tv Bloomberg Daybreak Americas Bloomberg December 6, 2018 7:00am-9:01am EST
across the board. the saudi oil minister says cuts have to be equal. it is helping oil to find some support. fo of huawei arrested. investors gut global equities. where to hide when nothing gives you positive returns? david: i am david westin. t is filing a registration statement for an ipo. it is not a surprise. we thought it would happen in early 2019. they have moved that date up, which i find puzzling. alix: the best day for the s&p last week since 2011, but a lot of volatility. david: you don't want to go out
with an ipo when there is a lot of volatility in equity markets. they moved it up. it is a hot area. uber is expected to follow. lyft goes, uber is not far behind. alix: it is interesting, particularly when it is an ugly tape. 2%, down byoff by 44 points. the initial fall was enough to set off cme circuit breakers. go-two-safetyff, trade. high-yielding currencies getting pummeled today. what is interesting is the lack of buying in the treasury market. in the had a big bid last few days and are below the 3% level, but yields are only
down by two basis points. brent completely hammered. unbelievable movement and headline soon from opec. david: it will be interesting to see what happens over the next couple hours. alix: and how that volatility will spread to other asset classes. andd: 8:30 to trade balance job numbers, followed by durable goods numbers. this morning, arguments in the justice department request to reinstate its anti-trust challenge. mary barra continues her meetings on capitol hill to explain her decision to close plants and lay off workers, and whether gm will add some other production. alix: we are joined by rachel evans, bloomberg's etf reporter. oil the story. the headline had to do with what the oil minister said.
he basically said that as for the current agreement and keeping with saudi arabia's policy come up for a restricted. period of time, the markets work. are seeing isch what has been playing out for quite a few months, a breakdown of opec, or the power and magnitude opec used to have. the saudis are out on a limb on their own. russia is not on the same page. there is no one left in this cartel the back of saudis. alix: if you're going to buy value and you want to buy cyclicals, you want to buy energy. that has not played out, even when oil prices were $85. >> you are seeing shorts rising in the etf world. one focused on oil and gas,
shorts 17% so far. we're seeing traders taking contrarian bets and abetting on a bounce out of this meeting, a rather painful trade. may be time to take profit? i don't know. there are a lot of painful traits right now. as i recall, the last opec meeting, they talked it down and then came out and talked it act up, so you don't know how much is noise and how much is the signal until they decide what they are doing. >> the past few opec meetings if last five oro the six, we have seen a similar pattern with initial comments out of the ministers were bearish or not very bullish, then by the time they issue the final statement, they gave the market what they want, so it could potentially be another set up like that. alix: you know what is different this time? and the need for
saudi arabia to have president trump's protection. david: i think president trump understands it fully. he has some leverage this time. our second story has to do with china and huawei. it's not across the wire yesterday. the cfo and the daughter of the founder of the company was arrested. the reports are because they want to extradite her to the eastern district of new york on charges that huawei has violated trade sanctions against iran. this is a fly in the ointment with china. >> this cross the wire late yesterday. the arrest was done on saturday. there is speculation that some pain in the market on monday and tuesday was related to people knowing about this or having some speculation, that not everything was all rosy on the trade front. david: there was a dinner in buenos aires, and they were
arresting a prominent executive. is a massive company at the forefront of expanding , sond its domestic market the arrest of her depending on whether the u.s. was actively involved, it will throw a wrench in it. alix: morgan stanley upgrading china saying it is time to buy in. go to em. we will see a weaker dollar. big call.s a people are bullish on china and em. the fundamentals have been to two rating over the last three or four years. there is an interesting bet going on. etf saw itschinese biggest flow on monday in a month. people are still going into china. when you look at this, it does paint a cloudy picture for trade relations. alix: s&p futures got hit on
monday, then up yesterday. ap downwindt g futures reopened. why? it? is i have had eight different reasons for why equities are selling off. what wasd the trader the reason for the selloff on tuesday. , "capitalrd reply was preservation." what you are seeing is a lot of people in this market are unsure about the trade front and what is going on with opec and the other geopolitical issues, and now it is time to lock it down and wait it out. people are getting concerned saying i don't want to lose the money. >> if you look at flows over the last month, a ton of money going into short on's, altra short on's, almost $10 billion, so
people are going to the short end on the bond side and looking at treasuries. when you're looking at that, it suggests people are moving away from risk and may be taking money off the table. it is not long until we get to year-end. if you have a profit and why would you be in the market? david: when will we have the santa claus rally? >> technically it's not supposed to start until christmas. there is still hope, david. alix: fair enough. where do you go for safety? nothing is returning anything. >> you still have a lot of bullish analysts and strategists . guggenheim was out with a bunch of upgrades on the tech sector based on valuation. going to see some recommendations to get back into this.
whether investors follow those recommendations to something else. thed: was it that come or rivals of huawei really climbing? >> you also had snap him of facebook that aren't connected that were more violation place. alix: ok, now we are in a good place to buy some assets. thank you so much. you can find all the charts at gtv on your terminal. check those out. you can say those charts. go to gtv . coming up, more on the global bloodbath. we are looking at some contrary in kohl's. this is bloomberg. ♪ is bloomberg. ♪
>> this is your bloomberg business flash. research has been fired for misconduct. the company said it was related to misconduct that did not issues areancial raised questions about financial controls. he is being replaced by the president. but leaders of the biggest tech companies in the u.s. will be at the white house, talking about emerging innovations such as ai, the trade war with china in the background. among the companies, google, ibm qualcomm, and microsoft. broadcom reports earnings after the close today. will it be another apple supplier that has slashed revenue guidance? top revenue estimates have increased over the last four weeks. of theade up 20%
quarter. david: thank you so much. tensions between washington and beijing heightened when news came out that the cfo of huawei was arrested on charges of iranian sanctions violations. welcome now enda curran. thank you for being with us. it's not up on us. explain how important this is, the cfo of a company that is rather important to china. >> i have heard people today say you really can't overstate how important this development is come up potentially a major development in the overall tensions between china and the u.s.. the cfo is the daughter of the founder. huawei is a major national champion for china. they aspire to be a global leader in technology. the sectors ing
ai, semiconductors, and smartphones. it goes to the heart of complaints the u.s. has against china, that they are trying to secure technology from the u.s. that china is a state-sponsored machine trying to create a state-sponsored economy, and even if the huawei story is part of the sanctions issue with iran, it is hard to separate them both. even though china has called for her release, the foreign ministry did say they are waiting on further details and the trade talk should continue anyway. that will be critical in the coming weeks, whether trade talks continue on one track while we have this issue with huawei on the other side. david: thank you so much for reporting from hong kong. , it isn the markets clear what the reaction was. a three-day chart on s&p futures, the gap down last night and overnight monday.
