Skip to main content

tv   Bloomberg Surveillance  Bloomberg  October 17, 2019 4:00am-7:00am EDT

4:00 am
>> boris johnson's northern irish allies say they cannot support his brexit deal. nancy pelosi accuses donald trump of hurling insults at her after lawmakers on both sides criticized his withdraw from syria. and netflix's streaming success. international growth figures senate shares of soaring bubble apple and disney take a bite out -- growthprofits
4:01 am
figures senate shares of soaring but will apple and disney take a bite out of global profits? let's get a check on the market. struggling for direction of it, down .8%. the s&p 500 fell after that surprise drop in sales data. will the soaring shares we saw for netflix maybe give a lift to some tech stocks as we come online? cable is sliding on the reminder that there are still stumbling blocks to a deal. are those losses limited by the prospect of an extension? coming up tomorrow from the imf meeting, francine lacqua sits down with mark carney. now let's get the first word news in new york. pressingenators are ahead with a bill which supports hong kong's pro-democracy movement. that is in defiance of china
4:02 am
threat of retaliation. the legislation would subject the specials -- special trading status to review. there is a broad support to show support for the protesters and punish china for a crackdown. european central bank policymakers are calling for a supportn strategy from for fiscal stimulus to wholesale policy review. eurozone stuck with feeble growth and inflation. this comes a week before mario draghi holds the final policy meeting of his eight-year term. to return $20 million to shareholders by 2022 and may look at acquisitions to help grow faster and maintain profit margins. flush with cash after the $12 billion sale of a dermatology unit. it is starting a new buyback program alongside special dividend payments.
4:03 am
and billionaire money manager cam fisher is approaching a hit of $1 billion. joined tof boston other pensions and yanking money from his investments. the pension board pulled $248 million. fisher made offensive remarks about women at an industry conference. and you now need to earn even more to the rich according to one metric. to get into the top 1%, you need to earn more than $500,000 a year. since 2011, that level has gone up by one third. the only group that because giants and gains are people who beat thosealthier -- gains are people who are even wealthier. global news, 24 hours a day on air, on tictoc, and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. nejra? nejra: thank you so much. after days of intense negotiations, the brexit
4:04 am
agreement is again in doubt. sterling is sliding after the dup said they cannot back to the quote as things stand. the dup has flagged three sticking points including crossing the border and have northern irish leaders will give future consent. let's speak to adam in brussels. how should we read the statement from the dup? we look at it and say they are still working together and therefore it is positive, or they put out the statement on twitter that was quite firm and so it is negative? >> exactly. it was not exactly the statement that boris johnson was hoping for on the morning when he was planning to come to brussels to seal a deal with the european union to try and get his brexit
4:05 am
plan over the line. the prime minister was pressing the flesh in london while his negotiators were in brussels trying to get those final legal details sealed in the document. he was hoping that this morning would bring approval from the dup, not a statement on twitter say they don't see an agreement. was a blow and that is reflected by the pound. anna: -- nejra: absolutely. but you wonder if some of the downside has been limited by the extension. extension, angela merkel mentioned an emergency summit. what we know about that? >> she has been speaking in the we areag and she said not quite there yet on brexit. she is getting the message from brussels and hearing what the dup is saying.
4:06 am
of course, eu leaders have been who before with theresa may ran into roadblocks from the same democratic unionist party. she has said they are standing ready and eu leaders are prepared for an emergency summit. there are no details about that, but the former brexit deadline as it stands is october 31. there is time to squeeze in one more leaders meeting here in brussels try and consider what might happen if a deal is eventually negotiated after further consultation. consultation's -- the consultations don't come to anything, perhaps to debate an extension. or even no deal is still on the , a law hasremember been passed which appears to rule that out. nejra: great to have you with us.
4:07 am
joining us is an investment strategist at allianz. what is the most likely scenario? what has been clear in the hours isle of days and there seems to be strong political will in london and brussels to get brexit done. there are still hurdles to overcome, including what has just been mentioned. the support by the dup. even if the u.k. and eu agree on a deal, it still has to be ratified by the house of commons on saturday. so what could happen is the dup asks for some more concessions and then decide to support boris johnson's deal for this to be ratified. then, we would end up with a scenario of an orderly brexit on the 31st of october, or maybe a
4:08 am
bit later after technical extensions. speaking of extensions, the other big scenario is an extension of brexit combined with new elections. -- that times time to take profit on sterling? ,> for sterling to go higher and let's not forget it has after the break through the negotiations, we would really need some tangible further positive news so that the deal is clearly ratified. have heard from strategists is that we could get in a nor down to 1.11 deal scenario. and people are changing their calls around u.k. equities. it,ing to actually act on
4:09 am
would you act on and on look at stock market like the u.k.? for the next two weeks, visibility remains low for investors. once the path has been cleared, and depending on the scenario for an orderly brexit or an extension or the unlikely no deal brexit, investors are well advised to rethink their position. in terms of an orderly brexit scenario, there could be some further upside here. the could be further upside for domestic stocks. also not be dragged down by stronger sterling comparison or contrast to the ftse 100. nejra: just got to bring you a line. an eu official says that no legal text on brexit is yet available. that is the latest update.
