Transcripts For BLOOMBERG Bloomberg Surveillance 20240713 :

Upside we are seeing and some of the other parts of the Continental European market. And with perspective, it seems to be one of those days where the markets are looking on the bright side. He saw that in the Asian Session and the futures, and the u. S. Futures pointing higher. I do say we see some areas of red. We have been focusing on the scandinavian financials and have had some reports this morning, so we will see, but elsewhere, matt, i see a lot of red on the board. On thereat deal of red board. It seems the market just wants to go higher this morning. Matt yes, and we do see a lot of scandinavian movers who have put out earnings today for one reason or another. The big movers to the upside, if you take a look at a number of stocks gaining, 409. The number of stocks losing 159. This to percentage movers, anna, so we will see a difference. I did this because a couple of the Earnings Companies are not big Market Movers but still making a lot of headways, so there is a logistics company, traded in denmark, right now 6 after raising earnings and targets. There is another one that provides Armored Car Services to toks and retailers, loomis, move your money around, also a 4 jump right now. If you take a look at the losers, we have got another danish mover, danske bank, donw. Down. We were just talking to christian weinberg about the biggest loser, in terms of not only points or percentage but also in terms of points. It is one of the biggest losers. You have got a lot of banks down, barclays, standard charter, santander, among them. Anna it seems to be an area of weakness in an otherwise upwardly moving market. Matt, the equity markets, and the risk appetite, your etn european markets open broadly higher. Boosted items. Mi next up, a jobs report that is likely to be depressed by the gm strike. Joining us now is the global head of fixed Income Research at hsbc. Good morning to you. Let me ask you. Picturet term, a bigger , the jobs data we are expecting tosee, it led many anticipate the worst six months well, the worst six months since 2010. Are we going to see something similarly week today, do we think . Different,a point is but with the incoming data today, it is a reflection of last years over tightening. How Monetary Policy works, so it is a fact now. At the time, it was an opinion, but we are looking back, and they have reversed the hike, so they have cut three times and have been reversing the balance sheet, so that is not really a question of that. Now, the incoming data is reflecting that. Of more concern to me is the risk of double counting. So if we respond too aggressively to soft debt today, to me, it invalidates the evaluations. It does not necessarily mean we will change our forecast because of one data point, so to me, it is consistent with lower yields for a long time. Anna so you suggest they have already cut rates to deal with the worst, they do not need to do it again. Toven not everyone is going put their hand up and say, sorry, but the tightening and exactly the data coming in now reflects what happened last year. Anna ok, match. Matt ok, matt. Matt with the over tightening, what were the results of that . We see unemployment at less than 4 . I mean, the lowest level it has been since 1969. I do not know what you are doing a 1969, but i was not doing very much, and we still have no recession. There is still growth in the u. S. Economy and positive rates, unlike many of the other developed nations around the world. Trying toll, i am work on a forward basis, matt, so if we had been discussing this last year, which i believe we were, when yields were virtually double in the u. S. , above 3 , most of your guests would have been arguing for 4 . To me, that was the tightening. It is a fact because of the hikes of last year. It is no longer an opinion. Years timeata in a will look different, so i am not going to react on the incoming on a monthly basis. Weighting they cyclical drivers, the nearterm data points, like the data coming in from china, weighting those against the longerterm structural drivers, and to me, the failure of mainstream forecasting has been to underestimate longerterm structural drivers, excess debt, etc. Anna so where does that leave us in the big conversation, the big picture about how low yields stay for how long . I have got a chart here that talks about this is a value a chart of negative yielding bonds. Everyone is talking about the extensive negative debt globally, and we still have so much, but not nearly as much as we did. It is a problem for some people, the negative debt, but you have to think of it from both sides of the argument. Negative yielding debt with negative Interest Rates is an outcome, of what went before. It is the price we pay for previous excesses. It sounds about a bit harsh, doesnt it . But it is not wrong. An oxymoron to say it is wrong. So to me, the amount of negative debt will go up or down. Anna because you say the markets have functioned perfectly well with the negative yields. We saw that relative value now. Steven exactly. That is my point. Everything is relative. Fives, germany versus the u. S. , and if i talk to my father, he is 80 years old, and his Reference Point is zero, so he would not understand, but that is his Reference Point. I suggest that people who work in big institutions and hedge funds are a bit more sophisticated and presumably understand the valuation. To most of the world, who are not actually rich, if you are a japanese or u. S. Investor, they yield more than your local market. I know that may sound a bit complicated, but, again, is a fact. The u. S. Rates are so high compared to other markets, which created this opportunity, so to call it rich or wrong seems to be dangerous. If you look five years out, where will the policy rate be . Will it be above zero . I doubt it. In which case, those who yield above that cannot be rich. Matt you could also you can make money if someone else is willing to pay for it, so if you find a greater fool, you can pass on that negative debt. Doterms of the u. S. , steven, you see those rates going lower . I mean, what is were forecast for 10year treasuries . I am not into the greater fool idea, which reminds me of bitcoin. U. S. , our forecast is 1. 5. The 10year, and that is over the next five years. I doubt that in five years time it will be above 2 , in the same way i doubt we will be above zero. Japan has been zero or negative for 20 years, so if i suggested to you that we are five years in in year of and are entering it in the u. S. , you have to frame it in the context of what has gone before in japan, and it is similar. The outlook for this country is compared to japan. Matt but do you expect negative nominal rates in the u. S. . Steven there is enough of a potential balance and response from lower rates to avoid that this time, but who knows for the next cycle . It could well be that we have to go below zero. So for now, i would say no, and it is probably quite a big lobby in the u. S. To fight against it. Anna if anyone watching is in the Asset Management industry, they are thinking it is temporary, and that is interesting. Thank you, steven, with hsbc bank prehe stays with us. Later, bloombergs jonathan you, is with us thank steven, with hsbc. He stays with us. Up next, we will bring you the stocks on the move so far. Nk so far the biggest loser. Money laundering worries. This is bloomberg. Welcome back to bloomberg markets. This is the european open. We are looking at some green arrows in terms of the equity indexes, the ftse up, as is the so we are the cac, looking at some decent gains here. Lets get to the individual stories behind those indexes with dani burger in london. Seeing some big losses from donskoy bank k, citing higher compliance costs. It is still dealing with the fallout from the Money Laundering scandal, one of the biggest losers, and one of the biggest gainers are loomis, gaining more than 6 . They also had earnings, net sales beating expectations. Now, we are seeing shares trade at a record high, and they also announced a chief Compliance Officer that is new stepping in today. And down 23 , just about, giving a warning that trading is looking much more difficult than they thought at lookers, and it is starting to hurt. They had two clues 15 car dealerships. Also, they said their ceo and ceo are stepping down their ceo and coo are stepping down. Dani burger on the movers. Donald trump has lashed out on thebrexit deal, saying agreement will make it difficult for the u. K. To strike a trade deal with the u. S. Areident trump there certain aspects of the deal, you cannot do it. You cannot do it. You cannot trade. We cannot make a trade deal with the u. K. , because i think we can do many times the numbers that we are doing right now. Trump making his views clear. Lets talk about where we are with the u. K. Story, with , andions, and brexit talks steven major, the global head at hsbc is with us. Curve, and you. Say that the curve has a steepening bias. Holdingto us what is the low and down for you or what will hold the and down. What is holding the low end down four what will hold the low end down. Steven it is very positive force sterling and sterling assets. The front end of the curve, the shorter securities, are very sensitive to the policy rate, and however this turns out, inside the probability of the bank of england pushing rates up, it has been sort of removed, and we were talking about them even cutting rates, so if the valuation does not reflect the chance of a rate cut, then it is cheap, so for us, holding it relative holding twos relative to tens, that is good for us, and it has a very long curve. There is a steepening pressure, more technical, related to these and also bias, and guys who are liability driven investors, and the balance of all of this is that much of it is done already, so these are people who are forced to buy, so if you add that to the fact that the next movements could be down rather than up, the hold curve is tilting toward steepening bias, and we cannot find many other markets with steepening bias. In fact, everything we are looking at is flattening. It seems that it is flattening from the front. The u. K. Is a bit of an outlier with the markets. Anna yes. Matt so how could that be changed, given certain outcomes of the brexit situation and the election . Are there results you are looking at that could trip change that trade . Steven how you weight them with probabilities, and each day, the opinion polls will be shifting up and down, but it looks like on balance, we are going to have a Monetary Policy that is more accommodative, so, therefore, supporting the funds, and it could be the fiscal policy is brought into play war, whoever wins. Now come of course, that might change, given the various opinion polls, but imagine if you had a looser fiscal policy and lower rates. On balance, the two should add up to a steepening of the curve, on balance. Anna ok, major global head of fixed income with hsbc, steven, he stays with us. Christine lagarde becomes the new president of the ecb, but how will she cope with the euro downslopen zone risk . This is bloomberg. Nobody thinks that negative rates is a signal of a healthy economy. Rates have interest less effect in terms of stimulating growth. Everybody can see that. Overall, for our business, it is not a good thing. If this situation stays like this for a long time, we will have to think about charging institutional customers. Oure are looking across businesses and passing along negative rates to clients, where it is prudent and sensible and also legal. Our clients put a lot of money into our bank. 6 . We do not pay them anything. We have to change. Negative Interest Rates on retail deposits is something for the future i believe europesse are some of key banking voices on the impact of negative rates from the last week of earnings. Toa, subzero rates continue bite some lenders. Today sees a new era began at the European Central bank. Christine lagarde is now the president of the ecb and the first woman to hold the position, and despite a glowing resume, she faces a lot of challenges as she inherits a dismal Economic Outlook, negative Interest Rates, looking at fiscal spending, a governing council that seems pretty split. Joining us now is a senior multiasset strategist, steven fixed global ahead of income at hsbc. He is still with us. What do you think Christine Lagardes first task should be . Task would be to press the case for more fiscal stimulus, or fiscal stimulus to take on more of a role in helping the euro zone in this slump, and i think she would be focused on that. On the Monetary Policy front, she will not upset the apple cart. With thee, she will go council recommendation. It would not be much of a change. Your thoughtsven, on what Christine Lagarde would have to do, and there was a lot of talk about the tier system that mario draghi put in place. Withn they will continue the same policies. So much has been done that there is very left very little left to do. In the previous meeting it is quite interesting. Investor,e a rational would you buy a twoyear note or so . O 90 twice or so, we have bounced off reversal rate is that theoretical level where if you go underneath that, the policy rate becomes, in a way, it is like a anna and it shows we bounced