joining us now is the global strategist from allianz. >> i am not surprised around technology. i think the trade war is a headline story rather than a tariff story. tech is muchof more concerning. .t is 35% of the u.s. benchmark i am worried we will see a lot of disruption in the supply chains. getting it made or assembled in china not be 50 going forward. alix: does this change your base case for u.s.-china trade? >> i think china does not want a trade war at the same time it is deleveraging and rebalancing. i think china is trying to be as accommodative as it can, but you can't fill a $500 billion deficit quickly. it has taken 20 years to build the american consumer around chinese products. it will take four or five years
for it to unwind. we have to be realistic how much china can change, and how quickly. david: talk to us with that means for the investor. you had some calls at a time with asset classes down that it is time to pick some contrary that's come and one of them is chinese equities. i put up a bar chart showing the equity market in china, devastated -- decimated. >> i think if valuation will be key, what we have seen outperform in 2018 has been momentum and the dream of the future, the netflix-type of companies. with the fed raising rates and quantitative tightening lessening the ability to leverage in the u.s. market, you have to look at valuations. you have to look at where people don't own it. china has been horrific this year. valuations look good. i believe china can rebalance. it has a government managing the
country on a 20-year view rather than a 20-minute view. the brainan get around brexit, so everyone has given up on sterling and the ftse. i want to take risks where the rest of the market isn't taking risks. alix: we will delve into your call in a moment. when you look at broad asset classes, it is hard to find one with a positive return this year. where do you go for safety? kinds ofk about many headline risks. substance underneath it is what would i do with my portfolio? finding good about returns and u.s. short duration, some asian and emerging markets sovereign debt come and get a 6% to 7% return without putting your capital substantially at risks. laying the equity markets from
here, valuations are key. the u.s. is expensive. you have to look elsewhere. david: all asset classes have gone down this year. how do we distinguish whether this is a temporary down dip as opposed to a longer-term issue? >> the bond markets have never walked into the story we have seen in the u.s. equity market. the bond market is telling you the world is ok and the u.s. is ok. alix: ok. it is a flat yield curve. >> it has been flattening recently. is question i wrestle with what is the time horizon of the s&p? is the s&p looking six months out and saying the recession is coming in the summer of next year? or are we looking 18 months out? the market is beginning to feel the super cyclical parts of the economy housing the rolling over. the consumer, we can only spend more if we get a pay rise.
bloomberg or mr. my boss are giving us much of a pay rise yet. david: you are staying with us. we will get to brexit coming up. dayssa may has just five to convince parliament to back her brexit deal. ross mcewan says it is the only option. more next. this is bloomberg. ♪ >> i have in a backer of the deal. i don't see another deal. from a business perspective, we need certainty. ♪
at the moment, i don't see another deal. from a business perspective, we need certainty. you not going to get everything you want. you have to give up on something to get something else. for me, it is how do we get certainty into the marketplace. investment is not being made. companies are not investing for the long-term at the moment and want to see certainty. that is why this is important for the u.k. economy, build some certainty. i think it is in the hands of our imp's. brexit,n't get a hard this economy will go into recession. is thatthe reality uncertainty will push this
economy into a much slower growth than we've had the last 12 months. david: still with us is neil duane of allianz global investors. you think investing in u.k. equities make sense given all the we have heard. is that because you think it is as bad as it can get? >> yes, sterling is weak. the u.k. is slowing down rapidly. that is priced in. the ftse has underperformed for the last two or three years. other than a jeremy corbyn brexit, i, a hard disagree come it will be hard one way or another. i think that is in the price. the u.k. has already underperformed. alix: what sectors? >> the whole of the market. the domestic sectors have been worried about what the boe has been talking about, house prices, interest rates already flat on the backs.
just certainty, whether a crash out for hard deal, we are then done. all the certainty is back in the market and people can make investments and start to move forward. dismal lookarney's at the economy if there is a crash out, that doesn't materialize? >> i don't think it materializes. i look at his scenario, house prices rising because he raises rates to 5%, really? a normal governor of the bank of england would not be thinking am going to crush the economy by raising rates. can you imagine jerome powell raising rates to 4%? what would happen to the assets? david: talk about the pound. in the early stages, the pound went down, equities went up. that seems to be turning around now.
we are not seeing the same resurgence in the ftse every time the pound goes down. why is that? what do you expect going forward? 21.20, thenrom 1.50 bounced to 1.30. 60% of the ftse earnings is dollar-related. if you care about the u.k. economy, you care more about oil than the dollar. if you saw more political pressure, sterling would take the strain. the international side of the ftse would do well. the domestic side is waiting for clarity and some sense of certainty. as long as we don't get a general election, the u.k. looks ready to bounce. alix: do you buy gilt? >> no. one scenario is the u.k. sees sterling weaken further, then the u.k. will have an inflation from. money slowlylosing
buying gilts. david: what about a disruption of the supply chain? the predictions out of mark carney were pretty dire. what do you anticipate? >> i will give you two answers. you know what bmw would do in april? they will have a holiday. minis in not make april and wait to see what the world looks like in may. i think some supply chain issues will be managed by companies on a one-off basis. alix: good stuff. you will be sticking with us. coming up, oil and opec, the meeting still ongoing. this is bloomberg. ♪ rg. ♪
we were down about 450 points in dow futures. sn -- s&p futures were down so much earlier. exports down by over 2%. bid ofr asset classes, a a desk a bit of a touch of safe haven. not like a monster rally in the treasury market, dollar, or yen. yield, 2.89%. i am a bit surprised that you are not seeing a bigger bid on the back end of the bond market. vix right at 24. brent off by over 2%. a brutal day for the oil market. a lot of volatility with opec. some will say we had about selloff so time to buy top assets.
david: now an update on what is making headlines outside of business with emma chandra. emma: good morning. the arrest of a chinese telecom executive is likely to make trade talks between u.s. and china even more difficult. the u.s. convinced connected to arrest huawei's cfo in connection with violating sections against iran. china has reacted with outrage and is demanding that both countries moved to release her immediately. off the coast of japan, a u.s. marine refueling plane and fighter jet collided in darkness during routine trading. two crew members were found in the ocean and five others are missing. the marines are investigated. the opec is meeting in vienna. in opening comments, it was said there is no deal yet to cut output and a proposal that it is only a moderate production.
