Crude turning positive in the last few minutes at 58. 18. I wanted to point out one of the conundrums in the stock market today, the steel sector was downgraded at j. P. Morgan in the premarket. All of the Steel Companies were lower. This follows still companies in europe as well still companies in europe as well down lower. Right now u. S. Steel is back up about half a percent. Lots of optimism in this u. S. Market. Not so much over here. Not when it comes to the manufacturing sector. The economy grinding to a halt in the third quarter. Factories slump and it started to bleed through into the Services Sector as well. Specifically, germany is ignores downturn and most seven years. We are joined now by stephen macklowsmith, Market Strategist for the International Equity group. Good afternoon. The data are bad, stephen. Is that reflected fully and European Equity markets . At the moment, yes. You think about where the markets are, basically unchanged in 12 months. Theres been a substantial rally we are pretty even. If you look at the background, one of the drivers has been earnings have been continually downgraded this year, expectations. And that is not a story just about europe. That is true in the states as well and end asiapacific and emerging markets. And in asiapacific and emerging markets. Containing real gdp relatively low levels and no sign of it moving higher. Nominal gdp operating leverage, goes into reverse. There was an expectation earlier this year it would rise and according to bloomberg, that is about 1 . We are kind of flat. It is not clear what is going happen next year and whether there will be a recovery. Guy if i dont have to investigate if i dont have to invest in europe, is there any incentive to put money to work here right now . Maybe there are a couple of companies here and there you can find if youre a bottom up kind of stock picker, but most people these days are increasingly investing in the etf point of view, why would they put money here . The story is about positive opportunities. If you want to put your cash, negative return. Sovereign, that is not great. From an equity point of view, all the earnings have been calm, they have been rising. Not yet sing margins back to cycle highs, so there is some upside for margins if you get some acceleration of global growth. Yes, the story is down at the moment but trade rhetoric altered became less hawkish if there was more sense of a constructive exit from the european union, you might see a change in capex. A change in confidence. That should boost growth. The lead indicator for that is on the credit side, there are encouraging signs. Normally a six month to nine month lead. If we think about book to bill, it has not improved in europe. Clearly, the data state is weak. But it is bottoming out in china and in somewhere like sweden, which is kind of important because sweden is an important source for the european economy. It is not worth giving up just yet. Vonnie stephen, how much more concern does do our customers become on the big geopolitical questions of the day . Are people getting ignored to things like brexit risk and trade risk or other becoming more urgent about what to do about these risks . View, oner point of of the things from the last two years, a continual slew about outflows from retail funds. They have looked at the landscape. They have been withdrawing money from retail funds. My senses a lot of that would be theo with uncertainty about fed situation as youve have rightly diagnosed. But that could turnaround very quickly if a different view is taken in some of the seats of power. , tell us a Stephen Little bit about the idea that the fed is working on its own and we have mario draghi begging for fiscal stimulus from european governments. Our Central Banks having to take very different approaches to how they try to boost Economic Growth in the major developed countries . We have seen it going on in japan for quite some time now, between the u. S. And europe . That is an important question. The room for maneuver Central Banks around the world varies for yearly, and the states, theres room for rates to be cut should the fed not necessary. They could also do something about sidestep Balance Sheet. Just recently, you started to see the feds Balance Sheet increasing again and that maybe in response to what is happening recently in the repo market. We dont know. But the from the ecb point of view, theres been a change the attitude toward negative deposit rates. There is a sense that tearing for banks has will be introduced. Mario draghi made it clear asset purchases were back on the menu. I think one of the most important things that is happen this year is the appointment of Christine Lagarde at the ecb. As important as her background, which is as a politician, head of the imf, very, very a droop adroit negotiator. It is interesting who did not get the job. I think theres a slight change in emphasis. I think within the eurozone, there are plenty of governments who are keen to see if theres a little bit of more physical wiggle room then they have allowed themselves 04. That could come either as a National Government level or supranational level and forms of europe. I think the hope is there will be more push on the fiscal side next year. Guy if that happens, what is the upside . So the germans decide to spend money. 