Transcripts For BLOOMBERG Bloomberg Daybreak Europe 20240713

He weighs in on the trade war but says the group is extremely wellpositioned despite the risk. If we are not forced to do deals, we have a good strategy. Years, wehe latch you are wellpositioned to capture organic opportunities. Of course, if we have an opportunity to evaluate nonorganic options, we will, but it is not something we are forced to do. Nejra defense undercut. Gordon sondland says President Trump demanded a quid pro quo from ukraines new president as he implicates senior officials in the administration. Welcome to bloomberg daybreak europe. Breaking numbers coming through on the bloomberg. The event headlined is that is proposing suspending his 20182019 dividend. That is the main thing to look at. Fullyear adjusted ebitda comes in at 802 million euros. A little soft on the fullyear adjusted two number. 42 billionevenue at euros. Estimate, 41. 6. That comes in slightly better than expected. The strategy was key for investors as the industrial giant reports these numbers today. Months of investor focus on the development of the elevator unit disposal. Really, what we are seeing and focusing on is it being set to suspend this dividend as losses have been widening. Dividend to suspend payments after it warmed losses would deepen. Crisis for thee industrial giant peered losses were significantly worse in 2019 and 2020. The uncertainty around the u. S. China trade war have complicated the operating environment for companies. The Industrial Group has downgraded its fullyear earnings outlook and said weakness in the asiapacific region oppressed its thirdquarter revenues. Chinas Economic Growth hitting the slowest pace in 30 years. It has affected big multinational companies. For more, lets get to shery ahn at Bloomberg News Economy Forum in beijing. Great to see you. Shery thank you so much for that. Whom to best ask . The ceo joins me at the new Economy Forum in beijing. Thank you so much for being with as. We are seeing so much uncertainty over these trade tensions between the u. S. And china. How is that affecting your customers view and investment plans ahead and how is that affecting your business . We look at it through the lens of our customers. In china markets, we are viewing our customers, where are they going with their demand, where do they see their changes, and there has been a lot of discussion. Do supply chains move . Forward, wills go customers move production . We have not seen that. We continue to serve customers in china. Isare 70 of our revenue specified in our customers materials or the processes they use. That tends to be very, you know, and cycle demand from them, that is staying here in china. Shery one of the most difficult markets for u. S. China specifically. What made it so difficult for you to gauge customer demand here . Mike we saw softness. Industry, automotive and we saw a decline in demand. It globally slowed down. China, significantly it declined into 2019, and it has been staying soft all year. Electronics softened as well. Between china electronics, automotive globally, it is 30 of our road for new revenue that we saw slowing and we had to make adjustments in our plans as we went through the middle to the lagger part of the year that are part of the year. Shery is it difficult to gauge demand . Mike we get clear demand from our customers. And specifiers of our solutions. The automobile makes and models, the electronic oems. In between us is a channel and that is something that has to adjust to changes in demand. We saw that in the first half of the year. That added to the decline. Have been down. The channel took out inventory, so we saw doubledigit decline in automotive for a time. Shery what have you seen Going Forward . Will you see this demand come back next year . Mike we see inflections first. We see downturns early. We tend to lead out as well. Us, whatconomists ask are you seeing . Do you see anything changing . Second half of 2019, it has been pretty steady. We told everybody, we see q4 much like q3. We have not seen the inflection up yet. There is hope and optimism things will get better, but we have not seen that yet in the marketplace. Shery you have to revise down in your marketplace. Do you wish you had been more conservative . Mike we thought we were. We came into the year knowing electronics and automotive would be stopped. As we came to the second half of q1, it changed dramatically, and you can be more conservative, but that has impact. Shery what do you think led to that change . Mike the marketplace saw softer consumer demand in both electronics and automotive. It was global. It was also in the china market. That changed. It slowed down. The inventory and Everything Else had to adjust. We had to adjust. Have is thehings we strength of reacting quickly. We can react within a cycle. It was difficult to react in half of a quarter, but by the time we got in the Second Quarter, we realigned ourselves to the changes in the market place and we have been delivering strong execution operation performance even in a Slower Growth market. Shery you do a lot of costcutting as well . Mike we did. Everything from operations to the investments we were planning on larger growth around the world. We just pulled back on those. We did that fairly quickly. Shery you have gone through with massive acquisitions. The medical tech company as well. Some have pushed back on those cost synergies. What do you say to them . Mike we continue to invest for the future. We are not going to that is one of the strengths of coming out of slowdowns. We keep investing for the future organically and when we see the opportunities to really take advantage of acquisitions that can leverage the synergies, the thing that makes our company greater than the sum of our individual parts, we will make those acquisitions as well. The largest acquisition we made today at happened to fall right in the Second Quarter after we had come out with a slowdown of those markets, but it was really the great strategy. Takes advantage of our global position. It will be a very strong platform for growth. Nejra nejra is everything you are saying right now meaning you are looking at more acquisitions ahead in organic growth . Shery it takes a lot of our focus and we are putting a priority on that. Doing another large acquisition in the near term is less likely, but we continue to make key strategic acquisitions. We had made one right before we announced the company in the digital space. A billiondollar deal, which is in line with some of the acquisitions we made in recent years. It does focus office on a priority. Shery when it comes to these Big Industrial giants, it is all divesting were spinning off. Do you feel the pressure to simplify . Mike we have one big idea that drives us. Centered on our technologies and we take our technologies and combine multiple technologies. We solve customer problems in unique ways. We end up specified and designed in at our customers. They are a unique Value Proposition for our customers. We