>> the principle is to bring supply demand and to balance. we do not think the u.s. will benefit for an oversupplied market for an extended amount of and contest the growth of u.s. shale is brought to a whole bike in 2015. emma: global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. alix: thank you so much. the opec news for conference to start. oil moving off the lows of the day as ministers try to hammer out a deal. there seems to be some discord still. look at some key players at saudi arabia says the cut seems to be adequate but it has to be across the board. they are not going to go it alone. iran says oversupply could be as much as 2.4 million euros of oil
a day. 1.3.raqi minister says no consensus. the obvious energy group director is joining as on the phone -- the rf energy group director is on the phone and what are you hearing on the ground? can you hear me? ok, we will try to get him back on the phone to get the read from vienna. still with us is neil dwane of allianz. what is the breaking point for you when it comes to oil? whetherld say, i wonder the global economy has been slowing in china has been slowing? it was too high for indonesia and indiana -- and india. now there should be relief of tension for the global economy. we know libya and nigeria are back. they will not want to cut because they have had supply
concerns all year. i think your president has confused saudi arabia because he targeted a ron with sanctions -- he targeted iran with sanctions, and then he let millions of barrels go to india and saudi arabia. we take the supply off the market and then let it back on. david: certainly a head fake on the sanctions. he tweeted yesterday, a hope there are no cuts to the production level. alix pointed out, there may the more say given what happened with khashoggi. russia and saudi arabia, they want a stable and ,elatively support number closer to 70 than 60, and i think they would like to get some tension. what we should be concerned the oil price is showing that the global economy
is growing faster than they think. so they are trying to work out the underlying level of demand in the global economy will be in the next six to 12 months. alix: totally right. ministers said you could see demand coming off a little bit. i think it was the uae who said there is plenty of demand in the market. withwas interesting to me some of the conversation out of opec, which was also like, u.s., you cannot and do not tell us what to do, which i feel was very different than any other meeting. you hear the iranian oil minister -- trumpelieve president part of thepec is secretary of energy of the think,states, and he, i .orgot opec is independent of course, some of the opec
countries have a very good and very close relationship with united states. opect does not mean that receives instructions and orders from the united states. alix: a little throwdown. derek is now with us from vienna. the oil minister from iran throwing it back to the u.s., saying u.s. does not make policy for us. what are you hearing? >> actually, i am down the road from headquarters right now. vienna and chilly in very frosty in the room where the ministers are meeting right now. spoke to one of the iranians earlier and he describes the internal politics is very sad. today will be a difficult meeting. i do not think there is any consensus arrived at yet. from allunanimity producers that oil needs to be
removed from the market. but there is not agreement on who will do the cutting and how much. we expect something to be done today, but i think everybody agrees it is a difficult meeting. david: is there a consensus on what the baseline is from which the cuts are made, whatever they end up being? >> it is a good question. there is talk. there was the technical meeting last night the suggested the baseline be october or september or a combination of the two. but saudi arabia has surged in its own production since october. there is a high chance that the deal that emerges, if there are cuts agreed, it will be pretty vague and the wording will be somewhat fudgy and the market will have to figure out what it means over the next few weeks. alix: does any country get an exemption this time? >> that is another difficult one. saudi arabia has make a pretty hard.
it wants the cuts to be across the board. that means including libya and nigeria and even iran. i spoke to the libyans, and they are not so keen on that. their capacity is way down because of many years of war. so cajoling these producers to agree to cuts when they are not even at their true historical has cities is quite difficult -- historical capacities is quite difficult. saudi arabia has done the extra pumping in recent months. alix: what we may most likely here is a lot of murkiness in the announcement but on the back burner a cut over the next few months, in part to save face with president trump but also to rebalance the market or do you think that is what we will see in the next hour or so? >> i think we will have to wait a bit longer. i do not think there is going to be a great deal of clarity.
what the market wants is barrels removed an absolute clarity on what the metrics are and how they arrive at the number and who will do the cuts. that just seems really difficult because of saudi arabia is going to do the heavy lifting, there will be blowback's from consumer companies, especially the u.s. squaring the circle is quite of gold. the easiest -- is quite difficult. the easiest way is some lowest common denominator agreement , and it involves removing some barrels from the market, but it is unclear enough that it ornot an flame -- inflame does not look like the cut of headline cut that saudi arabia is trying to avoid. of -- derekrow or brower of rs inergy, thank you very much.
watch "commodities edge today as we will be talking about the in a. david: perfect timing. well done. us. dwane is still with a fewer wrote in about a subject that is very important, which is bbb's. we hear a lot about this. a lot of concern about it appeared i talked with ahead of barclays last week and his biggest concern was those bbb's start falling, that is a big problem. there is a lot of them out there. >> one of the big stories behind the power of the s&p is the resin leverage of u.s. inporate's -- is the rise leverage of u.s. corporates. there is not yet a sign of recession in the u.s. so how far is the s&p looking ahead? the high-yield market is probably in the duration of five
or six years, not the one or two we had in the last financial crisis. many companies are looking at 2020 to 2023 engines of financing. maybe downgrades will not be near as bad as people fear. everything went wrong with you as high yields the last time, feels like it is going off the market and going somewhere else. maybe high yields are better place. we think investment grades are overvalued. we will look at treasuries and high yields. if you want to take risks, moving into investment grades is more risky. dwane of all lands joining us, thank you so much. coming up, the huawei cfo arrested in canada. we will look at the infield family ofnfluential the top of one of the largest telekinetic shenzhen -- telik medication companies in the world. this is bloomberg. ♪ omberg. ♪
emma: this is "bloomberg daybreak." cfo.g up, the kroger this is bloomberg. emma: this is "bloomberg daybreak." this is your business flash. lyft has submitted early stage documents for its ipo. lyft is working with jpmorgan, but it swiss, and another company for the offering. $18ations range from billion to $30 billion. in japan, softbank's ipo's telecom unit has been fully subscribed.