10 move . Zed move . Si on the trade side, then that could be really quite a story. Guy you talk to people in the states and their terrified missing out on a trade deal. What i get a bigger about in the s p or in the dax on the trade deal . Good question. It is a little difficult to call it exactly, but i think the dax is probably more beaten up than the s p. Potentially, there is more upside in euros on equities just on that rally. So, people are fairly invested in the u. S. They have withdrawn a lot. Vonnie are they holding it in cash . If so, where are they holding it in cash . U. S. Treasuries are not exactly yielding all that much more than anybody else in the world right now. From European Investor point of view, one of the things that attracts is first of all you get positive carry but secondly, you have had a stronger dollar. In the median turn, we think the dollar is moderately valued. Just in the last year, if we think about where the returns have come, returns and u. S. Treasuries have been really attractive because youve had a kicker from the dollar. To stickhen is going around, stephen macklowsmith joining us from j. P. Morgan iset management were he asset manager. He will stick around. Lets get a check on global markets. Heres abigail doolittle. Abigail stocks in the u. S. , take a look. Just slightly lower after the european pmis came in disappointing when european shares but in the u. S. , pmi market numbers came in basically inline. Not a lot of reaction. As for the s p 500, and interesting technical look we have in the bloomberg terminal. We can take a look at that and see where the s p 500 is relative to its alltime highs. This chart goes back a year. You can see the s p 500 is really stalling out your two different sets of alltime highs well, only one can be an alltime high. At the point i want to make, the momentum indicator starting to ram down. All of this could suggest perhaps the s p 500 may cool off in the days or weeks ahead. Coolingoff today, take a look at some of the bank stocks. Amazon is lower. This is Morgan Stanley has lowered its price target setting margin pressures. We have facebook and netflix lower. Facebook and part of the antitrust probe. Finally, take a look at the 10 year yield. We have yields coming in once again. The 10 year yield down 23 basis points. That is the longest down street for the 10 year yield since early august. This tells us the haven bonds are rallying. You put that together with the fact the s p 500 is stalling out near record highs, and it may suggest some volatility could be had. Vonnie thank you for that. Do you remember the function to tv allows you to browse all of our recent charts . Catch up lanky analysis, save your favorites for future reference. This is bloomberg. Live from new york, i am vonnie quinn. Guy from london, im guy johnson. Lets check in with the bloomberg first word news. Arends has Legal Proceedings against a british flag oil tanker help since july have concluded. Held since july have concluded for some the ships crew has not turn on a satellite tracking quitman in nearly two months but there has not been any sign that it has left its position off the iranian coast. Israels arab minority is throwing around its newfound weight. The joint list of arab significant strengthened by israels inconclusive election last week, recommended on sunday that former military chief benny gantz a form the next government. The move could nudge israels instead of Prime Minister benjamin netanyahu, Whose Campaign preyed on antiherbst sentiment. Democrats are ramping up pressure on President Trump after his phone call with ukraines president. House Speaker Nancy Pelosi signaled her readiness to take stronger action against the president. The speaker called the president s move a great new chapter of lawlessness. House Intelligence Committee chairman adam schiff called the president s action profound violation. In the race for the white house come Elizabeth Warren has overtaken joe biden as the frontrunner. This is the latest i will pull. In the iowa caucuses, the massachusetts senator has the support of 22 of likely participants. Joe biden is second with 20 . Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more 120 countries. Vonnie still with us, stephen macklowsmith. How much clarity will we get in the coming earnings season on things like how multinationals are being impacted by trade uncertainty and other geopolitical concerns . It will be totally key. I was telling earlier, the expectations have fallen pretty steadily all year and it will be very important to see whether there is further weakness. In a way, i think the guidance is going to be of more interest to us as investors and the actual numbers. My sense is European Companies debt at make adept at making sure they meet guidance. You tendency downgrades coming into the quarter and an out turn roughly in line. But it is the guidance looking forward i think will be really important. As i say, the corporate confidence has really been thected by the notion attacks are been on the Global Supply chain. It will be interesting to see exactly where theyre going to seek to make the decision to impeach given that uncertainty. Of ambiguityunts around everything. In all seriousness, when i talk to a ceo of a company, the first thing out must get back is, look, were trying to figure it out. How much visibility do companies actually have . We are all going to Pay Attention to the guidance, but how much visibility do they have . Very little. As part of the guidance, they say we have very little visibility therefore are capex in the coming year will be toned down. We will ratchet back some of that from the Capital Investment class previously announced. That in itself will be sending a signal about growth. One of the things that has not really happened in the expansion since the great financial crisis is growth in productivity. Youve seen restructure, restructuring of government finances, some growth in real