Expenses. Regulatory and privacy pressures mount. Dar p china spoke on alphabets ceo spoke about this. The momentum has been great. Ever since thomas has come in, he has continued to invest across the board. Focused a lot on operational teams. It is playing out well in this business. To be inortant for you as many situations as possible. Nejra joining us now is bloombergs opinion tech columnist and Marija Veitmane from state street is still with us. Before this release, alphabet shares had hit a record. How concerned are investors going to be about this latest news . People are fundamentally investing for growth. There was a bit of dip in aftermarket trading. The cloud is becoming a very contested space. We saw pretty much the same from amazon last week, that they are also investing to defend their market share. Investing tole is secure their market share. They do Something Like 8 billion per your revenue from the cloud. Amazon doesnt 9 billion per quarter. Doesan see that amazon 9 billion per quarter. You can see the discrepancy between the two. Google isty that giving to growing a business such as cloud, diversifying away from search is actually quite healthy. Nejra it is a distant third behind microsoft and amazon in the cloud. When are investors going to want to see this investment really pay off . How much patience will they have . It is profitable. It generates healthy margins. There has been already in terms cash int share, patients share, in patience. On the sense of when it should gain market share, already, it should have happened. Nejra let me get your take on tech right now. In the past, you have been positive on i. T. What sector specifically . So diverse areas, some semi conductors have done fairly well so far in the earnings season. What bits of tech are you most interested in right now . Marija we have been positive on tech. In general, we are looking for kind of large tech. Tech is one area where it is actually investing. Markets are crying out for the lack of cape we are really worried thatx. Nobody is investing, nobody is taking a view. Its fantastic. They have a lot of money, a lot of cash. They are talking about some m a activity. They are returning money to shareholders through buybacks. , verya great business profitable business. They have lots of cash. They are investing into the future. Nejra for alphabet as well, Consumer Devices is the other way alphabet is looking for new sources of Revenue Growth. It is a way of securing more Revenue Growth but ensuring that people state with the services. If you think about the pixel phone, some of the price points are not as high as the iphone. Pixel has a way of delivering more user data, which improves their advertisements, gives them a better sense of your browsing habits, interests. Google is looking to acquire fitbit, the maker fitness trackers. That is a place where google does not have an offering. They have all these things, but they dont have a watch. There is a sense that maybe that is where may be a lot more of the interaction comes going forward. Apple has seen real growth from the apple watch. Google strengthening its hand right there would seem like a good place. Nejra i think to some people that tell me that software is an area where they want to reduce exposure because the valuations are so high right now relative to other parts of the tech universe. Is software one area that you like, particularly with all the cloud aspects to it . Marija we do like it. We are less concerned about valuation. We have a more strategic view on growth relative to value. Stocks are expensive, but for a reason. They are delivering future growth, fairly clear and kind of predictable earnings stream, which is not something to be said about lots of other sectors. Nejra one about the semi conductors . Just before this conversation what about the semi conductors . Just before this conversation, we were talking about trade and people getting positive with semi conductors now. Inld you be wanting to jump here or do you already hold positions in semi conductors . Marija semi conductors is something we have liked for a long time. What i add to this position would i add to this position . Maybe not. To semiprefer software conductors. More service type model as opposed to more cyclical. Got amazone, we have and google and microsoft and others spending on cloud. One beneficiary, the primary beneficiary tends to be intel. Intel dominates the market. The more people spend on data centers, the more intel benefits. Nejra we saw that in the latest earnings because they gave a really bullish forecast. Marija absolutely, absolutely, absolutely. One ecosystem but infrastructure. Nejra Marija Veitmane from state street stays with us. Lets get the bloomberg first word news with Annabelle Droulers in sydney. In the u. K. The Prime MinisterBoris Johnson has failed again to call an early election. It is the third time he has wanted a vote on the issue but has not given up. He will try using an easier legal route to change the date. Politicians can try to amend this bill, potentially sing the conditions on the elections. A u. S. Army officer says he raised red flags that President Trumps ukraine call about President Trumps ukraine call. The Lieutenant Colonel orcs for the White House National security council. He says he flagged the july call and other events to the nsas lawyer. Nancy pelosi says the house will take its first about on the impeachment inquiry later this week. First vote on the impeachment inquiry later this week. Bones chief executive is said to tell lawmakers boeings chief executive is said to tell lawmakers that the playmaker made a credible critical mistake. A fresh allegation has emerged that the company withheld key safety information. Visits capital hill coincides with the oneyear anniversary of the first crush. Space galactics has become the first Space Business to go public. He looks to compete with the likes of jeff bezos and elon musk and what is being dubbed the new space race. The company says its aim is to make spaceflight more affordable. Longterm, our hope is to go down. In the near term, the price will go up a bit because it is underpriced. Longterm, my vision is to bring the cost down so more people can experience the wonder and joy of human spaceflight. Chinas largest convertible bond sale has drawn over 1 trillion of bids. Shanghais Development Bank offering over 230 times esersubscribed 330 tim oversubscribed. That money could buy