underwriters were able to cover it yesterday thanks to strong demand from retail investors in japan and overseas buyers. cheers begin trading december 19. u.s. regulators will try to convince an appeals court that a lower federal's court was wrong warner dealand time goes rupee are they say at least a higher prices. at&t denies the accusations. that is your bloomberg business flash. alix: turning to wall street eat, three things wall street is talking about -- turning to wall street beat. 's family ties spirit we look at the rest of the ceo and look at the family. apollo warns of a credit bubble. says that could be a credit bubble. outrage was expressed over a outrage was expressed over a
bloomberg article detailing wall street's handling of the #metoo movement. i do not know that word. it is i get five-syllable word. david: joining us now is lisa abramowicz. we want to talk about the daughter of the founder of huawei, arrested in canada. should you opt out of high school but ultimately got a masters degree. this is big. >> she rose to become the cfo. a secretary.being david: and in charge of international operations. lisa pot is important for this said: which isy an important part of this story. it is arguably one of the most powerful chinese companies. i would argue that the star district of new york, federal court district that takes its job thursday, the fact that
canada was going to operate -- to cooperate indicates this is trump.ing from president it is not intended tandem with trade negotiations but an investigation that has been long-standing looking into this. david: they have done some very high profile cases. your husband works for the southern district. the problem is that china will never believe it is a simple criminal sanctions case. they will think it will tied to the u.s. issues. lisa: the narrative that the was concerned about the intellectual property, this would of stature that china is getting, all of the sudden to go after one of ,heir major companies, 5g becoming one of the major cell phone providers in the world, it is too perfect. alix: and major families,
basically corporate royalty and china. david: exactly right. her father is revered. he is bill gates. the cornerstone of their 2025 plan to move into technology. story, leon black warning us about credit and there being a bubble. he has raised some money to buy some of the stock. lisa: i went back to stories we wrote about and what he did when the market turned. he has been talking about this for a while. plow furthering to into the credit markets as they see an opportunity down the line. it is interesting to be calling it a bubble right now when you are seeing the wind taken out a little bit from the credit market.
sort of burgeoning of this market, and prices have dropped to the lowest since 2016. you have seen some of the biggest outflows on record from loan funds. so it is not like this is coming at a time of incredible euphoria. it is a time when people are skeptical. may bethat skepticism part of a larger story, and there is no business about credit in general. lisa: and we are feeling the nervousness about credit. to call this a bubble on the proportion's of, say, the dotcom era, hard to rectify that. david: for more on this, later on.ill have the tpg co-ceo that will be at 11:00. alix: looking forward to that one. this story is in response to a thatberg piece that said
the rhetoric on wall street is to avoid women at all cost. there is anger about this. it is said there are three solutions. men should be required to break bread with female colleagues. two, the need to start mentoring and sponsor both men and women. three, note two men that if they want to raise the ranks, they need to see the women leaders ahead of them. lisa: implicit in this story was that a lot of men think that the #metoo complaints are frivolous or that a significant proportion come from small things that they perceived as being sort of and a women blowing it out of proportion. that seems to be the implication of not wanting to even be with women and not put yourself in a scenario. no, there this is, are legitimate issues and most women are not looking to throw a guy under the bus.
they just want to do their jobs. the in a what i am saying? it is a sticky point here in whether to take you seriously -- go ahead. david: mindful of my gender, it is terribly serious and they're very worried they may cross the line are be perceived as crossing the line, so the best way not to is to stay away from them. my problem with the story is the dinner party. water cooler is one thing or going to lunch, but i do not know what you have to take a woman out to dinner. i thought about it, i have never gone out to dinner with a woman in a business setting ever except once, and she was my boss. said, why dinner? alix: lunch. the: alcohol changes scenario. alix: so go to lunch, have breakfast, be done with it. david: many thanks to lisa abramowicz with whom we could talk for a long time.
is what i am watching. the senate has a resolution coming up on jamal khashoggi. lindsey graham is leading the way. they had one hearing were they did not here with -- from the cia director. now they have had a briefing and say he is responsible and they want to hold him accountable. but mike pompeo has said otherwise. this is what lindsey graham had about what the secretary of defense do not say the crown prince is responsible. i as to pompeo and mattis, have great respect for them. i imagine if they were in a
democratic administration, i would be all over them for being in the pocket of saudi arabia, but since i have such respect for them, i am going to assume that they are being good soldiers and when they look at the analysis, they are being technical in a statement. but they are not getting the assessment that i think the senate will have. david: this is a rift between the senate and the white house. the white house is saying we're not sure it is true. the senate says we have seen the evidence and we are sure. alix: we could see antitrust pushback. coming up, we will dig deeper into kroger's third quarter results we will be speaking with the kroger cfo. this is bloomberg. ♪
alix: saudi's is equal cuts across the board, and opec is still debating cuts to the saudi oil minister says they have to be equal. a one million barrel of oil a day cut would be adequate. onwei's cfo arrested violations on sections to iran. equity futures sink, dragging the rest of the world done with them. nothing is giving positive returns. david: welcome to "bloomberg daybreak." i am david westin. i am here with alix steel. alix: broker -- kroger numbers coming in. same-store sales coming in at 126%. -- 1.6%. we will look about margins and with the consumer is doing. and there are toys "r" us pop-up
stores in their stores now, as well and we are going to talk to the hour. david: they are going to have their own outlets in walgreens, they just announced. people were nervous, but this -- that does not seeing too bad. alix: i want to see what is happening with margins though. that was also a question. do margins have to degrade even more? and what is the consumer by an? how much money do they have? david: and they are doing e-commerce. alix: and hiring. and amazon with minimum wage at $15, can you match that? that will be an interesting conversation. decidedly risk off. dow futures off by triple digits. as a piece futures off by 1.5%.
down so much -- s&p futures off by 1.5%. 1.13, modestly positive. 10-year down by three basis points. %.9 crude getting killed. a terrible day. it was down 5%, down 2%, now down almost 4%. will they are will they not cut? they are now like an hour late on this announcement, which, in my mind, cannot be good. speculating, but just saying. david: i thought they went to vienna to take the price of oil up. going the other way. time for the morning brief. we get jobless claims numbers followed by durable goods at 10:00. 9:30 this money, court of appeals in washington will hear arguments in the justice the permit to request to reinstate
the challenge to the at&t have a time warner merger. barra to trymary to explain the decision to close plants and lay off workers. and she will look about whether gm might be adding other production in michigan and ohio. let's get an update on what is making headlines outside the business world. emma: the price of oil is lower today. at the opec meeting, the saudi energy minister proposed a moderate reduction that would bring the market back into balance. it is a fine line between preventing a surplus and appeasing president trump, who still much lower prices. a resolution has been introduced saying saudi crown prince was implicit in the murder of a journalist. the measure is nonbranded and would put pressure on president trump to act. the resolution is senator lindsey graham.