end up in many markets. We see opportunities. Largely material science in markets, transportation, consumer, health care. We end up and we look like a diversified conglomerate from a market perspective. Even our portfolio is very broad. That one 3m model at the heart of it. If we do not deliver synergies off of that, if we do not have differentiated value, it is up to us to manage our portfolio. Parts of our business become disconnected from those synergies. We make acquisitions when they are connected to synergies other than that, the priority is to continue to invest organically. Shery are you bound by this big unit . You dont really see it being broken up . Mike you would have synergies. If you pull apart those pieces that benefit from not just our Technology Platforms but our manufacturing technologies, we have a lot of intellectual property in our manufacturing. Our global capabilities to operate these different go to market models from health care to consumer to industrial. Shery do you see the slowdown in growth in industrials of bottoming out anytime soon . Mike it has been more study in the second half. One way to see that is what is happening in the distribution channels. Are they adjusting inventory . They have continued to moderate a little bit. It has been less pronounced than the first half of the year so it is more stable. It still has been stable at a low growth level, and that 30 of our business in electronics and automotive, that is still negative. Shery you can still have it hanging over 3ms 100 lawsuits or so over alleged water contamination because of your chemicals. What risk does this pose for your company and how should investors see this . This ishis mike very complex. When you have been leading to try to be as transparent as we can with our investors and all of our stakeholders, our employees care about it. We are leading forward with a focus on 3m sustainability, trying to help people understand it. I think it will evolve over time. Probably get more visibility on some of the litigation next year. In the meantime, we have taken a step forward where we manufactured to remediate to step forward and solve some of the challenges. Shery do you have an idea of total liability . Mike not at this time. It is too early to have a view of that. We can get pieces of it. We have it in place for what it will take to resolve that but beyond that, it is too early to tell. Shery mike roman, great to have you here with me in beijing. The ceo of 3m at the Bloomberg News Economy Forum. Back to you. Nejra thanks to shery ahn with. Ike roman stay tuned for more interviews from the Bloomberg News Economy Forum in beijing, including with David Solomon, the ceo and chairman of Goldman Sachs. You can catch that exclusive conversation at 6 30 on the show, this morning london time. First word news with Rosalind Chin in hong kong. Rosalind damaging testimony for President Trump in the impeachment inquiry. He says Rudy Giuliani was working at trumps direction and demanding a quid pro quo from ukraine. Giuliani was calling up a white house meeting unless the country announced investigators that would benefit trump politically. President trump is expected to sign the bill supporting hong kong protesters. It was passed by both houses of congress and could go to the president as soon as today. It sets up a confrontation with china that could imperil the longawaited trade deal. Beijing says the legislation is a grave violation of International Law. Is nearing its 30 election in a year after former military chief benny gantz was unable to form a government. This follows Benjamin Netanyahu failing to do the same. Line up a news governing coalition. If it cannot break the deadlock, israel goes back to the polls. 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. Nejra Rosalind Chin in hong kong. Coming up, staying the course. Bill winters says the bank is extremely long on chinese economy and shortterm economic pressures are manageable. Do not miss that exclusive interview, next. And how does Goldman Sachs ceo and chairman David Solomon feel about the trade war . He joins us for an exclusive interview. Dont miss it. This is bloomberg. Omberg. Deals. Re not forced into we have a good strategy. It has been quite successful over the last few years, and we are wellpositioned to capture organic opportunities. Of course, if we have an opportunity to evaluate the nonorganic options, we will, but it is not something we are forced to be. Nejra Sergio Ermotti speaking with manus cranny in beijing. He says the group does not need to do a deal to change the scale of the business. One group that is looking to a change of sorts is bengal santander janko Santander Banco santander. She spoke in an exclusive interview. We are ready to grow. Our business in dallas is doing great. Theres a lot of growth here and it is going to be profitable. Does growing in the u. S. Eventually mean buying in the u. S. . Not necessarily. I think we can grow organically. Nejra Standard Chartered ceo bill winters has seen a reasonably robust Global Economy but is going extremely long on the chinese economy. Inspoke with Francine Lacqua beijing. Are long and the medium and the longterm. In the short term, there theres some pressures. 5. 6 growth, these are pressures that are manageable. I think we will continue to get stronger. Francine it seems we are in a better footing than we thought we would be three or four months ago. It is still fragile. Theres lots of things going on in the geopolitical world which could derail a robust economy. I think it persists for a little while. We get into 2020 and beyond and i think it is pretty good, actually. It feels like we made some of the adjustments related to the initial phase of the trade war. If things get worse on any of the funds we watch quite closely, it will be different. We are optimistic we can avoid the detour back into that. At Standard Chartered, we are continuing to invest as if the economy will steadily improve over the next year and a half. Francine if we stay in this trade war without getting a phase i deal but without it getting worse, what does that mean for the World Economy . Bill i think china has adjusted and supply chains are steadily adjusting to the to this reality that it will become more expensive. We are seeing some of the companies dealing with it. The one that was identified as a result of a visit from President Trump was apple. Very difficult for apple to run their business. That is not a good thing for u. S. Consumers. I would say there is a flexibility and reality on both sides. Francine if you look at apple, what does that mean . Is it more likely beget a phase one deal because of the impact it could have on u. S. Consumers before christmas . Bill i do not know that the christmas effect is that big given the timing of things. Right now, it is as much a sentiment as anything. If the Consumer Community detente,there is a investments will begin again and people will begin to stop taking actions that one takes if they think tariff increases are