Transcripts For BLOOMBERG Bloomberg Surveillance 20240713

Surveillance. Yesterday, we saw a selloff on the back of the President Trump press conference here in nato. Lets get that board up for you to look at your markets. , they are treasuries extending gains. I am also looking at shares in asia. Stocks in europe edging higher. I am looking at that vote in the u. S. House. And what that means for sentiment on your markets. Coming up, a conversation with londons mayor sadiq khan. First, lets get straight to first word news in new york city. She simply did not have the resources to keep running. ,his, from Kamala Harris suspending her campaign for the democratic residential nomination. President ial nomination. She had a strong start but her campaign failed to catch on. Opec plus sending mixed signals about output. Iraqs oil minister reiterated his view cartels should deepen cuts. An earlier technical meeting ended without any discussion of steeper cutbacks. There are a number of key members, yes, they want to do that. Addition toels in the 1. 2. As far as i know, nobody is thinking of less than 1. 2. Last quarter, australias 0. 4 asgdp growing just Interest Rate cuts failed to spur household spending. It is reinforcing expectations the central bank will need to resume easing next year. Global news, 24 hours a day on air, on quicktake, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Francine . Francine thanks so much. Now, to the nato summit starting shortly. Donald trump has been a vocal critic of nato, especially the unfair bird he says the u. S. Has borne in defense. Yesterday, he became the surprise champion. He had a spat with Emmanuel Macron over nato reforms. Our reporter is at the summit. Tensions running quite high. Can the two countries heal their divisions . Maria that is the big question. It was tough language yesterday from donald trump. Emmanuel macron was someone trump used to refer to as a special guy. Yesterday, trump said he was very rude, insulting and disrespectful towards nato when he said it was braindead. You have to pile in the fact we have the potential tally should from the u. S. When it comes to french products over the digital tax. There is one thing trump kept repeating, the fact that he is not going to let other countries tax american companies. If anyone is going to tax those companies, it is going to be the u. S. I have to say, we heard from officials through amanda macron who said ultimately this is trump reaching out to his the mystic audience and the to his domestic audience. He did not backtrack from the brain dead comment. He said he is going to speak for europe. Francine when you look at President Trump at their commitment to nato, are we sure it is a uturn or just to get at amanda macron Emmanuel Macron . Its interesting because he changed his language when it comes to nato, that the u. S. Would not pay to protect rich countries. Yesterday, he said nato is working well and tried to take credit for the increase in spending. What is remarkable is nato is letting him run with that line. Said, ultimately, i do not care why they are paying more. We are waiting to see whether or not nato changes its language when it comes to china. That is something the u. S. Would love, a tougher approach when it comes to china. Francine i reporter on the ground and our reporter on the ground and more to come through the morning. Freddie, a founding and chief investment officer, welcome to the program and welcome our executive editor for International Government who has been following politics. Welcome to both. I have like a million questions. About theres a video President Trump at the press conference. Trudeau was saying just dropped jaws dropped. What that backlash . Will that backlash . It depends on the president. These videos happen at every summit. They can be caught on camera, theres gossiping that goes on. In this case, it was the fact the u. S. President has a desire to go on and on in his press conferences. It depends on how donald trump reacts when he arrives. But the broader discussion is really about nato itself and its future. Particularly how the french president lays out his agenda at the meeting for reform. Blip but possibly be a it depends on the president s mood. Francine he said it depended on china and trade deal going into the election. We are also getting live pictures from the president of turkey. On china, do we expect them to know more from china . Is theywe are hearing are dismissing what donald trump said as an offthecuff remark. He has a penchant for saying offthecuff remarks. The feeling is the u. S. President and the u. S. And his campaign cannot delay until after the election. Gettingage we have been his negotiators feel they are is hisward negotiators feel they are moving forward. Francine we understand the u. S. And china are moving closer spite this heated rhetoric. What does it mean for the markets . It leaves us in uncertainty. , but forsarily worse stocks exposed to tariffs work cost of goods sold, it continues to push pressure but does not change the longterm narrative. Francine what we understand from our scoop, these are our people talking to people familiar and we understand the u. S. And china are closer to agreeing the amount of tariffs despite what is going on with hong kong. What does a phase i deal mean for equities . Freddie this has been a longterm deal and would be the best solution. But its almost impossible given he needs to beat them. Stages and ily be believe we will ramble on through the election. Meanquities, it needs we need continued high risk. Francine President Trump was downplaying the urgency of a deal. People who spoke to us on the condition of anonymity say it was just offthecuff. Who does policy . Does it come at the end of the . Ay, depend on President Trump the president announces as he decides to. He suddenly announced he would put tariffs on steel and aluminum, catching everybodys surprise, including u. S. Officials. So he can announce policy just like that. However, there has been serious negotiations going on with highlevel officials and that process seems to be continuing regardless of what the president is saying. We can see his comment was perhaps him just pondering the possibility. Francine you could describe it as a chess game, but is this tactfully a strategy . Downplaying his desire for a deal. Freddie it is a chess game, but no one quite knows the rules. Yous clearly his tactic, if have read art of the deal. It is always a feature of his negotiations. His war with china is a great battle to be fighting. It gives him a lot of promise, same way in 1984 we are at battle with the east and west. If he can rumble the song he has got something to continue to promise as a victory in the future. I dont think he would mind rolling through. Francine december 15 is crucial because that is when we know if there are extra tariffs. And President Trump afford china battalion retaliating . Rosalind china is making it clear that, while they are angry about some of these things like the bill passed by the u. S. Xinjiang around discussion about the muslim majority uighurs, there have been cautious they have been cautious in responding. The actual action is middling. Stopping warships from visiting and banning individuals from going. That is pretty small fry, really. Showing us china does want a deal. Francine the heads of state will arrive at walked the lobby. How would you describe yesterday . It was smooth, apart from the spat. Rosalind thats right. Donald trump met with Boris Johnson hind closed doors. Behind closed doors. That did not creep into the election as much as feared. We have seen a general unity that it is time for a conversation around the future of nato. The germans are putting together a working group. It was really just the exchange which got tense. That really reflects Donald Trumps domestic agenda. Francine freddie, what is priced into the markets . Anything on geopolitics . Freddie on geopolitics, we have the worst kind of uncertainty. And uncertainty with a rolling deadline. We always think it will be sorted and it goes on. I think that is continuously priced in. I dont think impeachment is. If the economic get worse, bond yields fall, and less is priced in. Francine where the leaders will meet is a nice Country Estate that has been used for weddings of a footballers on many occasions. Believe that is marine one. There are decoys to make sure the president is safe. The impeachment process is following the president around the world. To be have any insight on how he is taking it . Saying u. S. See him democrats were behaving unfairly by putting these hearings on while he was in london trying to be president. But the release of the report yesterday is quite damming, even though they did not say outright they are pushing for an impeachment vote. It is clearly setting things up to have a potential vote for the end of the year. They dont want it to bleed too far into the primary campaign. So you can expect the president will be tweeting and commenting quite aggressively on that and it could be a distraction. Weights as we at the as we await the president , what does he need to see the summit deliver for him back home . The world stage and enjoys speaking to the media. Does it actually help back home . Rosalind possibly. Say he is trying to do is my policy might be unorthodox, and it is delivering. I managed to singlehandedly save hong kong from obliteration by china, which is what he said. He can see from his language is starting to wrap up that rhetoric on north korea and threaten ramp up that rhetoric on north korea and threaten. He feels that makes them strong at home, saying he is putting America First. He is hoping it will play well at home. Francine there is another helicopter coming. , actually, about the defense of the u. S. And how they travel. But theres another helicopter maybe the president is on that one. Freddie, when you look at the policy of America First, does that mean europe last . They are kind of stuck in the middle between the u. S. And china, plus these extra tariffs. Freddie the idea of american first America First is rhetoric. They have to play to the home audience and continue to ramp up the rhetoric so much higher. But when ramp up you look at the private meetings , broadly, they are getting on with business. The same is true through the future. China may be an exception, but in terms of trade deals with europe and the u. K. , i believe they will be relatively smooth processes. Francine what is nato actually getting done . To these leaders have commonality . Rosalind the u. S. Would like commonality on china. They want to bring china into the discussion. You can see the french saying that this is a military alliance, not the format be looking at chinas economic growth. Sure, there are security issues, but this is not the format. But nato has been an anchor point to European Security since world war ii. It has been the pushback against russia, for example. Eastern european states are still saying they need nato. You dont realize it sitting in london and elsewhere, but does matter to us. There is a strong sense that nato is relevant, important, that it has been through difficult patches before but it certainly does need to continue. Francine we are seven days from an election in the u. K. What do the parties need from nato . A distancing from President Trump is what we were discussing today yesterday. Rosalind it has taken a bit of a backseat and will continue to do so while Boris Johnson is hosting. You dont really want to throw time bombs into the Election Campaign when the head of state is hosting other leaders. So there is a bit of courtesy that goes on, but the key event will be the leaders debate. As soon as they leave today it will be back on. Then we see Jeremy Corbyn debating on friday. Thats the last chance Jeremy Corbyn has to win voters over. The polls are still showing was johnson in front. The betting agencies are showing 50 odds for Boris Johnson to get a majority. Francine big moves in the pound. President trump shortly possibly look out walk out of the helicopter which just touched down in watford. Nators are taking meetings are taking place and celebrate