off of it, putting a yellow line in at, what, 100 basis points, but you say the reversal rate is where the conditions start to tighten. Steven yes, and you mentioned tiering. These sixdeposit at times acquired reserves at zero, so that is a safe asset. We talk about eurobonds or euro bills or a combination. It is happening. There is a safe asset which yields zero, which is competing with the short german paper, which went as low as 92 and is andmoving back to 60, 50, as we said earlier, it is all relative. Why would you hold something at 60 . You were talking about negative rates forget that does not help bankers when they are losing money. To someone from Deutsche Bank, and he did not seem that excited, saving about 100 million a year. It is still losing money and not able to grow revenues. Yes, absolutely, but it has to be said that the bar is quite low for banks. We have known that for some time, and that is already in the expectation for earnings, so we actually got some surprises, even from some u. K. Banks, as well as some net interest margins. Also, barclays, although that came from the Investment Banking side surprise. They are able to sort of navigate this and manage expectations, with a surprise on the upside, which was a surprise to us. Supriya. Stay with us, steven, thank you very much for your time. Steven major, with us for the past halfhour, from hsbc. European automakers and their story, and their credit. We will talk more about their sector. This is bloomberg. Matt 30 minutes into the trading day, lets get your top headlines. Payrolls arearm expected to show job growth at a five month low. The strike from gm will skew the numbers. Followingh higher better manufacturing china data, anda call between the u. S. Chinese today threatens to unsettle the market. As an impeachment inquiry against donald get started, he says Boris Johnson donald trump get started, he says boris avoidns plan could help in the future. I am matt miller along with anna edwards. Anna still seems as if this European Equity session wants to go higher. Two thirds or so on the stoxx a0 moving higher, leading to net gain of four tens of a percent. We wait for the jobs data. We focus on the chinese data, the beat data as opposed to the data that missed. We put aside concerns on whether ofwill stumble on phase two the trade deal. Has up 8. 5 . That is the biggest mover to the upside and one of the standout performers. We also heard from bba aviation. Lets look at the other side of the equation, one third of stocks moving to the downside. We talked about danske bank. They reduced their guidance, still concerned if they have a handle on what is going on, down 4. 8 . An interesting story around anything to do with leasing cars or selling used cars, a move to the downside in those stocks, auto trader moving down 1. 9 . Know the handover from some of the numbers out of avis overnight, that is rental of course, there are a few elements of the car story having an impact on the market. President trump is weighing in on Prime Minister boris itnsons brexit deal, saying will be more difficult for the uk2 to strike a trade deal with the u. S. Speaking to nigel farage, the president said the two countries could be doing much bigger numbers when it comes to trade. Under certain aspects of the deal, you cant do it. We cant make a trade deal with the u. K. I think we can do many times the numbers we are doing right now. The trump impeachment inquiry is going public. The u. S. House voted along mostly partisan lines to begin open hearings to investigate whether the president abused his power and should be removed from office. Formal voteint to a of articles of impeachment. There are trouble Republicancontrolled Senate is unlikely to convict him. Ndinavian earnings season donskoy bank comes in danske bank below estimates, citing an market. Ngly difficult denmarks bank is still dealing with the fallout of a 200 billion money scandal. Pg e has restored power to essentially all customers. The blackouts were to protect electrical waters wires from downing in wind and causing forest fires. The bad news, there are still weeks left in californias wildfire season. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Half this is bloomberg. Oft we are about the third the way into earnings season, this weeks report includes heavy hitters like apple and google along with european banks that have struggled to find their footing with rockbottom or even. Burger. H more is dani dani there is no limit, and corporates did reflect that when it came to banks. Still a lot of surprises to the upside that probably has more to do with expectation setting. Some of the smartphone makers like apple and samsung, they beat estimates. We saw chipmakers boost their prices today. Facebook beat expectations. Scrutiny means Continental Europe<\/a>an market. And with perspective, it seems to be one of those days where the markets are looking on the bright side. He saw that in the Asian Session<\/a> and the futures, and the u. S. Futures pointing higher. I do say we see some areas of red. We have been focusing on the scandinavian financials and have had some reports this morning, so we will see, but elsewhere, matt, i see a lot of red on the board. On thereat deal of red board. It seems the market just wants to go higher this morning. Matt yes, and we do see a lot of scandinavian movers who have put out earnings today for one reason or another. The big movers to the upside, if you take a look at a number of stocks gaining, 409. The number of stocks losing 159. This to percentage movers, anna, so we will see a difference. I did this because a couple of the Earnings Companies<\/a> are not big Market Movers<\/a> but still making a lot of headways, so there is a logistics company, traded in denmark, right now 6 after raising earnings and targets. There is another one that provides Armored Car Services<\/a> to toks and retailers, loomis, move your money around, also a 4 jump right now. If you take a look at the losers, we have got another danish mover, danske bank, donw. Down. We were just talking to christian weinberg about the biggest loser, in terms of not only points or percentage but also in terms of points. It is one of the biggest losers. You have got a lot of banks down, barclays, standard charter, santander, among them. Anna it seems to be an area of weakness in an otherwise upwardly moving market. Matt, the equity markets, and the risk appetite, your etn european markets open broadly higher. Boosted items. Mi next up, a jobs report that is likely to be depressed by the gm strike. Joining us now is the global head of fixed Income Research<\/a> at hsbc. Good morning to you. Let me ask you. Picturet term, a bigger , the jobs data we are expecting tosee, it led many anticipate the worst six months well, the worst six months since 2010. Are we going to see something similarly week today, do we think . Different,a point is but with the incoming data today, it is a reflection of last years over tightening. How Monetary Policy<\/a> works, so it is a fact now. At the time, it was an opinion, but we are looking back, and they have reversed the hike, so they have cut three times and have been reversing the balance sheet, so that is not really a question of that. Now, the incoming data is reflecting that. Of more concern to me is the risk of double counting. So if we respond too aggressively to soft debt today, to me, it invalidates the evaluations. It does not necessarily mean we will change our forecast because of one data point, so to me, it is consistent with lower yields for a long time. Anna so you suggest they have already cut rates to deal with the worst, they do not need to do it again. Toven not everyone is going put their hand up and say, sorry, but the tightening and exactly the data coming in now reflects what happened last year. Anna ok, match. Matt ok, matt. Matt with the over tightening, what were the results of that . We see unemployment at less than 4 . I mean, the lowest level it has been since 1969. I do not know what you are doing a 1969, but i was not doing very much, and we still have no recession. There is still growth in the u. S. Economy and positive rates, unlike many of the other developed nations around the world. Trying toll, i am work on a forward basis, matt, so if we had been discussing this last year, which i believe we were, when yields were virtually double in the u. S. , above 3 , most of your guests would have been arguing for 4 . To me, that was the tightening. It is a fact because of the hikes of last year. It is no longer an opinion. Years timeata in a will look different, so i am not going to react on the incoming on a monthly basis. Weighting they cyclical drivers, the nearterm data points, like the data coming in from china, weighting those against the longerterm structural drivers, and to me, the failure of mainstream forecasting has been to underestimate longerterm structural drivers, excess debt, etc. Anna so where does that leave us in the big conversation, the big picture about how low yields stay for how long . I have got a chart here that talks about this is a value a chart of negative yielding bonds. Everyone is talking about the extensive negative debt globally, and we still have so much, but not nearly as much as we did. It is a problem for some people, the negative debt, but you have to think of it from both sides of the argument. Negative yielding debt with negative Interest Rates<\/a> is an outcome, of what went before. It is the price we pay for previous excesses. It sounds about a bit harsh, doesnt it . But it is not wrong. An oxymoron to say it is wrong. So to me, the amount of negative debt will go up or down. Anna because you say the markets have functioned perfectly well with the negative yields. We saw that relative value now. Steven exactly. That is my point. Everything is relative. Fives, germany versus the u. S. , and if i talk to my father, he is 80 years old, and his Reference Point<\/a> is zero, so he would not understand, but that is his Reference Point<\/a>. I suggest that people who work in big institutions and hedge funds are a bit more sophisticated and presumably understand the valuation. To most of the world, who are not actually rich, if you are a japanese or u. S. Investor, they yield more than your local market. I know that may sound a bit complicated, but, again, is a fact. The u. S. Rates are so high compared to other markets, which created this opportunity, so to call it rich or wrong seems to be dangerous. If you look five years out, where will the policy rate be . Will it be above zero . I doubt it. In which case, those who yield above that cannot be rich. Matt you could also you can make money if someone else is willing to pay for it, so if you find a greater fool, you can pass on that negative debt. Doterms of the u. S. , steven, you see those rates going lower . I mean, what is were forecast for 10year treasuries . I am not into the greater fool idea, which reminds me of bitcoin. U. S. , our forecast is 1. 5. The 10year, and that is over the next five years. I doubt that in five years time it will be above 2 , in the same way i doubt we will be above zero. Japan has been zero or negative for 20 years, so if i suggested to you that we are five years in in year of and are entering it in the u. S. , you have to frame it in the context of what has gone before in japan, and it is similar. The outlook for this country is compared to japan. Matt but do you expect negative nominal rates in the u. S. . Steven there is enough of a potential balance and response from lower rates to avoid that this time, but who knows for the next cycle . It could well be that we have to go below zero. So for now, i would say no, and it is probably quite a big lobby in the u. S. To fight against it. Anna if anyone watching is in the Asset Management<\/a> industry, they are thinking it is temporary, and that is interesting. Thank you, steven, with hsbc bank prehe stays with us. Later, bloombergs jonathan you, is with us thank steven, with hsbc. He stays with us. Up next, we will bring you the stocks on the move so far. Nk so far the biggest loser. Money laundering worries. This is bloomberg. Welcome back to bloomberg markets. This is the european open. We are looking at some green arrows in terms of the equity indexes, the ftse up, as is the so we are the cac, looking at some decent gains here. Lets get to the individual stories behind those indexes with dani burger in london. Seeing some big losses from donskoy bank k, citing higher compliance costs. It is still dealing with the fallout from the Money Laundering<\/a> scandal, one of the biggest losers, and one of the biggest gainers are loomis, gaining more than 6 . They also had earnings, net sales beating expectations. Now, we are seeing shares trade at a record high, and they also announced a chief Compliance Officer<\/a> that is new stepping in today. And down 23 , just about, giving a warning that trading is looking much more difficult than they thought at lookers, and it is starting to hurt. They had two clues 15 car dealerships. Also, they said their ceo and ceo are stepping down their ceo and coo are stepping down. Dani burger on the movers. Donald trump has lashed out on thebrexit deal, saying agreement will make it difficult for the u. K. To strike a trade deal with the u. S. Areident trump there