pending. It is a confidence thing as much as a behavior thing. Francine the supply chains have changed. Will it go back to what they used to be for the resolution . Bill they are evolving anyway. China is not the low cost producer. It is a much more prevalent high value added producer so that change is happening anyway. The world was changed forever. The confidence of supply from a Single Source for anybody in the world has reduced. So people will be spreading their bets, hedging themselves, arranging alternative supply chains, and i am afraid there will be building more and more at home. I sound afraid because we all know that this whole theory of comparative advantage, we should be doing things where they are best. Bill wintersas speaking to Francine Lacqua at the Bloomberg News Economy Forum in beijing. Francine lacqua is standing by. Joining us again today from the u. S. Economy forum with an exclusive interview. Great to see you, francine. Francine we are delighted to be here at the new Economy Forum and i am delighted to be joined by Goldman Sachs chairman and chief. Mr. Solomon, thank you for giving us your time today. Thank you for joining us. When you look at the Financial System in china and the fact that it is opening up, what does it mean for goldman . How much money are you putting in it . The most important economies in the world. Goldman sachs has been in china for 25 years. It is important that the opening up continues because we would like to own our business and take control of our business, so economic control of our business, so we are watching what is going on in the trade discussions. At this point, it is talking about the Financial System. If that occurs, we will own 100 of our business and i would expect it will make more significant investments there. We went in front of our board a couple of months ago with a fiveyear plan for china. And assuming we could own 100 of our business, that would lead us to put significantly more capital onto the business and significantly increase the people we have on the ground. Nejra how much more capital . David a significant amount. Hundreds of millions of dollars of capital potentially. When you think about the headcount, 200 people in beijing and we could see over the next five years that that number could grow materially. Francine that would be World Management . David our primary client franchise. Serve a very broad array of clients across china. We do think that the Wealth Management opportunity could be a very significant opportunity over time and we are starting to think about ways we could partner with people here to build out our Wealth Management presence. It is a business we are only nascent point at this point in time. Francine do we carefully get a phase one . David i think we care a lot. One of the big issues when you think about Economic Growth in the mediumterm and longterm is the u. S. And china finding a way to coexist more productively economically. I think there is a good chance we will see some progress for the trade discussions. I have been fortunate to speak with policymakers on both sides and i am encouraged. I think we could probably expect the progress to be in stages but i am hopeful we will see some progress and i think it is important. Here in china, the chinese realize it is important for them. I think the u. S. Realizes it is important for the u. S. And for Economic Growth around the world given the size of both economies, it is important for everybody. Nejra does it actually mean something concrete for the World Economy or is it just the status quo . David we have to hope that over time in a world where both of these economies are super important to Global Growth that we could find a way to make progress on all these issues, so certainly, a step in a positive direction is a step in a positive direction. I am a glass halffull die. I will assume chinas interest, it is in the u. S. s interest, in the Global Economy at large, its interesting to see this progress, that we should see progress over time. Francine if you see an opening in financial services, how important is it to be one of the first big banks . David we have been here for 25 years and i do not know how this license process there are a number of firms applying to take economic ownership of their entities. You know, i would hope, given the commitment we made to china, earlier we will be first. What is important is the longterm investment we have made and will continue to make here to better serve our clients. Francine talk to me about hong kong. You were just in hong kong. Celebratingve been around the world this year the 100 50th anniversary of Goldman Sachs and we have been having events in cities to celebrate or commemorate that with our clients so we did postpone an event in hong kong but i spent some time in hong kong and it is a very complex multilayered situation that we are watching very closely. I was glad to be in hong kong and spend some time with our team. We have over 2000 people on the ground. I would say that when the routine that people experience in a city like that is disrupted, it is tense. Quiet. There were not people on the streets. You could see the impact on the economy. So we are watching this very closely im hoping for a resolution because i think that is good for everyone. Francine are your clients opening offshore accounts, diversifying . David i dont see any change in the behavior of clients that are significant financial players in hong kong. What i would say is that hong kong has always been very, very important as a Financial Center across the asiapacific region. I think china recognizes the importance of that. I think the rest of the world recognizes the importance of that. It is going to be important that we find a resolution to this in the near term. Francine can it actually lose its status as an Asian Financial hub . David i dont see that as likely to die do not see evidence of that. The situation needs to be resolved. For the people who live there and are affected by what is going on, this is a challenging time. Francine talking about markets, you just rolled out in japan. You are about to . David no, we have not, and we are not about to. A digital bank that is primarily Digital Consumer bank that is primarily focused on the United States. We have taken some deposits in the u. K. , but at the moment, we are primarily focused in the United States and we are quite excited about the progress we have made. We built a Digital Consumer platform that has 55 billion, 4 million to 5 million customers, 7 billion of loans, we built a credit card platform with apple, and the are quite excited about it. It allows us to partner with others in the future. We think we have a very interesting, disruptive platform that allows us to help consumers with their financial needs in a digital format with more transparency, more information, less friction, and we are excited about what we think we can do. Its really a different business for us. If you think about Goldman Sachs long period of time we had a very high end