an anniversary. I believe the president will walk out. President trump come arriving on the lawn of the hotel in watford, u. K. The pound of its highest since may. How much volatility are we seeing on the pound . Briefedhnson probably the president not to weigh in on politics. Freddie the pound will go higher, we believe it is volatile. In most scenarios, the pound will move higher. The Hung Parliament story at least you know youre not getting a no deal, possibly a second referendum. What we have been lacking is an enormous amount of confidence in the economy from our leaders and external observers. A house orof buying investing in this country if you are thinking a buying a house or investing in this country, he would wait. So you are simply not buying the pounds and i think sterling will drive higher in the next number of years. Not merely from the event, but in a flow perspective. Francine to be have any insight on how he would work with Jeremy Corbyn . Jeremy trump said he is easy to get along with. Rosalind the president also said he does not know Jeremy Corbyn and recognizes some of himself in Boris Johnson, which is why they have such a good friendship. But he did say he would work with anybody, and that is true. Donald trump has worked with a variety of animal species of leader, for lack of a better word. He recognizes strengthen others whether he disagrees with their policies. Even with Emmanuel Macron, they argued in public, but they quite like each other. Theres a sense of admiration. You can see that with Jeremy Corbyn. It is too soon to tell, though. Francine marine one is referring the president has a smaller white hawk. It is interesting to look at the details of the president. There will be many more leaders and its interesting to see the dynamics of that. How does President Trump deal with turkey . Rosalind thats the question. He did say he might meet with president early gone erdogan. Officials behind the scenes said they met only recently in washington, so there was no need. It is clear they would like to have that sit down, but there is anxiety. When he visited washington, there was outrage in congress about that. Theres a strong sense donald trump gives erdogan too much leeway on things like syria, Russian Defense missiles. Whereas in congress, there is a concern that turn it on erdogan is getting away with it. An awareness of too much interaction with the turkish leader. But they did not meet yesterday, theres time today, but we dont know. Francine going back to u. K. Election, what does Boris Johnson need from the other leaders . I have a great chart i have here. It basically shows it reached highs since may. Fromhat does he need president erdogan and france . Particularly, Jeremy Corbyn is getting attacked around weakness in his defense policy. Comments about nato and the nuclear button. I dont think he needs to be particularly strong in the conversations, just show he is standing behind it. To be hosting the event is sufficient for him in terms of the campaign. I dont think he needs to make anymore key messages. Francine lets talk pound, its always great to talk pound. Freddie yep. Francine will pound move on every single Leadership Debate . Freddie yes, sadly. Francine do you trust the polls . Freddie not particularly. In general, i find them tricky to look at. But this election is not just a linear swing between two parties. It is a complicated lattice of opinions. Remaintory,ght which radio . Which way do you go . Constituency polls are relevant. The last that came out was the most interesting to date and had the tory party with the large majority. Likewise, i still dont trust it. The pound moved up a percent and has followed through but it has hardly moved a lot. , in my opinion. Francine President Trump we are tracking him live and saw him get out of , tweeting saying he enjoyed his meeting with Boris Johnson of the u. K. They talked about numerous , nato and trade. , isheres a Hung Parliament the pound stuck in a range . Freddie i think that is right. You would argue the pound should not go much lower if we get a Hung Parliament, given a guaranteed no deal and a second referendum, in my been opinion. On a conservative majority, the pound should rally. In Jeremy Corbyn is still languishing at his bookmaker alts. Odds. People should be looking to get longer pound, but will remain range bound if we dont have a majority. Francine if we look at the polls, as labor have a chance of getting a majority does labor have a chance of getting a majority . Rosalind anything is still possible. There are questions about the polls and debates. Some are consistently showing the conservatives in front, but it is about individual seats and tactical voting. In many seats, conservatives may be five or six points up, a margin of error, really. You have labor voters who want brexit, you have the middle ground, other parties sanctus put the boat. Theres vote. Theres a lot of advice going out so it could come down to intercultural individual seats. Its possible we get close results. I am fully familiar with the president s security detail. Watfordjust arriving in before arriving in the growth with other leaders. We did catch up with the secretary of general secretarygeneral of nato just minutes ago. When you look at the other leaders out there, i dont know if you have thoughts on emerging markets, but could anything come out of the nato summit where you build a big position on turkey, or oil stocks . Freddie thats not the way we trade with a macro buys. Bias. But some things that could come out, geopolitics around oil are a key driver and helps fuel the dollar move. To get a level of certainty around opec meetings, a level of confidence run oil supply would be helpful. Two currencies move on the back of these things . Do currencies move on the back of these things . Hedge, but the problem with currency investing is that the dollar is all important. If you think about other currencies, the chinese yuan is so politicized its almost impossible. Francine isnt the dollar politicized . Freddie absolutely, but my point is that yen is the same and sterling is uninvestable. Everything just leads the dollar higher. Uncertainty, more clarity, everything is pushing the dollar despite policy pushing for it to come down. I believe that if you get more certainty around oil prices and brexit, you will see an ability for other currencies to rise. A bigee a sharp move down in the dollar. Who will be last to leave when everybody goes home . Rosalind me. Francine [laughter] rosalind for boris, just a straightforward meeting. No particular drama that affects him. He does want to get back to to prepare and needs for his debate on friday. So he will probably be relieved. And Angela Merkel, in all of this. She has been quiet in all of this. She has a lot of problems at home and is going back to questions about her ruling coalition. Someone who is one of the key architects of the european project and has a strong interest in things like nato. Shes probably watching this with some concern. She needs to allow micron to have to debate does not want it to get out of hand. She would probably be relieved if we get to a point they agree to take further steps and look at reforms. But nothing too shocking. If you look at the world economy, people are worried about things like nato, spats, differences, and divisions, if something ugly were to happen, then central ks come along freddie that that that comes down to the fiscal policies of these leaders. Part of that is mostly domestic, but some of it is on an international scale. It is one of the most fragile, actually. What is nato achieving in this meeting . It is just carrying on. If it just existed in its form with increased buyin, that is a very positive thing. If you did get a spat and nato was fractured and other alliances were to fracture, the rest is irrelevant. There is the president france man u macron Emmanuel Macron just arriving. We are getting data out of the u. K. Services pmi a little better than expected but at 49. 3. At the leaders coming, and a lot of these leaders have real trouble. So does Emmanuel Macron. He has national strikes coming, unrest at home, a revival potentially. The goal of having these strikes is to kick up something that is a bit more protracted. He cannot really afford to be picking too many fights. With donald trump. He needs to be careful himself. He is going to brussels, so the at the same time, he needs to bear in mind that he also needs to take care of some things at home, it the economy. Ofncine the president france giving a short statement to reporters gathering outside, how muchut how will terrorism feature in the u. K. Election next tuesday . It is very hard to tell. It has come up in prior , and we saw labor and conservatives trading accusations about who might have been responsible from a policy perspective was it labor in 2008 with Early Release policies, was it the government in 2018, letting this guy out of jail and saying he was rehabilitated when he obviously was not . But how much plays into the election is hard to say. People are concerned about crime in the u. K. It is definitely an issue. Francine thank you both for joining us. Our government coverage, and we will get back to freddie lait. A bloomberg report came out saying that china and the u. S. Are closer to a trade deal. Futures are rebounding. Tone. Le bit of a riskoff lets get straight to bloomberg first word news in new york city with viviana hurtado. Viviana we begin with the u. S. China deal. Bloomberg learning President Trumps comments downplayed the urgency of an agreement. Despite the heated rhetoric of the last few days and weeks, the u. S. And china are moving closer to a trade deal. Recent u. S. Legislation over hong kong and human rights unlikely to impact a deal. An online backlash about the holiday add hitting pellets on stocks, depicting a woman showing a video diary of her time on the pellets on bike. Blasted it as sexist, saying it is looking like the woman is trying to keep her weight in check. Highprofile clashes in liver crime takesth, over, showing 20 live matches from the premier league. 20 global news 24 seven. Im Viviana Viviana hurtado. Francine Boris Johnson just arriving as well at watford, at the grove, with the secretarygeneral of nato, jens stoltenberg. We covered that life. After a short drive after theing, trying to rally leaders to Work Together and borismoments ago, johnson arriving, speaking to mr. Stoltenberg. One of the things that did go viral this morning was the group of leaders, four or five of them, including mr. Trudeau of canada, and Emmanuel Macron talking about President Trumps conference. That was not expected to be live, or at least the comments were not expected to be released. We will see if there is any fallout from President Trump. Lets get to the tech world, big changes there. The google founder will sit down will take over the running of the group. The move brings to an end day to day involvement. Dani burger is here. Danica one of the big things that dani larry page had this quest to create a berkshire halfway type structure where you have a number like company outfit that gives operational independence to google, then you get a separate budget for more nascent projects. But now he oversees both alphabet and google. This divided structure that they have had of google parent companies, then the moonshot projects over here, caused a lot of turmoil, constantly in flux. The ones over here, the socalled other bets, they lost 3. 4 billion last year, 1 billion last quarter. Companies of the then putting back into the fold into google. Former employees told bloomberg that the alphabet structure was never quite clear and that google was the tail that wags the dog. And maybe that distinction was not needed. Google share prices have doubled since creating that umbrella. Francine dani burger with the latest on google. You are watching life pictures from the nato summit. Just outside london. , from latitude investment management, freddie late. , what look at the managed that means for policy some people must look at that. Freddie im sure some people do, some people pay machines to do it, but we dont. Your top what are three tips for 2020 . What are the biggest things you worry about, and do you see markets overpriced or underpriced . Changed very little has from the beginning of 2019. The political uncertainty, these particular deals like trade deals and brexit, the only thing that has changed is that the markets are up 20 this year. Bond yields have gone from nearly 3 to nearly 1. 