lower risk of that is a lot of the Central Banks for the most have u. S. Dollar reserves as a buffer against any shocks. That is probably one of the key things. Most important issue continues to be trade. Spill over into em and push currencies down, and we worry about the ability of corporates or sovereigns to pay back u. S. Denominated debt, that is probably what we have the most in our mind, but the odds are relatively low. Francine what is your dollar call . You get your dollar call right and your emergingmarket call right. Daniel that is a pretty good job. Francine your dollar call is stronger from here . Daniel if we look at the Dollar Strength we have had against the euro and em currencies in by relativeven economic straits, the u. S. Doing better than europe. Opposite, they is u. S. Has been able to cut rates where the ecb has not. That is more in favor of the euro. That has been the marginal driver. If we are able to reduce tensions, it should reduce demand for foreign currencies. Francine your trade call is not specific at all. Stephanie it has been straightforward for investors, not expecting that to change. Isn it comes to trade, it one of those issues where there is the tendency of investors to say, it is fine. I dont think that we can rely on that. Those risks are to the downside. Francine thank you both, Daniel Morris and Stephanie Kelly both stay with us. Rlet a first. S. Is close to phase deal with china, but it is not done yet. Wey kudlow told reporters are coming down to the short stroke. They have been holding working. Evel videoconferences warning the conflict between the u. S. And china could expand beyond trade and technology. Associatesater founder said congress could be next. Trying to limit the flow of money from Pension Funds into china. In southern california, investigators are trying to figure out why a 16yearold boy pulled out a gun and opened fire in a crowded schoolyard. Two were killed and three were wounded for the shooter turned the gun on himself. U. S. Supreme Court Justice Brett Kavanaugh told a groupie went through an ugly process to get on the court. He spoke to the federalist society, a group whose members helped him become justice. He narrowly won confirmation after being accused of committing Sexual Assault in high school. Global news 24 hours a day, twitter i am ritika gupta. This is bloomberg. Francine we are back with Daniel Morris and Stephanie Kelly. We are talking about the trade war, the way out and how markets are positioned. Point is thating the tariffs, they do not see i to i, the chinese and americans on how to deal with it. Stephanie there is some positive signaling coming out and our view is you will end up with the phase one trade deal. The tariffs in december, that makes sense politically, because the last thing you want to do in an Election Year as tax or consumers. The chinese are pushing hard for tariff relief and that makes me nervous. We know that President Trump believes in trade tariffs, believes they work and they are important leverage. Outright tariff relief the day of signing would be a significant upside surprise for many, because i think that the risk is you push too far on these things and we end up going down the path we are way too familiar with. Francine there are so many heavy hitters including ray dalio saying this is much bigger than trade. We get use to it for 20 years because nothing will give. Stephanie this is a Crucial Point to bear in mind. President trump did not invest tension between the u. S. And china. This is a multidecade story that we will continue to see play out. Importantly, the next u. S. President , be that President Trump or a democrat, will have their own approach to the tariffs. ,n terms of nontariff action there is support not just from republicans and democrats and the white house, there is cross party come across institution support for increased nontariff action to build up those barriers in investments and supply chains. Those are the things we will be talking about, as well as foreign policy. Scarlet stephanie mentioned President Trump believes sanctions were, but have they work, but have they worked as the white house intended . He has threatened to use them against europe, turkey, and egypt. Are they more effective or just a blood tool that gets your attention because diplomacy takes time . Daniel you could argue they have worked because to some hasee, the European Union had issues with chinese trade practices and there are concerns about intellectual trade property. Nobody did anything about it and we are talking about it now. From that point of view in terms of raising it to a level of all the government focused on this, that has been successful. Whether it was the best strategy is another point. If we think about what happens after the u. S. Election, if it is a democrat, not much will change in terms of the objectives, but the means might be quite different. If you imagine a democratic president trying to ally with the europeans and japanese to increase pressure on china, you could argue that would be more effective than the strategy the Trump Administration has chosen. Than the strategy the Trump Administration has chosen. Francine foreign scarlet for investors right now, what is the best scenario or the most realistic scenario . Daniel we would love to see this first level, phase one trade include not a complete rollback of tariffs, no one expects that, but at least a partial rollback. My fear is it is priced into the market and we do not get as much of a rollback or no rollback at all, and the potential for disimportant desk disappointment. That will be the key lever, how much for how long. If we can get past that, the markets will focus on other things because if this trade tension continues for decades, we are going to start looking at other factors that drive the