off the coast of japan, a u.s. marine refueling plane and a fighter jet collided in darkness during routine training. rescuers hunt two crewmembers in the pacific ocean. five others are missing. marines are investigating. the arrest of a chinese telecom executive is likely to make trade talks between the u.s. and china even more difficult. canada huaweinced to arrest -- to arrest huawei's cfo meng wanzhou. china is reacting with outrage. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. david: thanks so much. tensions between washington and beijing have heightened overnight when news came out that huawei's cfo had been arrested in canada on iranian sections violations. joining us on the telephone is
peterson institute for international economics senior fellow. tell us what the chinese response might be. the u.s. might think one thing is iranian sanctions violations, a criminal matter we have to pursue, and another thing is huawei and 5g. we have to wait and see exactly what the charges are , the speculation is iranian sanctions but it could be for other countries, as well. huawei is the world's are just telecommunications company, an equipment company. in the u.s., people know them for handsets, but they are big equipment many fractures that do business and hundreds of countries -- they are big equipment manufacturers. sells enormous amounts
of huawei, and they have to a by the u.s. regulations and sanctions when they sell their products internationally. it -- if they do not follow the law, i think they will be prosecuted. david: explain what huawei is so important. how important is it to the chinese 2025 strategy in telecom? >> huawei is probably the leading company in this area. they have an enormous research and development program. they are filing hundreds, if not thousands, of cabinets every year. there on the lead in develop. they are very major competitor in that space. david: a major competitor, but also, what is the social significance in china? i read the the father of this
cfo, the father of the company, is really revered as a really significant ceo in china. >> i think he is. basically this is a company he started from scratch. he had some previous government connections. he is kind of in the category of jack ma, start of the company from nothing and has been hugely successful and is one of the best examples of a successful private entrepreneur in china over the last 20 years. david: finally, i am struck that this arrest reportedly happened on saturday, the day the president xi was meeting over dinner with president trump. president trump not even know this was going on? thet possible that left-hand did not know what the right hand was doing? >> the u.s. government is a pretty big operation. i would be surprised if trump
had advance knowledge of the arrest. this investigation of huawei in the eastern district of new york started almost three years ago, so this has been ongoing. it long predates the trade dispute that has arisen over the last year. i think it is most likely that these were proceeding on completely separate tracks. david: we really appreciate you being with us. nick lardy. the markets have turned down, in part because of huawei. s&p futures are down. not just stocks and not just this week. stocks, bonds, and commodities down overall this year. you can see from this chart, the white is stocks and blue is bonds and yellow are commodities . researche the bca global strategist. good to have you here. my question is why. >> i think we have seen the
divergence the between the u.s. and the rest of the world has produced bond returns that have not been favorable. we have not seen u.s. safe haven assets, treasury yields rally. we have senate more recently at most of this you, stronger u.s. growth, higher u.s. inflation upward. yields going global conditions have not been positive, bringing bond yields lower. we have seen this dynamic and fold, and there has not been anywhere to hide. bonds have not provided a safe haven that it has historically provided. so your clients say, all right, give me your global macro view so i can talk to my strategist and figure out how to invest. what do you tell them? globalof the battle in micro is identifying the two or three factors that matter most for global markets. alix: good because i have heard
eight reasons. >> i will break it down to two. digit but most upon forecasts for global investors to make since 2014 have been the outlook for the chinese economy and the outlook for the u.s. dollar. those two parties are much more related than people think. when i get asked about it, start with the chinese economy. when the chinese economy is weak, the rest of the world tends to suffer more than the u.s., europe, japan, australia, new zealand it's a when the chinese economy is weak, the u.s. looks relatively stronger. when you think 2014 through 2015, the u.s. dollar was up 20%. what i heard often from clients was because the u.s. was the cleanest dirty shirt. everyone looked especially bad because of the weakness in china. so china weak, you is so strong. 2016-2017, we moved into the second phase of that. china was stabilizing and the fed that off.
of we argue the chinese economy was the polar of that reisinger is asian -- re-synchronization and global growth. in 2018, we go into the third round. weak china, strong dollar, and we're seeing the consequence. david: so this is all about china. tell us what is going to happen in china. growing.een slow they have made real intense to try just annoy the economy. they want to try to deleverage. >> there are questions they asked that are useful, but sometimes it is the questions they do not ask that provide just as much information. earlier this year no one was asking about china. through the year but we have observed is a very important political dynamic that we have been highlighting through our political team, which is that resident xi jinping is emphasizing structural reform. structural reform entails deleveraging.