5 . Asset prices are more elevated. An element of caution around all essay classes is required. The second most important thing, probably most important thing, as long as the fed stays relatively easy and fiscal policy continues to ease around the world. Equity markets are quite well supported with reasonably high levels of employment and consumer confidence. Are a large allocator for the long term, equities are still a better value for bonds on a global basis. Markets are the anywhere where you can see bubbles . Equities at a record high, unclear about how exactly that will sustain . Freddie to be bullish on equities, one needs to talk more about Earnings Growth. One needs to see 8 , 12 Earnings Growth. Maybe they will be much more muted, maybe 5 per year. Next year they will be something comparable to. There is no reason why it will be any less volatile. You will have 20 drawdown in an asset class that mix you 5 to 10 per year. But it is still more attractive than bonds and far more attractive than cash. Expect returns for the next five returns for the next five to 10 years have to be much much lower. Francine can banks deal with the downturn . I dont want to draw too many parallels, but if something were to go wrong on geopolitics, freddie they have shown a great willingness to do it. Their ability to do that seems to be the question. I think they have the ability to do it. We have seen extraordinary differences in quantitative easing around the World Without extraordinary volatility. That is the only negative output. There is a huge currency devaluation because of a se excessive currency printing. The real question is, if i am the government and i want to borrow more money come in order to do so and keep yields low, i need my central bank who is not really independent to buy those bonds from me to keep yields low peer it i have to then spend that money productively. Governments do not have a great history of doing that around the world. But over the next five years, if that is the plan, you will see you that she will still see full employment, problem probably not value weighted economic growth, but there will be more spending on technology. As we discussed earlier, if you get a breakdown in Foreign Policy or international affairs, that is the biggest risk. I think it is unpredictable, but it is the biggest risk. I think so. I think they have to. They have to set the scene. They have to realize and they do realize that they have been an in normas beneficiary enormous beneficiary. Things that have gone wrong with it has led to huge amounts of capital surplus in germany. They need to rebalance a little bit. So even half a percent or a full percent of gdp, which seems almost left double almost laughable to the rest of us is necessary to set the tone across europe. Europe is in the absolute doldrums. High levels of unemployment, low levels of confidence, low levels of investment, zero gdp premuch across the countries. System tobanking extend credit. Andou need Central Banks the governmentss to revive it. Nato leaders are meeting to celebrate the anniversary of the alliance. A family photo very shortly. If something goes wrong in geopolitics, what is the first line of defense, and at what point does it hurt the consumer . The consumer worldwide is holding strong, which is why a strong inkets hold the market will continue. Freddie it can breakdown in two ways, war or no war. I hope we are not about to go to war, but that would be a very story. Nt trade wars without any actual action is what we are facing to date. That has a meaningful impact. Is in america import over 50 of their goods from china. They have been a huge amount to of thesethe cost tariffs. They have split it with the consumers, a tiny bit of inflation has passed through. But to date, not highly inflationary. Less goods there. That keeps prices down. I dont believe it is coming through yet, but the real risk around this one is inflation. The also puts a stop on quantitative easing program, also possibly a stop on the fiscal easing program. That is a fly in the ointment. It has been absent for decades, despite the most Extraordinary Program of easing. Fromine freddie lait latitude investment lets get an update on the nato summit. Maria, what will you be watching for . It was such a big scene yesterday, especially when you look at trump and Emmanuel Macron. We just heard from Emmanuel Macron today. He said when he looks at nato, is not just looking at mandeep or the problem of course is that trump looks at it in many ways is a question of money. Trump now is also saying that the 2 do not spending target, we will have to deal with them through trade. Turkey with erdogan, and of course china is on the agenda. To u. S. Would love for nato change their language when it comes to china. One of the things the United States keeps repeating is that periodme, over a longer of time, china is perhaps the biggest challenge to western countries. Maria, the video that was taken when no one knew that their microphones were being watched, which will be by President Trump at some point, any insight as to how he will react to it . Maria it is interesting because in particular for the u. K. Delegation and this is a video that was circulating this justin,in which you see macron, Boris Johnson talking about a leader that they do not they say he kept them too long because of a press conference. In just two weeks time, and then keeping a low profile. When it comes to trump, we havent actually heard anything come and he hasnt commented on the video anyway. Francine he was tweeting about 20 minutes ago, saying he had a good and fruitful conversation with Boris Johnson on trade and on nato. When will the two men get down to business . It has to be depending on the Prime Ministers after the election on december 12 in the u. K. . Do we have any idea how President Trump wants to fasttrack or put the u. K. On footing for a trade agreement once brexit happens . Maria one of the things he has always said is that the trade deal could happen immediately, but then of course there are many question marks as to how fast because a lot of this could depend on the transition period with the European Union. We still do not know how long that transition period is going to be. It is interesting that we have not actually seen much of Boris Johnson and trump together. Trump has also not really commented on the political situation here. He says he doesnt want anything to do with the election, and that is good news for the u. K. Delegation, which wanted to make a clear distinction between nato leader summit and the u. K. Elections here and perhaps that off, and could shift the campaign either way. Francine we are also understanding from our people on the ground that President Trump, president macron may have had a public spat, but they have been part but they have been getting along. We have been briefed by people on both sides saying that President Trump gave emmanuel in the italian minister a ride to the johnson residency. Mood behind the cameras was excellent. Excellent work. We will get more from maria throughout the day. Stocks are extending gains in europe and the u. S. Equity futures turning higher after we had the news report about 40 minutes ago that china and america were moving closer to trade deals heard i am also looking at treasuries and some of the earlier against the dollar dropping against its after thes, euro low euro zone is barely expanding. The economy in the euro zone is barely expanding. Pull show that the conservatives have increased their lead before the election. Lets switch focus and talk about the u. K. , but from a real estate point of view. Only about a third of people own their homes in 2016. With more Young Professionals one u. K. Based company is hoping to take advantage of the trend. It offers apartments at several has plans to open more after being located in manchester. Lait withave freddie us. We are watching the World Leaders, but we need to get active people, what people want to know, which is can they afford housing. Thanks for having me. The idea that we have is if you look at Consumer Brands around the world, whether it is for airlines or hotels or car rentals, when you think about something you want, preferences really matter. As rental is globally as an industry, there is nowhere customers can go as a trusted source. Behind uncle is to create that kind of trust. We talk about renting as it should be, that what you would expect from a customer taxtionship, when after income is going to the expenditure. Is brexit changing the Housing Market . Will it be more difficult for young people to buy homes and therefore do they need to look at rental property . Have beenink there Global Trends over a much longer period of time then brexit happened the bigger trend around that hasn the impact had on buying. The french the election is a much bigger topic talking about red an rent. A more difficult for investors to say i want to put a million, a billion, whatever we need from them . With leases and take longterm liabilities with shortterm assets. We either buy or own all of our own real estate, so it is a vertically integrated model. It gives us more insulation around the economic cycle. We have about a billion pounds of assets under the uncle brand today just in london and ran chester. The and manchester. The problem is more about red tape and the system and how you can kind of find labor and the other challenges that are sort of related to brexit. Francine so what the government is saying is that you cannot is it things like that . Through planning permissions, finding labor to build things are challenges, and to your point earlier, brexit will potentially make that tougher depending on where we land. Francine do you look at real sales stocks in general . Freddie personally involved in it, but i think it is fantastic, these sorts of businesses coming up. I have not heard of uncle before, but i have always wondered why there is not more of this type of branding in the real estate model. A billion is a large amount, but a fraction of the asset space out there. I think there is a huge amount of innovation that can happen within the real estate sector. Model was wrong, borrowing long and lending short. You need to either be vertically like ated or operate Hotel Management company where you get paid a royalty. Francine we know from insiders was briefednt trump not to talk not to talk Boris Johnson. Critic ofn a vocal nato, especially what he says is the unfair burden that the u. S. , forrding to him, has defense. Conference inhis full, exactly 24 hours ago. 45 minutes of President Trump talking about trade, china, tariffs, and saying Emmanuel Macron was wrong and calling nato brain dead. You look at the real estate properties, nato is one thing. There are huge global issues. Do people feel like they are a little more uncertain about their paychecks . Does it make them more likely to rent . Ryan there is a whole variety of reasons people are choosing to rent. Some of it is getting married later and jobs changing and being shorter. The other reason financial is, in the past, Interest Rates are 10 , inflation 15 . The benefits of owning a home financially are much greater than if you look at today on a low interestrate environment. Our view is that renting will continue to grow as an asset class, through choice and that over time i think housing and owning a home will be less interesting as an ownership asset. Francine how big do you want uncle to be . Ryan we really think of where the hotel world was 30, 40, 50 years ago with marriott as a global proposition. The goal for uncle is to create a Global Network of living spaces. In the shortterm our goal is to own and control everything we do so we can deliver our promise to the customer. World. E you say the old the younger world disrupting the market. That needs totor disrupt the market . Health care kinds of comes kind of comes to mind. Freddie the key thing to note is that in 2015 all the made in the s p businesses. Where the interesting part of the market is to date. There is no particular sector where i see imminent disruption more exciting. I invest in the threat to me in every sector is that capital is actually not the issue. Most people with a Good Business plan can raise capital. It is how to deploy it. Francine this is a wonderful conversation. We are talking about rental and the markets. Prince, andryan to freddie lait, who probably spoke more about nato than he thought he would. Thats go to dani burger. Dani this latest news on china and the u. S. Potentially reading a meeting a trade deal one of the biggest losers today is laurent should theyre planning on selling off some of their towers, but investors are disappointed because dividends came in, at least land dividends, . 