market, looking at the state of u. S. Economic growth, and monetary growth and so on. Onmight have a Healthy Focus other topics despite the continual focus on trade. Morris, daniel Stephanie Kelly will be staying with us. I want to bring up another wrinkle in the chinau. S. Trade relationship, the events going on in hong kong. Washington has tried to incorporate it in how it ties with china. Low. S bring in iain mar the Hong Kong Government has downgraded its fullyear gdp forecast and expects an annual recession. Clearly, the economy is slowing down, and when you see the real wouldy affected, protests diminish, according to some. Have we seen that . Iain the economic pain has been obvious in hong kong for some months now. Retail sales, tourism have been down for weeks if not months. It the data is only now revealing what people have been feeling. People remain patient. There are protests in the central and financial district, and a lot of workers are going down and voicing their support for some of the more radical students. It seems the economic pain is not transferring into a lack of support for some of the overall ideals of the movement. Scarlet we are seeing pictures of rising violence and with the rising violence, perhaps a smaller number of protesters on the streets. Hong kong is asias Financial Hub. Global banks are telling people to steer clear of protests. Thererd for banks moving businesses out of the city . Iain especially this week, we saw that citibank staffers surrounded by cops, berated, tried to run, and was tackled, that brought it home to some people in the financial district that the protests are not something that only affect diehard protesters. We had teargas going off in front of Louis Vuitton stores and bystanders getting caught up. You hear the chatter of people moving, a lot of events canceled , and noncritical meetings have been canceled in the city. That is something that has become regular for people over the last couple of months. There has not been big, serious talk of moving headquarters and stuff. A lot of analysts who look at this thing have suggested there is a difference between people who are already embedded here, have stakes down, and people who are considering further investments here or expansions here. That stuff is on hold, but for people who are already here, they are trying to do work from home arrangements and more flexible things. There is no bigticket exodus or anything from the city. Lets also bring in Stephanie Kelly of aberdeen standard investments. I dont know how easy or difficult it is to link with trade, but how much of a problem is this for china . Stephanie it is a significant problem for china because clearly china is visible in its action. That is a reason why when you talk about extreme downside risks, at the margin, what you are likely to see is symbolic gestures or at the margin, it nontariff actions. I think a lot of it will be u. S. Lic in terms of the commenting on hong u. S. Commenting on hong kong. We have seen the rhetoric from President Trump and the rhetoric is never on who is right and who is wrong. It is just on, cease and desist with the violence. That is the line they want to dread and for the u. S. And china, that is the ideal political line. As long as things continue the way they are, it is an intense, chaotic environment, but it is so localized that it is unlikely to completely derail things unless there is a severe escalation in the way chinese authorities engage in hong kong. Scarlet we have some new headlines from out of hong kong. Government has not stopped exploring Legal Options to stop the violence. They have taken different steps including banning facemasks and possibly imposing curfews. One reason people are watching so closely in hong kong is because china wants to fool taiwan into the mix as well. What does it mean for taiwan and chinas relation with the island , especially as taiwan gets ready for president ial elections . Stephanie you have hit the nail on the head around the importance of the taiwanese elections. We need to watch closely in terms of the engagement with china around that. The hong kong case in many ways is taking up a lot of time within hong kong and china, trying to assess and reduce tensions. One of the big challenges we have had is where does it go, how does it escalate and deescalate . How long can this ongoing chaos continue to affect hong kong economy . Thus far, it is a localized effect, but as we move into january and see taiwanese elections, i am in hong kong in february so im hoping by february there will be a resolution. We have low confidence in that. That. Investors struggled to call which way it will go because it is so uncertain. Francine thank you so much, Stephanie Kelly and iain marlow. Coming up, we speak to lord adair turner. This is bloomberg. Ritika the cut and apple shares was 3 10 of 1 . Investment is valued at almost 56 billion, one quarter of berkshires spot. Cut his holding in superstar taylor swift is begging Carlyle Group to help her in a dispute over her past hits. She accused her record label of blocking her from performing her own dutch old songs. Carlyle group is involved because it puts up the money for the former agent and the money to buy the songs. That is the Bloomberg Business flash. Scarlet tom would have broken into song and dance of taylor swift, but we have a day off. Francine tom would have broken into song and dance of taylor swift, but we have a day off. A group of 30 identifies a shortfall in global pensions. By 2030, economies could be facing an 8 trillion funding gap for aging populations. Joining me now is lord adair the former u. K. Financial Services Authority the former u. K. Financial Services Authority chair. This is concerning. This means you will have people without a safety net when they age. Who should be concerned