wealth but we nt business, really havent delta with the everyday consumer. A new business for us. When you look at the client list were attracting, there are all demographics, all ages. There is no question, i have and there is 20s no question they are very attracted to the digital applications. Hey are not typically walking into a more Traditional Bank ranch using a more traditional offering but there are people across the age spectrum that are offer. Ed by what we deposit attractive rates, less friction and were trying to develop products that for make life easier consumers. When will that roll out in asia . If cant predict when and it will come to asia. Were focused on building a thats ood business primarily based in the United States and as we make progress think about whether or not it makes sense to expand to other places. Apple. Mentioned a couple of weeks it came under ressure because of an algorithm. First, when did you hear about the news and whats the next this . In how you can fix i would start by saying were very excited about the launch of a credit card. Partnership with apple has allowed to us offer a credit gives at we think consumers more information, more flexibility, the ability to do digitally, and the launch of it by any standard has been cobranded cessful credit card launch to date. There is no gender bias in our for extending credit. When somebody applies if they are a man or a woman or married. Set up our when we credit processes, as is required under law in the United States, brings to all credit platforms a Third Party Consultant to make sure there biases in thated process. You just used the word black box. When you look at our credit process any individual that applies for the card we can look at the exact specific characteristics of why a credit communicatemade and with them about that credit decision, and so one of the things were trying to do is transparency and well continue to work at that. There is no bias . No bias. No bias. There is no question that can get applicants different results and that can be for a variety of reasons. Ut were working and were going to be very focused on making sure people understand hat when they apply individually for credit, there are a whole variety of factors that go it into. Not one but its their individual credit and well work over time to deliver more clients ncy to our because thats one thing we like about this credit card. How can you have more information . You go on, you apply, youre immediately told what your credit line is. If you dont like your credit line, you can call and give them can information and there be a change. Were working with apple to improve that transparency. Do you worry about liquidity in the market . Ust, you know, liquidity looking a little bit funny as we go towards year end . Panel here oke on and i dont know if you saw it and if thats why youre asking there was sked if some stress in markets over time, you know, what would you be worried about . Liquidity. There has been significant shift n Market Structure and regulation over the last 10 years. We havent had a lot of market we ss so one of the things think about a lot at Goldman Sachs, if there was market can there be liquidity issues . The events in the repo market, a month ago, are an indication of the fact that and t structure changes, that for some reason the supply and demand market changes you tightening and liquidity. Thats something well watch and on. Focused can you protect yourself if it happens . I dont think its so much Goldman Sachs protecting speaking, generally investors buy liquid securities. Participate in markets, and they re looking at the amount of liquidity thats available in those products today. One of the things you have to do risk management, in a per of stress you have to expect hat there is going to be less liquidity, and you might be in a position where you have to hold hat longer than you would like to. So you have to have enough liquidity to protect yourself for sure. From liquidity and the trade war, what is it . Shadow banking . Andstors looking for yields taking too many risks or Something Else . Its my job to worry. About job to worry things affecting our clients but i actually think in a lot of at the environment moment is relatively benign from an economic perspective. The u. S. Economy is doing quite well. U. S. T, one of our lead economists in the last 24 hows was talking about the fact we ight make some progress on trade and Monetary Policy. Been more accommodating. Expecting in 2020 a slight acceleration in growth from where we are. Hes more positive. He also commented on the fact given in the uk there is more there will ow that path out of brexit without an abrupt thump, could see a slight acceleration in Economic Activity and if you look across in pe, maybe an improvement whats path out of been slower. So economically, i think were doing okay. Of things you lots that can change that. Anything thats positive out there . Describing are things are getting less bad. 3. 5 ,e world is growing at thats not bad. I think you have to everybody looking for whats wrong. There are a lot of things going well. Are there issues, sure . There uncertainty . Yes. Relationship. S. And trade tension a headwind of growth . Yes. Make progress and find ways through knit yes. High you step back, at a level, things are going okay. The economy is moving forward, nd there are lots of issues, lots of issues and political processes that need to be discussed and dealt with. Find places where we need to do better, but generally speaking, from an economic okay. Ctive were doing given all of that, how do you see Goldman Sachs in the next five years . Where are you putting your growth . Where are you putting money in . Units here sure. Weve talked a lot about this. Eve talked a lot about were trying to find opportunities to continue to grow our franchise and business. Obviously on strengthen our core existing that weve been in for a long time. Places for places where we can make investments. In any business there are gaps youre not performing where would you like to and the discipline of going and saying share . Our market can it be improved . We do that in our businesses all the time. Weregnificant thing that doing is that were focused on building a Digital Consumer as you and the u. S. , i talk about. Were focused on expanding our ealth management capabilities to a broader audience. We made an acquisition earlier this year thats helping us to that direction, and, in addition, were adding certain products and services that can existing clients. So an example of that is that weve built a transaction platform. A Corporate Cash management platform, that the firm is now on, because we used to be a service, and were going to invite clients on to that platform in the first quarter. Expand making steps to our client franchise while adding some new businesses that traditionally been focused on. To be is it going resolved what kind of time frame . I expect repeatedly as ive trying to were resolve it as soon as possible. Were doing all