brazils entire equity market and then some. Global news 24 hours a day, on air, and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Nejra Annabelle Droulers in much. , thank you so lets focus on the fed ahead of tomorrows crucial fomc meeting. A Third Straight rate cut is widely anticipated but the real focus will be on chairman jay powells guidance on policy going forward. Is he ready to hit the pause button . Powell has her pedal he said that the wider u. S. Economy is still in a great place. Gdp growth is expected to have slowed further in the Third Quarter. Data mixed Economic Risks amplifying tensions between lawmakers. Officials may adopt a meeting by meeting approach to valuing the need for additional stimulus. Today, we are asking the question, how do assets react if the fed holds rate cuts . You can reach out to us and the mliv team. Marija veitmane from state street is still with us. The rate cut this week is not really a discussion. It is fully priced. If anything else were to happen, it would be a complete shock. Does it jay powell need to put some really specific conditionality on further rate cuts beyond the one this week . Marija it is impossible to put myself in jay powells issues powells shoes. I think it is very important for him to stress, to leave optionality on the table. It would be unwise to kind of m ail your card. He has been telling us for a long time that the u. S. Economy is slowing but not in a terrible state. It is doing ok. It is not going into recession by any means. It is slowing. Whats very challenging and on predictable is trade policy unpredictable is trade policy. When the first insurance rate cut came about, they were talking about, we dont know what will happen with this trade deal. The longer we dont have a deal, the bigger drag to underlying economic growth. It makes sense for them to do some insurance cutting. On till and unless, and i expect we have someunless clarity, it is very difficult to say policy should be this way or that way. They need to leave themselves a lot of optionality and do meeting by meeting assessments of the economy. I think it is absolutely right. Nejra if Jerome Powell were to say that beyond october, we are going to be very data dependent with future rate cuts. If there were any hawkish hint in his language, how badly would bond markets take it . Marija i think market is very of veryoying this kind accommodative support from central bankers. A lot of this years rally was the economy is slowing, but we have lots of support from balance hass. Supported this very delicate balance has supported risk markets. Should that go wait, markets away,e very upset go markets will be very upset. Nejra later in the column, he also said that keeping policy options open, the risk in the approaches that basically powell could come across as hostage to a muddled middle that lacks strategic anchoring and effectiveness. When does that concern and that perception of powell start to translate into market dislocation . Marija i would probably not go that far. I think the fed definitely needs optionality and the fed definitely needs to be responsive to very fluid trade negotiations. I think we have passed the point where the trade war was easy to win, it only hurts chinas economy. We are increasingly realizing that the u. S. Economy is part of the ecosystem. It has other component parts. Consumers are quite sanguine. It is beginning to seize back. It is important for fed to leave optionality. I think it would be very wise and unwise to go any other way. Nejra right. The yield curve has steepened. Does that make you positive on u. S. Banks, particularly given the strong earnings we have had . We are waiting for quite a number. Of european banks to report what is your position on banks at report. It banks to what is your position on banks at the moment . Very banks are very, bank stocks trade very much in line with what is happening in bond markets. Yes, the yield curve has steepened. But how much it has steepened, 20 basis points . We know that Interest Rates are still extremely low in any historical perspective. We know that yield curve is extremely flat. It is very difficult for banks to make money. I keep adjusting our expectations for lower profit. U. S. Banks are delivering. I think the situation in europe is a lot more challenging. We have a few banks reporting. Covered m i think it is it really difficult to run a bank, particularly in europe. There was a contraction in corporate lending. The indicators on european banks we are watching very closely is long demand. It is not long demand, not for corporates, small businesses. There is a bit of a long demand for mortgage loans. Great. That is probably as far as it goes. I am increasingly hearing anecdotes of 110 mortgages. That is probably not very sustainable and profitable business for banks. I would worry about that. I think banks are probably less negative than u. S. Banks. Nejra with the thirdquarter earnings in full swing, we have a great week of bank interviews. First up, we speak to Credit SuisseCeo Tidjane Thiam on wednesday. The same day, we have interviews with the Deutsche Bank cfo and cfo of standard chartered. Dont miss our exclusive with ceo. Santander thursday, a sit down with the ceos of b. N. P. Paribas and ing bank. Nill Lower Oil Prices weigh o thirdquarter results bps on bps thirdquarter results . This is bloomberg. Nejra this is bloomberg daybreak europe. London. Ra cehic in the biggest names in energy have a earnings out this week, as slumping oil prices, sluggish demand, and shrinking chemical theins all weigh on industry. Thats right. [indiscernible] 42 in earnings. Nejra we have a bit of an issue ,ic iAnnmarie Horderns ,i think mic i think. The bp ceo will be joining us and Marija Veitmane from state street is still with us. Challenges because of the slumping oil price for the oil majors. The socalled super majors are expected to disclose a 42 plunge in thirdquarter earnings. They cannot blame everything on the oil price. Are you in anyway positive on oil majors given the investment side of things and the fact that they are big dividend players, even with a week oil price . Marija not really. Energy sector is the worst performing sector in msci europe , probably for a reason. Those companies are really struggling. It is very challenging. Prices is ain oil big component in it. Global growth, concerns a big component. Say, it is very difficult to be more positive on oil prices