about this and what can we do . Lord turner it is not new, because we have known about this problem for some time. It is fundamentally the results of we are living longer and we have lower birth rates, population stabilization. Inevitably, if you dont change your Pension System and in particular, if you dont increase the retirement age within a Pension System, you will have more and more retirees relative to the working population. There are only three things you can do. You either increase the retirement age or you increase the amount of money that goes into Pension Systems, whether it is from taxation or private savings, or pensioners get poorer in retirement. Across the world with lots of Different Countries, they have got to have a serious debate of which of those three or which ofes of those three mix those three levers will they pull. If you are a politician and come out and say, this is what im going to do lord turner the answer is the. Ix has to vary by country in some countries, pensions provision is poor for people so maybe they have to increase taxation or compulsory savings rates. Increase taxation or compulsory savings rates. Somewhere, pensions are generous and taxes are high. They may have to be less generous with pensioners. In almost all countries, there will have to be an increase in retirement ages. We cannot go on with rising Life Expectancy, putting more adult life into retirement rather than work. We need a balance and we propose the proportional principle, as Life Expectancy goes up, we should divide it into stable proportions between how much of that is extra working life and how much is time in retirement. Scarlet these are all very reasonable descriptions you have laid out. Are there countries that have started to move in this direction . Are there best practices for us to look at . Is singapore better prepared . Lord turner i think singapore in some ways is better prepared. It has the large, compulsory savings system. Done someas significant changes following the Pensions Commission report which i produced in 2006. We are now committed to a significant increase in our state pension age. It was at 65 and will get to 68 by the mid20 30s. Sweden has done some intelligent things as well, particularly on how to reduce the costs for people making savings. There are a set of different levers at Different Countries can pull, and there are some examples of Different Countries which have done some of the right things. What we do not do in the report is say, this is the precise answer for all countries. Is aine negative rates problem for anyone who saves. Lord turner negative rates are a major problem and i think they will be with us for a long time. We have been very slow to wake up to the fact that we are in a structural set of conditions where the balance of attempted savings and attempted investment will create very low or potentially negative real Interest Rates, so we have to design our Pension Systems within the environment. We cannot magically get out of it by having high rates of return. Inyou owned a pension fund 1985 and he wanted to invest completely safely for 25 years, you could have bought a u. K. Or u. S. Index linked bond with a real yield to maturity of 3. 5 . That figure is now 1 . Scarlet that says that all, negative rates opens up Fertile Ground for more conversation. Coming up in the next segment, we will hear from our interview with adrian orr. This is bloomberg surveillance. Francine this is bloomberg surveillance, scarlet and francine from london and new york. Lord adair turner is still with us, talking about a report issued by a group of 30, talking about urgent action needed to safeguard Pension Reserve returns. We also spoke about negative rates and the fact that it is a killer for savers. Lord turner i think negative rates are here to stay for long time. If you look at what other longterm real yields, nominal yields, which is the market expectation of rates, they could stay zero or very low or negative for 10 or 20 years. They have been incredibly low in japan for 30 years, and for many years economists said japan is different. We have failed to see that was the canary in the mine. There are structural characteristics in the economy where we like to have negative Interest Rates for a long time. Francine what are the unintended consequences . Lord turner of course, the of course, the search for yield. If you can only get a negative safe yield there is a voracious search for anything that you can get an uplift with. That is circular because it creates an economy where if you increase Interest Rates would go into crisis. This is the nature of the circularity, once we created the amount of debt that we have in the world before 2008 and some structural risks with labor markets and information technology, all of that traps us with very low Interest Rates for a long time, which means we will have to use other levers apart from Monetary Policy to stimulate the economy. Scarlet we know President Trump has been stumping for negative rates, urging the u. S. To do something about it. If you were advising him, how would you convince him that negative rates is not necessary in the u. S. Because it is not a secret weapon . Lord turner i would hate to think i am on the same line as President Trump on anything. The crucial thing to realize and what we should have realized over the last 10 years is that when you have a large debt over a annum and structural characteristics of the economy which are driving low rates of inflation, Monetary Policy is pushing on a string. It is not effective. We have tried to keep the global economies going with ultralow rates and quantitative easing. It has been ineffective on real terms but is increasing wealth inequality. Francine lord adair turner, thank you. This is bloomberg. Francine inching towards a deal. Larry kudlow says a trade deal with china is in its final stages, but jack ma says tension could last decades. Labour pledges once and for all to boost u. K. Rates. Hong kong flashes its gdp forecast that reflects its first annual recession since 2009 as protests take their toll. This is bloomberg surveillance. I am Francine Lacqua in london, scarlet fu in new york. Fed,cus on the market, the and the hong kong protests. Scarlet hong kong predicting its first annual recession since 2009 and we are seeing the protests spilling over into the work week, changing the contour of the events. Francine lets get straight to the bloomberg first word news. Of protest months have taken a toll on hong kong. Firstrecasting their recession since the Global Financial crisis a decade ago. 1. 