4:10 am
on the move higher, i was talking to someone earlier who thinks we will start to see the u.k. breakeven come down. elsewhere in the world, the u.k. has been a standout. you see that changing from here given the move we had in sterling? interestingation is as it has been pushed higher by higher wages and a strong labor market. but on the other hand, weak sterling. it will lead to lower inflation and would be a drag on inflation expectations. -- soending on scenarios depending on the scenario that materializes, negotiations could continue down that path. nejra: thank you. and stay with "surveillance."
4:11 am
after 129 house republicans vote to rebuke president trump, we bring you the latest on syria and the growing storm in washington dc. plus, millions of new subscribers. offlix and beats forecasts new subscribers with almost all of them coming from outside of the u.s.. we bring you the story later in the show. this is bloomberg. ♪
4:12 am
4:13 am
>> what we witnessed on the part of the president was a meltdown. i see a pattern of behavior with nancy pelosi. she storms out of another meeting, trying to make it unproductive.
4:14 am
the other democrats stayed and had a very productive meeting. generals from the joint chiefs and secretary of defense. >> he was insulting to the speaker. she kept her cool completely that he called her a third rate therecian, he said that were communists involved and you guys might like that. i mean, this was not a dialogue. the sort of a diatribe, nasty diatribe. nejra: that was congressional leaders speaking after a meeting between democrats and the president broke down. president trump appeared shaken after 129 republican lawmakers rebuked him his decision to withdraw forces from. . -- from syria. joining us is kathleen hunter. how surprising is all of this? >> in some ways, it is not.
4:15 am
we know tensions have been building over the past several weeks ever since she launched this impeachment inquiry. it sounds like that did not come up in the meeting. it was about syria and the response to turkey. however, it seems this was a moment where things just boiled over. nejra: republican saying the speaker is at fault for walking out. talk us through what this means for any political tactics. there is a risk here the storyline or narrative which had been focused on the republican rebuke of trump over syria and now refocused on this partisan battle to trump and pelosi. that has the risk of not necessarily helping democrats. however, it does potentially paint trump as a bit unhinged, which i think was pelosi's point.
4:16 am
to call attention to her accusation that the president had a meltdown and tried to paint him as someone not fully in control. nejra: we saw that quite extraordinary letter released on social media as well. >> absolutely. not surprising that from pelosi standpoint that gives her some latitude to walk out of the meeting and paint her as the unhinged one. letter the tone of the and not torumpian tone we see from a president. it read more like his twitter feed them something you see on white house letterhead. perhaps, pelosi is trying to capitalize on that as well. nejra: what could happen next briefly? mike pence headed to ankara? >> mike pence and mike pompeo andgoing to be in akara,
4:17 am
the question is whether they make any kind of headway. my expectations would not be that high given that president trump has already given at the green light to things. from turkey's perspective, it might be hard to see in redline coming from the white house. nejra: thank you so much. let's get the bloomberg business flash. >> netflix jumping in late trading after overseas growth help calm investor concerns. the company signed up more than 6 million new users outside of the u.s.. even mores will be important as netflix faces competition from disney and apple. ,arning estimates mrs. prompting shares to fall in extended trading. revenue from red hat fails to compensate for other declines. total revenue was $18 billion from a year earlier, now down nearly 4%.
4:18 am
it marks ibm's fifth consecutive quarter of shrinking sales. that is your bloomberg business flash. nejra: thank you so much. let's focus on the fed. we got the beige book last night finding the business expansion to continue but many have tempered their outlook for growth. our guest from allianz is still with us. what caught our attention was the surprise drop in you tale -- retail sales data. surprising when we heard such a good report. are you concerned about the consumer? >> not at this point. the consumer remains the strength of the u.s. economy. but saw forget they are responsible for 70% of economic. -- economic growth. but as the cycle matures at risk and continues to
4:19 am
be present, this is something we will likely continue to watch. nejra: for the moment, you have got preference for u.s. equities. are you tempted to it anyway shift that to a preference for elsewhere like your -- europe? given the positive signs we had on brexit and trade? u.s., we think that lower markets are interesting in a global equities context where we continue to be more cautious. not in terms of shifting positions in order to be bullish on eurozone equities, they would need some stumbling blocks to be overcome be in brexit or the decision of the u.s. on eu produced cars. , the question of whether weakness in the eurozone will
4:20 am
continue. if we see stumbling blocks getting out of the way, given the fact that valuations are attractive and the market has be aunloved, that might better entry point for long-term investors. nejra: for now, you think the fed continues on the cutting path? >> yes. nejra: all right. says a ratehe imf cuts could be storing of trouble for the rate economy. we focus on the slowing growth story. this is bloomberg. ♪
4:21 am
4:22 am
4:23 am
4:24 am
nejra: this is "bloomberg surveillance." i'm in a rich a hitch in london. london. cehic in stronger that oversight is needed to ease threats of an already shaky expansion. imf and worldthe bank hold annual meetings in washington this week. one thing i have been reminded of as we headed to the fourth aarter start to question fourth quarter of 2018 a scenario with things like brexit well,ade not going well, no but we have got central-bank support now, particularly from the fed. so should we be less worried? >> interesting question.