at that stage. We know demand is slumping, economy is slowing. Definitely a slowing economy. On the supply slide there is a glut of oil. The u. S. Is the biggest producer now and they can pump as much as they want, so its very difficult to see kind of major improvement of the supplyside. Demand is going down. Not very positive on oil price. Energy stocks dont come out very well. Be just ad it recovery in the oil price that will make you change your views on the majors . Marija i would say oil price is probably the biggest driver. On the margins, other things do help. It is part and parcel of this bigger idea of growth versus value. Energy stocks are very cheap for a reason. It is very difficult to make money. The market is not happy to pay for it. That is part of a bigger story. Not in the right space. Nejra you do think we are in a sort of structural decline for oil prices, even though we sometimes see these spikes on geoPolitical Risks . A risk that is very real. Marija i would not go as far as saying a structural decline. I would say cyclical, but it is definitely a decline. Nejra earnings season more generally as well, you have stuff that you sent before the show, energy and materials are not doing well. What else are you taking away from the earnings season so far . It is the marija third marija it is the third time around for us. It is not as bad as market fears. The last three quarters, expectations of earnings were really low. It is not the usual, lets cut expectations for the earnings season and beat them. Expectations were really low, kind of cycle low. This kind of pessimism that we mean, we see Consumer Sentiment low, Investor Sentiment low. Profitability is not fantastic but it is a lot better than people here. The pessimism still in the market is still there and analyst expectations. Majority of companies are fairly comfortable beating those expectations. Guidance is very mixed, as you would expect. Hole in the world right now can say with any degree of confidence who in the world right now can say with any degree of confidence what is going to happen . Same brexit uncertainty, same policy uncertainty, as everyone. Nejra the guidance is key. We spoke to the phillips ceo yesterday on the show. Even with such a big business, he said the visibility is so big difficult with the u. S. China trade war. Lets get back to Annmarie Hordern back with the details of the super majors. Good morning. The super majors are out with earnings, starting with the bp, mobil,tale, shell, exxon and chevron. There are expected to close a 42 plunge in thirdquarter earnings. Bp has already taken steps to manage these expectations from shareholders. First, while bp has been making swift progress on asset sales earlier this month, they did flag writedown and warned investors of higher tax rate. Bp said disruption production was significantly disrupted by hurricane barry. Every oil company that will report this week will have to deal with this chart. A 20 drop in crude prices over the last year, a big blow, especially for bp, who says oil prices looked firm at 70 per barrel one year ago. Outside the figures, sticking on may get personal because a longtime ceo, bill dudley, will be passing the baton to the upstream director. That is said to attract a lot of interest within the industry. Nejra thank you so much. Comment. I was speaking to someone yesterday that told me they are noticing a lot of volatility in stocks on earnings day. It is that something that you are seeing . What do you think is behind it . Marija definitely. It is quite common for stocks to see volatility on earnings date. It is exactly what we talked about, uncertainty. We do not know what to look for. We do not know where the guidance is going to be. Longer terms, stronger earnings tend to generate positive returns. We still see that. My final comment on earnings is that earnings are slowing, but they are at still fairly high levels. They are coming off alltime highs. Margins are high, sales are growing. Upseto,o be t too upset or concerned about this collapse in earnings. Nejra still have faith in the corporate profit cycle. Thank you for joining us, Marija Veitmane. Great to have you with us. Eu delays as the brexit until january 31. Thats next. This is bloomberg. Nejra good morning from Bloomberg European headquarters in london. This is bloomberg daybreak europe, with todays top stories. The s p 500 hits an alltime high on encouraging trade talk and corporate results, but not rainunshine as cloud costs on alphabets parade. Bp is expected to take a hit on oil prices. We speak with the cfo. And Boris Johnson will try to secure an election today again after failing to trigger a snap poll for the third time. Nejra welcome to daybreak europe. Numbers from bp breaking right now. The red headline, Third Quarter billion,net at 2. 25 estimated 1. 77 billion, a clear beat on First Quarter adjusted net. Waiting for more headlines to come through. A little detail as we do that. First quarter Dividend Per Share at 10. 25 cents for bp. First quarter operating cash flow ex the gulf of mexico oil spill, 6. 5 billion. Bps ceo noting significant hurricane impacts in the Third Quarter. To give some guidance on what was expected ahead of the earnings, the Third Quarter adjusted profit was expected to slide due to Lower Oil Prices, while charges connected to the gas of u. S. Onshore natural assets was expected to deal a further blow to net income according to analysts. But Third Quarter adjusted net beat, 2. 25 billion dollars a versus estimated 1. 77 billion. To keep antliv blog eye on in terms of bp, taking a look at it now. A strong start to the big oil Quarterly Earnings season. Our chief Energy Correspondent is commenting. Dont miss our interview with company ceo Brian Gilvary, 7 30 london time this morning. Yet more breaking news sticking with the oil space. To startares are trading in saudi arabia, december 11th. A local listing we are looking at there. We had a report from reuters that the ipo could happen on november 3, this sunday. We recently heard about saudi aramco delaying the ipo, but the latest is that shares would start trading in saudi arabia december 11. Now joining us as our guest host, the head of European Equity strategy at bank of america, merrill lynch. Great to have you. Lots to discuss. Equities and earnings in a moment. But talking about energy first, having a discussion with our previous guest who is not positive on Energy Stocks at all based on the oil price. Do you see anything to be positive about in Energy Stocks . . Sebastian it was an interesting discussion and i will take the opposite. We are overweight energy. We dont have to argue about it. It is clear the main driver of the sector is the oil price, and the oiln our model price is . 