3 and 2019act from last year. A grim outlook is inline with what is visible in hong kongs streets. Shopping malls and restaurants are on shortened hours. A white house economic advisers says an interim trade deal with china is down to the final terms. Larry kudlow says the deal is close but not done yet. Talk focused on issues ranging from chinese purchases of u. S. Products to intellectual property. President trump asked the Supreme Court to prevent his tax returns from being turned over to way new york prosecutor. It is the first time the Supreme Court has been drawn into an investigation for the president s conduct. Lawyer oilts markets will remain calm next year. Keep thentories will world supplied. It is almost twice the expansion. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Francine thank you. This is what the data is looking like, a lot of the focus on the trade war and in what we have seen for stocks worldwide. Touch. Yields down a onrlet i am keeping an eye the rise in asian stocks overnight. The ms ci was up half of 1 . Futures look like we will build on yesterdays record high in u. S. Stocks. A bit of a melt up this entire week. Francine this is my bloomberg for the week. If there is one thing investors need to get right, it is their inflation calls, their dollar calls, and recession calls. Of thes a great index probability of a recession. You can see a lot of what we saw during 2008 when we saw a recession, but we saw a little bit more elevated for that index over the last couple of months. Scarlet from the longerterm to ideahorterterm, we get an of smart money. Who is smarter than Warren Buffett . They cut their stake in wells fargo. Changes are growing berkshires cash to a record. The white line is berkshires cash asset ratio and the blue line is the s p ratio. They are concerned on whether this is a bigger tell on whether the u. S. Broader stock market has room to fall. Does berkshires cash have directional value and does it mean stocks are too lofty to buy . Low, sellultimate buy high investor. Francine china and the u. S. Are close to signing phase one of a trade deal, according to larry kudlow, however some believe competition between the nations is firm permanent, warning they could wind up in a capital war. The cofounder of alibaba, jack ma says the trade war could last for years. Jack it is so important for china and the u. S. To work together, supporting the economy , keeping people in prosperity, Share Technology together, and for so many years, china and the u. S. Have been working together. There is a problem. That is natural. If there is no problem, that is not natural. Francine joining us now is howard ward. How do you view the trade war and is the market price in for a phase one deal or nothing . Howard the trade war has been contributing to the Global Economic slowdown more than any investors had expected. Mostnk the stock market in if not all of phase one deals has been priced in. Ofyou go back to october 2018 when the white house and people started talking up the trade deal with tweets on how great the progress was, and here we are a year later and we are still not there. I will believe it when i see it. If the white house has something to say, they should come out and say it or just keep their mouth shut. Francine we were speaking to Stephanie Kelly of aberdeen and she was saying the problem with tariffs is that china wants the u. S. To get rid of the tariffs and President Trump and the administration sees tariff work. Howard that is why i am per click perplexed at how great the deal is going. It is not going great. The chinese, in terms of timing and dollar volume, the chinese want the rollbacks in tariffs and trump will not do that. Who is more desperate, the chinese or trump . It is probably trump so we will probably have a weak deal and will be touted as the best thing we have ever had. Scarlet there are some timeline constraints. The election is coming up in 2020. I want to look at the timeline of the tariffs to see how the trade war is hurting countries. Tariffs connected to computer hardware, Capital Expenditures and china are disappointing as well. Is this the tip of the iceberg or our Companies Limited to a few mega caps . Howard the impact of the tech war goes beyond what we might think because of the impact it has on confidence. Capexfidence recoils, gets pulled back and companies do not invest as much. Asiang into the ports from to the u. K. , way down during the month of october. I dont think this Global Economic slowdown has bottomed. It looks like it will go into next year and we are looking for weaker growth around the world next year. Earnings estimates are still tied for next year. We are in an earnings recession and 75 of the time, gdp recession follows. The pmis are still in a downtrend. Earnings have retracted and are stalling out. It is a difficult time for stocks when gdp is at an alltime high. Scarlet when you say it affects confidence on the corporate side, is it enough to cause companies to change their hiring and firing patterns . Howard thank