And fighting on all fronts. The tory rebellion over Boris Johnsons coronavirus powers Gains Momentum as brexit talks enter a crucial week. 6 00 a. M. In london. Annmarie hordern is out for the day. A solo show. Morphing tol risks the center of the barbell. Inmorgan warned very clearly terms of where we are. We are moving toward a point where correction is overdone. Moves from the tail into the middle. It is the size of the risk you have to measure. Lets take a look at what jp morgan has to say. Three quarters of the way done. We have moved straight to the markets. Lets have a little bit of a look. Csi 300 industrial profits up in china. That has bolstered the equity story. Standard chartered shows a moderating in the growth story in china. An eighth of 1 . The s p 500 up 0. 4 . Lets roll it across and have a look at other products on the move. Oil is moving. Its going to be a long road to recovery. The commodities story is reflective of the dollar story, but also this morning in terms of a long road back. Demand will drop by 10 this year. The aussie dollar turns it around. Is that about growth or about retrenching over at westpac . He called for more stimulus. Hes pushing that into the long graph. Finally, go back to jp morgan and the information they gave us in terms of jordan long. Things yen. That is the most important point to take away from that. The euro down and began rallying. Quick price check on hsbc. Two things. Emboldens and that the biggest oneday move since 2009. We will come back to that. Ets talk trump the president paying just 750 in income taxes in 2016 and 2017. He had not paid any taxes for the previous 10 out of 15 years according to the New York Times report. Trump is reportedly losing millions from his golf courses. In debt duemillions in the next few years. The president has called the report for canoes. Fake news. Out at the top of the agenda or not at all really in the president ial race . I think this is going to be a live issue. In 2012, when mitt romney was running, the u. S. Electorate got a few into some of the strategy that most people can only guess at. There are a lot here donald trump is using that people who are who are advanced in tax strategy will say, this is a familiar maneuver. Most voters really do not understand. There is a basic issue of fairness when voters see big people payr rich less in tax then they do as a percentage or here in actual dollars. The Biting Campaign has already got a web ad about this. They have merchandise. I pay more tax than donald trump did. That is the issue. The other thing is the potential liability for the president. What else might come out of this . Are there discrepancies in how much he told the irs is worth versus how much he wrote on loan documents . That is a potential trip hazard. There are plenty of these things you can say if the times does have the amount of data they have, this is a frontpage story. This is a newspaper standing behind this at the highest levels. If they have what they think they have got, you have potentially days worth of other stories that could come out of this. The executive editor was out with a statement that said they have more stories in the works. Mean inhat could it terms of tax life the democrats take control . Is this a bigger risk . That is a really perceptive question. One of the things you have to democrats who wanted a go at the republican tax law anyway, are going to use this as evidenced so to do. Ron wyden who would take over the Senate Committee if democrats win is that with a statement saying hes going to and the rich tax cheats strategies they use to lower their tax bills. This is going to be cited as an object lesson about what democrats want to do. Apply massivean losses over many years, take your corporate losses and throw thatonto your individual, is all fair game. Be the headline under which other democratic proposals are put forward as well. Manus thank you very much. Debate out from the tomorrow evening. Stephen, welcome to the show. Jewel thee word Virtual World brings us closer. You aint seen nothing yet in the election. Good morning. Does tax matter . . Does tax matter it figured into the 2016 election results. We know what happened then. It was brought up in 2016. Drifting over to the macro space, which is critical, the picture really to me would not have changed even with the u. S. Election cycle and even with the covid19 pandemic. The thing to focus on is that we loopn a neverending between reflation and deflation and global asset prices. We are not going to escape that until one or more of the Major Economies escapes from the low growth, low rates inflation trap. The only way you can do this is with some combination of economic and industrial policy. That is new debt creation. Not the case even before covid19. That is where we are. One of the things where it is most evident, other than the ecb particular, has been the em space. In the local market currency space we are seeing carrie absolutely stripped away. That is an indication of the banks going toward repression, manipulating interest rates, shoving liquidity in the banking system, covid19 was a catalyst for this most recent round of behavior. Even without covid19, that is the unending loop. We need to escape that for the paradigm to shift noticeably. On we will pick [laughter] you know what . It will feature quite highly tomorrow night in the debate. You would imagine is going to take center stage there. One of the narratives you say, and im trying to understand this, is about the volatility that we are going to face between now and the election. This goes back to your point. There is this great debate about what kind of volatility you might want to own. You say you were going to see volatility will climb. You have trouble believing fx investors are looking to buy volatility from here. What is it you think that hold back from buying volatility . Ultimately take the other side of the trade. The time period where you want to be positioning for intense uncertainty, political risk, the time where you want to be positioning for that by buying the, getting exposed to