certain aspects of the deal, you cannot do it. You cannot do it. You cannot trade. We cannot make a trade deal with the u. K. , because i think we can do many times the numbers that we are doing right now. Trump making his views clear. Lets talk about where we are with the u. K. Story, with , andions, and brexit talks steven major, the global head at hsbc is with us. Curve, and you. Say that the curve has a steepening bias. Holdingto us what is the low and down for you or what will hold the and down. What is holding the low end down four what will hold the low end down. Steven it is very positive force sterling and sterling assets. The front end of the curve, the shorter securities, are very sensitive to the policy rate, and however this turns out, inside the probability of the bank of england pushing rates up, it has been sort of removed, and we were talking about them even cutting rates, so if the valuation does not reflect the chance of a rate cut, then it is cheap, so for us, holding it relative holding twos relative to tens, that is good for us, and it has a very long curve. There is a steepening pressure, more technical, related to these and also bias, and guys who are liability driven investors, and the balance of all of this is that much of it is done already, so these are people who are forced to buy, so if you add that to the fact that the next movements could be down rather than up, the hold curve is tilting toward steepening bias, and we cannot find many other markets with steepening bias. In fact, everything we are looking at is flattening. It seems that it is flattening from the front. The u. K. Is a bit of an outlier with the markets. Anna yes. Matt so how could that be changed, given certain outcomes of the brexit situation and the election . Are there results you are looking at that could trip change that trade . Steven how you weight them with probabilities, and each day, the opinion polls will be shifting up and down, but it looks like on balance, we are going to have a Monetary Policy<\/a> that is more accommodative, so, therefore, supporting the funds, and it could be the fiscal policy is brought into play war, whoever wins. Now come of course, that might change, given the various opinion polls, but imagine if you had a looser fiscal policy and lower rates. On balance, the two should add up to a steepening of the curve, on balance. Anna ok, major global head of fixed income with hsbc, steven, he stays with us. Christine lagarde becomes the new president of the ecb, but how will she cope with the euro downslopen zone risk . This is bloomberg. Nobody thinks that negative rates is a signal of a healthy economy. Rates have interest less effect in terms of stimulating growth. Everybody can see that. Overall, for our business, it is not a good thing. If this situation stays like this for a long time, we will have to think about charging institutional customers. Oure are looking across businesses and passing along negative rates to clients, where it is prudent and sensible and also legal. Our clients put a lot of money into our bank. 6 . We do not pay them anything. We have to change. Negative Interest Rates<\/a> on retail deposits is something for the future i believe europesse are some of key banking voices on the impact of negative rates from the last week of earnings. Toa, subzero rates continue bite some lenders. Today sees a new era began at the European Central<\/a> bank. Christine lagarde is now the president of the ecb and the first woman to hold the position, and despite a glowing resume, she faces a lot of challenges as she inherits a dismal Economic Outlook<\/a>, negative Interest Rates<\/a>, looking at fiscal spending, a governing council that seems pretty split. Joining us now is a senior multiasset strategist, steven fixed global ahead of income at hsbc. He is still with us. What do you think Christine Lagardes<\/a> first task should be . Task would be to press the case for more fiscal stimulus, or fiscal stimulus to take on more of a role in helping the euro zone in this slump, and i think she would be focused on that. On the Monetary Policy<\/a> front, she will not upset the apple cart. With thee, she will go council recommendation. It would not be much of a change. Your thoughtsven, on what Christine Lagarde<\/a> would have to do, and there was a lot of talk about the tier system that mario draghi put in place. Withn they will continue the same policies. So much has been done that there is very left very little left to do. In the previous meeting it is quite interesting. Investor,e a rational would you buy a twoyear note or so . O 90 twice or so, we have bounced off reversal rate is that theoretical level where if you go underneath that, the policy rate becomes, in a way, it is like a anna and it shows we bounced off of it, putting a yellow line in at, what, 100 basis points, but you say the reversal rate is where the conditions start to tighten. Steven yes, and you mentioned tiering. These sixdeposit at times acquired reserves at zero, so that is a safe asset. We talk about eurobonds or euro bills or a combination. It is happening. There is a safe asset which yields zero, which is competing with the short german paper, which went as low as 92 and is andmoving back to 60, 50, as we said earlier, it is all relative. Why would you hold something at 60 . You were talking about negative rates forget that does not help bankers when they are losing money. To someone from Deutsche Bank<\/a>, and he did not seem that excited, saving about 100 million a year. It is still losing money and not able to grow revenues. Yes, absolutely, but it has to be said that the bar is quite low for banks. We have known that for some time, and that is already in the expectation for earnings, so we actually got some surprises, even from some u. K. Banks, as well as some net interest margins. Also, barclays, although that came from the Investment Banking<\/a> side surprise. They are able to sort of navigate this and manage expectations, with a surprise on the upside, which was a surprise to us. Supriya. Stay with us, steven, thank you very much for your time. Steven major, with us for the past halfhour, from hsbc. European automakers and their story, and their credit. We will talk more about their sector. This is bloomberg. Matt 30 minutes into the trading day, lets get your top headlines. Payrolls arearm expected to show job growth at a five month low. The strike from gm will skew the numbers. Followingh higher better manufacturing china data, anda call between the u. S. Chinese today threatens to unsettle the market. As an impeachment inquiry against donald get started, he says Boris Johnson<\/a> donald trump get started, he says boris avoidns plan could help in the future. I am matt miller along with anna edwards. Anna still seems as if this European Equity<\/a> session wants to go higher. Two thirds or so on the stoxx a0 moving higher, leading to net gain of four tens of a percent. We wait for the jobs data. We focus on the chinese data, the beat data as opposed to the data that missed. We put aside concerns on whether ofwill stumble on phase two the trade deal. Has up 8. 5 . That is the biggest mover to the upside and one of the standout performers. We also heard from bba aviation. Lets look at the other side of the equation, one third of stocks moving to the downside. We talked about danske bank. They reduced their guidance, still concerned if they have a handle on what is going on, down 4. 8 . An interesting story around anything to do with leasing cars or selling used cars, a move to the downside in those stocks, auto trader moving down 1. 9 . Know the handover from some of the numbers out of avis overnight, that is rental of course, there are a few elements of the car story having an impact on the market. President trump is weighing in on Prime Minister<\/a> boris itnsons brexit deal, saying will be more difficult for the uk2 to strike a trade deal with the u. S. Speaking to nigel farage, the president said the two countries could be doing much bigger numbers when it comes to trade. Under certain aspects of the deal, you cant do it. We cant make a trade deal with the u. K. I think we can do many times the numbers we are doing right now. The trump impeachment inquiry is going public. The u. S. House voted along mostly partisan lines to begin open hearings to investigate whether the president abused his power and should be removed from office. Formal voteint to a of articles of impeachment. There are trouble Republicancontrolled Senate<\/a> is unlikely to convict him. Ndinavian earnings season donskoy bank comes in danske bank below estimates, citing an market. Ngly difficult denmarks bank is still dealing with the fallout of a 200 billion money scandal. Pg e has restored power to essentially all customers. The blackouts were to protect electrical waters wires from downing in wind and causing forest fires. The bad news, there are still weeks left in californias wildfire season. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Half this is bloomberg. Oft we are about the third the way into earnings season, this weeks report includes heavy hitters like apple and google along with european banks that have struggled to find their footing with rockbottom or even. Burger. H more is dani dani there is no limit, and corporates did reflect that when it came to banks. Still a lot of surprises to the upside that probably has more to do with expectation setting. Some of the smartphone makers like apple and samsung, they beat estimates. We saw chipmakers boost their prices today. Facebook beat expectations. Scrutiny means Investor Sentiment<\/a> is still mixed. Some of the oil majors, some of them on the beat board, bp, shell. We saw a lot of the shares slumped. Shell gave a downbeat forecast for the Global Economy<\/a>, and the Falling Oil Prices<\/a> hurt. Credit suisse, a solid beat, even though we have negative Interest Rates<\/a>. Analysts use words like mixed, mediocre, unimpressive. Ing didredit suisse, miss their analyst expectations, feeling the pinch of rates and struggling to boost revenue. One of the other highlights to point out is google, a rare stumble by the Parent Company<\/a> , dented by spending on cloud business. I want to give a quick breakdown of what the sectors look like. Consumer sectors in europe posting the greatest due to utilities. If we look at the negative, those are more telling because it shows why europes Earnings Seasons<\/a> have looked so weak, and it follows oil prices. Materials Earnings Growth<\/a> down 35 and energy down more than 25 . This might be why we are seeing europe move towards an earnings recession. Anna dani burger. Steven major is still with us. Thingsick up some of the there seems to be some big structural changes underway and now we see consolidation seemingly about to take place. What expectations do you have for autos . Subriya while the structural challenges for the sectors should not be underestimated, also causing them to bulk up and respond to those challenges. We have seen signs of consolidation this week between a mergeriat chrysler, to create the worlds first fourth largest carmaker. Cyclicalsvalue especially in europe and japan, and the auto sector is smack bang exactly what we are looking value. Clicality and that you bought psa fiat and not psa, because we saw that huge move. Are there certain names or certain areas in the automotive supriya . We are sticking with european autos as a whole. To be had further down the supply chain or upside as growth is realized in the electric vehicle space, but that is not we are focusing on tactically. The sector is rated at nine times forward pe relative to a Global Market<\/a> trading north of 15 times, so that is the kind of value we are looking at. Some of our Economic Data<\/a> around Global Office<\/a> sales, that creates a good tactical entry point, signs of improvement from a low point. Anna just looking at some of your calls, you do not want credit in the portfolio and i wonder why when Interest Rates<\/a> are so low. Aboutng to steven major lower from longer Interest Rates<\/a>. If rates remain low, why worry about credit . Thatya it is precisely environment of ultralow rates that has caused a clear deterioration in credit quality. The cr companies have started borrowing again and financial corporates have taken on a lot of debt in this cycle, causing debt to raise to historical highs. The deterioration in credit quality and obstruction, there is better compensations in equities. You are not being compensated in credit markets relative to the risk you take on. Poundwhen you look at the gainsu see the changes, when we think there is less possibility of no deal, or drops when we think there is more possibility. You dont think that tells the whole story, right . Has had somepound blinkers on. Gauge,been a narrow narrowly focused in shifts in brexit related sentiment, but in a very narrow sense. Just looking at prospects for no deal but no brexit, the fact is a deal can be quite nuanced, especially when it comes to the scope of a future trade relationship with the e. U. When we look at the election, perhaps there is less attention given to the fact that if you did have gains coming through coulde labour party, this present present risk in terms of significant shifts in the structure of the economy. You have this current account deficit, information coming out overnight. In 2018, the current account deficit widened. There are a lot of different aspects the pound has been paying less attention to, and this has been odd in my view. We expect that to change. Anna thanks for joining us this morning. She will be continuing the conversation with us on bloomberg radio. We have got to let her go. Up next, some of the stock movers, including dse pen alpena. Beat since the 5 billion takeover in august. The stock is up more than 50 this year. This is bloomberg. Bloombergme back to markets. 