incomes, but you have not releasing any Capital Investments and you have not really seen it looks as if youre going to start to get that your two years ago, but then trade tensions came along and blew it out of the water. Guy no Capital Investments and profit productivity issues. How investable is the ftse 100 as we approach october 31 . A large proportion of the ftse 100 earnings are not related to the u. K. Guy but if we get a deal, the pound goes through the roof. The ftse 100 goes to the floor. The elements the ftse 100 on the translation basis not be affected but there are other elements on the ftse 100 where people have been underinvested in Domestic Companies we will have to be nimble and try and make sure we are properly position in our portfolios. Will we think about the negotiations of the european union, there are two prisms. One is exposure to growth and one is exposure to u. K. Sterling earnings. We are currently much neutral on both because we actually trying not to take a view because we dont know how those negotiations will pan out. Vonnie are you taking on your return assumptions for clients . I would imagine it can be easy to promise a return ive any kind these days, but what are you telling them you can achieve for them . I am really glad you asked to that question. We are about to reduce our longterm Capital Market assumptions for 2020, which take attended for senior view. Over the last few years, our expected returns have been falling. This year i think youre really going to see returns in the same kind of area. There would it is pretty tough to call significant real returns in european fixed income given where yields have got. Given the growth is also affected by demographic issues around the world, and that is a key driver of Revenue Growth for equities, we are still thinking mid Single Digits there. Were not painting a particularly rosy picture for clients. But it does point to the imports of them having active management to add value to it could be a pretty pedestrian market return. Vonnie how much risk are you taking in emerging markets or beyond that, Frontier Markets . From our International Equity group point of view, we have some investments in emerging markets, not directly but through companies we invest in who have investedthere. Our emergingmarket team are sophisticated in their approach. I am lucky enough to sit here on the strategy meetings that they have. Waryare feeling pretty about the future over the next 12 months. They recognize there have been pressures on emerging market growth. I think what they have been hoping for, again, is a ratcheting down in trade tensions. But theyre not holding their breath for that. Guy china is up 30 . That is excluding december, which obviously if you take it out over a longer term time period, a slightly different result. Nevertheless, why should i expect more than 30 out of china this year . That is an eye watering number if i get to the end of the year and can post that in my portfolio. It is interesting. It kind of depends whether china government feels further need to apply stimulus to the economy down the road. Haveeling is they do still a fair amount of firepower they could deploy if they chose to. Guy but they are deploying it because the data are slowing down pretty rapidly. And the question really is, how much of that is reflected in that 30 . Is the balance of risk to the upside . You are saying there more stimulus. Or is it there to mitigate that data and is the stock market really reflecting that . Im wondering where the balance of risk is . Do i bank that number . It depends on your time rise. Im not here to make a call about the shortterm direction of the chinese stock market. There has been a recovery, not in china, but pretty much every developed stock market around the world this year. Europe is up about 15 . That is against the decline of declining earnings expectations and pmis in short supply. Guy on that note, we will leave it. Stephen macklowsmith, jp morgan. This is bloomberg. London, i guy johnson. Vonnie from new york, i am vonnie quinn. Time for your latest Bloomberg Business flash. Anothers bracing for landmark privacy decision from the eu. The law forces the tech company to delete links to personal information on request. The court is questioning if the rights should apply globally. The court could reach a decision as early as tomorrow. Out, 21,000y lost jobs at risk and left travelers around the world stranded. Earn 215 million from the bankruptcy of thomas cook. They invested in derivatives that pay out when a company folds. Thomas cook will be the latest of several big payouts for hedge funds and traders. That is your latest Bloomberg Business flash. Checking u. S. Markets now, we are fractional in our declines for the s p 500 and the Dow Jones Industrial average, which actually has turned positive. It is up 14 points. The nasdaq is still down. General weightiness to the markets today, again on uncertainty triple witching on friday which injected a little volatility in the the markets. Today we are also looking at the United NationsGeneral Assembly and other things that might be a little bit prone to headlines moving markets. The vix is up 15. Guy here in europe, the big data from germany is the real catalyst for the Market Action when it came to equities and other Asset Classes as well. You can see it down a little bit. Things really started motoring to the downside is the data started coming out. As you can see, that has resulted in a negative close. 100, with stocks like shell and glaxo commanding some points to the upside. Is factor as well. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store to