china has one of the highs levels of corporate debt to gdp the world has ever seen. that means president xi understands this -- debt needs to be brought down. but then the chinese economy is being brought done with it because debt has pushed chinese growth since 2009, chinese debt. so deleveraging is weighing on activity.onomy so it is the chinese political call investors need to understand. alix: this is where the tray conversation comes in. on a normal basis, they would have a lot more flexibility to do was slowdowns. there will be trade implications and it limits the ability to manage it. >> definitely true trade has certainly played a role. from about the middle of 2017, president xi jingping and the leadership in china was empathizing reform and leveraging. in the past six month, the have emphasized much more economic
stability. that is because they understand the leveraging is negative for growth, but a trade war is also negative for growth. and they do not want a significant slowdown. so there have been some signs of stimulus, so many investors are thinking, is this stimulus we are seeing some evidence of today going to create the same in 2016, ie, saw stabilization and chinese growth? if so, there could be buying opportunities. but investors should be cautious. debt is much higher, so stimulus will be more nuanced. i often highlight to clients, could chinese stimulus be a bad signal? the best forecaster for the chinese economy is beijing. if beijing is stimulating, and might be because they know the economy is going to get worse. that is how it usually works it when the fed was cutting rates in 2012, sell
signal. could the chinese be giving us a single about how the chinese see their own economy? david: fascinating. he will be staying with us. time now for the bloomberg business flash, a look at some of the biggest business stories in the news. emma: the crucial holiday shopping season has gotten off to a good start for cosco. they are reported comparable sales that beat estimates. costco go sales were up 9.2%. lyft going public. they have started early stage documents for his ipo. jpmorgan,rking with credit suisse, and jeffries. the banks have pitched valuations for the committing ranging from $18 billion to $30 billion. ipo to theoftbank's telecom unit has been fully subscribed. were able to cover
the entire book yesterday thanks to strong demand. says begin trading december 19. and that is your bloomberg business flash. alix: i love the softbank story. like, how much confidence you have in yourself? david: it is pretty impressive. i will take the number and go for it. does not matter, i will sell it. coming up in data adp implement in at 179,000 jobs, below estimates and below october's reading by about 40,000. how much does adp mean for job support tomorrow? not a lot necessarily. whater, you have to wonder can of risk will be in the market if we get a killer number tomorrow. sets up tomorrow. alix: sets up the tone. david: 24 hours from now, we will know. alix: we are the lows of the
session. we are still awaiting opec. oil ministers still trying to hammer out a deal. saudi arabia wants to cut about one million barrels a day and says it is prepared for a deal or no deal solution.joining us from the in the is anne-marie. they are an hour and 15 minutes late. what is going on? >> that is right. this is a buzzing pressroom here at opec headquarters in vienna. they're still talking and still meeting. what we heard from the ministers going into this meeting, as you said, the saudi oil minister saying one million barrels a day would be adequate. he said if there is going to be a cut, and sv across the board. very different from 2016 when saudi baird the big burden for their cut. the market moved on this news, at one point down some 5%. two massive hedge funds are
telling us anything below 1.2 million barrels a day will be seen as bearish and not enough to get prices higher. remember, this is just opec. tomorrow russia joins. , they are getting ready for a meeting with mr. putin to see how much they will be willing to cut. alix: they have yet to agree on a deal on the side of the oil cuts. what is saudi arabia's biggest problem, will it be russia or internal members of opec? >> i think one of the biggest problems is traders have been saying they are walking a fine line. it is a complicated meeting for the. saidu dhabi, the minister they need to cut at least one million barrels a day. he has not said that since. on tuesday when he spoke to me, he was backtracking that.
he said it was too premature to talk about cuts. many say it is getting political health can they provide -- how can they divide president trump is a call for lower oil prices and washington showing support for saying the crown prince was part of the killing of jamaal should kobe -- jamal khashoggi. minister iranian oil took a big swipe a president trump's interference in the oil market. trump think that the secretary of energy of united states, and he, anhink, forgot that opec is independent organization. of course, some of the opec member countries have a very good and very close relationship with united states, but it does not mean that opec receives
instructions and orders from united states. alix: still with us is our guest from bca research. on this, it is present from, oversupply, and demand. how would you view it? >> i would say it is all those issues. at certain points in time, of course as we have seen oil prices move much lower and gas prices move much higher in the u.s., we have to understand that in 2019, everyone in washington, especially president trump, is thinking about the 2020 general election. as oil and gasoline prices move beher, president trump will held to use the power of the u.s. presidency to ensure that allies such as saudi arabia and others, russia, will be doing what they need to do to bring oil prices down. so geopolitics will surly play a
toe if oil prices continue climb -- geopolitics will surely play a role. pricesif he gets a oil down to low, how does it affect rates? if they reflect an expansion of supply because of geopolitical pressure, you may not expect rates to move much lower because that would stimulate economic activity in the u.s. it would not necessarily cause the fed to back off a price out hikes. if demand is weakening because weak and em is weak, you could see u.s. treasury yields fall. president trump may not be able to have both, particularly if it helps the u.s. economy as oil prices climb. alix: there is an enormous amount of gasoline monetary in the u.s. it is a whole different kind of story. what is the implication of a $50
oil price for other asset classes? toit depends on how we get that $50. alix: what is most likely? >> we do think that supply dynamic in the oil market is tight. so if it was a positive supply shock pushed through geopolitical pressure from the united states, then we could see some easing in conditions in emerging markets and other economies that could help global growth on the margin. but china is a critical factor in the global economy. if we get to $50 and a chinese --nomy is weak and nonentity nonenergy commodity prices are declining, the could be a concern. if the rest of the global economy is doing relatively well and we have an increase in supply and oil prices go lower, cyclicals could catch a bid after having a very rough year in 2018. alix: he will be sticking with
us. tune in later today for "commodities edge." hopefully we will be breaking down some kind of announcement from the delegates in vienna. adp mrs. estimates -- adp missed estimates. october the -- was revised slightly. there was a little bit of a safe haven play in the dollar earlier. dxy now lower. david: time for the bottom line or we look at three companies we are watching. held a big caring is being and the district of columbia -- a big hearing is being held this morning. a judge saying to please reinstate our challenge in the acquisition of time warner. they are saying, look, we told you prices would go up and that there would be blackouts, and it is happening. at the appellate level, you do not get to revisit the facts. law. just the even if some facts have come out since the decision --
alix: it does not matter. david: and less it is a really egregious situation. it is -- unless it is a really egregious situation. it is the law. i would be really surprised. alix: i am looking at and oh international -- indo international. apparently they raised the price of one final of a drug. it is what you give women when they are trying to induce labor in childbirth, and they're looking at doubling the price. epipen scenario, raising prices on drugs of people actually need. david: president trump has really been harping on drug prices. they may make some progress. alix: there is less supply. so if there is less supply, prices go up. being jerksot
raising the prices. david: third company is lion air. remember the terrible plane crash in the ocean. our bloomberg opinion column this is joining us for more. this story keeps going about the boeing 737. >> it does. lion air is talking about canceling some of its remaining orders for that going 737 max jet. does that boeing 737 max jet. there was a preliminary report issued on the crash of focused on a maintenance issue, suggesting that lion air improve its safety culture. boeing responded, doubling down, and failed to mention the automated system regulators were talking about being in play here. it seems a trend of boeing, making statements about the they were saying that
the full details were not given on how it works. david: lion air was the premier purchaser of this particular plane. >> yes, they are a really big buyer. it is not necessarily all about the crash, these tensions with going. l -- with boeing. lion air's order book is aggressive. this could be sort of a way of being able to trim their order book and creating a public stink that allows them some cover to do that. they cannot just back out of these orders as they are contracts. there will have to be a negotiating process and some financial penalties. alix: a good point. it is covered. but either you intentionally lied about it or did not know about it. which is worse?