30 minutes into the trading day and looking at some decent green arrows across European Equity<\/a> indexes, the dax up for tens of 1 . Fiat and peugeot. Fiat and peugeot plan to merge. To 47cap of close billion. Emerge as the may biggest winner in the deal, since the talks were revealed. The other winners are the small Advisory Firms<\/a> being hired. , tomated by freeman and co. Split as much as 90 million in advisory fees. Lets bring in chris reiter who has been covering the Auto Industry<\/a> for years. Clearly anl, this is acquisition, right . We can call it a merger but you is buying fiat, which is good for john elcon. Ands the elcon family agnelli family have wanted to reduce their exposure to cars since they took over, and this is the deal that gets them to a manageable state and automaker without totally getting out. Matt anna . Anna what does this leave us with, the picture for the big automakers . How will this entity stack up against the competitors . We are not talking about the Worlds Largest<\/a> carmaker being created. Peugeotiat chrysler and still have the same problems in that they are massmarket automakers largely exposed to mature markets. Fiat chrysler is mainly in the u. S. And have given up a lot in europe, and peugeot is basically only europe. The combined entity will have a weakness in china, and with the best prospects. But are strong in europe, that is not a huge prize these days. Our previous guest likes the automakers because they are starting to do something about the predicament they are in. Who is next to go in this consolidation . Chris there is probably a number of candidates. You would think Jaguar Land Rover<\/a> is a company that has sort of been floundering. One of the things Fiat Chrysler<\/a> peugeot, is very massmarket focused. They do not have an audi or a porsche. The brands are relatively small and weak. If they wanted to go to the next step, they could go into luxury to get more margins, which are really important, given all the expenses to upgrade technology, selfdriving, electric cars. Then there are smaller players like ford has been struggling for a while, who knows what happens with gm, mazda is around. Matt there is a lot that could happen, basically. I find the land rover jaguar deal interesting because it is such an incredible brand, such an amazing luxury product in range rover, but they need investment to step up the technology. , and it is the weekend. Anna you go ahead and do that. Matt we can talk about oil as well, if you like. Anna we have 12 minutes left and you can go off and talk cars until monday. Those Advisory Firms<\/a> that get the job this time around are looking ahead to all the other mna. Does m a m a. Oil could have the biggest weekly loss on doubts on Donald Trumps<\/a> trade deal. We expect numbers from exxon mobil and chevron later today, with earnings from bp, total, and shall. Joining us as our executive editor for energy and commodities. U. S. Look ahead to the majors that report later on. What are we expecting to hear . We went into this week supremely confident we had the right theme, and the earnings from shell, bp, and total have confounded that. We are having a tough time. The oil price is lower year on year and there is an overlying underlying program does problem of getting people to invest. Exxon and chevron will be two different stories. Chevron is in a much better state than exxon. We are looking for information on potential m a. Exxon, we are looking for something resembling a turnaround. No one wants it anymore. The ceo is showing up on the analyst calls making an effort, trying to show investors they are friendly again. I guess we are looking for a continuation of that effort. Matt how does the trade war and possibility of a trade truce affect the outlook for these oil majors . Stuart enormously so. Shall is a very good example is a very good example. We fell back three or 4 on the open yesterday, largely a function of them saying there are some doubts about the timetable for the buyback given the lack of Economic Growth<\/a>. There is no doubt you are seeing it for the futures in crude oil. It is not all about supply specifically on the demand side. Anna stuart wallace, thank you for joining us. Next, the impeachment inquiry. Live tojones joins us also talk about jobs. This is bloomberg. To bloomberg back markets. Open. The european looking at pretty solid green arrows across European Equity<\/a> indexes, the dax up for tens of 1 . 1 . 10 of joining us in the studio is fx and rates, our strategist. This is the big friday for you, for the blog, for Economic Data<\/a> points because of nonfarm payrolls. Richard i think the chances for a positive surprise are high because the survey consensus of 85,000 is the lowest we have had since september 2017. That is a low far low bar for a beat and anything above that will be positive for the markets. We might get more pullback in the rates move. The data in the u. S. , including the chicago number, was awful. Yields came down 10 or 15 basis points in the short end. Anna a conversation we had earlier on was steven major of hsbc, which was trying to sequence our thinking from jobs to rates to market. The weakness we are seeing in the jobs market was anticipated earlier in the year and led to the Interest Rate<\/a> cuts we have already seen. I guess that rate is a flag, but just because we see weakness in jobs data does not mean we should expect more cuts of Interest Rates<\/a>. Richard if you look at the survey data, which is forwardlooking, the chicago fed , dallas fed, philly fed, the pmi data out of chicago yesterday surveys what do businesses expect going forward. They have all come in on the south side of expectations, so the hard data coming in softer than expected, that is what the markets were anticipating. The markets are starting to price more into next year because the survey data is soft. Matt the weakest month for the dollar in 21 months. Is there upside . Richard we were overdue a correction in the dollar. If we get rates continuing the dust continuing to be softer, we get a further downward move in the u. S. Dollar. Matt Richard Jones<\/a> in berlin. Richard is not the only exciting interview we have today. We have the fed vicechairman Richard Clarida<\/a> for an exclusive talk. Francine im jobs on the rope. U. S. Payrolls in a slump. What do warning signs in the real economy mean . Trump weighs in on brexit. And the house formalizes the impeachment process. Will earnings good morning. Good afternoon watching from asia. In london. Ne lacqua tom keene in new york. There is only a four hour different between the u. S. And europe. I know that the clocks change on sunday. Before that looking forward to your great interview. Tom i want to say with apple tv launching their new morning show, i would rather talk to you any day of the week then Jennifer Aniston<\/a>. Just so you know. The morning show thing is what we do. Francine i dont believe that for one second. Never. Tom the morning show is what we do and we are thrilled that apple joins the competition. Francine there are plenty more on markets and we will look at brexit. First lets get to the bloomberg. Voting to. House approve and proceed with its impeachment inquiry putting Donald Trumps<\/a> presidency on treacherous ground. It sends a signal, a vote to impeach mr. Trump is all but inevitable. Economists expect the u. S. Jobs report to show falling to a fivemonth low. In october bloomberg believes employers added 85,000 workers. Reflectlikely General Motors<\/a> strike that lasted six weeks. A warning from Boris Johnson<\/a> to donald trump on trade. The president says the brexit deal will make it difficult for the u. K. To strike a trade deal with the u. S. Speaking with nigel faraj he said that if they made a break with the eu the two countries could do a bigger trade deal. It was a chaotic halloween in hong kong. Police using tear gas scuffling with protesters and partygoers in defiance of a ban many wore masks. Taking tougher security measures. Hong kong approving restrictions on online posts inciting violence. Global news, 24 hours a day onair and on tic toc on twitter, powered by more than 2,700 journalists and analysts in more than 120 countries. This is bloomberg. Francine, tom . Tom two data streams that i know, there isnt that much going on into this jobs data. That should be expected after a two fed day. This is interesting. I will run that up to 112 right now. Sterling i am watching, what are you watching . Francine i am also watching sterling. We have elections on december 12. Yesterday we had an interview. President trump spoke to nigel faraj. That was unexpected by some. Ofhink that there is a lot investors focusing on these better than expected chinese manufacturing data and what that means because of the uncertainty over a trade deal. Tom lets go to jobs day. We have a wonderful lineup to give you perspective on the importance of what is assumed to be a lesser jobs. This is a trend. I have taken lines out of the chart to make it better for tv as well. That is the wrong banner, my fault. I put the wrong chart out there because im recovering from halloween. This is the jobs market, the 12 month moving average and the sixmonth month moving average rolling over. That is extraordinary. I will get back to the inflation chart in a bit. , tomine following dressing up as Jennifer Aniston<\/a> from the morning show. Againstrump lashing out Boris Johnson<\/a>s brexit deal. He said the agreement would make it difficult for the u. K. To strike a trade deal with the u. S. President trump under certain aspects of the deal you cant do it. You cant trade. We cant make a trade deal with the u. K. I think we can do many times the numbers we are doing right now. Francine so lets get more on trade, more on brexit. Thank you for joining us. Robin, when you look at President Trump<\/a> weighing in on brexit, does it make a difference in the Election Campaign<\/a> . We are voting on december 12. Whenever donald trump intervenes in anything it causes a wave. The timing was very interesting. This was meant i think to be supportive of nigel faraj. Actually the timing to appear the nigel faraj show on london him. Is supportive of but it was on the day labor launched its manifesto. Labor was turbocharged in and antiBoris Johnson<\/a> language. The fact that donald trump was on the radio saying how terrible the labour party was an Jeremy Corbyn<\/a> is, it allows him to latch onto this one angle that somehow Boris Johnson<\/a> is going to sell out the nhs on a big american trade deal. Donald trump coming in at a moment that was meant to help nigel for pressure, but actually gave the labour party of boost, muchneeded. When you look at the what can a u. S. Trade deal mean depending on the brexit we get . U. S. U. K. Trade deal could still take place after the u. K. Negotiates a trade deal with the eu. Theres nothing to stop that from happening. Weve heard these comments from donald trump, but that is likely to change once we get to that point. Tom is good to have you here on an important economic friday. What is your team say about the linkage out in such a short space . The pulling now does that predict where we will be two weeks out . Robin the one thing we have learned is that the edition electorate has become remarkably volatile in the last four to five years. 