10 too low where the dollar is. We see upside for the commodity which would be good news. Nejra you think Global Growth momentum is close to a trough, but what tells you that . Sebastian we look at what has been driving growth, in europe and globally. The interesting fact, right now everybody thinks it is about china, because that is where the trade wars are, but the best indicator of growth in china, the pmi, is close to a twoyear high, and the u. S. Pmi is at a nine year low. What has been weighing on u. S. But not chinese growth momentum . A strong dollar and the delayed impact of fed hikes, but the dollar has not gone up and the fed has stopped taking so these main drivers are now fading in our view. Nejra we expect a third fed cut this week. There could be more in the pipeline. The market expects it and we will wait for Jerome Powell, but will that weaken the dollar . Main driver of the dollar the last 20 years has been movements by the fed relative to the rest of the world, and global uncertainty. The fed rate cuts are consistent with a 3 downside for the dollar in the six next months. The best measure of global uncertainty is at an alltime high, so the crucial swing factor for the dollar, if uncertainty comes down with a trade deal between china and the u. S. , and no deal brexit risk is off the table, you could argue uncertainty indicators shouldnt be at an alltime high. If it starts to fade, the last Thing Holding up the dollar would disappear. Nejra still a big if. We are quite positive with the phase one, but a long way to go even beyond that. Lets stick with the thesis that we do see a weaker dollar. Translate that into the European Equity strategy based on that . Sebastian three implications. First, the dollar weakening means more upside for commodity prices, like energy, copper, mining. Secondly, clearly good news for the emerging markets. The main driver for them is almost exclusively the driver dollar. And a strong dollar has done damage to the u. S. Manufacturing cycle. Thehe dollar weakens, then drag on u. S. Manufacturing from the strong dollar would go into a reverse, closer to a scenario in early 2016. The dollar weakens, manufacturing comes back and that boosts Global Growth momentum. If we have stronger Global Growth momentum, we would upgrade our European Equity targets. Nejra so the weaker dollar, a tale risk not the central scenario. Talk about the central scenario. What is priced in with european equities . Take me through the three different scenarios, in terms of what has further to go, what people need to pull out of and what might be the same . Sebastian thats a useful way of looking at it. When we launched our new product at bank of america, we said that ewere eopl people were priced, which was good for banks but bad for consumer staples. 10 . Have outperformed by that is the first basket. The second interesting basket, a very small basket, which are the stoxx primed for optimism on the macro side . One element in that basket, luxury goods are already priced for boy into Global Growth momentum that is too optimistic, so we are underweight. Some trades havent participated in the general optimism of the last few months, and they still look attractive. Treasuries, we think they have upside, copper is 10 too low, good for mining, and airlines are still priced for an extremely bearish growth environment. Utilities are the last offensive sector that hasnt rolled over. Nejra the s p 500 hit a record yesterday, so in terms of the u. S. , should we be looking to close that gap . Sebastian unfortunately, we think the conditions are not yet in place . Sebastian i would love the market to do well, but the problem is the market has weak structural growth and needs a strong growth story. We say Global Growth momentum will not deteriorate, but we see margin upside of 2 on the pmi over the coming months, and the truth is that you need strong domestic exhilaration for europe to outperform. Nejra sebastian stays with us. We have extended gains in europe so far based on the close yesterday, the s p 500 heading a record, partly to do with earnings, partly with optimism around trade talks, and also the prospect of a fed rate cut. As far as futures in europe, a little weakness or struggling for direction. Futures flat. Lets get first word news with Annabelle Droulers, in sydney. Profits tookphabet a hit from heavy spending on the cloud business, trying to keep up with rivals microsoft and amazon. Fromncome 7 billion, down 9 billion a year earlier and below expectations. Expenses jumped faster than revenue, rising 25 on the year. A u. S. Army officer says he raise red flags about President Trumps ukraine call. The Lieutenant Colonel works for the White House National security council, and says he flagged to the july call and other events to the nsas lawyer. Speaker nancy pelosi says the house will make its first vote on the impeachment inquiry later this week. Boeings chief executive is set to tell the planet senate the plane maker made mistakes in relation to crashes of the 737 max 8. A fresh allegation emerges the company withheld key safety information. Boeings visit to capitol hill coincides with the oneyear anniversary of the first crash. Hong kong chief executive carrie lam is dismissing the suggestion she will be replaced, saying the Financial Times report is very malicious. Lam says she has beijings support despite over four months of unrest. Other pro establishment lawmakers told us china is looking to replace her. Dangerous smoke blanketing parts of california as fires rage across the state. Commuters in San Francisco have been wearing facemasks, and officials are warning everyone in the region to limit exposure to the fumes. Wildfires have forced hundreds of thousands of people from their homes. 100,000 buildings are said to be at risk. A smartphone hit with the mario kart tour game, downloaded over 120 million times in the first month, easily beating the previous record. The game has already raked in 37 million in revenue. Commerzbank posted a surprise jump in thirdquarter profit, a month after the lenders chief executive unveiled a new strategy. The bank says operating profit increased 29 from a year earlier, with net income rising 35 . One source bought, a 17 one decline ina 17 operating profit in businesses catering to companies. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than120 countries. Is bloomberg. Nejra Annabelle Droulers in sydney, thank you so much. Another delay to brexit after the e. U. Agreed a flexible three month extension to the u. K. Exit, something Boris Johnson he didnt want to ask for. What he did ask for but was denied by mps was a december 12 general election. The Prime Minister says he will require try another route to a general election that would only require a simple majority but would require some opposition mps. Seestian raedlaeer, we repricing on the prospect of no deal brexit risk diminishing and more optimism about the brexit process. How have you been advising investors . Sebastian the truth is that if you have a no deal brexit, that would have significant consequences for growth in the euro area, for the equity market. And theave a deal, route we are looking at seems to lead to a deal, it would be a minor impact on equities. The major things, growth, uncertainty and the currency. Growth with a deal would be marginally stronger, but not a big swing. Uncertainty would be slightly lower. Looking at the index level, it would only mean an uplift to our target around 2 , so one of those scenarios where the downside is significant if it materializes, and the upside is mild. Nejra that is the euro zone. In terms of the u. K. Stocks, would you be more interested in any part of the u. K. Markets . Sebastian the irony about the uk exiting, if you have good news, because bad 70 of the news comes from abroad. They are very sensitive to the currency. A 3 or 4 swing in pound sterling on the back of a brexit deal, sterling strengthening, that would be a drag on u. K. Equities. We currently like them because they are typical drivers, but you would only have a flat outlook if you got the brexit deal because you have a additional drag on u. K. Equities from the stronger currency. The trade that has worked well and would work better in a brexit deal is domestic. The domestics dont have the currency headwind and have outperformed by almost 15 over the last two months. A brexit deal after a potential december election would mean another 5 to 6 outperformance left. Nejra so that trade has further to run on more good news. If on an index level, ftse 100 might not be as compelling, but what about sectors that would outperform or underperform with more positive brexit news . Sebastian finally we get back to energy now. Energy and mining, very heavy u. K. Sectors, listed in the u. K. And they are exporters. They would be at risk with a stronger pound sterling. Some upside is from commodity , that that are too lowe, th would be reduced with a stronger sterling, which is bad news for energy, bad news for mining. On the positive side, theres marginal sectors that marginally benefit. One thing would be banks. Lower Political Risk, marginally stronger growth, that would lift the performance of banks around 3 or 4 , and utilities would benefit. Thehe euro rises against dollar and some Political Risk in europe is priced out, but these are marginal. From Sebastian Raedler bank of america stays with us. Coming up, we speak to the ceo former chief of the London Stock Exchange group, live from the future Investment Initiative in saudi arabia. When traveling to work, tune into Bloomberg Radio live on your london device or dab Digital Radio in the london area. This is bloomberg. London, 18 a. M. In about 40 minutes from the cash equity opening in europe. Lets get to a highprofile interview from the middle east. Manus cranny is at the future Investment Initiative today with a special guest. Great to see you. Manus good day to you. Here at the future Investment Summit at riyadh, the ceo of seek u. S. , xavier rolet. Good to see you this morning. I have been to some cool places, but this is in a different zone. We have a headline this morning that aramco will start trading at the beginning of december. My question to you, is that a smart move . See how that goes . What is your take . Xavier i think it is, and i hes executing vision 2030, and i think it is a very important milestone, getting the company listed, start getting some multiples. Theres also a lot of work to do for global analysts, portfolio managers, to realize what kind of Company Aramco is. Its not just that it produces oil. You look at the technology it has deployed, the way they are diversified, an internal pipeline system, the unbelievable level of Technological Advancement invested in this company. It is a remarkable company from an operational standpoint. The listing will give an opportunity to investors around the world to focus on the fundamentals and technicals. Manus there is a valuation gap, we understand 2 trillion mbs wants and what the market wants. Ceos. Ke to many global how do they close that gap . Xavier part of the gap is through relative scale. If you own a big portfolio of oil, Energy Stocks today, you have to own aramco. What are you going to do . Possibly sell some other large holdings, companies with higher production costs or not so wellpositioned, and switching to aramco. Some would be i expect switching. Thes i suppose herein lies point. Wheres the smart listing . The hong kong, lse, or new york . Manus what do you expect xavier what do you expect me to say . Manus the smart answer. Xavier i think the future of the Exchange Industry is through connectivity, like we did at the London Stock Exchange, shanghai stock exchange. Why as a Global Company would you have to choose between a dozen global exchanges . Eventually i think it will be down to two or three global exchanges that will be connected, and you wont have to make this choice anymore. But i do think the company will eventually be listed in north america, in europe, and in asia. I think it will take some time. My bet, i think london and new york will be part of it. I reserve my judgment on china. The surprise i think would be shanghai. Once they launch the international of course, if you list in london today, you can also trade in shanghai. But in the long run i think shanghai will take its rightful place as one of the top two or three global exchanges. Manus one other hot topic. Lets see where we go. I have my list. So hong kong made the bid for the lse. Xavier i heard about that. Manus do you think they will