the things that in our control to resolve as quickly as possible. Here is not a lot else i can say. The figures floating around are between 2 billion and 3 billion. Working to solve it as quickly as we can and well be happy when we can get it behind us. Thank you so much for joining us here on bloomberg. Music gets louder, well london and you in plenty more. Chief executive of Goldman Sachs. Fantastic conversation. Thank you so much. T the Bloomberg New Economy Forum with David Solomon of Goldman Sachs. Lets check on the markets. Risk in the some asian session. Pacific index posted its biggest drop in three months. Came off the low slightly, but what caused a little bit of concern is the fact that expected to mp is sign the hong kong bill despite chinas warnings, and also deal s that the phase one could be pushed back out to 2020. Year yields down a basis points. Switch out the boards. Seen a rebound from a oneweek low and the reason for that is bloomberg was reporting top trade s negotiator was cautiously optimistic on a deal so you can steady, edging into negative territory. Primarily jumped 3 yesterday. The story there to do with the job. Oil a little soft today as well. So about our top story, chinas negotiator is cautiously optimistic about reaching phase trade deal. It comes as talks continue to stretch out due to tensions over of which f issues one is hong kong. Donald trump is expected to sign legislation passed by Congress Hong kong protestors. The move is likely to set up a confrontation with china which called the congressional action a grave violation of International Law and jeopardize trade deal ed between the two. Edward park from Asset Management is still with us. Its great to have you with us this morning. So on u. S. China trade how are balancing out optimism versus caution because it seems that were either at the point atsigning something but also the point where everything could break down. They are looking at the may proposal. Might see that as a positive but then the hong kong story complicating matters. Exactly. Has been the classic story. Noise has been moving from over sm to pessimism last year and a half. At the moment on the margin i more were on a slightly optimistic position than we were, say, three, four, five months ago. Really ay, the interesting bits coming out at the moment is the idea that the negotiations, there of tariffs. Oll back anything that moves this way rom december 15 hike is going to be positive for markets. The mood music in general is positive. However, at the moment it seems today were seesawing between the two. Absolutely. The mood music being more positive is definitely reflected particularly u. S. Equities, the s p 500 hitting high after high recently going now overboard territory but weve pulled back a little bit with the risk off the past couple of days in between xuk and euphoria. Does this make you want to add to equities at this point . Weve actually been increasing. There are a few facts. Kind of china trade is have move down in political risk. Weve got a reduction in yields globally. Definitely a theme of 2019 and weve had qe keep on being told its not qe but it looks like it to me. Cycle adjustment. On top of that, youve got seems nufacturing, it like its bottoming in terms of the pmis, maybe not in the usa. On that later but definitely in terms of the United States. Ts generally setting a slightly more positive message making it relatively easy to though were hitting all time highs. The main reason for that is earnings yield available in u. S. Equities is around 5 and now youre getting one cent on f, treasuries. Its really not that attractive. That relatively differential, global locator. So strategically and tactically overweight to equities. You have a preference for the United States. From david d solomon, c. E. O. Of Goldman Sachs and he said generally speaking perspective, mic were doing okay. Support ood enough, to equities at a valuation level at almost 18 . Scenario a really good for stock markets normally. Hen its really good, the potential of overheating, the potential of inflation coming down the line, actually okay is good. Y and you can see this in the inflation break even, for example, no real sign of overheating. When we look at the u. S. 70 cents riving about of the economy. Retail sales, yes, we have a slightly soft patch in terms of but inomicide depot, general its a more positive picture. The global back drop is okay, i would say. A bit more optimistic to goods but it not overheating territory. Why we can be more constant that the policy will stay in force. Asia, has to do with your outelectric for u. S. China trade ut if we dont get the phase one deal by the end of the year and a pause on the december reacities ll you tactical overweights . We probably wont. E think coming into 2020 elections, donald trump will want some form of bill. Really is i couldnt really expect too much on the timing that. According to nd political factors, pressure on the feds, things like that, that to do but p may want i think its likely to come before the november 2020 election. The fact that is quite cheap. Asia pound. You take that against the u. S. Market hitting all time highs. 17 1 2 times asia is below 13, quite similar to the of the united kingdom. We always talk about everyone underweight but the growth story in asia and the bility for children to support is so much greater in that region. Actually were actually, im not saying that if its pushed back were not saying that would change our story too much. Asset management stays with us. In lets go to bloomberg hong kong. Hi. In the uk, the labour party to take down rs billionaires who profit from a rigged system. Jeremy corbyn is launching his partys manifesto promising change. He says he welcomes the fury of and powerful in his plans. Testimony for President Trump inquiry. Mpeachment the u. S. Envoy sondland says trumps was working at direction and demanding a quid pro quo. He said he was holding up a white house meeting unless the announced investigations benefit trump politically. After former military chief unable to form a government. Prime minister netanyahu failing same. The now something that hasnt ever happened in israels 71year gets to lineiament up a new governing coalition. It cant break a deadlock it goes back to the polls. News 24 hours a day. Tictoc on twitter, with analysts in more than 120 countries. Thank you so much. You another bring exclusive interview from the forum. Erg new economy us. Rons c. E. O. s joins dont miss that conversation. Plus the investment banker need to do a deal to change the scale of the business. Well bring that you conversation from bloombergs Economy Forum in beijing next. This is bloomberg. Next. This is bloomberg. Giuliani was working at trumps Prime Minister netanyahu failing thank you so much. Looking at the Common Ground they share, all business is important. That was president of the Asian Infrastructure investment ank on the potential for a phase one trade deal. Speaking on the sidelines of bloombergs new Economy Forum in beijing. Interview. To another Sergio Ermotti says his company positioned, well among the risks of hong kong and the ongoing trade war. There is no need for a deal to change the scale of business. Centered towards, you now, our position as the leading wealth manager in the world. Leading asset gatherer in the and Wealth Creation is a trend. R the need of individual investors invest money, nd is a trend that plays very well to who we are. Extremely well positioned to capture growth in that sense. Okay. Chess ve got all the pieces on the board. Aybe a more exact question is, are you at the right scale . Do you think ubs is the right take it forward . Look, were the largest wealth manager in the world. Not only because of the size of trillion of , 2. 