fall fx was three months ago. Finding someone to take the other side is going to be difficult. I think if i could summarize, a lot of what happened in the coming weeks and perhaps months is going to be very much driven by sentiment in equities and fx. Rates will play a long to a degree. Across the coupon bond curve, which is sizable, this is going to be an equity market story for the u. S. Election cycle. Manus we will come back to that in just a moment. A little bit of a news update. Stephen gallo from bmo Capital Markets stays with the crew. Lauren right with your first word news. Donald trump has nominated Amy Coney Barrett to the supreme court. She would be his third appointment to the bench, cementing a shift to the right for a generation. Be a devout to catholic and has described abortion as always immoral. Republicans are planning a confirmation vote in the last week of october. A conservative Party Rebellion against Boris Johnson is rate is giving steam is gaining steam. Labour party is criticizing the chancellor for putting jobs at risk. And says his planes to support the economy do far too little for hardest hit sectors. The lebanon Prime Minister has stepped down after failing to form a government. It leaves the nation rudderless as it struggles to recover from a devastating explosion. French president Emmanuel Macron has dubbed the move collective betrayal. Global news 24 hours a day on air and at Bloomberg Quicktake powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Thank you very much. Coming up on the show, chinas road to economic recovery might belong and uneven. Manus this is bloomberg daybreak europe. Sincerst oneday rally 2009. Hbc hsbc stock has seen a move. , 44 million hong kong dollars. Confidence is the word. Also the dividend story, the delay in the dividend is something shortterm. Narrative they certainly need at the moment. A vote of confidence. That causes the stock to go bid. It hit a 25 year low last week. That was on the back of an article. The narrative different last week, saying it was merely a longterm financial investment. The narrative changes. That is the u. K. Stock price hong kong stock price over the past five days. Tiktoknt trumps ban on locked by a federal judge dealing a blow to the u. S. Government in its showdown. ,n the Economic Data front chinas industrial profits grew in august for a fourth consecutive months. 19 of the countrys factories maintained momentum. The chinese rebound showed signs of plateauing in september. Weighed down by lackluster home and car sales. Stephen gallo from bmo is with us. Stephen, a lot to digest. Hard data, soft data. Leveling out of the ego data. You said before we went to break, the carry trade is being stripped. One yuan suffering from carry as much as being allowed to run naked through the woods by the pboc . Diagnosek whatever you chinese, quote, market variables, you have to think about the degree to which there is some Financial Market and free market involvement in variables, but also perhaps or importantly the degree to which those variables are manipulated by policymakers in china. Nothing happens by accident. At least since the 2015 devaluation of the rmb, which resulted in significant net capital outflows. Particularly since that point. Nothing happens by accident. Has been a feature of the picture for some time now. But china is pulling in capital flow for a reason. One of the reasons is it seems it sees ahead a period of relative instability or uncertainty regarding dollar assets, capital inflows into china, perhaps global trade tostructions and disruption the general reflation team we were talking about. It has been a feature, certainly. Why haveion is policymakers use this opportunity to put flow in . As a final comment, one of the things covid19 has done is it playingled the global field significantly. From the perspective of carry, covid19 has given the chinese a very big opportunity to suck in some of that capital flow. Manus stay with us. Stephen gallo from bmo Capital Markets, my guest host this morning. Jp morgan says cash is likely to remain king. Heres the details right here on bloomberg. Nus it is daybreak europe the unintended consequences of the stimulus could be cash under the bed. Good morning. That is right. Jp morgan chase saying they are expecting cash will remain king in the shortterm. We have not seen other safe havens act as a safe haven as a hedge since the s p 500 fell from record highs on september 2. You are seeing defensive assets delivering their weakest performance and therefore worst hedge protection of any equity selloff in at least a decade. Either doing very little or falling since we saw the s p 500 reach that high. Jp morgan saying they see the equity correction about three quarters done. Aside from cash you should have a number of other hedges including the dollar against em currencies and the yen against all currencies. Week, and in less than a it all changed. Dollarek the aussie crushed the one man west bank. It is no longer team australia. Who is this man . 11s, westpacs chief economist always moves. He is known forgetting these calls right. The fact he was expecting the rba to cut in october, he is now saying that is more liquid to happen in november allowing the government to focus on promoting its budget without the influence or distraction of monetary policy. That has sent the aussie dollar higher today. Meanwhile we have also got a call from Morgan Stanley saying markets are overpriced the lower front end rights in australia and new zealand. They think the rba wont hesitate, but that is more likely to come in increased asset purchases rather than a rate cut. Pushing these expectations back until november. Manus thank you very much. Lets take the conversation to stephen gallo. Last week, aussie dollar, aussie on the cross got crushed on the back of this westpac note. For me, the bigger narrative is this. It is quite a significant call westpac is making to cut yield curve control to 10 basis points and another rate cut. Steven major who i know you talk aussie anduld say kiwi set the precedent for the rest of the world into 2021. What does this narrative say to you from australia . Stephen one of the primary drivers of australia, and being on a Canadian Bank we look at aussie quite a lot, one of the key drivers of relative outperformance of the aussie for at least a portion of this year has been the rise in copper prices. Again, you have to look through some of the noise and try to think about where that strength and compromise has been coming from. It really has been coming from significant increases in chinese imports of copper. That again. 