reapproach . Xavier i think the economic pressure to harness and harvest the benefits of globalization, global compression, Global Collateral management, Global Capital formation, we talked about listings. Access to global indices, it m akes it inevitable, no matter what some governments are thinking and saying today, for the industry to continue to consolidate. I think at the end of the day, we will have two, maybe three global exchanges. Manus talk about that landscape. Do you think someone will come back and bid for the lse . Xavier the lse is currently engaged in a large transaction, the immediate future the answers probably no. It is a fairly large integration job that will keep them busy, fa number of years. Eventually consolidation pressures will resume. Manus what about china, hong kong . The exchange combination. Xavier my personal view i have expressed publicly is, china today has the opportunity to switch to capital mark etsbased economy, based on banks and bank funding. If china makes the switch and privatize is the shanghais privatizes the shanghai stock exchange, i would expect consolidation between the clearinghouse, the China Financial Futures Exchange and exchange,he hong kong which could create a 250 billion company. Thats what we are talking about, Global Financial infrastructure. Not the tiny, nationally configured exchanges. It is a global industry, and i believe there will be two or three that emerge. Manus we are waiting what happens with brexit . Xavier we can wait a little longer, we have waited for years. [laughter] manus Central Bank Governor mark carney said to expect investment to come back. Goyou expect, if things according to plan and theres an agreement, we would see an accelerated movement of capital back into the u. K. , after dropping 25 since brexit . Xavier i think the governor is right. The last three years of uncertainty, increased uncertainty, investment has been put on hold. There is a transitional if there is a transitional arrangement that would suggest parties are coming together, investigation would resume investment would resume, but thats a fairly big but. There are thousands of deeply involved technical issues. Things like migration, energy, education. These have not been resolved. That will take many, many years and will require decisions by parliaments and governments on both sides. Yes, investment would resume in the shortterm, but for the large infrastructure investments, i think companies will wait and see what the final heirlution is in t particular area of operation. That will take time. Manus let me ask about your business, cqs, 18 billion in assets. Where is the scalability . What is the ambition . How do you scale up here . Xavier we dont look at a target. The founder of cqs, we have known each other for 35 years. He and i talk about one thing, the challenge we want to make a contribution to. The Global Economy today, an 80 trillion economy. The World Bank Expects global pension deficits to grow nejra good morning and welcome to Bloomberg Markets, the european open. We are live from our European Headquarters in london. Na anna edwards alongside matt miller in berlin. Matt the global bonds selloff extends ahead of wednesdays fed decision and u. S. Futures are steady after the s p 500 closed at a record high. The cash trade less than 30 minutes away. Anna bp beats. The oil major reports profits significantly above estimates, although many analysts downgraded those estimates recently. We will speak to ceo Brian Gilvary lately soon. Johnson tries again. Can he persuade reluctant lawmakers to go to the pulse . Polls. And earnings dented by heavy investment in googles cloud business. Good morning. Matt good morning, anna. Less than 30 minutes from the start of trading across europe. We were talking about yields, bonds shuttling selling off and yields rising. Were up to 1. 84 right now. We were touching 1. 86 earlier, a long way from the 1. 52 we saw at the beginning of this month, 1. 40 at the beginning of september, so yields have really come up. Lets look at whats going on in the futures trade right now, after kind of a mixed Asian Session. Yesterday, wall street hit alltime highs again, a new record there. That was celebrated for a while, certainly by japanese stocks, but not by chinese indexes. European futures are down across the board, ftse futures off 0. 2 , even as the dollar gains strength against sterling. Take a look at u. S. Futures. We said they are holding steady, and indeed s p 500 futures are rising just a little bit right now. Dow jones futures are down just a little, but nasdaq futures jumped, interesting after alphabet earnings showed a lot of investment, cost rising and profit down. Anna a a lot of impact from the tech earnings season to be seen in those futures. Function toe gmm see what that shows about the Asian Session overnight. Optimism from some of the markets in asia, and as a whole the msci asiapacific up 0. 5 . We have seen to some extent this rotation into stocks and out of bounds bonds, the selloff in sovereign debt. You can see that in the red stripe. Earnings,he tech earnings more generally, watching u. S. Data with gdp numbers tomorrow. The fed, boj also setting policy, and the jobs report, so plenty to watch out for this week. Earnings, central banks, data. The s p hit a record level, and japanese stocks overnight closed at a yeartodate high. Some of that driven by President Trump speaking about being ahead of schedule in conversation around trade. Lots to talk about in terms of how long we can carry on this rally for, so it is a great day we equities story. We will certainly talk to him about that. We do not see the pound in there. It is fairly flat with a slight downward bias, down 0. 1 . We saw a big rally on the back of, or some rally at least on the back of the announcement of a delay to january 31 yesterday. 1. 28,still hanging in the 1. 29 range. Interesting to see the pound having trouble breaking out of this range. When we talk to investors and analysts, traders as well, they dont see a wide band for pound possibilities here, although you do see certainly volatility if you look over the last month, you certainly dont over the last few days. Lets talk about one of the Biggest Companies in europe, coming out with earnings. Bp kicking off the season with some strong numbers. Adjusted net income, 2. 25 billion, compared to estimates of only 1. 