5 client asset but also were a lear in the u. S. Of the leaders in the u. S. Were a lear in asia and europe and switzerland. Therefore, we are well it willto capture ventually be an issue for many players. [inaudible] rumors are in the market are, oure looking at this asset manager. Are you going to need to do it to change the scale need to do a deal. But, you know, its exactly like saying, you are never going to deal or you need to do a deal. Can really, in you ndustry today say, know, youre rooting out doing a deal. Ut were not forced to do deals. We have a good strategy. Successful for the last few years and were well positioned to capture organic opportunities. Of course, if we have an opportunity to evaluate the nonorganic options we will but that were ething forced to do. Press speculated you on until 2021. Is it reasonable to think that time for you to think about moving on and handing things over . No, i get to come to zurich very quarter but its a question for the market. You form the deal and set the for the reinvention. When do you think is the right time for to you think about it . I have said it in the past. Nough has been said about succession. Weve said everything that can be said and i really dont want on the subject. That was bloomberg speaking Sergio Ermotti. Hold. Licy is on federal Officials Say threats to the economy remain elevated when agree to keep rates steady. They cited Downside Risk of International Trade even as they policy would be well calibrated after the latest easing. Art of the reason that youve put on a tactical overweight in global equities, you were iscussing earlier is you see that the fed and markets have met in the middle in terms of 2020 expectations. Were to deliver one cut or more in 2020, would that ake you really concerned about risk severities because it would show that things have gone from okay to bad . The main reason for our tactical portion over the summer was that mismatch. Moment there is a 60 2020. Ed chance of a cut in fairly mooted. So for us, our main concern is bout when markets start saying is ally, you know, data poorer. Poor manufacturing data that on falling and markets just lowering and lowering an lowering rate expectations. Where we get concerned because we dont think the fed will deliver something dramatic. Comfortable with a 60 2020. Of one rate cut in its when that drawer opens up that we get more concerned about equities. European equities have not really underperformed u. S. Equities over the past 12 months. Gotten underweight on there. Why . We do to a of this comes down couple of factors. Risks in the area, and in the past, it doesnt become much of a problem until rates go up and rates arent going up for a long time. Thats bubbling away. To that we have this awkward position now where trying to pass the baton from Monetary Policy to fiscal policy. For the time being, the German Government which is almost uniquely positioned to deliver doesnt seem to be keen. When you look at Something Like last week, ased actually we saw germany narrowly a technical recession. 1 growth, thats probably the orst thing that could have happen. Some say a technical recession would be a good idea. Exactly, it could have encouraged that so now what e might be going into is a world where for germany in particular, actually very bad news if it e good oves away from this black zero of fiscal target. Definitely one to watch, and if fiscal, ee movement on that would be a situation for us to move to overweight in the region. Deployed some of your cash in the uk but still underweight that. Well have to discuss that next time. Were out of time. Deputy c. E. O. A rocky 2019 for icron in the trade war but is the worst over for the u. S. Tech giant . We head back to the economy for an exclusive interview. Do not miss it. Littlele, were seeing a bit of pull back on concern about the prospects of a phase one deal. This is bloomberg. This is bloomberg. Good morning, from bloombergs european of quarters, in the city london, this is bloomberg day break europe and this is todays stories. Beijings top trade negotiator is cautiously optimistic on a one deal. He markets falls as Congress Backs a bill defending beijing protestors. I think there is a good chance well see some progress on the trade discussions. Fortunate to speak with policymakers on both sides, encouraged. Lots more newsmakers to come rom bloombergs new Economy Forum in beijing. Mehrotra gave us his take on china. In the medium and long term, short term there are some pressures stanchart. Pressures that are manage ability. The economy is very, very strong to get ill continue stronger. Weighs in. Were well posited to capture opportunities. If we have an opportunity for we will but its not something were forced to do. Daybreak europe. The Economy Forum is in full the topic ijing and on scripts mind is the u. S. China trade war. We should pursue cooperative and sustainable security and sum gain and cold war mentality. In the present day world, only cooperation is the answer. Soaking up ogether, differences. I think from a Single Source, for anybody in the reduced. S i worry that some of the incentives will be irreversible. This is why its so important to results. As negotiations go forward, you see supply chains and customer chains move . We havent seen that. E continue to service our customers in china with their plans here. The Semiconductor Industry ad been one of the most noticeablevince of the ongoing u. S. Trade war even if some have of the sector performed strongly over the past few months. Micron technology, the tensions pain ed to earnings especially after the trump administrations decision to the list huawei, among companys biggest clients but as demand for memory chips shows rebound the worst may be over. Lets go live to beijing where coanchor is standing by. Hi. Good day to you. Its a roll call of global time we focus is in on tech forum, sanjay me now, c. E. O. Of micron technology. Welcome to the show. Good to see you. Good to be here. Thank you. Do you a lot of business with huawei. Want some clarity it, are can provide you on the first list to reengage with huawei . Give me . Te can you i can tell you that im here you know, and, certainly this is developing slowly. At this point i dont have any comment to share with you. Have you had conversations would you describe having ersations youre with u. S. Officials . Very large global company. Were engaging in conversation governments around the globe. China isur business in certainly important to us, and as part of that say the you conversations are constructive . Absolutely. Okay. I was just reading a little bit more about whats on here in china, the state put in about 29 billion this country positioned. Is that perhaps a bigger threat wars, e interim trade selfsufficiency for technology supremacy, being number one on agenda . What i can tell is you the memory micron these are extremely important when you of 5k. The trends today and in ud computing, products forp, the the customers here in china, were a very valued partner to those customers. Micron has a very rich history of 40 years. Remendous amount of innovation from the company. 