2 to the fact there have been significant state levers pulled in china to reflate asset prices, boost the industrial sector. That is what we have seen in the chinese data. Though the economy has recovered quite significantly if you look at, you go by the official data, what youators and would call the hard data, the economy has improved, but there has been a divergence between the industrial sector of the economy and of course the consumption, the private consumption area of the economy. Going forward, that is what china is going to have more difficulty. It is not impossible they boost the consumption share of gdp. But it is a long road ahead. The rba, the way they fit into this, we are above 70 ever so slightly. Jawboning from a lot of Central Banks has caused the dollar to strengthen from its recent lows. They are satisfied with the currency, but they are very cautious of the fact that a lot of the strength in aussie so far , at least since the depths, has been that global reflation trade, which of course as we know from past cycles is not sustainable. It does not reflect a real strength of the real economy in an organic sense. Manus we know those inflation targets are pretty darn hard to leave. That is the great fed debate. Stephen gallo with bmo Capital Markets, our guest host this morning. A vote of confidence coming from king and on hsbc. Ofy are confidence in terms its overall trajectory. Bumpy brexit week ahead. How will the pound react . Good morning from bloombergs middle east headquarters in dubai. I am manus cranny. It is daybreak europe. These are your top stories. The New York Times says the president lost millions and paid hardly any income tax in recent years. Sbc surges shares climbed the most in over a decade as the bigger shareholder doubles down, raising the stakes to 8 . A tory rebellion over Boris Johnsons emergency coronavirus powers Gains Momentum as brexit talks enter a crucial week. 6 30 am in london. 9 30 a. M. Annmarie hordern is having a wellearned day on the brutal schedule. The brutality of the schedule is never taken for granted. Industrial profits in china rising. That gives the csi 300 and nine slidell pop on the upside. You know you have four weeks of losses . For all risks, theating of tail risks, as i have said, the tail risks of a fiscal cliff, the tail risks of a political narrative, the tail risk of trade, we know what the tail risks are but its the size of the tail risk that matters and the ensuing volatility that will come. Jp morgan say the equity correction is three quarters done. So itsxx 50 up 1. 8 hard data versus the leveling and the soft data. Oil drops. Its a long road. Its a long road to recovery. By 10 . Nd will drop is that on the back of the dollar or is that on the back of that is the question. Does the dollar go big and the dying days of the election . More volatility to come. The aussie dollar rolls over. Bill evans pushes it out into the long graph in terms of a rate cut and yield curve control maneuver. Yourself,t to hedge jp morgan say give me yen, yen, yen. It will deliver a lot better a hedge than bonds, trifling things like gold. Lets talk about hsbc. It was the most in hong kong trading since 2009. The biggest shareholder, ping an , looks large. Dani burger is with the details. Last week, they were of them a bit sanguine i would say in terms of their rhetoric but they have gone in, they have looked march, and everyone else has to go home. Good morning. Dani a little bit sanguine. A 25 yearc trade to low. What a different story we are talking about today with the biggest intraday rally. 10. 8an jumped in buying million shares. Heres the interesting thing. It was barely at a premium from fridays close. They bought it at 28 hong kong 28. 30 hong kong dollars. Quite the big vote of confidence coming from ping an, saying this is a longterm play for the insurance unit. Its also saying that the slump only increases the appeal and this is key, manus. They think the suspension of dividends is only going to be a nearterm thing. They have been in discussion after discussion with management at hsbc and they are confident dividend will come back. This is getting at people to jump into the shares because it is so hard to find yield. If you are confident you can make hsbc into a yield play and it is trading at such evaluation, that certainly might spur a rally of the likes for them, manus. Manus lets pivot to brexit because u. K. Banks as well trying to assume brexit risk as well, pulling back some of the mortgage offers. Thats the discussion in the weekend press. The e. U. Wants some signup of intent from the u. K. What are we seeing in terms of the lenders . Dani manus, it is a big week, but we have not seen many banks really move assets in preparation for this, at least the big u. S. Banks. Last week, we did hear from j. P. Morgan saying they would shift 200 billion dollars from the u. K. Into the e. U. , but beside that, the Big Five Banks have three times the amount of equity in london as they do in europe and four times the amount of risk weighted assets so we will need to see a lot more of these lenders make moves like jp morgan before the squaremile loses its appeal. Bankers speaking privately with bloomberg have told us that there is a key concentration of customers in the u. K. So it does not make sense for them to leave. At the same time, they say regulators are telling them they should keep adequate reserves in london so, yes, we might see more movements after the next couple months, after we pass this key week. Londonit is hard to see completely losing its a