77 billion. Joining us now is brian gil vary, cfo of bp. Analysts had been lowering their estimates, but why did they go so far . What did they get wrong . Brian looking at these results, the big drivers were a strong result out of the downstream business, something the analysts could not have been able to track. Rosneft with a really strong set of results. And the mix wasnt as bad as we expected, which led to a lower tax rate than first anticipated. Matt it looks like you also have had a very good year in tra ding. Whats going right there . Can you give us insight as to what is giving you the edge there . Brian it is a volatile market. Floor, ande trading gas volatility is up 85 right now, in terms of natural gas. Similar volatility in oil. If you look at where the oil markets are, we are range bound between 55 to 65 a barrel. There are clearly still u. S. China tensions, in terms of where the direction of the Oil Price May go from here. Pretty stable at the moment, but the team has been making some pretty good calls, mostly around the structure of the market. Anna good morning to you. Let me ask a little about the gearing. A longterm ambition to get that down, and it stays stubbornly high, 31. 7 . What can use can you do to keep that down . Brian why it is where it is, we made 18 billion of payments to the deepwater horizon settlements over the last four years. What will bring the gearing down, first of all, it stab ilized quarter on quarter, so net debt is stable. The 10 billion disposal program, of which we have received 2 billion of proceeds. Willat comes in, net debt go down and gearing will track down as well. Part of that is also having operating cash flow significantly below what we need to pay, which will bring down debt even further. By the end of next year, we should be back to the middle end of the range. Anna asset sales is always the thing that springs to mind when you talk about businesses with a gearing level they want to bring down. Can you update us on the u. S. On shore assets, and sales there . Brian we just got two more packages this quarter. We took some impairments, losses on sales associated with those because the natural gas price is so suppressed and probably will continue to be over the next two or three years. We are still getting pretty good multiples in future earnings of the assets, and we have a broad buyer pool. ,ts typically private equity which brings issues and how to close the deals, but we are getting those closed. We announced a big alaskan investment, 5. 6 billion last quarter, and that has made a significant difference. We are compensating the 10 billion of disposals we promised over 2019 and 2020. We will have announced pretty much all of those this year by the end of 4q. Matt can i ask about the comments we heard from the u. S. Energy secretary yesterday . Rick perry said the globe is awash in crude right now and the u. S. , he seem to do intimate the u. S. Was underestimated in terms of its production capabilities. What do you think about the supplyside . How do you see it . Brian the u. S. In particular has probably been the most prolific base in the last five or six years, production approaching 13 Million Barrels, quite extraordinary. When i first traded oil in the early 1990s, the u. S. Was at 6 Million Barrels a day, so it continues to be prolific. We are starting to see back pressures in production, although recounts are down. Production is firming up, but there are concerns, as predicted for the last four years, that we might start to see Oil Production flatten out. We are not seeing any major signs of that, but we see activity back off. Nowprice around 62, right what you see in terms of pricing, if you get the resolution of venezuela, some weolution around iran, or continue to see trade tensions with the u. S. And china, that will soften demand. Demand this year was about 1. 3 Million Barrels a day. By the middle of the year, down to 1 million a barrel, and now probably below 900,000 barrels per day. Thats putting pressure on the price. We will see what happens with the opec meetings coming up. Anna we see change at the top at bp shortly, the longstanding business. G the what can we expect will be different, specifically around climate change, i wanted to ask . You are under pressure from some of your partners. I know you stopped the rsc. Foroup of mps are pushing divestment from oil and gas stocks. What will be done differently . Brian i think you will find, bernard will be very progressive and forwardlooking as we go into it. But bob really started the big discussion around energy transition, and i think bernard will lean heavily into that. We will lay out more about that in the early near the early next year. He will probably come to markets in the First Quarter of next year with guidance about what our missions are in the lowcarbon space. But we have done a huge amount in the last two or three years. We put out a framework last year about reducing our own admissions. We have taken 2. 5 million tons of the 3. 5 million ton target out, and we are on track to deliver that full reduction by 2025, probably well ahead of that, but more on that by the end of this year. We are also looking at improving products, and you saw the announcement we made around electric charging, at the forefront as part of that big transition. And if you look at plastics, what we have this week around recyclables, the hard to recycle plastics, we announced a plant around that in chicago. We are leading on all fronts, and you will see more of that going forward. Matt brian, thanks so much for your time. Brian gilvary, cfo of bp. Lets get the first word news from leighann gerrans in london. Profitnn alphabets took a hit from heavy spending on the cloud business, as it tries to keep up with microsoft and amazon. Net income for the quarter was just over 7 billion, down from earlier and below expectations. Expenses jumped 25 , rising faster than revenue. To politics. A u. S. Army officer says he raised red flags about President Trumps ukraine call. The ukraine colonel Lieutenant Colonel worked for the National Security council and raised the call and other complaints to the nsc lawyer. The first house vote on the impeachment inquiry will be later this week. The boeing chief executive is set to tell the senate the plane maker made a mistake, in relation to the 737 max, part of two critical appearances before u. S. Lawmakers as a fresh allegation emerges the company withheld key safety information. Boeings visit to capitol hill coincides with