70 a share. There was expectation that they would be higher. Of the biggest gainers on the stoxx 600 come up 5 . Morgan stanley saying they just released one of the versions of their games, and with that out of the way, some of the downside is limited. Execution continues to be good there there is potential upside. Gamesre announcing new they are making for the nintendo switch. Saatchi down 40 . Lastng was light in the quarter. Also costs were higher than expected. They said they will also restructure their u. K. Office with hopes of getting back to more profitability. Is doingll market well. We are certainly seeing that. European stocks up. 9 . This has to do with the trade deal. Basically everything moving off of those headlines. S p futures as well not as much as europe, up about. 4 , but apple one of the big gainers premarket when it comes to tech stocks. Other things that might be helping on these headlines, and the pound also gaining with the latest hold. Francine dani burger there with your main stock movers. Bloomberg surveillance continues in the next hour. Tom keene joins me in new york. And we are keeping a close eye on nato. This is bloomberg. Francine nato summit deppe final day after a contentious start to the meeting. Can leaders find anything to agree on . We are live outside london. Hopes for agreement. Stock 16 gains on europe and reports that china and america are moving closer to a trade deal. As larry page steps down googles head of Parent Company. Good afternoon, good evening, good morning, everyone this is bloomberg surveillance. Tom keene is in new york. Extended live coverage from the nato summit. We have been watching World Leaders arrived for the last hour. We also had tweets, President Trump saying it was good to speak to president Boris Johnson about nato and also about trade. I wonder whether a lot of leaders will be much more guarded after we had that video that was released of president macron, mr. Trudeau of canada, and others speaking about the president without knowing they were recorded. What will be interesting here is after the day, it is an invented fullday with the president eventful day with the president returning to washington. What i find more notable is the meeting with the president of the United States with the chancellor of the republic of germany, that should be most interesting. To say the least. The secretary of state there talking. Right now we talk it up with first word news with viviana hurtado. Viviana the u. S. And china are moving closer to a trade deal despite the recent heated rhetoric. Bloomberg has learned u. S. Negotiators expect a phase one agreement to be completed before december 15. That is when american tariffs are set to rise. Outstanding issues remain, including which tariffs to rollback and how to guarantee china buys American Farm products. Donald trump is a clear and present danger, this declaration for House Democrats on the intelligence committee, laying out the democrats most comprehensive case yet against the president , saying he abused his power, compromised national security, and tried to cover it up. Opec and its allies are sending mixed signals about whether they are considering deeper Oil Production cuts. Iraqs oil minister wants to cut output by another 400,000 barrels a day, but in a recent meeting, the Technical Committee did not discuss cutbacks or this week in vienna, opec and allies and rush our meeting. And giving up on making their Company Berkshire hathaway they are stepping down from roles at alphabet. He will now also be alphabets ceo. That means he will inherit projects such as self driving cars, delivery drones, and the model was based on Warren Buffetts handsoff management style. Global news 24 hours a day, on air and at quicktake on bloomberg, powered by more than 2700 journalists and analysts in i amthan 120 countries, viviana hurtado. This is bloomberg. Tom David Kirkpatrick is scheduled to be with us on surveillance this morning. Really lookin forward to talking with the author of the facebook effect. Equities, bonds, currencies, commodities. Dell futures up 1. 29. Down 1. 29. Francine there was a reversal in the last 45 minutes or so to stocks, so we had european stocks under pressure. Then the fact that we understand the u. S. And china are moving closer to atria deal to a trade deal despite the reddick we heard yesterday from President Trump, resulted in a little bit that should despite the rhetoric we heard yesterday from President Trump, resulted in a little bit of a downturn. Op or tom and i do it every time we are in london. The photo op, tom. Photo is not as exciting. Davos, folks, in tonya got a set of bagpipes and started to play them. Erdogan, seriously, folks. We see mr. Erdogan and the president of the United States coming up. Francine, please advise the audience on the importance of the photo op. Francine the photo op, and we have been talking about it all day what is interesting in nato celebrating the 70th anniversary of the alliance, it builds on every leader coming out. A lot of the troubles having at home. Chancellor merkel is struggling with a coalition in germany. Emmanuel macron was reminding us that he is going through strikes. President erdogan is in the Nato Alliance, but buying weapons through russia. Concerns that the markets have in one family photo there. Tom mr. Trudeau out on the right wing, forechecking it. The president standing next to mr. Erdogan of turkey. I am sure that will be counted the a shipby off newfoundland, on to 70 years ago, and the advent of the nato. The industry of nato. Saying hasolite and been hugely critical of President Trump over the last number of months over his unique stance with the organization. Francine, the surveillance drummers. Francine the first day, yesterday, was a Tense Exchange between donald trump and Emmanuel Macron, and then there was an evening reception at Buckingham Palace. To maria tadeo. How influential was President Trump . Maria we finally have that picture because donald trump has kept everyone waiting for more than half an hour to take that picture. Every other leader was on time the word here is that this is a power play. You want to keep everyone waiting for you. In terms of how president ial, we know he has some very tough language when it comes to Emmanuel Macron. He said he has been very nasty. The french are taking this well, saying this is not about Emmanuel Macron, this is about donald trump reaching out to his domestic audience and we are not surprised he was told to stay on script, did not comment about exit, do not deal or say anything regarding the u. K. Election, and so far he has done that. Tom here we are with a set up, and i would say the most important meeting with nato with mr. Trump, a bit diplomatic in not mentioning germany yesterday is germany. What would you suggest occurs when the president meets with mrs. Merkel . Maria for two reasons, and this was the highlight yesterday from donald trump. He said he is not going to let European Countries take advantage of american companies. He made it clear if anyone is going to tax them, is going to be me. And he also said, which is very interesting, countries that do not comply with a 2 target, and that would be germany, will have to pay more. If we do not, i will have to deal with this through trade. This is something that took many by surprise. He also said they have to pay up. Perhaps not just 2 , but also for percent. I asked officials where he got the number from. The reality is at nato they have no idea where the 4 number is coming from. The suggestion perhaps that this is an old calculation, not something new. Francine thank you very much. Of theadeo just outside photo is taking place. Matheson, Rosalind Mathieson, Bloomberg Government editor, is also with us. We have been talking about the leaders arriving current what are you watching out for in terms of tensions and friendships among leaders . Rosalind they are all looking pretty good, which is to be expected. We are getting messages of unity coming in, saying that we had better remember that nato has been around for 70 years. It is an Important Alliance to europe as a whole. The secretarygeneral saying nato needs to stay strong. We are getting all of that. When we get into the meeting, we will get the french president saying that is one thing, but i think nato needs to change. And here is why. There are fundamental threats that we need to talk about. Behind closed doors, it will be a different discussion. Tom i think the imagery there as she was speaking was profound. We saw diplomatic applause of leaders, and mr. Trump simply did not participate in the applause there there is no other nice way to put it. Explain the importance of europe. In the wall street journal, the new york times, and the Washington Post this morning, there is not one single opinion piece on the nato piece. Explain the immediate importance of nato within the traditional mandate, which was the soviet union and now russia. That has been the argument. The cold given that war ended sometime ago, is russia still the threat it used to be . If you go to eastern europe, absolutely. They feel a sense of security from nato. As a security umbrella, what it has done, it has provided protection from the smaller states for the smaller states. They feel if need be that nato will come to their rescue. We have seen that particularly in the balkans. Some would say arguably with a terrible lag, but they did get in there in the end with that conflict. In the smaller space, it does matter, and the protection from the u. S. Is essential to that. As Angela Merkel and others would say, nato as a european entity cannot do it by itself. They still rely on the u. S. To help with that. It is in americas interest to have nato continue, not just because of russia but also to avoid fresh conflicts in the to deal withd also turkey, keep it in the group. That it to be in than outcome and increasingly the u. S. Wants to use nato as a vehicle against china. So there are questions about the future, but many would say it still has a role to play. Francine currencies move on the back of nato, or barbed wires or you did not really see much move so far. What could move . The turkish lira. Thebvious that we had other two leaders appear to have Mutual Respect for each other. Theyps one of the reasons talked about bigger sections on turkey this year was because of the leaders. , the risk of sanctions, there is still a risk for theey, and for the economy, relationship between trump and erdogan is still important. Us jane foley, discuss for the so much of the tension with nato has been put soviet union to expand east, and that was a huge tension that was developed between mr. Putin and europe. Jane foley, give us an update on what currencies signifies for eastern europe. About easternhink europe, they are very much looking at the euro zone in terms of the economy and in terms of trade. Where a lot of the manufacturing is done with german companies. Pay the 2 es that do of gdp into nato, into the defense budget, then it is one of those nine. Looking east towards russia but also looking toward the euro zone, toward germany for economic support is massively important. If you are talking about the coherence of the euro zone, the coherence of the e. U. , then i think nato has to be a part of that conversation as well. Francine thank you both, jane foley and Rosalind Mathieson stay with us. Saudi aramco is now considering 25. 