40 uncertainty of voting moving to a much more tribal attitude. Not party allegiance, but leave and remain. When you have that level of volatility any polling is highly unpredictable. Last time Jeremy Corbyn<\/a> was able to haul back 20 polling deficit. This time he is running 10 to 15 percent behind. The labour party has kept a very open line. They say they will renegotiate the deal and put it to a referendum. They havent actually said whether they would campaign for the deal to negotiate or not. We have the election uncertainty, the uncertainty of jeremy Boris Johnson<\/a> or corbyn are Prime Minister<\/a>. Tom there is a sense of whatever the word is for progressive, of the moment. What is a liberal mean in the United Kingdom<\/a> as they go to this election . Danae thank you. Independent, neutral, from all sides of the political classes. I would say going into this election it is what happens after. Will this election actually solve anything . What do you mean by liberal . I agree it is more about leave and remain and the future relationship with what the eu in the world will be. Will the election solve anything or will be in a position where no deal is close to the central scenario again in a years time . Negotiating a deal is not going to happen very easily. It is something that will take time to be approved in the u. K. And ratified on the eu side. It will likely be a mixed agreement, and that will take time. Liberal is not a word that i would use to describe the political and Economic Outlook<\/a> in the u. K. After this election. Tom youre both with us to get us through this hour and into an eventful friday. We will be informed this friday as we try to bring you the voices we can to provide perspective. We begin with the vice chairman of the Federal Reserve<\/a> system. Then we will move on to the politics of emotionallycharged white house. Tom good morning, everyone. Bloomberg surveillance. T is jobs day it is a full and important jobs day. It is almost worldwide. It is a global slowdown. Let me start with you. Does global slowdown just involved, on a global basis, more unemployment . Danae employment has been quite high and most of the advanced world. The issue is not with unemployment. I think the world Economic Outlook<\/a> projections we saw from the imf suggest we are closer now to a recession. The question is where will this come from . The jobs data has been fairly strong and political trade tensions have been strong. What happens first . Do we see the consumer reacting to the trade tensions or the trade tensions and investment tensions and proof first . What we improve first. In europe and the u. S. We are seeing fairly strong Employment Conditions<\/a> and very weak Business Investment<\/a>s. Much onnot focus as unemployment. If we go into a recession we see on the labor side as well. Tom maybe it is not an arab spring, but it is a global spring. There are a lot of protests and populism. I will let you choose the nation. Is it labor tension and slow Economic Growth<\/a> that gets that going . Robin i think this goes further and deeper. There is a sense of instability and uncertainty since the political leaders are not in control. Obviously a slowdown in growth, a sense that job prospects are more uncertain especially among younger populations who you see leading protests from chile to hong kong. A sense ofve is ia uncertainty about the future. Governments have lost their capacity to drive change. When you have an american President Trump<\/a> taking on chinese president xi, and each looking after their own interests, it creates a great amount of uncertainty and their political allies, and whatever country it might be, especially europe, and leaves them with an air of uncertainty about how they carry their policies forward. The protests at the moment, the fuse is different in each country, but in general the sins of governments out of kilter is the main dynamic at the moment the sense of the governments out of kilter is the main dynamic at the moment. Francine in the data, is it construction, is it something we are looking at . If you look at the fed and you look at trade, what would you be concerned about . Danae it is about Business Investment<\/a> and the strength of the American Consumer<\/a>. Also the sense of economic insecurity. We look at the headline data in terms of unemployment, but what quality of unemployment . Looking at the Participation Rate<\/a> and type of employment we are seeing, and how this is affected by the general Economic Outlook<\/a>, and what causes the fed to react to it. Francine if you are the fed how would you worry about the trade war with china . Danae is a question of insurance for the economy. The fed has cut rates to provide that buffer. Is its judgment enough for now . In the see a weakening Economic Data<\/a> in how the consumer is doing, Business Investment<\/a> is changing . That is what would change the fed rather than the trade tensions. Having said that, a potential escalation of the trade tensions are likely. You are seeing the chinese side hardening, not just the u. S. , because it has been going on for a while. A deal is less likely to see. From their side they are saying does the u. S. Actually want to have fair business with us or not . Tom i will introduce a chart. I will lead with my first question for eyes president clara today. I hear from bloomberg surveillance listeners worldwide , here is goods inflation with a little lift up in the last two years. Here is Service Sector<\/a> inflation. The number we are living is up here somewhere, and the number that the Central Banks<\/a> are living is down here. The pce, the core, whatever you want to call it. House,conomic to chatham but how do Central Banks<\/a> react to their theories and inflation guesstimates . They seem to be out of whack with the public. Robin they are out of whack with the public, but they dont have enough space to tell you to cut rates anymore. There is a question as to whether Central Banks<\/a>, if they should play such a Critical Role<\/a> in the phase after the financial crisis in providing liquidity into the Global Economy<\/a>. Really feel it is time for governments to take the tough structural decisions to drive longerterm growth. Tough decisions such as investing in infrastructure, energy subsidies, what Climate Change<\/a> decisions, what type of employment protections they do or do not provide for the gig economy. We keep turning to Central Banks<\/a> to provide the answer. There is an element of resistance, you see it in europe, to Central Banks<\/a> playing that role. Governments are not taking the tough decisions because they are concerned about the quick backlash that you can get at a popular level turbocharged by social media, turbocharged by four to five years of a loss of confidence in government. We are stuck in this standoff between the National Government<\/a> and Central Banks<\/a>. It worries me a lot. Francine thank you. Next we will ask a thing or two about his industries and supply chain. This is bloomberg. Francine viviana you are watching bloomberg surveillance. Is taking a 2. 7 billion dollars stake in chineseamerican drugmaker beijing. That will clear the way for cancer drugs to be developed and sold in the chinese market. Mgen will own about 20 . Diabetes drugew beat analyst estimates. That is your Bloomberg Business<\/a> flash. Francine thank you. For more on novo nordisk, we are joined by the chief executive. Lars fruergaard jorgensen. Thank you for joining bloomberg surveillance. I want to ask you about how youre going to strengthen some of the things you are focused on, such as biofarma. How much will mna play a role in that . Lars we see our biofarma is growing 4 . We are quite pleased after the decline we have seen for a couple of years. We see with the full portfolio of products we have we can continue to drive, but we would like to complement that where we can add value to those. Isis on the table, but it encouraging. Francine where do you see prices for drugs going in the United States<\/a> . Lars there has been a lot of talk about pricing. The total market, manufacturers, the value has come down by 10 . The whole market is down by 10 yet volumes are up so manufacturers are getting less and less. We think that trend will continue for the coming period. Francine if that trend continues, does it mean some businesses will have to go out of business, or that consolidation in that market is essential . To keep are committed supplying and innovating. We believe in an opportunity to innovate. We have very strong exposure to an alternative drug class used type two diabetes latest innovation is being launched in u. S. Markets is driving growth in the markets and has become a blockbuster. We see significant opportunity for driving growth and helping patients live with diabetes. Tom your income statement in krona or dollars is exquisite. Your shareholder return is per year for1. 3 10 years. How do you send off the big boys . What is the corporate or National Strategy<\/a> of denmark to stay independent and push off the giant companies that would love to take you out . Lars that is a great question. Have a say we patientfocused close to 100year focus on diabetes so we know it better than anyone. When you stay close to your core you are more successful than most players. It is important to mention we have an Ownership Structure<\/a> that will mean we stay independent forever, basically, because we have majority ownership. The founders place control in a foundation which means we have long perspective on how we conduct business, focus on how we drive innovation. Tom greatly appreciate it. The chief executive officer of novo nordisk. It is jobs day. Giving you smart analysis of the slowing american job economy. We do that on surveillance. Jeffrey rosenberg, we loved him on fed day and we brought him back from blackrock. This is bloomberg. This is bloomberg surveillance. We will have plenty more on the markets and equities and some of the earnings. Lets get to the bloomberg first word news. Viviana donald trump has become the fourth president in u. S. History subject to a formal impeachment effort, the house making beneficial with its vote. Formove clears the way televised hearings and the release of depositions, and ensures the president s right to participate in proceedings. Wildfires still raging in california, but deliberate blackouts are coming to an end for now. The two largest utilities plan to restore power to virtually everyone. Down, wind is dying meaning less chance of wildfire will start fires. Saudi arabia gradually plans to cut government spending. The finance minister expects private sector growth to pick up. That will not keep the deficit from growing, likely to rise from 4 of gdp to 6. 5 in 2020. Chaining but is changing his primary residence to maralago, florida. New york state and city imposed a combined income rate of 12. 7 . In florida, there are no state income taxes. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine thank you so much. We are getting breaking out of. He u. K. Manufacturing this is the u. K. For the month of october as firms ramp stock building ahead of the brexit deadline. It has gotten extended to january 31, but if you look at the purchaser purchase manager index, surprisingly rising in october. Aindicates as sharp sharp slowing in the pace of contraction. Expansionll not in an but much better than expected. Pounds, 1. 2954. The chi zhang pmi data shows manufacturing continued to pick up. Tonese officials are said have doubts about reaching a comprehensive longterm trade deal with the u. S. We are back with Robin Niblett<\/a> and Danae Kyriakopoulou<\/a>. We touched on trade deal a short while ago. What we broke yesterday was a bloomberg scoop saying we could get a phase one deal but the chinese see it more difficult to have something more comprehensive. Could we have a trade war that last 10 years . Robin i think we will have a trade standoff and an economic level of decoupling or disconnection between the United States<\/a> and china that will persist. This is not just about trade and tariff rates and intellectual property. There is a deep fear, bipartisan as china continues to grow economically and invest in its military at will become a strategic competitor to the United States<\/a>. Wherever you take this trade relationship, it is a symptom of a deeper strategic standoff. The United States<\/a> has woken up to the fact that republicans and democrats believe they are helping their opponent get stronger. We may get a truce, and the idea of it being a truce rather than a trade deal is likely. You still have a december 15 risk of yet another set of u. S. Tariff hikes on the horizon. Ofhink this is the beginning a long. Francine can the chinese economy withstand Something Like<\/a> that . Danae the trade tensions are just one part of the overall tensions. Morenvestment tension is difficult for china to withstand , because domestic opportunities to grow and the return on investment domestically is slower because the economy is at a certain level of development. And not havingat the outward opportunities for investment, given where Chinese Foreign<\/a> Exchange Reserves<\/a> are, it will be more difficult. Episode in the overall tension. Now you have both democrats and republicans more supportive of a standoff with china, because it is more about the economic insecurity the American Consumer<\/a> is feeling. That is a strategy or policy that is hard on china, will not be unpopular. The real game changer is whether the markets react and whether that translates into the economy. That is not popular with any u. S. President , so even if he has an incentive to go to a deal or a truce, will he be able to get it through because of bipartisan support for a more hard stance . Tom we go through this tick by tick. With the bloomberg story yesterday and it was extraordinary reporting nobody is reading jonathan spence. Outpatientsg to our system, arent they . Robin the chinese view is the world is returning to the balance it had in the 18th century to the middle of the 19th century where if you ofbine a move, a linkage chinese per capita gdp, china will overtake the United States<\/a> or at least be equal as long as it preserves political control for the communist party, and is able to manage its economy in a way the communist party stays in control. When you use that kind of language, this is not an Economic System<\/a> that marries easily with a free market United States<\/a>. Ony have got their eyes set 2049. Gets a secondump term, they will play this out for longterm. Tom what do we miss on the week after week, on this friday as we enjoy another weekend in hong kong . What are we missing in the debate . What does Chatham House<\/a> asia say about the theme forward into 2020 on