boeing's stock is down, isn't it? >> there was a report earlier this week talking about the internal debate within boeing about what to put in the flight manual about this system. but they try to do when they introduce updates to these existing plane models, which is what this one is, they do not want to have a lot of training necessary. they do not want the pilots to have to go through additional simulations. they do not want to say too much. alix: they probably also do not want the plane to crash. trade balance numbers out ahead of the jobs report tomorrow after adp missed estimates. this is bloomberg. ♪
top line. the dollar taking a lead lower on that adp number. by .2%.lar up a little buying at the back end of the fed rate hike. here, andr futures oil continues to get hammered as we wait for opec. they are definitely late. here we go per the october trade balance coming in a little worse than estimated, widening out to $55.5 billion. september revised wider by a touch. unit labor cost seem to be .omewhat contained at .9% claims also raising her that was the story last week that i missed. initial jobless claims had been creeping higher. we are saying the economy and job market is good, but this is creeping up on the margin here.
but movingdramatic up at what strikes me is the trade balance, which is staying right where it was. despite all the talk in washington about tariffs and the .hreat of tariffs alix: the u.s. trade gap is a 10-year high basically. and all those tensions with china. a record now with china, as well. it is also distorted because there will be buying and movement. david: it might be a timing issue, but it has not had much of an effect on the trade issue. let's get reaction on the numbers. stephen liberatore is responsible for investing fixed income portfolio manager. bca research from is still with us to what do you make of these numbers, particularly the trade deficit? >> it shows the continued interconnectedness of the global
economy. when you have difficulty in relations, you still have so much interconnection between every economy globally. now we have global supply chains, as well as the fact that we pretty much are in a situation where each economy is dependent upon other economies for certain parts of how they grow up its of this trade deficit does not surprise me a lot. david: does that indicate that it is robust enough of an independent global economy that it can resist some of the protectionist things we talked about or is it even more fragile and the protections will have substantial damage on the global economy? a tippinghink it is point situation. it depends on -- >> i think it is a tipping point situation. it depends on what the tariffs are on. if it becomes a full-blown trade war, then you will have very much in negative impacts. alix: jim, how do you interpret the labor data?
we are heading into jobs friday. >> claims are great indicator because of their frequency. one of the observations we have researches since world war ii, there has not been one instance where the unemployment rate has increased a three have a month moving average basis without creating a recession. so if the unemployment rate -- david: there has not been one were thee world war ii unemployment rate has increased by .3%? >> on a three having month average basis, so smoothing it out a little bit. feedback loops are generated. once you take a turn in the wrong generation and -- and the wrong direction, negative feedback loops are generated. there is less investing or consumers lose confidence put you start to see the beginning of the end. so the claims data is important
to look at because it is high-frequency. if it is signaling folder abilities in the labor market -- if it is signaling vulnerabilities in the labor , but the indicators we look at point towards strength. broader set up the yield curves conversation, fed hikes being priced out, today in particular. 16 basis points of rate hikes are expected next year. peeking in december of next year. is that accurate? >> i think it is when you start looking at the overall data. while this was interesting to me here was the unit labor cost number. that number continues to decrease some a which should be something for the fed to look at. that is really a pressure point for overall inflation within the economy, and that is an 1.221.9on, going from that you have additional fica and economy. 1.9 thatfrom 1.2 to you have additional inflation in
the economy. about we have heard unemployment and the three-year moving average, look at the yield curve. the get help they have been narrow in just look at how they have been narrowing. we may be nervous about a recession with less growth, or has the market had too much raising by the fed on the short end? >> probably a combination of both. when you look at all of the data, especially more recently, which has been part of the driver of the selloff in volatility in the credit markets, it is more of a mixed data set. the information is not certainly coming in as strong as it was earlier this year. when you look get what the fed has done and the relative hawkishness of its speech, you can see heather could be a concern that this you can see that there could be a concern
about the fed remaining stringent in their talk. alix: yield curve? do you buy anywhere? three-monthses the 10-year,which goes -- which goes higher than 2.10%. this tells us that bond directors that the front end of the curve, the economy cannot handle the fed to the policies. policy becomes restrictive. what is interesting today, and that is why it is a great indicator for recession and a bear market, what is interesting today is that the yield curve might not be telling us that u.s. monetary policy is too tough for the u.s. but in fact too tight for the rest of the world. that is why we have seen downward pressure on a long end, because of risks abroad, because of conditions you can take back to 1998. when the yield curve inverted some of the fed was forced to back off. because problems in asia and
with emerging markets, just as we're seeing here. the fed is backs off, and we get more in the u.s. equity market run. we expect that would most likely be the case.i think the yield curve is a proxy for, is the fed of theht for the rest world? david: the yield curve is telling us or is a lot of nervousness. part of what you do, because you investing,d in esg you're using it as a surrogate for safer investments when it comes to bonds. criteria,ize that esg and what else you do in fixed income is ideal for the best operating and managed issuance. it is avoiding the losers. esg creek syria allows you to identify who should be in a position to avoid having problems going forward are running into troubles are running into troubles or when you get into a more volatile environment. identifying those issuers should
put you in a position to weather the storm. alix: thanks very much to you both. a recap on data. adp number missed estimates. trade balance wide. down.abor costs now we're just up by .9%. nonfarm activity picking up a little bit. the market action scene in two ways to dollar around the lows of the session. and euro-dollar. it is not even a real hike. how pessimistic as the market now? david: and ahead of the jobs numbers tomorrow, which will be interesting. alix: whatever, you have the day off. look at me stressing up by myself. david: you do so well without me. time for an update as of the business world.