40,000 were used to all around the globe. We, of course, continue to focus on bringing new products, new for the benefit of customers around the globe ncluding the ones here in china. And there are challenges therein from a production point of view. Deal with the reality of a trade war. I want to get a sense of, how additional production are you taking out of america and moving it into other Global Centers . That this year . Do you anticipate to do some of year . Next we actually have manufacturing of our leading flash products around the globe, in the u. S. , we have manufacturing. Weve not taken any u. S. Acturing out of the n fact, our centers, in manassas, virginia, is a Center Automotive products, number one market share. Very diversified Global Supply chain. Agile. Aptable and and in these teams where there have been some challenges on the trade front weve seen that weve been pretty resilient n terms of addressing the challenges and moving on. Bringing value from our products globe. The one of the questions, have juncture, ill ask you the same question, have to share ny Pressure Technology here in china . S this a media and perhaps a political myth that this is one of the defining pillars of trade. Have you been forced to share . Here ron has shanghai in china, we have as well as we have close engagement with our customers. We have, as i said, and Technology Capability all around the globe as well. So we, of course, continue to here in our customers china bringing our products, bringing our technology, and we eally value all the relationships here in china as well as around the globe with customers. Would you say that i share echnology, not that im forced to share technology. I share willingly. We share with our customers that were built using our Innovative Technology products, of course, are defined in close collaboration with customers all around the globe. 5g. Xample, what does 5g need in terms of memory and various applications . These are the kind of things micron is very good at putting on the road map. Products, and continuing to advance an for our n agenda customers as well as of micron itself. Help me by telling me what 5g is going to do, for people at this conference and c. E. O. Dealing with businesses here what does it do . 5g is about the ability to connections, very latency, and tremendous capacity in terms of bandwidth how many devices can be connected. Underestimating theand 5g . It drive a tremendous load cycle. Its not just about smartphones. About machinetomachine communication. It will be key enabler of all he date ata thats being created by these, you know, 5g evices in the future, enabling smart cities, smart factories, smart communications, and what i to you, as t out this data gets created between intelligent devices, they with each other. They communicate with data centers. The value of data is extremely that data lives in the product that micron makes thats where there is tremendous exciting future ahead. Certainly for micron and its will be a g tremendous place of growth. Mean terms of what it will in profitability, where is going to be the biggest geographic for the biggest return in 2020 5g and beyond . Be 020 it will just smarting. 12 gigabytes and a tell bite of flash storage in new phone models. This will be a major step up in storagent of memory and that these phones will have. Products the kind of we manufacture. They will be needed, for 360 degree a game is being broadcast an youre smartphone. On the youll be able to see it on multiple radio streams coming in. So next year is the beginning 5g. New evolution in 40 of your revenue is from bottoming out . It goes 65 to 70 of our revenue is from band and there had beengh a set supply in the industry, in actuallyl 2019, micron produced the second best year in company. Ry of the there is still some extra supply but the important demand growth is higher than supply growth so its a matter of time before supply and demand get into balance. Again, when we look at the end secular demand trend, for flash, in various market applications, im excited about the possibilities ahead for our business. To greater cle back china in terms of the demand levels. Ts the lowest growth at a headline level in 30 years, lowest fixed investment in a years. Of has that translated demonstrably in the slowdown for you here . 6 as you manage at opposed to 6 1 2 , make that slowdown come alive for me . What i have to highlight to business, whats happening here, all the in the data today economy need more memory and more storage. More flash which micron makes. Ere one of the best countries in the western hemisphere that makes memory and storage. Increasing. Today its all about data. A. I. Workload, servers in the much d and imes as two times more flash than standard servers. Your best buddy, amazon and netflix and those step ers is that the change for your world . The step change for us here, memory and storage have become essential, and is value to the endmarket application. And therefore, it has become in this a. I. And 5g and revolution today. Thank you for being with us. Forum. Good new economy the c. E. O. Of micron technology, say sanjay mehrotra. Thank you so much. Lets get a check on the markets. Markets still weighed down by a phase we may not see one deal by the end of 2019. President trump is expected to the hong kong bill even though hes talk about being cautiously optimistic on a deal, you can see futures in europe on the back foot. Proposing suspending its 20182019 dividends may not be taken well by the market. On the actual close, some 5 . Switch the board. Seeing safe havens bid but thats eased off, rebounding from a week low. 10year treasury yield 10year. Ong with the in fact, just edging up ever so slightly. Bloomberg news in hong kong. Thanks. For president mony trump in the impeachment inquiry. Enjoy sondland says Rudy Giuliani was acting under demanding ection and a quid pro quo. He said giuliani was holding up a white house meeting unless the country announced investigations trump uld benefit politically. Nearing its third election in a year in israel. Was unable toantz form a government. T follows Benjamin Netanyahu failing to do the same. Now something that hasnt ever 71year in israels history, parliament gets to try to line up a new government coalition. Break the deadlock israel goes back to the polls. Motive with fiat in a lawsuit implicating its former executive. It accuses the late c. E. O. Of year long of a racketeer scheme. Its already landed some labor leaders in jail. He denies the allegations and gm is trying to undermine talks. Global news 24 hours a day and twitter. C more than 2,700 journalists and analysts in more than 120 countries. Bloomberg. Thank you. Oming up, shifting focus to merging markets, the bank is hiring in these markets to boost growth. Exclusive conversation and more from the Bloomberg New Economy Forum next. This is bloomberg. This is bloomberg. 