the week after week after week tensions . Robin unfortunately, the problem with the hong kong protests is they have now in essence gone deep into the Younger Generation<\/a>. It has some of that echo of other parts of the world, a loss of trust of the Younger Generation<\/a> in the older generation taking care of their interests. The Younger Generation<\/a> are use to a level of political fear freedom that they feel will be when onefrom them, country, two systems closes. It has been a failure by the Political Leadership<\/a> in hong kong to address the Economic Development<\/a> or a step four greater political representation. Without that being addressed, even carrie lams potential resignation, that is not enough. We have passed a point of no return for many young people. This will be a constant sore for hong kong for at least a year. Tom interesting, this linkage of International Relations<\/a> into november. Robin niblett and Danae Kyriakopoulou<\/a>. At 8 30 and at 9 30, the vice chairman of the Federal Reserve<\/a> system Richard Clarida<\/a> in a conversation with me and jon ferro, and lawrence kudlow. This is bloomberg. To me, the negative yielding debt with negative Interest Rates<\/a> is an outcome of what went before, as the price we pay for previous excesses. If you look five years out, where will the ecb policy rate be . Above zero . I doubt it highly. There is a safe asset which yields zero competing with the short german paper which went as low as 92 and is moving back to 60, 50. It is all relative. Why would you hold something at 60 when you can hold something at zero . November 1, 2019, and extraordinary call by mr. Major of hsbc, and those comments on negative rates are profound, particularly after the banking results. Robin niblett and Danae Kyriakopoulou<\/a> are with us, to talk to us about a european system. Steven major has absolutely nailed the ramification of this odd Interest Rate<\/a> environment. Provide perspective on that. At the World Economic<\/a> forum, how do they answer year after year after year of a structure that wasnt in our textbooks in school . Danae whatever it takes has become it takes forever, because we have been used to Central Banks<\/a> being the only game in town. The question going forward, is this going to continue . The European Central<\/a> bank are tied is tied to the mandate and inflation is nowhere near their target, so they will keep doing expansionary policy to reach that, or other policy levers to support that economic recovery because theres not much more they can do. At the same time, the marginal benefit of the policies they have is diminishing and we are starting to see negative consequences of that, that a lot of the members of the governing council are worried about. Tom we are on our way to december 12, madame lagarde darkening the door at the ecb, no doubt changing the curtains yesterday as well. Everyone is focused on the fiscal space. Does she need to focus on the Banking System<\/a> . Robin the Banking System<\/a> remains fragmented, i would say, given the size of the european the continent remains overly reliable on bank loans or more flexible finance and liquidity. Structural steps could be taken in the financial sector. Christine lagarde, rockstar leader of the ecb is walking at a time when the capacity for Central Banks<\/a> to make a fundamental difference is very limited. So long as germany remains committed and connected to a surplus budget deficit and does not drive new consumer spending, so long as europe, Continental Europe<\/a> relies on exports to drive growth, and a Global Economy<\/a> is slowing down, so long as you have what you are going moreve, and aging europe reluctant to take integration at a scale that would make a structural difference, it is an uphill rock to push and not in Christine Lagardes<\/a> power. Francine what does it mean for negative rates . How much more negative rates can banks hold . Danae will we start to see Christine Lagarde<\/a> being more successful than draghi was in having that relationship and making sure policymakers move with fiscal spending. The ecb is independent, but in the time leading up to her taking over she has been vocal. Working with the governing council so they can work with the government to have more coordination will be key. Negative rates are starting to have a negative impact. Various members of the ecb board have been stressing this over months and spoken openly on the impacts on the Banking System<\/a>. We cannot know the counterfactual, where would we be had the ecb not gone into negative rates . That is important to keep in the back of our mind. Francine can they go further negative from where they are now . Danae they have indicated the measures they have now and the are theof qe, these measures on the table and it could go more negative, but i dont think that will be needed. We are talking about a potential reversal of qe. These are questions the members of the governing council are getting, what will the Economic Outlook<\/a> look like an and what environment will they consider negative rates . Francine thank you both for joining us, Danae Kyriakopoulou<\/a> and Robin Niblett<\/a>. Later, david westin speaks to the u. S. Ambassador to me nato. U. S. Ambassador to nato. This is bloomberg. Viviana this is bloomberg surveillance. Most of the worlds biggest banks have been cut out of europe biggest deal of the year. Tot chrysler and psa turned small advisory teams. Used angeline and goldman sachs, the only wall street bank in a leading role. The firms will divvy up 90 million in fees. Einhorn month for david , Greenlight Capital<\/a> falling 6 , cutting gains to 16 . He is having a resurgence following his worst year ever. He has remained committed to his strategy of buying down buying shorted stocks. Network giving a Sales Forecast<\/a> that missed the lowest projections, the ceo indicating facebook is the source of the decline in orders. Facebook and microsoft accounting for 20 of revenue. Plunging, posting thirdquarter revenue that missed estimates. They added users in less lucrative international markets. That is your Bloomberg Business<\/a> flash. Script,e to rip up the Robin Niblett<\/a> with us. Iraq, corner of northern some of you well remember the wonderful essays on Northern Iraq<\/a> long ago and far away. This is turkey looking into syria, a green part of syria below the martin province martin province. Russiaturkey joint patrols, you did that 20 page paper on alexander the second and the russian turkish war. Did you ever think you would see that headline . Given that turkey is a longstanding member of nato and they are pretty suspicious of each other, no. I would not expect to see them on the turkish border, but the syria border is one that is deeply worrying and always has been to istanbul or any government, as is the border with iraq, because that is where spreadsish population over those borders. It is of particular concern to them. What they are most worried about in istanbul as if the Syrian Regime<\/a> retakes control of that border with turkey, they can then allow the kurds to exist surreptitiously within the border and will go back to the father bashar alassads when he used the kurds as a tweak when he needed it. Tom do you just assume we are setting up a 20 mile buffer zone, erdogan with a page up at the u. N. , showing this territory , is it basically a formed gaza strip except maybe thinner and longer . Robin this is an idea president in 2011was in favor of and 2012 when the turks shot leada russian airplane and to a decline in relations. They feel they need a buffer zone. It depends on whether they are or are not able to repopulate this space with syrians who fled. Millionas over 3. 5 refugees based all over turkey and is coming under pressure to move some out. If they can create a zone where they can send some of those refugees back, it would be a huge step up for erdogan. Francine he says, if you dont do this, send them to europe. Robin he will be careful because the one bit of leverage he has is holding back that pressure on the refugees coming through the eastern corridor. There is a big money payment which has pushed out 3 billion out of 6 billion total. He does not want to end up with too many enemies. He has a bad relationship with the United States<\/a>, prickly relationship with russia, and bad relationship with syria. It is a last resort for him to ever use. Changing with the u. S. Allies in the middle east, what does it mean for the rest of the world . Our allies across the world are allies across the world saying, i am less committed to the u. S. . Robin we have been moving slow motion since President Trump<\/a> was here and there were some echoes of this in the obama administration, a move to a more freeforall world that lacks a u. S. Hegemon that is there to write the rules and protect the rules. We have all piggybacked on it. Many americans say people in europe and east asia have free written and benefited from the u. S. Investments and we have all focused on getting rich. There is some truth to it. Europe areh korea, having to worry more about their security. Whoever becomes next president , it is hard to go back to the kind of we all take care of the world policy that we associate with the 1990s and 2000. Tom a moment of silence, everyone turns to the dreaded yearend review. What will be the theme for Chatham House<\/a> as you write up the forward view for 2020 . Robin the two interesting themes i would like to look at are the changing balance between governments, the corporate sector, and civil society. This public awakening around Climate Change<\/a> is driving it is part of that popular frustration we see with young people in governments. Companies are realizing maybe they cannot rely on governments to take care of them with trade deals and they will have to get more in tune with civil society. China will be big and is moving up. That could have a big impact on g20. Tom at least another 20 pages for your minions at Chatham House<\/a> to write up. A look forward to 2020, you do that on november 1. Later today, a conversation with Richard Clarida<\/a>, the vice chairman of the Federal Reserve<\/a> system. 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 today. Tom impeachment, the path is set as americans confront high crimes and alleged misdemeanors. It is jobs day, lesser jobs growth. There is apple and exactly 14 other stocks and the rest of the ofket, beware the ides november. This is bloomberg surveillance. Live from new york and london, we are going to do brexit and all of that in a moment. When you go home this weekend, is there campaigning . Francine you mean apart from halloween . It is becoming all halloween. , veryabout campaigning different from the u. S. The election is on december 12 so it is short and sweet i dont know about sweet but it is short. The polls are volatile by the who will end up Prime Minister<\/a> is not that easy. Tom right now, we move on this important friday to our impertinent first word news. The u. S. Viviana house voting to proceed with the impeachment inquiry, placing Donald Trumps<\/a> presidency on shaky ground, sending a signal a vote to impeach is all but inevitable as it a trial in the sentiment senate. A Bloomberg Survey<\/a> indicating an october, they believe employers added 85,000 workers. Data will likely affect the impact of the General Motors<\/a> strike that lasted six weeks. A warning to Boris Johnson<\/a> from donald trump on trade. He says the Prime Minister<\/a>s brexit deal will make it difficult for the u. K. To strike a trade deal with the u. S. , speaking to nigel farage in a radio interview. He said the two countries could do a bigger trade deal. A chaotic halloween and hong kong, police using tear gas while scuffling with protesters and partygoers. Communist Party Leaders<\/a> in beijing signaling they may be taking tougher security measures. Hong kong courts approving restrictions on online posts inciting violence. Global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. I am viviana hurtado. This is bloomberg. Francine as viviana was just lashingg, donald trump out at Boris Johnson<\/a>s brexit deal. He said the agreement will make it difficult for the u. K. To strike a deal with the u. S. Under certain aspects of the deal, you cant do it. You cant trade. We cant make a trade deal with the u. K. I think we can do many times the numbers we are doing right now. Francine joining us now on all. F this, Ronald Temple<\/a> we are delighted to host him in Robin Niblett<\/a> is still with us. U. K. U. S. Ook at the relationship, we thought it was strong but the interview put it in doubt. Ronald donald trump is always maneuvering and keeps his allies and friends as uncertain as his enemies. As too nigel Farage Trumpian<\/a> in the u. K. Victory was brexit, so this is a clever market on his part to use his alliance with put pressure on Boris Johnson<\/a> and say, remember the deal with the u. S. Is more important than your deal with the e. U. , but it is ae clever political maneuver to st nigel farage standing Nigel Farages<\/a> standing the day he releases his manifesto for the brexit party. Francine does this read across into your world . Does it make a difference for investors . Ronald it does. Part of it is the u. S. Strategy is divide and conquer. It is in the u. S. Interest to see the u. K. Negotiating