emma: difficult trade talks between the u.s. and china just got more complicated. canada has arrested the cfo of chinese telecom equipment maker huawei over pegida violations with you a sentience with iran. meng wanzhou faces extradition to the u.s. china has demanded the u.s. and canada release her. france has made it official, the plan fuel tech sox for 2019 lead to violent protests but have now been abandoned -- fuel tax hikes for 2019 have been abandoned. the so-called yellow vests say protests will go on because the government has not met other demands. former president george h.w. bush will be buried today in college station, texas. his final resting place will be at the residential library at the texas a&m university. he was flown to houston for his final service at his church. global news 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in over
were better than expected. joining us is mike schlotman, the kroger cfo. he comes from the kroger headquarters in cincinnati. this is an important day for you. >> thanks for having me. report saidloomberg same-store sales were actually up, which is good news, but there is some margin pressure. is that a fair summary? is a fair, it summary. we had a great earnings-per-share corner, 48 cents. sales are right on top of what we guided in october and our investor conference at the margin number, the 91 basis point declined, i am sure has some people confused. it is really not a function of anything we did this year. it is the fact of what we did or did not do last year. so it is the timing and size of investments last year compared to this year. we have been more consistent every quarter this year. last year we did in some
quarters and not in other quarters. the third quarter this year was higher than our second order margin of 2018. so on a sequential basis, arjun went up. they typically do on the second and -- margins went up. they typically do in the second to third quarters. david: you are making investments in the business that will put some pressure's on margins in the short-term. what does it tell investors about where you are going? 2017 when asked restart kroger, worried -- where profitct to generate margin we told everybody 2018 was going to be an investment year. actarch when the tax reform cannot, we told everybody we were going to take incremental 2019 and makeom them in 2018 it's so we expected
2018 to be a heavier year in investments. the idea is we make those investments this year. it is different investments in store fory or shop in- customers, so all of those incremental investments are hitting this year. not all hit our gross margin lines. &a got better, which was helpful to the bottom line. david: talk about labor and straight costs. >> freight costs where little bit of headwind to our margins in the third-quarter. we are not immune to some of the tightness in the freight market and the number of truckers out there. it was a bit of a headwind, probably little more this quarter. contracts that help us on certain lanes, but not every lane is secured with a contract. so we are subject to what is available in the marketplace. david: you are also exploring
new ways of marketing to your somemers, including preprepared meals being sold in walgreens. newnytime you start a pilot, there are startup costs and customers getting used to the fact that when they go to walgreens early next year, the 13 walgreens stores in northern kentucky, there will be a store within a store where customers can find a wide variety of kroger products. our prepared meal kits will be available in those stores. some of those are available and a lot of our kroger stores as we speak today. we are excited about this pilot. it is a pilot. but i think people should think about it, when two big companies get together and test something, we would hope that we figure this out and it is not just the 13 stores. david: and we have to talk about e-commerce. what about the are caught a --
what about the arcata deal? >> it is an amazing relationship. we're learning a lot about logistics on home delivery from the. they are learning about the size and scale of the u.s. marketplace. it is a lot bigger than what they have dealt with in other countries. we have announced that our first shed, as they call the warehouses, will be near cincinnati. i am excited about the relationship. it is not just solve home delivery, this will be able to do overnight click list orders. this service would be able to supply replenishment product to the walgreen stores because that comes in relatively small batches at a time. so those sheds and the way they pick the product are supremely situated to be able to handle that kind of process. how far am i way from the
time i can just call up a kroger will deliver some been pretty quickly to my house, and is that going to cost you a lot in capital investment? >> it depends how you do it. and thereg economy, are a lot of ways were you do hard-earnedinvest dollars and people are willing to use their capital, drivers using their own car and doing the delivery for a fee. there are lots of ways to sell that home delivery issue. there are markets we're testing were you can call and get a product in 30 minutes or do we do not talk about everything we're testing in a big way or where we are testing to it in scottsdale, arizona, we're testing home delivery with an .utonomous vehicle we are trying a little bit of everything. our goal is to be over to meet the customer wherever they are. anything, anytime, anywhere, we want to be there for them. for speakingyou
with us today. mike schlotman, kroger cfo. alix: some headlines from the opec meeting. apparently there is no deal yet, no final agreement yet. but they may propose a 900,000 barrel a day cut to a one million thousand barrel -- to a one million barrel a day cut. toc will see further cuts non-opec nations. saudi arabia said we will not be going this alone. brent off below of the session. $59 a barrel. david: deutsche bank in the news. it is reported that they processed an additional 31 .illion euros for dansk a bank this is the money laundering scandal in europe. additional 31 billion dollars in euros processed by deutsche bank in that scandal. their stock is down almost 4%.
eso partners is said to form a new committee to make a bid for about $4.6 billion this year's holdings. -- for sears holdings. they have about a 74% stake. buying himself? david: he is going to sell it to himself. it is so complicated, i cannot figure it out. alix: they are going to form a new company. what? real estate is good. questions than answers. coming up, back from a day off in u.s. markets. it could be ugly into the open. we will break it down and find some value. this is bloomberg. ♪
of the session. joining us is brad mcmillan, commonwealth financial cio. are there buying opportunities today? toi would probably wait start buying. i think the selloff is probably overdone to on the other hand, and might be a while before things calm down. alix: do you need to sell more? >> well, i do not think we necessarily need to sell now. for traders, there is an opportunity to ride the market down. for investors, this is part of normal noise. sure, it is scary and the numbers are back, but on a percentage basis this is still pretty normal. we just need to sit and watch and not panic. alix: are there other levels to watch? monday, account eight reasons for why we saw the start to the selloff. --'s, forced selling, etc. how big a role is that playing in the market? >> the big number is the 200-
bid moving average, trigger point. the question will be, are we tong to hold 2700 or get him 2600? i would be looking to round numbers on the s&p. alix: are u.s. shoppers ready to go? >> i am sitting and waiting and watching. i personally think this is overdone. volatility, there is a real risk it could go further down. david: what are you watching? what would be the indicator to you on which way this is going to break? >> i think the trend right now is down. we are seeing the 200-day moving average act as resistance on the upside. my personal opinion is we going to see more of a downtrend, and if we can break that above that trend line, i think that would be a very positive sign. but right now i think the market is trying to get a handle on what is going on with trade,
what is going on with interest rates. just too much uncertainty to establish a positive trend in the short-term. alix: brad mcmillan, thank you very much. a yield curve, brexit, trade, yuan, cta, earnings. now oil. david: which is what you are watching. alix: yes. maybe they will be out of the opec meeting. coming up, the open with jon ferro. bank of america, head of merrill equityand u.s. strategist, their call. this is bloomberg. ♪
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coming up, wall street getting back to work. investors are gripped by fear again. ceo.he arrest of huawei's and in the market that thursday morning, futures are -1.53%, treasuries lower by three basis points on the 10 year, and 2.88%. investors once again looking for a culprit behind the equity selloff. >> there is a wall of worry that looks like it is made out of cinder blocks. >> that is a function of all the different geopolitical risks. >> it is the trade tensions between the u.s. and china. >> plenty of room for that to the rail. >> china has been horrific, down 30%. >> tension between overvaluation on one side with the dollar.