you, because we are at a point in the cycle where it is time for the weekly unemployment claims to move higher. Scarlet we saw a little bit of that this week. Howard we are up around 10,000 or 14,000 this week. We bottomed out in april. In the last couple of weeks, the weekly number for this week was the highest since the end of june. This is critical because the weekly unemployment claims are considerably correlated to the stock market and you must pay attention. If this number continues to move higher, it is bad for stocks. Longer than held anyone expected, and the weekly unemployment claims continue to be near lows. It has been phenomenal. Francine howard ward stays with us. We are looking at live pictures of venice. The Prime Minister has declared a state of emergency for the city, releasing some 20 Million Euros for urgent repairs. Live pictures are heartbreaking and stunning. This is bloomberg. The u. S. Economy is the star economy these days. We are growing at 2 , right in that range. Better than any of the advanced economies. There is no reason to think that cannot continue. The policy accommodation with the three rate cuts this year, the policy stands to make that base come out where it needs to. It is in a good place and Monetary Policy. The labor market remaining strong and inflation moving back toward the 2 symmetric target. U. S. Inflation expectations reside at the lowend of a range i consider consistent with our mandate. There is no reason i can see the probability of a recession at this time. Scarlet comments from fed officials. Right now we are with howard ward and there has been a consistent message, the economy and Monetary Policy are in a good place. We are keeping an eye on rates. When you look at what is going on, and you are a bottom up investor. You look at companies and their Balance Sheets and income statements. Earnings matter less and rates matter more . Howard i think on a temporary basis you can get away with that , but ultimately at will come back to earnings because earnings drive everything including wages and consumer spending. You have to have the Earnings Growth or it just doesnt work. Powell and the fed, it is not just powell and the fed. It is the fed and the economics profession. Including the fed called the biggest recession since the depression . You can count them on one hand. Powell in december raise rates and said you should anticipate three to four rate hikes this year. He has cut rates three times in the span of the last 11 months. There is not a lot of credibility in the forecasting. I hate to say that. It is a tough thing to do. I cant do it, but you have to take at face value that it could change. Scarlet he is dealing with a completely unquantifiable variable, which is the trade war and President Trump. Lets look at the markets overall because you are a growth investor. People are looking for value to get there moment. What is it going to take . Rally we had a value lag for the past five weeks. Scarlet will it last . Howard that is the question. It could be premature. Without the acceleration in economic growth, you are not going to get the earnings to support that. Slows, itns as growth tends to be most difficult for industrial companies, materials, energy, the more cyclical parts of the economy get hurt the most , and those are higher beta earnings dependent stocks. Even though they have not been as good as defense stocks, they will go down more. At this point in time in history , we have a situation where stocks have done so well so long that their defensive nature is not what it usually is. If the stock market becomes more demanding negative, low beta is your figure so utilities, even though they have done very well, will protect you what stock market. Health care will protect you, Consumer Staples will protect you. Willd that, reits, those be the safe places to be if we get a correction. Frankly, i love the stock market next 4,m, but for the 5, 6 months, there could be a repricing of stocks. We have had such a run and we are fully priced on a piece pe basis, so we need to reset. I looked at a lot of stocks this morning and we have come a long way. Where do you see bubbles . Howard that is a good question. I dont really have a good answer for that because when you look at stocks, certainly there are bubbles in private equity. Lesson that has been the , when we see a lot of these stocks in the private market turn out to be egregiously priced and they go public, so that has been the obvious in the current era. Francine thank you so much, howard ward. In an exclusive conversation with the new zealand central governor, he says the door is open to more cuts after Central Banks surprise investors by keeping rates on hold. Here is a snippet you can catch on bloomberg throughout the day. Rights will stay low foray rates will stay low for a prolonged time and we already have bought ourselves the opportunity to observe the data, watch the monetary stimulus work through the economy, and we are starting to see all of the funds we would expect to see through policy being effective. This is bloomberg surveillance. Lets get the Bloomberg Business flash. Amazon is in a legal war with the pentagon and will challenge the Defense Department decision for the more than 10 billion Cloud Computing project to microsoft. Jeff bezos also owns the washington post. Saying theairbus boeing 737 max is an earning learning opportunity. It hasnt learned and i believe this will be the case. We others have been looking at it and making sure we are learning from what happened. I hope the industry will emerge stronger having learned what has happened. Itska airbus will not move business out of the u. K. After brexit. Qantas fluid test flight for the worlds longest commercial. This time the flight was from london to sydney and lasted 19 hours 19 minutes. Last month, the