alone and if the Trump Administration<\/a> have its way, would love that with every other trading partner. What that means for the conditions under which the u. S. And u. K. Will trade. Tom your global work for Deutsche Bank<\/a> years ago and your , yourial work for lazard thoughts on the city. The ever changing pauls. What do you think of the spirit of the city into 2020 . Ronald brexit will have negative implications for the city. We dont know the shape of the agreement we will have with the european union, how the rules will work. We have talked about financial passporting and the ability to trade or transact across country lines. When i look at the city of london, it is a phenomenal infrastructure, the amount of talent you have here. You cannot replicate it anywhere else in europe, so i tend to be more optimistic about the resilience of the city of london , although this is likely to lead to market seepage. Tom the image on the cover of the new york times, Speaker Pelosi<\/a> on the podium is extraordinary. Your thoughts, and particularly working on this historic moment for democrats in the polarization with republicans . Momentit is a remarkable , because it looks as if all things being equal, donald trump will be the fourth president to face impeachment or be impeached and obviously be taken up to the senate for the trial. What worries me from where i sit is when donald trump is in a corner, he hits back twice as hard. I am trying to work up, where will he play his counter move . This is a serious case. The democrats have resisted as much as possible under nancy going theeadership impeachment route because it will probably harden up Donald Trumps<\/a> base. The seriousness of the call, the fact that you only had two democrats step aside and not go is athe vote of the party show of the seriousness of the charges being made. When you see the recent evidence being done secretly moving to public hearing, this will take on an even more partisan days. The worried we are in for kind of election with election donald trump likes, with gloves off, us and them. Francine how does the market price it in . This is one of those topics where the market is not good at pricing in. Thequantifiable events, market tends to look past. If i could back out, where investors should care as if you want your currency to be the reserve currency of the world and want to be a global leader, the rule of law is important. The challenge in separating facts from politics, and good luck with that in washington. It is critically important that the people in the house and the senate objectively evaluate the facts and think about the longterm standing of the u. S. And our credibility and world leadership, because there are real consequences. Tom Robin Niblett<\/a>, thank you so much for perspective today, from Chatham House<\/a>. Ating up today, jobs day 8 30, lots to talk about off a slow presumed labor economy. One of our themes with the vice chairman of the Federal Reserve<\/a> and the 9 00 hour. I will take a broader view and Jonathan Ferro<\/a> will go more narrow. After that will be mr. Kudlow. This is bloomberg. Surveillance. It is jobs day. Ronald temple with us, and with us now from citigroup, andrew hall and horst. We will do a couple of briefs throughout. Chase. Ut to the i am going to show a chart in a minute. How much rollover is rollover . Andrew in terms of the jobs report, we will get a weak number. Tom is it g. M. Adjusted . Andrew you have to autoworker adjust. A number like 70,000 or weaker than that. We know we have 47,000 workers that were on strike and on top of that you have the workers that were out of work because they are suppliers for the Auto Industry<\/a> or related. You will see that clearly in the Manufacturing Sector<\/a> so the markets can look through that easily. Tom this is a chart i did years ago. I have darkened the three month moving average. This is the one year and six month moving average from the regression from a peak of a year ago. It is irrefutable we are rolling over. Did you hear that rollover in the discussion with chairman powell . Andrew what he is reflecting, we definitely slowed down. That is undeniable in the data and your chart. How concerned should you be . Are we slowing down because we are hitting supply constraints in the labor market and running out of workers . That would be a good reason to slow down. Is there weakening demand in the economy overall . It looks more like the first story, a Strong Economy<\/a> running at a pace of 140,000 jobs per month. Plusis lower than 200,000 where we were last year but no one expected those numbers to continue. Francine is it really only the ism that could give more indication on where the economy goes next . Important, ism is but we are not out of the woods yet. The data has decisively slowed down. Month. 200,000 jobs per that, 200,000. Re if thisatching to see global synchronized industrial deceleration combined with the trade war is starting to contaminate the Consumer Sector<\/a> and household confidence. The university of michigan has given conflicting signals. I am worried and i think the pmis will be helpful. Will manufacturing pmis start to bottom out because global negativity is pervasive. Francine we did not get a hint of that from the fed this week. Why not . Ronald i think the question mark is still there. Francine what happens to dollar, given what we were talking about . Andrew it is a very interesting scenario, because you have these scenarios where if we have a weakening in u. S. Growth, the dollar will rally because there will be a risk off. If we have a big increase in u. S. Growth and a bottoming in terms of the data and it looks like the u. S. Is that outperform or, we will have a stronger u. S. Dollar. Like we were talking about globally, things are may be looking better or not as bad as a couple months ago. Extremesay those more scenarios have become increasingly likely where you will get an outperformance from the u. S. Or globally a weakening. Both of those are stronger dollar scenarios, but we have a weak trend that is persistent. Tom with that said, what is the 12 months for gdp call of you will of you and Catherine Mann<\/a> of the United States<\/a> of america . Ronald right at 2 . Story wherea consumption is driving things. Tom you have to help me withclarida today. Is that solid Economic Growth<\/a> . Andrew 2 is a fine pace, but not solid. This is all in consumption, weakness in investment, global weakness in the industrial sector. We would like to see more of a broadbased Growth Scenario<\/a> which we are not seeing. Tom you want to join me in jon ferro at 9 30 . Andrew i would love to. Tom andrew hall and horst and Ronald Temple<\/a>. Horst andhall and horst and Ronald Temple<\/a>. In two hours,t important perspective on the labor economy. Ellen zentner killed it. Jeffrey rosenberg on the fixed income view. This is bloomberg. You are watching bloomberg surveillance. Amgen is taking a 2. 7 billion stake in a chineseamerican drugmaker, clearing the way for about two dozen cancer drugs to be developed and sold in the chinese market. Stake. Ill own a 20 most of the worlds biggest banks have been cut out of europe biggest deal of the year. Turned toler and psa small advisory groups. Used angeline and goldman sachs, the only wall street bank in a leading role. The firms will divide 90 million in fees. That is the Bloomberg Business<\/a> flash. Tom lets bring up a chart. Andrew hollenhorst and Ronald Temple<\/a> with us. The chart is extraordinary, something i have looked at, dave wilson has looked at as well. 500 ande series is s p the gray line is the medium geometric average of a gajillion stocks. Temple, there ron value geometric index. There are 14 stocks moving higher. Do i climb on board those 14 or do i have to go the other way with those behind . Within the 14, there are some good values that have upside, but you are showing there is real opportunity in the u. S. Equity market despite alltime highs in the s p 500. Look beyond the headlines and beyond the small group of momentum that seems to drive the market. There are some good values. Tom give us a name, sector, country . Ronald some of the more cyclical stocks. We are looking at numbers and saying is the Global Industrial<\/a> deceleration going to contaminate the consumer and pull us into a recession, or do we get scared, stocks get cheap, and it is a great buying opportunity . The key thing is to balance your portfolio. We consistently see value focusing on the rons raw fundamentals of companies that have large amounts of capital and attractive valuations. Attractive valuations is the challenge but it just takes scouring. Francine when will equities and bonds stop sending the emerging messages . Ronald you see the sharp declining yields and think recession is imminent and look at the equity market and think the market must be great. The only thing that i can think of is perhaps investors have decided that Central Banks<\/a> will succeed, we will avoid a recession, but rates will be lower for longer than we thought so you need to buy as much duration, credit risk, and spread as you can. Equities look relatively cheap. Arguably, ixist and still see upside in equities. Francine where do you see treasuries going . Andrew we think they can go higher from here, but close to fair value, and consistent with what was being said, this is a Market Pricing<\/a> a fed that will keep rates relatively low, Central Banks<\/a> globally that will keep rates low. That is why you can have a coexist in of low rates and high equities. It is pricing Central Banks<\/a> that will stay relatively dovish even in this 2 Growth Scenario<\/a> in the u. S. Tom where is your potential growth line . It goes to the conversation with Richard Clarida<\/a>. I have seen a change to a new subdued potential gdp and terminal rate. Andrew growth is still around 1. 8 . 1. 8 , is that politically acceptable in the United States<\/a> . Andrew i think it is a question of economics. The potential is where the economy can run without creating inflationary pressure. We are not running at a rate of growth that is pushing inflationary pressure, but ultimately it is an economic question, not a political question, and economics telus 1. 8 . Hollenhorst and Ronald Temple<\/a> stay with us. Radio, aoomberg tv and conversation with the jcpenneys chief executive. The focus will be the u. S. Consumer, whether the economy is Holding Strong<\/a> or not. We will have plenty more on online versus mortar. Tom this will be a fascinating interview with the vacancies and amazon, itncy of comes down to an arch issue for america into 2020, when do the storefronts go away . When do the storefronts in their way get refilled . In new york, there is a huge issue and i am sure coasttocoast as well. Richard clarida do in the 9 00 hour. It is jobs day. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Bloomberg surveillance, it is jobs day. We will go beneath the headline data. Trump has become only the fourth president in u. S. History subject to an impeachment effort. The house making that official with its vote to proceed with its inquiry, clearing the way for televised hearings and the release of depositions. It ensures the president s right to participate in proceedings. Yorker, he is changing his primary residence to florida. That is where he owns the maralago resort, a move that could benefit his reelected reelection chances. Rateork has a combined tax of 12. 5 and in florida, there are no income taxes. In the state of california, the fires continue to rage but the blackouts are coming to an end. They plan to restore power today to virtually everyone. Fierce wind is dying down. Blacked out apg e record 3 Million People<\/a> in the golden state. Day,l news 24 hours a powered by global news 24 hours a day, on air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Tom you must be a certain vintage where this gives you pause. Times,n the new york the speaker, and this headline harkens back to it as well. We are thrilled to bring you Anna Edgerton<\/a>. She is editor of polarization for bloomberg, and she joins us today. Us the polarization of your congress. Anna it was amazing on the floor of the house yesterday as you could feel the polarization. It was like a team sport and the fact that the vote was so partisan is remarkable. Tom the morning must read, dana milbank for the Washington Post<\/a> , clearly against the president. He speaks to the republicans. Republicans claim that trump did nothing impeachable and nothing wrong. Go gop were asked, will you on the record and say the president did nothing inappropriate . 