6terprising of billion for its ipo. This is according to people familiar with the merger. We also understand many Fund Managers have been placing orders at that level under the assumption that because there is Strong Demand for it, it will lead the deal to price at the top. We will have more. This is bloomberg. Nato is the most successful alliance in history. Is one for all and all for one. Tom the Prime Minister of the United Kingdom, with great appreciation for winston churchill. Prime minister johnson clearly speaking to a domestic audience today, speaks of nato and many was say largely invented by fdr and sir winston in 1941, onto its postworld war ii invention 70 years ago. This is outside london in watford. I hope i am pronouncing that right. The luxury hotel, a former georgian mansion. With us, Holding Court on bloomberg surveillance, jane foley, and the head of all of our government reporting, Rosalind Mathieson. We will speak of turkey later in this hour. Let us speak right now of the people not at this meeting, and that would be number one, mr. Putin. How does mr. Putin observe this meeting, and particularly within russia, having a better economy . Rosalind certainly has been commenting about nato as being an obsolete entity, but that has been hints narrative that his narrative. He might get some benefits from the actions of the turkish leader at nato, even if that is an unintended side effect. Erdogan has come into the meeting saying he is not going to sign a declaration about the baltic states, collective defense of the baltic states. His declaration is about the kurdish militias in syria being terrorists. That in fact helps russia, whether it is intentional or not. It is a side effect. Any weakness within nato is good for vladimir putin. As we go across another ocean, the North Pacific treaty organization, china not at nato as well. China looks at this as a statement of the western world. How will they perceive this . Watching they will be very closely because donald trump has realized that nato has some utility perhaps for him because people want them to take a stronger stance on china. They want he wants nato to be stronger on chinas military side, perhaps. China is saying this is a military alliance, not the nato is saying this is a military alliance, so we could see some pushback on that. China will be watching closely to see what is the collective intent about it from nato today. We expect a mention of it as a segment at the end of the meeting, but it should be pretty benign, certainly not the level of the u. S. Is looking for. Francine how do you follow trade . Yesterday donald trump downplayed the urgency of finding a deal with china, and said we bloomberg have noticed that they are close to a deal. There could still be a trade agreement forthcoming by december 15. But actually, the longer that we have to wait, the longer it goes on without a place, without a firm date, the market will become quite skeptical. Even if a trade deal is announced quite soon, the market whatis going to about phase ii . Difficult to achieve, it would not be a phase two, it would be all wrapped up in phase one. Difficult to find a compromise. So i think it is perhaps only a matter of time. Even if we do get some good news before the markets again become concerned about trade and the differences between the u. S. And china. Tom we will continue on trade and international relations. Much more to talk about with Rosalind Mathieson and jane foley this money. Today, a later conversation, an important and timely conversation with the senator from massachusetts, ms. Warren, and joe weisenthal. Look for that at 6 00 p. M. This is bloomberg. Francine this is what pound is doing. We are not looking at that because tom keene is on his way to the u. K. , we are looking at that because pound reached the highest level in seven months. Andl with us, jane foley Rosalind Mathieson. A million things to talk about the polls, the pound. But actually, President Trumps is on his best behavior, not weighing in on the Brexit Debate that much. It seems conservatives did have a phone call to his people and said stay out of the election entirely, which he has largely done. He did have some words with Boris Johnson. It was behind, very quiet, but very much trying not to put himself in the campaign, saying he would work with either Boris Johnson or Jeremy Corbyn. Francine what are we seeing in pound . There is the perception that Boris Johnson can get a working and the, that he can , if borise really johnson gets a Withdrawal Agreement through, then the no deal brexit is off the table. If the trade talks do not go well, the market will say, my goodness, is there going to be a deal at the end of this transition . Which is 12 months away. Wellhnson does perform next thursday at the election, i think at the beginning of next year, perhaps more volatility again. Back to president flies an exceptionally unique washington. What does Prime Minister johnson do when the festivities are over . Rosalind he gets back to campaigning this sort of courteous thing where the u. K. Election campaign has been largely put on ice for a couple days while he hosts nato leaders , he is debating with Jeremy Corbyn on friday. That is really the last big thing before the election next week. That is the last chance Jeremy Corbyn has to sort of move back up in the polls. They are polls that can be unreliable, but they consistently show that Boris Johnson is in front. As soon as the leaders get on their planes and leave later today, and lets face it, throw a few grenades on the way out on nato that he has to mop up, it is back to the usual for him. Francine thank you very much, jane foley and Rosalind Mathieson. Mr. Boris johnson, the Prime Minister of u. K. , talking about the london terror attack nato, saying it underscores natos vital role. 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. Row. Down two days in a liftck data check with a to the market after the 2. 4 , the three or four day pullback. Upures up 13, dow futures 130. Sterling strength as well. Francine big changes in the tech world. Google founders will step down as leaders of alphabet. End the brings to an day to day involvement as regulators. Is davids from tokyo kirkpatrick. In whatctly will change this company will become in the next five years . David i doubt if much will change, except we will have more visibility on what is going on. Ceo oftrange to have the the Parent Company completely invisible as larry page has been. Willingmeone much more and explaining what is going on, getting out in the public and showing his enthusiasm for the business. He has done an excellent job running google, and we kept calling this whole Company Google even though it was technically alphabet because we never knew what it was. Francine i thought it was only me. That makes me feel better. If we look at what google faces, it is probably regulation. How will they deal with regulators . David he has already gone and sat in front of congress and answered questions. Page was called not long ago and did not show up. Did not really help explain the company much. S willingnesschai to get out there and do the job. We have had an invisible pair of leaders for this company for such a long time, it was a question of why they werent around. Tom when we look forward to the google effect from david googlerick, if i look at i see something that intrudes on all of our lives, particularly through youtube, and yet the company is a complete enigma. Do you agree . David i would not say complete enigma. The company is the search engine, that is what the company is in terms of revenues and profits. It is not an enigma, but it is unruly and we are facing a time when society is not content to let it operate the way it has. Just like all the tech giants and there arent many, but this is one of them many of the behaviors of google are suspect and being called into question on an hourbyhour basis in countries all over the world. It is true that we dont understand the internal algorithmic intrinsic part of google, how it works from a Software Point of view, but we know what the company is. We dont know these other things, the life extension stuff, health care intervention, what will happen with waymo. The Main Business is the business we have been paying attention to all along. Tom do they have a lot of cash where they would go out and buy something and make a splash to show it is google and a new google . David i doubt they would do that. They have tons of cash if they want to spend and buy things, but that will not be the way pichai looks at things. He will try to bring a new steadiness and transparency to the company, because we have had an opaque company. It is really under assault from many fronts. Notably from regulators, but also from its own employees, and im not sure he has the formula because it seems to me that he is the one that has been leading the charge and what some employees would consider repressing their speech by reducing the weekly meetings, changing the rules for internal dialogue on their message boards, etc. , but it is a challenge. It is a Gigantic Company that is sort about the soul of a start up. Maybe what will happen is that will turn into a typical Mature Company with unusually large costs. , greatlyd kirkpatrick appreciated this morning on such short notice. Changing of the guard at google, the leadership missing in action and not visible for any number of years. Here is viviana hurtado. Viviana donald trump reviving his rocket man nickname for kim jongun and bringing back the threat of military action. Orth korea warning if there are no concessions on military talks they are preparing a socalled christmas if for the United States gift for the United States. Nameuld be a blow to brand far tsuda calls. Pharmaceuticals. It offers 10 years of protection from cheaper generic spinoffs. She did not have the resources to keep running for u. S. President , Kamala Harris suspending her campaign. She had a strong start that sent her to second place in the polls, but her campaign failed to catch on, her poll numbers sinking. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Tom thank you so much. This is a joy right now, jane foley with us and Lauren Speranza. What is so important is this is the actual plumbing, the nuts and bolts of nato. We are thrilled you could be with us. What is the single thing mr. Trump does not understand about nato in its military projection east . Lauren thank you so much for having me. I think the biggest thing that the president is not fully grasping is really what value nato brings to the United States interest globally. The reason nato was so important to the United States is it is the most important defense mechanism for our interest around the world, in europe. The shared values we have with europe, freedom, democracy, human rights, and the liberal International Order that the United States has sought to build in europe since the end of world war ii. I dont francine know what you do with turkey. They are part of nato but they are buying arms from russia. Jane it is a significant headache. Not only have they bought arms, but there is a disagreement about the role of the kurds. As everyonerorists wants nato to recognize, or are they not . It is unlikely the likes of macron will agree. There is a significant difference on turkey. There is also significant differences with respect to budget, significant differences with respect to russia as well. In the baltic region, the eastern part of europe, tensions are far more tangible then perhaps the western part of europe. There is lots of different issues and we could argue that we think of this before, but the threats are quite different. Russia is a disruptor. Ifna perhaps will benefit nato were to disintegrate or see a lack of coherence. Francine the President Trumps relationship with nato is volatile. Yesterday he kind of became the thee champion when he said, unfair burden that the u. S. Has to pay on nato