new york to sydney flight was three minutes shorter. Qantas turned both planes into flying laboratories to find out the impact of long flights on the crew and passengers. And vancouveron, are losing with luxury homebuyers. Luxury property prices in those cities all fell in the Third Quarter from a year ago. N vancouver, the drop was 10 among the reasons cited, the thatr, populism, and is the Bloomberg Business flash. Francine hong kong protesters returned to the central financial district or the fifth day of rallies in a push that has driven the premier Financial Hub towards recession. Joining us is Rishaad Salamat and. Go . E does it do they still have supporters among the people . Will the protesters continue and escalate the violence . Rishaad nobody knows. It seems a bit calm her. Calmer. We have the usual lunchtime rally. I will give you an idea of how people are feeling at the universities in hong kong which conducted a poll. Last year, just about 6. 5 of zero or the police, they thought the police were entirely competent. Incompetent. Now, 52 of people think the police are incompetent. That is the feeling on the ground. Protesters are extended across the city in one of the major arteries. We have the Hong Kong Government here doubling down on this, promising more decisive measures to halt the protests. This as we are probably facing another weekend of unrest in five Straight Days of mobs and vandalism, molotov cocktails and the like. Scarlet the Hong Kong Government downgraded their gdp forecast. Is this going to take down the Hong Kong Market . Will it reopen on monday . The market is resilient. Rishaad this is the thing, we knew it would happen. We are in a recession. 2019,ll contract 1. 3 in the first time we have seen a contraction in a decade or there about. Perhaps this has already been priced into the market. Scarlet Rishaad Salamat, thank you so much. Bying up, we are joined Libby Cantrill with pimco, discussing the goingson in washington. There are a couple of hearings you might have heard about. This is bloomberg. Except expecting you to cover. Francine Jeremy Corbyn speaking on what he wants to promise his voters as we head to the december 12 election, unveiling plans to give free broadband to everyone in britain. The estimated cost would be at least 56 billion pounds. This is one way to try to get people on his side, saying the conservative party has not done enough for the person on the street. We will have plenty more on this election scheduled for december 12, the first december election for at least half a century in the u. K. Lets get to the bloomberg first word news. Ritika the u. S. Closed the first phase of a trade deal with china, but it is not done yet. That is according to larry kudlow. He told reporters last night, we are coming down to the last stroke. The two sides have been working in videoconferences. Among the issues our purchase of American Farm products and theft of intellectual property. Ray dalio warning the conflict between the u. S. And china could extend to trade and technology. He said a capital war could be next. Congress is trying to limit the amount of money flowing from pension and Investment Funds into china. In southern california, investigators are trying to determine why a 16yearold boy pulled out a gun and opened fire in a crowded schoolyard. Two were killed and three wounded for the shooter turned the gun on himself. E is in Critical Condition supreme Court Justice Brett Kavanaugh told a conservative group he went through an ugly process to get on the court. He spoke to a group whose members helped beat kim helped him become a justice. Assaultccused of sexual decades before in high school. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am ritika gupta. This is bloomberg. Scarlet thank you so much. We have Libby Cantrill, pimco head of Public Policy joining us as we want to talk about what larry kudlow said. The white house Economic Advisor says negotiations over phase one of the trade agreement is on course and is down to the wire. We have heard this before. Deja vu. Some people might say that mr. Kudlow is supporting, trying to fallsure that taxes do not stocks do not fall. Howard market manipulation, we would call this. Scarlet why is there still hope they could get something done . Libby they see the politics of this and they are assuming that the politics support a skinny deal that the u. S. And chinese get there. However, and a big however, is that we have been here before. There, been almost 90 in the words of the administration and the last 10 , the tapering of the deal has proved to be the most difficult. Not only is it around ag purchases and Technology Transfer and intellectual property enforcement, it has led to the devise demise of stocks. We are probably more cautiously optimistic because it is a skinnier deal, but it the hooves folks to remember the previous experiences and until there is a real paper deal. Scarlet you called at market manipulation. How do you strip out the uncertainty driving the trade destruct trade discussions . Howard while trade has certainly been one of the factors hurting the economy, the economy would be in a slow down anyway. If you have a trade deal, it will not matter that much over the next 12 months in terms of what earnings are because sentimental uplift for stocks, probably is baked in. It will not matter for the underlying fundamentals. It is sort of a sideshow and gets more attention then it should, although i dont want to understate the importance of it. Scarlet we are talking about a late cycle in the economy when things are slowing down. When the president looks at the stock market and is fixated, he sees record highs and thinks that gives him more leverage in the trade discussions. Does it . Libby folks at the Economic Council are also looking at the Economic Data and