the oneyear anniversary of the first crash. Global news, 24 hours a day on air and tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. Anna thank you very much. Leighann gerrans, here in london. Asking today, how do markets react if the fed halts rate cuts . We put that question to our markets live managing director mark cudmore, who joins us shortly. This is bloomberg. Matt welcome back to Bloomberg Markets. This is the european open, about 13 minutes from the start of Equities Trading across europe and in the u. K. Lets get to mark cudmore, bloomberg mliv managing editor, joining us from singapore. What do you think . After the s p 500 hit an alltime high and getting earnings beating lowered expectations by a lot, where does the equities rally have to go now . Mark well, as you say, earnings are beating expectations, but those have been slashed massively and overall we see an earnings decline this quarter. Theres a number of potential downsides. We are getting swept up to the upper level again, so bears we had three of the biggest s p 500 companies, two of them missed hardly and one beat. Toe to go on wednesday, decide the earnings season. We have the fed, a likely negative catalyst, and the pmi print and jobs data on friday thats likely to confirm this is one of the worst jobs markets since 2010 in the u. S. Since 2010 in the u. S. For thed 93,000 print first time isince 2010. Anna let me get to the markets live question of the day. How would assets react if the fed halts rate cuts, tying into the rally we have seen in equities, i am sure. What are the ideas you are throwing around on this . Manus the context is that the fed will maintain that these are midcycle insurance cuts. They havent committed to any plans, but that is the general guidance. The market has never believed that, and is pricing quite a few more cuts next year, a big convergence that will probably have to be sorted out today. Today will be the third cut of the cycle. The last two midcycle insurance cuts in the mid1990s were both 75 basis points, so if this is a midcycle insurance cut, the fed will probably have to say that theres no more coming, committing to guidance. Theres three different variations. One is that the fed, theres no way they are ever going to stop cutting rates, and they would admit the market is right and everything will be wonderful. They will say we are wrong, the economy is horrible and we will cut rates aggressively. The fed is not normally quick to admit they are wrong in these things. The other idea, they are going to stick to it, say that the economy is fine, and that means we have to price in all the rate cuts, and the market will really tank. There is a third theory here, from my colleague mark cranfield. The idea that the market might be disappointed the fed sticks to the theory that this is a midcycle insurance cut and we might see a hit up in equities in the last few days or weeks, but ultimately this is a market where investors believe in the fed put. They believe the fed has their back, and are not overly worried believingds they say, the fed will change their mind as soon as theres a pullback in the s p 500. Matt i dont want to keep hammering home on that pullback you have been forecasting, but we have a viewer that says you have been bearish equities for a year now. Is this officially the top . I know you have a macro view column on it as well today. Manus the viewer is incorrect. April 30 was when i first turned bearish on equities. Approximately 3 below here. The turn to start in september, but was ready at any point until then, and the latest is october. Three days left in the month, so timewise i might be wrong. Be 3, top side would 105, and we havent been near the capitulation and overall the market has gone nowhere. It has been flatlining, but flatlining bores me. It ties up capital, the flatlining trade returns nothing. All the inputs have paid out as expected. We have the trade war. We havent had tariffs removed. We had Economic Data deteriorate rapidly. Earnings season disappointed. Expected,puts are as but not the output expected by this stage. By the end of october i expected we would start a severe downturn in equities. We havent yet, and that is why i wrote today it is this week or never, and bears must admit they got this one wrong. Anna we thought we would have brexit to talk about on thursday, but we might not. Maybe we will talk about that instead. Thanks very much, mark cudmore joining us from singapore. Up next, we look at the stock to watch at the market open, including commerzbank, which had a surprise boost after unveiling a new strategy. This is bloomberg. Anna a few minutes to the start of the equity trading day. Bergeret a look dani covering orange, Annmarie Hordern on commerzbank. A boost to commerzbank after announcing a new strategy . Annmarie announced it a month ago, and many said it wasnt ambitious enough, but the earnings quite strong, beating net income and operating profit, both exceeding analyst estimates. Shares are likely to rise at the open. Matt joe, a story on byers dorf . What is it beiers joe currently guiding for growth around 1 to 2 , below the 3 to 4 protected previously, largely coming from the automated unit facing macroeconomic uncertainties. Shares could fall a few percentage points. Anna dani, orange . Pricesrange seeing recover despite weakness in spain. They are heading for their Second Quarter of sales growth, and shares higher just about 1 today. Matt thanks very much for joining us. The latest stock stories by putting first go on the terminal. This is bloomberg. Anna a minute until the start of cash equity trading, welcome back, this is Bloomberg Markets european open. How the market is position. ,sci asianpacific up by 0. 5 making gains after we saw the s p close above a new alltime high. President trump tweets around the trade narrative. Number and central banking decision. Take all of that in stride, waiting more on the earnings story. The pound dropping a touch in the last few minutes. Clinging to some of the gains yesterday. January 31 for the brexit story, we will focus on that shortly. German and french futures point to a downside. Lets get this session underway. The futures is to the downside but pretty flat. E are not expecting big moves the euro and the pound a little weaker. 100 fairly flat. That could outperform to the downside. Nero stocks looking flat euro stocks looking flat. The cfo of bp says we should not worry about