53 on stage, a very clear yes, said kevin mccarthy. Doesnt he know that colts always ended badly . End badly . Ways members are left with whose constituents love donald trump, so this is a political move. We lost a lot of moderate republicans in 2018 when democrats had an amazing midterm election, and the ones who are left are loyal to donald trump. Francine when do we find out exactly when the impeachment process continues . Tom i would like to know that too. Anna everyone would. Yesterday moved us into the next phage phase. The next stage is public hearings which will have risk for republicans and democrats. We will probably see articles of impeachment on the house for. House floor. Tom how purple is texas . They are retiring, they are leaving. I dont buy this. Anna texas is a fascinating state to watch and could be a place where democrats could pick up congressional seats, but not like we will see texas go for the democratic nominee. With so many retirements, democrats could pick up a few more seats. Francine Anna Edgerton<\/a> of bloomberg news. What happens with brexit . What do the polls tell us about the december 12 election in the u. K. . Questions foron our International Audience<\/a> and ourselves. The polls are so volatile. Do they settle as we get closer to december 12 . David this is one of the most unpredictable elections and the campaign does not start until next week. Nigel farage speaking in about a half an hour about the plans of the brexit party. They will eat about 10 of the vote or more. 2017 remember that one . That was billed as a brexit election and the polls shifted enormous leaf from the beginning of that campaign to the end enormously from the beginning of the campaign to the end, enough to throw the result into unknown territory. Where we are on december 12 could be a different thing. Francine we had a guest who said what is being overlooked is there is still the possibility of a no deal brexit. If the conservative party gets a narrow majority but there is not enough to stop a no deal. David that is right, whether there is a narrative narrow conservative majority or a hung parliament, we could be all the way back to that same situation, propped up again perhaps by the dup. They are the ones who do not like this deal. A lot could go on with boris innsons big plan to leave january, and we have another cliff edge facing us at the end of january. The europeans are running out of almost camed fromm close to blocking the one last week. What are the odds of everyone agreeing we need to get this done . Francine david merritt, bloomberg executive editor. War, stillina trade with us Andrew Hollenhorst<\/a> and Ronald Temple<\/a>. ,hen you look at u. S. China insiders in beijing telling our reporters that we could have a phase one agreement but anything bigger and longer lasting beyond that was quite unattainable. That is my expectation. I think phase one might be the final phase. Many issues are nonnegotiable or intractable. To chineserphed being a competitor to a National Security<\/a> adversary. Whether we will sell products to use for theave dual likely wewhile it is will see a phase one deal, investors should not get too excited, because i am worried the damage is already done. The uncertainty into the Corporate Board<\/a> rooms and csuite has been damaging to growth. Even if you get phase one, you have an election in 12 months, another uncertainty. People are thinking short term of resolution of china means off to the races with capex spending, that is too optimistic. Tom Andrew Hollenhorst<\/a> of citigroup having the privilege of working with catherine manm who owns Catherine Mann<\/a> who owns this idea of chinese dysfunction. I know you cannot talk china specifically, but the body language . Andrew that is what investors are looking for and what we are looking for, what is the tone, where are these things going, not just the nearterm possibility for a shortterm resolution but are we headed in a positive direction . There is a lot of uncertainty. Tom francine . Francine i wanted to go back to ron to figure out what that means for your investment. Ronald it makes it harder on dust ittion, because to is one thing to analyze tariffs it is one thing to analyze tariffs but another thing to say companies cannot sell to china. It puts a limit on how much of a rally you can get out of equities, and on Earnings Growth<\/a>. 20 20 is looking a little better, but we should be careful not to get too enthusiastic. Hights a lid on how treasuries can go. You can see with positive moves on trade, maybe we will get the yields back to 2 and that will be reason to extend duration. Tom Ronald Temple<\/a> and Andrew Hollenhorst<\/a> with us. Later today, an important conversation with Richard Clarida<\/a>, vice chairman of the , evermore after the nuance of the press conference of chairman powell two days ago. Tom bloomberg surveillance, we survived halloween. Devilleella thing go . Francine people thought i was lady gaga, a star is born. Tom very successful, very brave. Alike. Rs and laborers Andrew Hollenhorst<\/a> trying to be the adult, Carl Riccadonna<\/a> dives in with immense detail. This is inflation and it is just like jobs, a raging debate. Service sector inflation is way up. Goods inflation is coming back but nonexistent. That is a jumble of inflation data just like the jumble of jobs data today. Carl Service Sector<\/a> inflation, the white line in the chart is really what the fed cares about. The vector is moving completely sideways, no slope in that line. That is telling the fed there is no inflation problem they have to be worried about. The other line is the goods sector where you can see a little bit of an acceleration. That is the tariffs starting to percolate through to consumers. That notch down, that is the impact of the strong tradeweighted dollar starting to clobber import prices and push goods inflation may be back into an outright deflation. The strong dollar is something the fed has to be focused on. Francine what does that mean for the markets . Ronald it is interesting that you are seeing an uptick in tradable goods. If you look at 2017, the average tariff on chinese exports to the 3. 1 and nows. Was is 25 . A key point for me to watch is, does that lead to an accelerated momentum in inflation that is sustained . Place put a tariff into you expect inflation to be higher that year. I think you are more likely to dip back to the old trend which is less likely to have an effect on the markets. Francine lets bring the chart up again that tom brilliantly made. I have not asked about dollar dynamics and how that percolates your investment. Ronald the dollar is a tough call. Towardto lean more stability to slight strengthening. The fed signaled pretty clearly the midcycle adjustment is over and we should not expect further rate cuts absent economic news. We might have reached peak negativity on the industrials in terms of pmi and other soft data. It is unlikely we get a resumption of easing in the u. S. But you are likely to see it continue with the ecb. Tom i have the gm strike, noise, noise. If i get a gloomy number, do i go with that . Carl you plug your nose, cover your ears, hold your breath until we get to that november data. Remember this chevy slogan, like a rock . The impact of the gm numbers will be like a rock and we could potentially see a negative payroll. Strip out manufacturing and government, which will be affected by census workers laid off, and look at private sector hiring. Tom cut to the chase. Carl the private sector number matters and we are seeing a deceleration of the economy on the back half of the year, going 6. 3 to around 2 on the back half. The strong dollar, the trade war still very much present, the gdp going deeper than 2 . Andrew you take the noise out and see some slowing, but i am more on the side of ron that we are slowing to something that looks like potential. Tom we have a job economy, two brilliant minds, and Carl Riccadonna<\/a> is quoting Robert Seeger<\/a> of detroit. Cool that we got bob seeger into our jobs day. Surveillanceon at 6 46 a. M. New york time. Carl riccadonna. Tom night moves terms of earnings, we saw surprises to the upside, apple and samsung beating estimates, boosting chipmakers. Energy giants shell and bp looking at shells slumping after a downbeat forecast for the economy. Credit suisse with an ok beat while ge feeling the pinch of Interest Rates<\/a>. ,oogle showing a rare stumble stunted by spending on its cloud business. We will look ahead to the week that is an data coming out. This is bloomberg. Viviana you are watching bloomberg surveillance. Shares of pinterest plunging. Postingany thirdquarter revenue that fell short of estimates. Primarilyadding users in less lucrative international markets. Another milepost along the comeback trail for jcpenney. Today they open what they call a brand finding store, a place for them to test ideas before rolling them out to 850 outlets. The ceo speaking to emma chandra in an exclusive interview. It has been an interesting decade at jcpenney, and as i have been overt on my earnings calls, there is a lot of fundamental problems to fix. We are marching down that path, but at the same time running a parallel path of transformation and innovation because we know we have to be more than a department store. Siviana taking over at penney a year ago. Tom that is called managing the last 10 jcpenney, the years, 25 per year. That goes right to what i want to do. I lost all my alpha owning to jcpenney like stocks. Passive do active when month after month seems to do better . Give me the defense of active. Ronald if you look since march of 2009, the s p 500 has compounded 17. 5 per annum. It made sense to be passive because you made so much money off beta that you would be a winner. If you are an active manager you have typically 2 to 3 residual 50 basis pointo drag before fees. It is almost impossible to see another decade of 17. 5 compounded returns in the s p. You are more likely to see a 5 to 7 earnings, driven by Earnings Growth<\/a>, it may pe appreciation. When you have that much lower returns from beta, you will have a better time with your active managers delivering you on hundred 50 to 200 basis points. It should give them more activity to do idiosyncratic risk around trade, etc. Tom inform our audience how they avoid the next jcpenney. There are always going to be companies that encounter difficulties in the market and it comes down to understanding what you own. When i talk to a junior analyst, how does the company make their money . What are key variables that you can predict that will drive cash . Accounting, build scenarios out to understand what the bear case is, the bull case, and the base case. At the portfolio level, understanding the drivers of risk and how they relate to each other, and how you may be taking unintended bets so you do not wake up one morning and say, i had a big risk in the factor terms here. Francine do Technology Stocks<\/a> have a valuation problem . Ronald parts are overvalued, parts are attractively valued. You have parts of the market where people are chasing growth at any price. That is a dangerous situation. We have seen it before in the bubble. There are some Companies Generating<\/a> tremendous cash flow where barriers to entry are enduring, and people are underestimating. We were all taught in undergraduate estimation education that you should a sermon the reverse mean and by definition, they will revert to their cost of capital. Our analysis in the last 20 years is that does not happen in a number of sectors. Francine we spent a big chunk of the program talking about the car merger with peugeot and Fiat Chrysler<\/a>. Even if you have a megamerger that drives costs in a better direction, if you are not present in china, can you survive the next 10, 15 years . Ronald i think you can. It depends on the scope of your addressable market. I think in the largecap universe, companies have pinned too much of their hope to growth on china, which has not come through. Part of what led to the trade war is the u. S. Corporate community and european Corporate Community<\/a> have been thinking, we can compromise and overt timetomarket dust over time over time, the market will open up. There is plenty of growth outside of china as well as in china. Tom Ronald Temple<\/a> with lazard Asset Management<\/a>, love seeing him in our london offices today. Much more to talk about. It is jobs day. Ellen zentner will join from morgan stanley. As you heard from Carl Riccadonna<\/a> and Andrew Hollenhorst<\/a>, it is a jumble of jobs day. We will try to give you perspective on whether it is up or down. Hour,ctive in the 9 00 Richard Clarida<\/a>. I will open this conversation on this conundrum of inflation. Michael mckee weighing in as well, and Jonathan Ferro<\/a> with lawrence kudlow. The game doesnt end after that insane buzzer beater. Because with Nba League Pass<\/a> on xfinity you can watch the out of market games you want all season long. And with the allnew xfinity sports zone, you get everything nba all in one place even notifications about your favorite teams. Watch the dropped dimes, monster blocks, and showstopping dunks. Plus get instant access to your teams with the power of your voice. Thats simple, easy, awesome. Say Nba League Pass<\/a> into your voice remote to upgrade for a great low price or go online today. Alix job distortion. Confuse thecould jobs and wage data. In big oil really means big dividends. Exxon and chevron will report this morning. And china talks tough. The government says it will take a bigger role in hong kong as the communist Party Meeting<\/a> promotes strong leadership above all else. Welcome to bloomberg daybreak on this friday, november 1. Im alix steel. Happy jobs day. Lets take a look at where we are in the markets. Wee debt huge rally had that huge rally in the bond market yesterday. 0. 2 . Ures up by about it was a really big move yesterday. Also watching the dollar. The dxy fell the most in october since january 2018. 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