the fears in april about recession, about a real slowing, a recession that might spill into the services sector, those fears have lifted. Folks at the white house are looking at data and are not as concerned, and they are looking at the market, propped up i the sentiment. They view that as more leverage. The to be clear, does president care about the market . Yes. He also needs a stronger deal from china. Cannotot, in my opinion, tariffe more for a rollback. That will be seen and washington is a copout so he needs to address the structural issues. That has had some stickiness before. Howard between the impeachment hearings taking place today and through next week and all that that entails, and the fact that we have an election in less than 12 months, the white house has to be concerned. I need a win and need to get the economy boosted up. They are more desperate than they have been. Time is running out. Libby they do not need a win at any cost. That is what you saw the president at the u. S. Economic club of new york on tuesday. Up, willariffs will go go on if there is no deal. Howard if that happens, that will be negative to sentiment and stocks and the economy. Francine what do you make of what is going on in hong kong . Does this change the trade narrative . Libby that is a great question, and it is a dynamic that the markets have not been as focused on as they should be. From my view, this is a potential stumbling block to the trade deal. Congress is very concerned about what is going on in hong kong, and they have not put human rights and the issues like that to the forefront, so congress is worried about that. The house passed legislation. Outlinemitch mcconnell a bill yesterday about hong kong. Billave to think if this on human rights passes, they will retaliate in kind. I think this is something that is brewing and the market is in focus. This could be a stumbling block to secure this phase one deal. Francine going back to trade, more fundamental even to get to the phase one . Clear they have been very they want a rollback of all the tariffs. We have tariffs on 315 billion of goods from china. That is what they want, but the u. S. Has said, we will give you some rollback, but it is conditional on some of these concessions. Is and where the hangup where it was in may, and has been for the negotiations the last 18 months. Ofy are willing to make some these things in their best interest, willing to open up the Financial Services industry, for interest for example. That was underway since the obama administration. In terms of the esso we or technology trance or, they are reluctant transfer, they are reluctant to make changes. Blocks thatox have led to the decline of previous discussions have continued to this day. To think they will be able to reach a resolution is a little bit naive. Francine thank you so much, Libby Cantrill of pimco, howard ward also, both stay with us. We will bring you some of our exclusive conversation with the airbus ceo, talking about bowing and tariffs. This is bloomberg boeing and tariffs. This is bloomberg. Manufacturing the wings in the u. K. Around bristol, and we are very competitive with it. It is a risk. The shortterm risk is on a no deal brexit, that could have a lot of disruption in the supply chains. In the long term, we hope and believe the economy will become competitive. This year has shown in the past it can turn around, and it has turned from events. I believe this would be the case. We, like others, will be looking at this. I hope the industry will be stronger and learn from what has happened. It drives cost for the passengers at the end. It is unnecessary. This will be balanced, rebalanced. That was the airbus chief executive speaking to bloomberg earlier on. Conversation, he is a plain expert and an overall safety and security expert. What did we learn in the interview . He is confident about the future. Nothe wto tariffs, he did say how much they would hurt him. Howard they are clearly hurting airbus, things related to the wto ruling which relate back to state aid. There will be a mirror ruling related to airbus we are in a transition period where we are awaiting the airbus ruling and there is the expectation they cancel each other out. The understanding is that they are having a discussion with the united states. It makes it more expensive. It is a little opaque. Francine what about boeing . We have to see how regulation will fall on the back of that. Guy it is difficult. He has a320 aircraft which competes with it. Have soldese aircraft out so far in advance, thing trying to get an earlier slot if you are an airline and want to switch from one to another. You will have to wait a lot longer for the aircraft. It is difficult for them to take advantage of it. They will have to deal with some of the fallout from it because what will happen is the certification will become more difficult. The faa will take a much more clearly focused look at these aircraft. You go from one version of an a320 or 737, they are viewed as derivatives of incremental increases. Changefuture, that will from one version to a newer version and will probably come with greater scrutiny and greater cost. Looking at what is going on with airbus overall, how can boeing take advantage of this situation it is in . 