means that he was critical of it. That criticism is not just from President Trump alone. That has been a u. S. Position before President Trump, but he has been the harshest and his tactics are different. This is an important turning thet of him embracing progress nato has made. What we are seeing is President Trump feeling validated on his approach to burden sharing and quoted the figures that european allies in canada will have put 130 billion toward their own figures are their expected to be up to 400 billion by 2024. That is not just symbolically important, but it is making nato stronger. We have stronger buyin from allies. That was an important shift. Tom thank you so much, Lauren Speranza with the Atlantic Council with us at the nato meetings outside of london. The president flying back to america in a number of hours. Coming up, he will land at andrews and drive off to the white house, maybe watching joe weisenthals interview with the senator from massachusetts, Elizabeth Warren, at 6 00 p. M. This is bloomberg. Good morning. Sebastian francine this is bloomberg surveillance. We are watching closely what is happening in a if all day of buy full day of bilateral meetings ending with a banquet with the queen. Erdogannd president asked for additional military support for the creation of a. Afe zone in syria unclear how the europeans reacted or if they had support on those for those plans. Discussions were preliminary. For more on nato and how they were dealing are dealing with turkey is the Bloomberg Bureau chief. President erdogan yesterday, if people could hear the conversations between him and other World Leaders, it was probably one of the most interesting because it is problematic for nato. Do you have any insight into what he needs from nato and its allies . Turkey need support for the creation and funding of a free zone in syria, and that is what erdogans team has asked for. This meeting was a preliminary one. It did not yield a concrete result where everyone committed to amount to a certain amount of spending, but we heard the meeting was a lot better than one would expect, judging by the harsh report. Francine how would you describe the relationship between europe and president erdogan . Are they friendly . Are they friendly because they need turkey inside to deal with refugees . Onur yesterdays meeting was a great case in point to explain what kind of relationship they are in. I dont think they necessarily enjoy working with each other, but yesterdays meeting was another sign that they are fully aware that they need to work with each other when it comes to issues such as turkey and bolivia. They are trying to work with each other although they may not necessarily enjoy that. Tom the single dominant issue is the use of russian missiles by turkey. It is unthinkable to the photo op that they would buy or use russian missiles from mr. Putin. Is that going to happen . Onur is turkey going to use russ and russian missiles . Tom yes. Onur it looks like it. Turkey has been deploying an air Defense System and there are no signs that turkey is looking to get more concessions, which quite a few people suspected would be the case. It looks like turkey is set to deploy russian missiles and just began testing radar components a couple of weeks ago a week ago, right before the nato summit. Tom thank you so much, at the grove north of london. With us, Lauren Speranza and james foley. This is really jane foley. This is really unthinkable that russian missiles would be used by turkey. Which nato nation is most upset . Hughes as caused a huge rift in the alliance. It is about what this does for nato overall. As a blown the s 400 to interoperability within the alliance and brings vulnerability of exposure to our is theogy to russia, and case with how we deal with turkey and the ground. It is still ongoing on certain specific issues, but a much broader, longerterm issue for what is available ally for nato in a volatile region, that we need. We are going to have to find some practical and savvy ways of working around these issues to keep turkey anchored. Tom Lauren Speranza of the Atlantic Council with us, with jane foley. Coming up, he viscerally knows it and viscerally agrees with his disagrees with his president. Admiral struve eat is knows it. Is knows it. Tom good morning, everyone. I want to go to a chart, a many ofchart, something you may not be aware of. This is the chart we use with Stanley Fischer when we were altar accommodative and we are accommodative, and we are clearly headed back in that direction. Fallsoley knows this directly into currency dynamics. How does that affect dollar call . Jane i think that is an interesting question. We were here last year and they were the first bank to call for the fed to cut. Despite what economic textbooks might tell you, we were calling for a strong dollar and both of those calls have worked out well. If you are talking about the fed cutting Interest Rates, talking about a weaker dollar, performance would say not necessarily. 2020, the ahead to fed will be cutting potentially into the second half of next year and i dont think the dollar will fall significantly. I still think you are looking at the dollar as being relatively strong. Tom the commercial interest of rabobank, i write that the United States imports, the disinflation and deflationary tendencies of slower global gdp. Jane you have got to think about the u. S. Economy and the dollar in terms of its reach across the global economy. When you look at the val the developments of the global theomy, particularly of emerging age, india, china, how muchdollars they need, how savings they have, how much they are contributing to the savings glut, how much that has influenced the performance of u. S. Stocks. You are looking at a dynamic that is not just about Interest Rates. It is more complex. Francine are we underestimating inflation for 2020 . Jane are we talking about asset Price Inflation or measured cpi inflation . Measured cpi inflation over the last decade or so has been disappointing. Lots of the reasons that have impacted cpi inflation are still there. Until we have much stronger wage inflation, it is likely you will have relatively low cpi inflation generally speaking. Francine as President Trump trying to manipulate the dollar maybe not manipulate, but change the course of the dollar because of what he is doing . Jane he would like to see a weaker dollar and makes no bones over that. He would like control over the payment system. He is not a man that appears to enjoy military conflict, but he has used the dollar in the payment system, the strength of fines, for instance. He cant have it both ways. If the dollar is the currency in the payment system, companies and individuals would need the dollar in times of stress. The dollar has an underlying demand which will keep it firm and he cannot have it two ways. The dollar andn use it as the payment system. Foley, foryou, jane adding great value on the litmus paper of the global system. Monitor theto gathering of the leaders of nato , a photo opportunity with the president of the United States and Prime Minister of the United Kingdom and the secretarygeneral of nato. Coming up on the equity markets, she has a very interesting note. Subramanian taking it back to 2001. Futures out 12, what i shock on the trade news. This is bloomberg. Morning, after a frenzied press conference, and a photo op with the queen, nato leaders deeply divided. Thepresident will meet with chancellor of germany, lecturing on paying her fair share. The president returns to chairman nadler and a feisty judiciary committee. Law professors way in, including noah feldman. Buy the dip, it takes a certain courage. Do you buy the dip . Where were you yesterday at 3 00 p. M. . London, she isnd directly south of watford, the grove, francine look while. Francine lacqua. And in 1360a farm one William Ashton took over lease of the grove. 2013, Team Surveillance celebrated our anniversary at the grove. What is it like . Francine the grove is the place where conferences take place. A lot of footballers get married at the grove. Can be easily arranged, which is important when you have the u. S. President together with about 25 other World Leaders meeting to discuss defense and trade. It is quite secluded, outside london, but not too far. We saw President Trump arriving from marine one to winfield house. Tom the president with a trip back to washington, arriving around 8 00 tonight. She is in Eastern Standard Time with our first word news. Viviana the u. S. And china moving closer to a trade deal despite the heated rhetoric. The u. S. Expects a phase one agreement to be completed before december 15 when american tariffs are expected to arise. Outstanding issues remain including which tariffs to rollback and how to guarantee that china buys american products. A clear and present danger, a report laying out the democrats most, prickett comprehensive the yet for impeaching president , saying he abused his power, compromised national security, and tried to cover it up. Opec and its allies sending mixed messages about whether they are considering deeper Oil Production cuts. To cutoil minister wants production by 400,000 barrels a committeehe technical did discuss deeper cutbacks. Opec and allies including russia our meeting. Larry page and sergei brin giving up on making their company the Berkshire Hathaway of tech, stepping away from alphabet. Will inheritchai projects such as self driving cars and internet deeming balloons. Alphabets model was based on Warren Buffetts hands off style. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Hurtado. Ana this is bloomberg. Tom equities, bonds, currencies, commodities. Futures take a bounce off three days of ugly. Lets go to cash. Upee days down and we are 11, dow futures up 115. Francine stocks extending gains after the news report from bloomberg that china and the u. S. Were moving closer to a trade deal. Gold and treasuries erasing gains. Pound had a significant move. Pound climbed to a seven month high because polls showing the tories, the conservatives have increased their lead before the election. Tom i want to put into perspective the last few days, buy the dip, the ugliness of december a year ago, a true bear word, and this year, my we are going down about 2. 4 , and a correction down 10 . We have a ways to go before a correction. Francine we have to keep an eye on what is going on with nato because the u. K. Is hosting this Nato Alliance summit. This marks the 70th anniversary. We have been tracking that with the family photo. The timing is delicate as there is a lot of friction amongst allies. Donald trump and Emmanuel Macron got into an extent into a Tense Exchange over turkeys role in nato and its purchase of russian arms. Yesterday was pretty tense, although we know that Emmanuel Macron and the u. S. President shared a ride. The leaders, behind closed doors, are Getting Along Better than what we saw. Any other tensions out there . Seems like things are smoother possibly. Maria it is. It has been a much quieter day. French officials saying they were not surprised by those results, saying macron has been rude to nato, because this is an Election Year and he needs to reach out to his domestic audience. That was the feedback. Today has been a quiet day. We are waiting for donald trump Angela Merkel to meet. That could lead to some tension. Donald trump made it clear he does not understand why germany is not hitting the spending target and countries that do not comply, he may have to deal with it through trade, hinting at tariffs. We had a draft version of the final document which caters to many of the talking points of the u. S. Saying china is a challenge and nato needs to pay much more attention to cybersecurity. That is something trump would like because the u. S. Is pushing to get china in the final document. Merkelw well chancellor respond to the president of the United States . Maria this is a very delicate moment for Angela Merkel. Andcoalition is very shaky the German Economy is flirting with a recession. The german industry business, it has been a difficult year. Germany, they like biggest economy in the European Union needs to