7 18 in london. 41 minutes away from equity trading in europe. Daybreak oomberg europe in london. Focused on the growing and hiring markets and is board tiojane the up. M speaks forget were one iting an investing, in of the most exciting economies in the world. We want to play a role. Look at your very wealthy clients in asia are they impacted by the u. S. China trade war . That the biggest problem for the economy in two or three years . Has a number of impacts. Ts more difficult to make longterm Investment Decisions including that. Side. Negative on the Positive Side its led to of trade in ietnam [inaudible] they can shift production and manufacturing from one ountry to another and youve seen a lot of that. What we hope for is a resolution. Chain change . Ply maybe even more than a phase one, lets say, does the supply back to children or stay as they are . Worry that some of it will be irreversible. This is why its so important that we get results. I every time i talk to you talk to you about negative rates. Ofit going to happen because negative rates . A positive for consideration. We need the day what is growth. Hich is why were focussing on emerging markets is very important. Entrepreneurs in create markets to wealth. In ervation is necessary europe. To long term, the future is win outside europe. Are you hiring in emerging markets . Yes, we are. Are. In all units . Almost across the board. Mean, lots of dynamics. Brazil. Italy. Southeast asia is huge. Is it huge. Were hiring everywhere and a lot of offshore in which is also growing. Tiojane thiam speaking at the new Economy Forum in beijing. Returning to our top story, is as chief negotiator cautiously optimistic about reaching phase one of a trade deal. His comments come as talks stretch out due to tensions over a number of issues. One of which is hong kong. U. S. President donald trump is expected to sign legislation passed by Congress Supporting protestors and the move is likely to set up a confrontation with china which called the congressional action a grave violation of International Law and could awaited e a listening trade deal between the two. European equity Portfolio Manager at global investors. Weve seen a little bit of a risk assets on concerns about the progress of phase one. What are you expecting from a headline level going into the end of the year . Good morning. Seem to bety markets in a holding pattern. Moved ahead when President Trump tweeted that he felt the u. S. China trade deal, least version one of that was ready. In recent weeks things have become slightly more nervous. Trade sideways. Of ink in the next couple months will dictate where we move to in 2020. If we get version one of the deal we get a conservative majority and a resolution to could be on nk we course for quite a better 2020. Got some comments in a briefing saying china is urging the u. S. To prevent the hong from becoming law. This is the added complication there as well. Nonetheless have been seeing u. S. Equities hit all time highs. Pulled back a little bit but also european equities have not been u. S. Overrming in the the past 12 months so you look a lot at europe. Expectation for 2020 . If phase one doesnt go through . Particularly vulnerable . Finally were seeing inflows. Remember, this is coming from a base of having seen 85 weeks of outflow to European Equity markets. One reason for this is the season was much better than people believed. Also, europe being a large exporting region, its more than most regions to global trade. If we see a solution to the they are one of the biggest beneficiaries of them. What are you liking at the moment in europe . Particularly technology. As youve heard from many. E. O. s that youve had on the show this morning, they are all drivers so in the semiconductor clearly seeing Companies Benefit from big data, a. I. , autonomous were focusing on clear contents one does t clearly need to be disciplined about value wayses in places. Evaluation is one thing but in terms of being selective as well, are you staying away from exposed to re more the Economic Cycle and the u. S. China trade tensions . Are you seeing opportunities there if you see the sort of improving . Were very much focussed on the companies and sub sectors within that market. Ne of our core positions the Market Leader in euv technology and thats likely to the Manufacturing Industry for the next 50 years and they 98 . A market share of over they have been able to establish very clear barriers to entry. Because of that they are much volatility like with the chip makers we discussed. On your uk positioning at the moment, i best the last hour was reducing their underweight in uk rid of theot getting underweight but more incrementally positive. Your take . I agree with that. Thats what were seeing many investors globally doing. Dangerous to have underweight in uk markets. Weve seen 25 billion to to uk equities since the european referendum in 2016 is very much undervalued. To you see a benign outcome brexit and the conservative majority. I would expect you would see a all of money coming back into the uk which would benefit uk domestic stocks probably to a 3100. Er extent than the great to have you with us, us, you for joining European Equity Portfolio Manager. Interviews host of from the forum in beijing. Mike ch up with white house economic adviser. The e. U. Open is up. As we head towards the opening over 30 minutes time were seeing futures under pressure over concerns about the prospect of a fay one deal being passed before the end of the ear even though some are cautiously optimistic. This is bloomberg. Optimistic. This is bloomberg. Whether youre out here on lte. Or here on a wifi hotspot. Xfinity mobile has more coverage to keep you connected to what matters most. Thats because its the only Wireless Network that automatically connects you to millions of secure wifi hotspots and the best lte everywhere else. And now get 250 off when you buy a new Samsung Phone during Xfinity Mobile beyond black friday. Plus, you can save up to 400 a year. Click, call or visit a store today. Good morning. From our European Headquarters here in london. Alongsideedwards, matt miller in frankfurt. Good morning. The trade risk is back on. Hong kong fears spooked the equity markets. As well as a deal could not get done