8, givenat the 737 max the regulatory issues, what can it do . Guy at the moment, boeing does not have advantage. It will be interesting when the max comes back into service at the beginning of next year, how competitive boeing will try to be. It going on the 737 max 8. Maybe boeing will discount heavily to get some of the orders it needs and that will ripple through to the airbus order book. That will be one of the challenges airbus has to face next year, that boeing will come out of the gate once the max comes back out and they will need to convince airlines and the traveling public. A lot of money on both of those factors is something airbus will have to deal with. It does not have to deal with the safety in the way that max does, but they are going to probably take discounts as a result. That is something that airbus in the middle of the p l might have to do. Scarlet guy johnson, congratulations. Lets talk about apple. Blasted theiren response to claims of against women. Credit limitower than men. Here is what she said when she spoke to bloomberg. We are beginning to understand that algorithms are only as good as the data that gets tapped into them. If a lot of discriminatory data gets packed in, in other words, if that is how the world works and the algorithm is doing nothing but sucking out information about how the world works, then the discrimination is perpetuated. Lets bring in our single best chart. Lets talk about Apple Services sales, the part of the business they have been focusing on, and apple card is an attempt to drive more revenue. Still with us our Libby Cantrill and howard ward. You have been bullish on apple for a while. How are you finding the benefits of apple card . Howard short term, there are not any. There is no Financial Impact on apple and there will be no Material Impact for many years. If you want to Talk Services in a more general sense, services have become 20 of apples revenue apples revenue. That is helping over time to give you a better multiple on their earnings, which is up to about 20 times forward earnings, 13 times ebitda. We have come a long ways from the phenomenal stock. We are into the 5g rollout for next year and markets are beginning to discount that. It should be a good year for Apple Earnings wise, if things in china stay calm. Scarlet that is a big if. Howard the card is not a factor. Scarlet it is grabbing headlines. Role, warrens putting the burden on them to override the flawed algorithm. This is marring Goldman Sachss attempt to get in on the mainstream business segment. Libby any Company Wants to stay out of these types of headlines and that is true in this case. What you have seen with goldman , its and Elizabeth Warren is hard to go up against a formidable president ial candidate. Not thecompany, this is adage of all press is good press. This is press they would rather not get. Francine thank you both for joining us, howard ward, and Libby Cantrill. In order tooomberg not miss our exclusive conversation with the founder of alibaba, jack ma. We will have more what he said about the u. S. China trade war and investment in africa. This is bloomberg. I am scarlet fu in new york with Francine Lacqua in london. , tom who . E was saying lets talk about washington. The House Intelligence Committee carries on its impeachment inquiry. The former ambassador to the ukraine is scheduled to testify. Libby cantrill is still with us. Whenever anything is going on and washington and we listen to it for a while, there is a lot of grandstanding. How much of the impeachment open hearings is grandstanding versus new information being divulged . Libby at least as of now, it seems as if people are still looking at this through a very skeptical lens. I dont think the testimony on wednesday will change that. If you look at the polling in the united states, the folks who supported impeachment changed a little bit, but it is mostly the same group for impeachment and conviction. Base, itident trumps has not changed at all. For hisobably not great Approval Rating overall, but possibly it is not affecting the political dynamics. Scarlet if nothing else, this is distracting and Administration Web a lot on its to do list. The u. S. China trade discussions and what about plans to impose tariffs on european autos . Kudlow said the president is thinking on it. Libby that deadline has already passed. This is part of the section 232 investigation into whether imported autos pose a National Security risk. The Commerce Department has said yes, they do, giving congress the authority to impose tariffs. Againays the deadline another six months to preserve optionality. If he actually takes action, that will be upsetting to the market. What is better for an election campaign, fighting with china or having a deal . Libby that is a great question that our clients and Investment Committee have asked. You could sort of go both ways. This president wants to run on a strong economy, a strong market, so that would be in the plus dealn of getting a mini with china. Or refuses totant give away the structural concessions and President Trump decides to move forward with the escalation, you could see how this could benefit him politically. China has and will continue to be a convenient bogeyman for the president and policymakers on capitol hill. Jingoism, thehe nationalism, the America First agenda with his base. There is the scenario, even though conventional wisdom is he needs a deal, there is a scenario where maybe he doesnt. Francine thank you so much, Libby Cantrill of pimco. This is what venice looks like, underwater. 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 inching towards the finish line. Andy kudlow says the u. S. China talk every day, and it is down to the short strokes. The worlds 250 trillion problem. Markets borrow more, potentially setting the stage for a dangerous finale as liquidity tightens and the Dollar Strengthens. In the u. S. Economy is the star economy. Fed chair jay powell talks up the consumer. The latest read on retail sales, and jcpenney earnings on deck. Welcome to bloomberg daybreak 15. His friday, november tgif. Are we trading on these headlines and you do not get the real direction and who you get some kind of clarity on trade . Equity funds had net inflows of almost 10 billion in the last week. The largest recipient, european stocks and equity funds. Time now for the global exchange