pay more, according to President Trump. The last thing germany needs is more trade uncertainty. The thank you so much, president and the Prime Minister and other nato leaders at the growth outside london. We will get to the markets with servetus a romanian. Servetus arica subramanian. Avita how do you take economics and fold it into your call on trade . Savita on trade, we have a differentiated view. Our outlook is the trade war will not be easily resolved and it will morph from a trade war into a Tech National security work. The repercussions here are more than just tariffs on soybeans, and it is really the idea of protecting our attack and i. T. Tom Central Banks are more accommodative savita one hopes. Tom that leads to a sustained equity valuation. Savita it is not even the valuation that improves. If you look at the dividend yield of the s p 500, it is higher than the 10 year treasury. That barely happens over time, but historically we have looked back and when that happens, 94 of the time stocks have outperformed bonds by a huge margin. The clear call is stocks is the place to be where they still offer the best yield opportunity. The s p 500 is a high quality benchmark. It is a little bit of a tweak on there is no alternative argument , except now stocks offer protection against a fairly dire backdrop of low rates and low growth. Francine what are stocks pricing in in terms of the trade deal, is there an assumption that we will get a phase one . Savita the stocks are not that sanguine about trade, as alltime highs on the benchmark are close to alltime highs. If you look at what is expensive within the s p 500, it is the utilities, staples, kind of more recessionary areas of the market, whereas your cyclicals like machinery and financials are supercheap. We have an environment where the stocks that are most likely to be hurt by trade have been hurt by tariffs levied against the , already discounting a relatively bad situation. I do think if we get a skinny deal or some kind of deal in the midterm nearterm, we could see a rally off of low valuations in the cyclical areas of the market. That is our call for next year, you want to be more cyclically positioned rather than in expensive defensive areas of the market. Francine lets bring in todd mariano. What do we know about trade . President trump was clear it was on his terms and we could see a u. S. China trade deal after the election. This is not what people close to the matter a briefing reporters today. Our briefing reporters today. Today. Briefing reporters todd that is right. We have become accustomed to President Trumps style where nearing the end of trade deals, he likes to muse allowed about a 180 degree turn even while negotiators are getting closer and closer. I dont think Market Expectations of a phase one deal necessarily need to be thrown out the window, not only because of yesterday but comments over the past week or so. Thatnk the signal is still they are getting close and both sides from our perspective have an overriding interest in getting this phase one deal done. Tom yesterday in the press conference, the president of the United States said he kept asia out of the war and after that, the idea that he is in control of this china packed and will decide how it goes. Is that true . Todd i think that the Nato Alliance has certainly kept the world far more specific than it might otherwise have been, not only through the cold war but through a turbulent past 20 years as well. Tohink that is largely due the United States and its military spending and deployment around the world. That is maybe not the preferred position for President Trump, but also not something he could necessarily rollback easily. Of the alliances, contributions to national security, i think he is correct. I also think he is proving quite clearly he is the decider on the china talks. Tom todd, thank you. Oning up on a conversation idis with his stavr observations of london. This is bloomberg. Good morning, everyone, bloomberg surveillance. The president of the United States and Boris Johnson with the secretary general of nato. They are behind closed doors. Todd mariano with us on nato and our position in international relations. We dive in subramanian. This is the absolute underperformance of International Stocks and you and yours stop your shop say it is the time. Why . Savita i think there is a bunch of things that are changing. One of the things that industrials analysts track is leading indicators. Tom what is the leading indicator for international . Savita a panoply, trucking in the u. S. Ism in china is inflecting higher and in concert, they tell us ism is likely to improve rather than further deteriorate. Earnings revisions are higher than u. S. Earnings revisions for the first time in multiple years. Are improving more outside of the u. S. Than inside. Tom s Business Confidence abroad of multinationals of more visible countries companies, is their Business Confidence greater than ours . Savita we have found that Business Confidence is a lagging indicator. Tom see how she did that . That was so diplomatic. Tom, you dont know what you are talking about. Savita it is a great question, but earnings revisions lead Business Confidence, so corporations do not necessarily get the all clear on the world until they see improving sales and demand, etc. A lot of the dynamics outside the u. S. Look better and in the u. S. , they are faltering. Francine you are diplomatic. Tom, they are rubbish questions. I tell him that all the time. Savita i think Business Confidence is what kept everybody from spending. What would unleash some animal spirits is some resolution on this trade deal. Even positioning, if you look at positioning, you have an environment where after 10 years of the u. S. Trouncing every region of the world, everyone is there. Institutional investors are far more overweight the u. S. Than they have ever been, and far more underweight europe, emerging markets, every other area of the world relative to the u. S. Positioning valuation would lead us to say there are better places to get bang for your buck. We are looking for an upside from the s p as well but there is potentially more upside in other regions of the world. Francine talk about your tactical shifts for 2020. Savita we are looking from the u. S. To the rest of the world and we are at a point where Growth Stocks could falter. We have seen this over the last few months. I am betting this continues, for very simple reasons that manufacturing and macro indicators seem to be inflecting higher, and leading indicators tell us that could continue. Valuations, positioning. What worries me is you have an Institutional Investor base that has converged into the same, very narrow subset of Growth Stocks. Right now, long only mutual funds and hedge funds are more similar to one another than they have been in the history of our data. Tom that is where i want to go in the next half hour. Patient with us this morning is todd mariano of eurasia group. We will come back with the meetings of nato. 6 00 p. M. , joseph wiesenthal with the senator from ,assachusetts, Elizabeth Warren a timely moment to speak to a Democratic Party leader. This is bloomberg. Bloomberg surveillance, from london and new york, we continue to follow the nato leaders. The president to meet with chancellor merkel. We meet with Savita Subramanian, and todd mariano has been more than patient memorizing the judiciary committee. What is the drama shift from moving to intelligence over to judiciary for these further impeachment hearings . What is the key distinction . Todd i think there will be quite a shift in the drama. Traditionally the committee where articles of impeachment are drafted and the committee that is really in the limelight earlier this year investigating President Trump. There were others in the house doing it, but the judiciary led by nadler were front and center. They have been chomping at the bit waiting to be involved in this impeachment process, and i think it will revive a debate the democrats a been having about how broad they should go in terms of drafting articles of impeachment. Tom has there been a shift in the senate . The senate is polarized, republicans, not a single vote go against their president. Do we see any shift as we go through this process . Todd we have not detected any shift in the situation in weeks. What has been shifting is the polls. A lot of that initial support for the impeachment inquiry coming from independents is starting to trail off in the polls, and you have seen republicans hardening, defending the president and certainly democrats hardening in terms of impeaching in the house and putting him on trial in the senate. The situation is largely similar now to what it was even a month ago, and that is going to drive outcomes in the house where you have got all but assured impeachment and all but assured in the senate of not voting to convict. Francine does the impeachment process change the way the president deals with trade . I dont know if there is a linkage that he tries to deflect or change Foreign Policy. Todd that linkage was probably stronger when there was that initial late september through the month of october shift in of polls, and when a lot americans were really paying attention to this news. There was certainly a greater desire for the white house to flip the script, change the story, and get other more positive policy outcomes out there. Now it is back to what it was before, they are pushing forward to 2020. Tom todd mariano with eurasia group. A headline from china, tensions in western china, and religion in china. The vice foreign minister meets with u. S. Embassy officials. Francine this is bloomberg surveillance. Tom and francine from london and new york. We are keeping a close eye on nato, with World Leaders descending on watford in london to talk about the 70th anniversary of the alliance. We will have full coverage as the president of the United States will hold a press conference outside of london. There was anmember impromptu press conference lasting 45 minutes with wideranging topics from trade to the koreas to the impeachment process. Lets get straight to the bloomberg first word news. Viviana President Donald Trump reviving his rocket man nickname for kim jongun, and is bringing back the threat of military action. North korea warning if there are no concessions on Nuclear Talks they are preparing a Christmas Gift for the u. S. U. S. Forroposal to the mexico would be a blow to brand name drugmakers. The current language offers 10 years of market protection for drugmakers from cheaper generic spinoffs. Bloomberg has learned saudi aramco may price its ipo at the top range. That is before socalled overallotment option. Simply did not have the resources to keep running for u. S. President , this from Kamala Harris, suspending her campaign for the democratic nomination. She had a strong start that sent her to second place in the polls, but her campaign failed to catch on and her poll numbers sank. Global news 24 hours a day, on air and quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Much, so much so going on. We will do it with Savita Subramanian of bank of America Merrill lynch, a discussion of small and large cap versus the things that have gone up. Merrillsynthesize in lynch into her equity call in the market, we have got to go for lower for longer. What i have seen in q4 is the x axis is extended out for everybody looking at the rate market. When you extend out the x axis and lower for longer is longer, what does that do to the calculus of stocks . Savita it makes them look better, and it goes back to the yield story. 70 of stocks on the s p offer higher income opportunity then your average bond. That is where stocks went out over fixed income. If you think about rates within the context of a longer cycle, one of our strategists has a chart that shows Interest Rates are at a 5000 year low. I dont know how they get that. I think he got it from the stone tablets. We are at a point in which one could argue the upside risk is profound, and nobody talks about that. Tom the friday gloom that comes out on the internet, everybody writes you are wrong and the world will end. Looking back 5000 years, when you see those apogees, those distances from normal, that is when stability works. Help me with us idea that this could be a signal of instability. Savita lots of things go awry when you get to an environment or Interest Rates are ultra low. See is why we will not massive expansion. Our clients will argue that multiples should expand to infinity as Interest Rates go to zero, but that is not true. Move when youco get to a low level of Interest Rates. Without even gangbusters economic growth, assuming we , that is thesion milliondollar question and we think we avoid a recession, we have easy comps to be this year. We have flat Earnings Growth and i think we have a reasonable pick up next year. The number one driver for when you want to buy risk, small caps, beta, etc. , is an inflection in the profit cycle, growth going from bad to better. That is what we are starting to see in the u. S. , an environment where we go from flat growth to reasonable, single digit growth next year. That could be a great catalyst for some of these areas of the market. Tom lets bring in francine. Francine you have so far told us stocks over bonds, small overlarge, and the rest of the world over the u. S. Do you break it down into industries . Savita we like financials and do not like tech. We are talking about an environment where within the u. S. , exporters are closing you want to go domestic. Financials are supercheap, high quality, wellcapitalized these are Companies Offering the highest shareholder return. Finance is the highest shareholder yield among the 11 sectors, including utilities. For the yield, they are paying half of that for financials. Yieldials offers superior with utilities, arguably better Balance Sheets than the sector has had in its existence. There are opportunities to buy high quality yields at Bargain Basement price tags. Tech has been the leader for a long time. We are starting to see signs of a tech war. We are starting to see the most global sector in the world, technology, if we see this continued friction across china and the u. S. , that could impact tack more than any other sector. Tech more than any other sector. You have regulators telling us tech is getting too big and ceos testifying in front of congress, whereas 10 years ago we had financial ceos testifying in front of congress. Tech is starting to lose its free ride from a regulatory standpoint. When i look at financials and tech, financials is value, tech is growth. Francine when you look at technology, you think there is a risk that Big Companies get broken up . Savita i do think they are in the crosshairs of regulators, and there is bipartisan support to regulate tack. This is regulate tack. Tech. They have had a free ride in regulations. Is thea sudden today, it biggest sector in the s p 500 and is starting to see that scrutiny. I am not saying we see these Big Companies break up. It will be hard for them to get meaningfully bigger. Moreover, the other critical detail on tech that we have been isking at in our esg work that the governance characteristics of the tech sector have been deteriorating over the last few years. This is an important tell, because we saw the exact same thing happen with financials from 2005 to 2007, ahead of the financial crisis. We are looking at things like the pay spread between the highest and lowest paid employee at tech companies, board diversity, management diversity, shareholder voting rights, and tech is starting to see meaningful deterioration which has been historically a negative indicator of regulatory pressures, some pe compression, etc. Francine saps salve of bank of america Savita Subramanian of bank of america. Stepping down as leaders of googles Parent Company. Googles Parent Company. You are watching bloomberg surveillance. Salesforce is signaling a bigticket acquisition and global expansion. Ae Software Maker giving profit forecast that fell short of expectations but sales soaring 33 and beating estimates. In august, salesforce closed its biggest deal ever. Qualcomm just lost a hughes antitrust case in soft korea and 860ordered to pay a record 4 million fine for abusing its market dominance. They plan to appeal to the supreme court. Larry page and sergei brin giving up on making their company the Berkshire Hathaway of tech, stepping down from googles Parent Company alphabet. Char p shy well pichai will step up as ceo. That is your Bloomberg Business flash. Tom thank you so much. This is not chart of the year. I stole it from Savita Subramanian and to dazzle her, i have taken it back farther. What if you take the Standard Poors 500 and compared it to an equally weighted Standard Poors 500 . What if you took it back to march 2000 which was the massive skew in madness of all time . We are nowhere near that, and yet we lift up. Put in scale the extent of the 18 stocks that are totally skewing everything up. Savita i think that we are due for a small cap balance, and that is what the chart shows. We have been in environments where the nifty 50 has gotten bigger and dominated more than today. What i worry about for large caps, this is a weird, not a normal worry the quiddity. I liquidity. Tom that is completely out of order. Why . Savita i worry about liquidity because the world has become passive and most Pension Funds have shifted their exposure to public equities from active to passive. If you look at the average penson fund, they are pension fund, they are invested in active equities or private equities. The exclusion of your pension fund to ill liquid assets has tripled over the last 20 years. We are at a point where Pension Funds have a lot of ill liquid assets. Illiquid if they decide to sell, if they are forced to sell, they will sell s p 500 index and that could put liquidity pressure on u. S. Largecap stops that have been the most liquid areas of the market. What is a little bit unnerving is that out of all 500 stocks, the majority owner of every stock on the s p 500 is a passive index fund. That is a different dynamic than 10 or 20 years ago. The liquidity issues could express themselves more within the largecap benchmarks than the small caps. That is not something we are use to, a new framework for thinking about liquidity risk. Francine when you look at the liquidity risks, how big are they . Does it mean there is a lot of pain for the markets, or is it something that people are aware of and will try to manage . Savita i dont think they are aware because if you look at the valuations of small caps related to large caps, they are trading at 17 year lows. Public versus private equity, nobody is worried about illiquidity in private equity. It is trading at a premium to public, which is a world gone mad. We have piled into private equity because of this low growth environment and private equity offers longterm growth, i get that. The idea that small caps are overly discounting liquidity underand is discounting it, that leaves the passively held public stocks at a potential disadvantage. Every selloff we have had has been led by some of the most crowded, larger Cap Companies in the s p 500, really taking it on the chin. In the Fourth Quarter of last year, we saw faang stocks not do particularly well in the initial days of the selloff. If everyone is reducing equity exposure, they will reduce the stocks they own the most of, which happens to be big mega Cap Companies. Francine Savita Subramanian with us, bank of America Merrill lynch. Up next, we talk nato, the u. K. U. S. Special relationship, and we have a watford update as leaders descend to celebrate the Nato Alliances 70th anniversary. This is bloomberg. This is bloomberg surveillance. I am Francine Lacqua in london, full coverage of the nato summit. Leadershas started with descending on watford. We saw President Trump arriving by marine one. For a roundup of news we are watching out for, President Trump is also giving a press conference in london, we are joined by David Merritt and Julian Fabian who has jordan fabian who has been traveling with the president. President trump seems to be well behaved and what he was briefed on, do not talk about brexit or weigh in on u. K. Politics. What does he need from his allies . Jordan i think you hit it right on the head. Unlike his past where he has rolled a hand grenade into the political scene, he has been on his best behavior, which is i think a favor to Boris Johnson. What the president is looking for is more affirmation to his approach on the u. K. And in nato where he has urged allies to boost defense spending. We saw him get into it yesterday with Emmanuel Macron of france and we saw some leaked video from the reception at Buckingham Palace where some were making fun of him for running late. He might seen that, react unfavorably to some of his nato colleagues. Francine on that gossiping amongst the World Leaders, it is not the first time the mics are hot. Would it actually change the president s warmness to the allies or would he brush it off . Jordan believe it or not, the president is a very transactional leader, someone who bases his approach on personal relationships. One thing he does not like his people making fun of him behind his back. He talks about the other countries are always making fun of the United States under the leadership of former president obama, so this could strike a cord for trump if he sees it. We will see how he responds in his meeting with chancellor merkel, which is open to the press, at a press conference this afternoon. Francine seven days until the u. K. Election and President Trump has not done Boris Johnson any favors or disfavors. David on his best behavior, a bland tweet about having a good meeting. There is this danger that mr. Johnson was in the huddle with the hot mic being picked up, nothing too egregious. Grenadess with no big lobbed into this, the conservatives can breathe a sigh of relief because they are still significantly ahead in the polls, a week ahead. The johnson victory is looking more and more likely. Francine as tom likes to remind me, we have short campaigns in the u. K. When it comes to election. David comparatively short. Francine if you look at the u. K. Campaign trail, is there anything labour can do to change that, or is the lead too far ahead . David it is not too far ahead at all. Quicklyn narrow quite in favor of the labour party. Tonight we have the liberal about notcomplaining getting enough coverage, they will get coverage tonight. On friday, less than a week before the polling day we have a head2head debate between mr. Johnson and mr. Corbyn. Most people are not paying that much attention. On friday night, they probably will, and if there are any landmines that could go off, it could be in that moment. We are definitely within the margins. It is looking hard for mr. But heto win a majority could deny mr. Johnson i majority. Tom thank you very much francine thank you very much. Coming up a little later today, guy johnson will speak to the mayor of london, sadiq khan, about trade. This is bloomberg. When it comes to using data, everyone is different. Which is why Xfinity Mobile is a different kind of Wireless Network that lets you design your own data. Choose unlimited, shared data, or mix lines of each and switch any line, anytime. Giving you more choice and control compared to other top wireless carriers. 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. Trade whiplash. U. S. And china move closer to a trade deal despite conflict over human rights and hong kong. Cracks in china the country es its first ipo in 20 since 2012 as confidence starts to break. Exit page and sergei brin stage right. The founders of alphabet give thunder pichai the reins, ending their attention to turn their company into the Warren Buffett of tech. Welcome to bloomberg daybreak. I am alix steel. The markets whiplash to earlier today on that headline that bloomberg roque that perhaps broke that we are still inching toward a tree deal. We saw a huge decline in equities and the bond market. We are reversing that a touch, futures up by. 5 . 10 year yields are up by two basis points. Yesterday we saw the biggest drop in 10 year yield since may 2018. It is time for global exchange. We bring you todays