4:25 am
the reality is that the global extension looks increasingly late cycle, so this is a matter of fact. global data has been weakened and named in the past 20 months. for the time being, we find ourselves in the cell -- in the scenario of a global slowdown we face two major risks. brexit on the one hand and trade of the other. this is a contrast to last year the globalnow facing easing cycle of central banks. and when we look into last year which saw the broadest selloff in recent history across all major asset classes, there are few places to hide for investors. to make it short, there will be supporting the economy.
4:26 am
nejra: in that economy where we are not quite out of the woods, the dollar continues strengthening and we had a bit of a stumble on retail data. >> the outlook for the dollar very much depends on monetary policy. the fed is likely to ease within the midcycle adjustments, but the other central banks are also easing policy. this will continue to support the dollar and it depends on risk aversion. the more risk-averse the environment, the struggle the dollar. nejra: our guest from allianz stays with us. and coming up, francine lacqua sits down with mark carney. don't miss that interview tomorrow on bloomberg tv. ♪ from the couldn't be prouders
4:27 am
4:28 am
to the wait did we just win-ners. everyone uses their phone differently. that's why xfinity mobile let's you design your own data. now you can share it between lines. mix with unlimited, and switch it up at anytime so you only pay for what you need.
4:29 am
it's a different kind of wireless network designed to save you money. save up to $400 a year on your wireless bill. plus get $250 back when you buy an eligible phone. call, click, or visit a store today. ♪ nejra: the dup's doubts. boris johnson's northern irish allies say they cannot support a brexit deal as it stands.
4:30 am
is an extension now inevitable? a presidential meltdown. nancy pelosi accuses donald trump of hurling insults at her after lawmakers on both sides criticized his withdrawal from syria. sendsational growth netflix shares soaring in extended trade. while apple and disney's new apple and- will disney's new offering take a bite out of global profits? hsbc may partially exit stock trading in some developed western markets as part of a cost-cutting drive by the interim chief executive, who wants the top job on a permanent basis. people familiar with the matter are saying that jobs in france may also go. l part ofew is al an overhaul of the lender. equity trading units in france, germany, the u.s. and u.k. are likely to be scaled back,
4:31 am
according to people familiar with the matter. asian equities operation is not affected by the review. we have also got some breaking data out of the u.k. we are monitoring the brexit developments with that opposition coming through via a tweet from the dup. in terms of retail sales for the u.k., you're looking at retail sales coming in pretty much in line. if you look at including auto fuel year on year, that is back in line, actually a little bit better than expected. montho fuel month on definitely better than expected. essentially, third quarter retail sales rise 0.6%, up 3.1% from a year earlier. the september retail sales are unchanged. the forecast was 0.2% decline. let's check in on the biggest stock movers now. >> good morning.
4:32 am
let's start to the upside with erickson, up more than 6.5%, as they lifted their 2020 guidance as a spending on that 5g network seems to be speeding up. temenos to the downside, plunging some 15%. just for some size and scope, this is the biggest fall for the stock since january of 2015. nestle down 0.9%. interesting, given the fact they announced this huge buyback. it is a rare day you see this kind of change get back to investors and it is just not welcomed with cheers. nejra: thank you so much. let's get the bloomberg first word news. from acratic unionists northern ireland say they cannot support boris johnson's brexit agreement in its current form. this puts the deal in dow again. the pm relies on this parties support ash barty's support.
4:33 am
support. -- party's president donald trump defending his decision to pull u.s. forces from syria. the president says it is a lot of sand. the u.s. house of representatives has passed a cross party resolution rebuking the decision. secretary of state mike pompeo blamed turkish president for the crisis. mark carney says that negative rates are not a policy option for the u.k.. he does not think the subzero move has hurt the eurozone's banks. time forys it is now governments to expand their budget. tomorrow, we speak with mark carney at the imf meeting in washington. some food for thought, as wall street is waking up. the top 1% -- to get into the top 1% of u.s. taxpayers community turn $500,000 per year -- u.s. taxpayers, you need to
4:34 am
earn $500,000 per year. global news 24 hours a day and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. nejra: thank you so much. netflix shares surging and extended trade and in the premarket after international subscriber growth helped calm investor concerns about a slowdown stateside. the company signed up more than 6 million new users outside the u.s.. these international markets will be even more important as netflix faces competition from the likes of disney and apple, who will be shortly releasing their own streaming services. still with us is ann-katrin petersen, argus from allianz global investors. our guest from allianz global investors. >> sometimes, what you see in consensus does not reflect really what people are thinking. i think that is the case here,
4:35 am
where people are worried we will see another weak quarter and another we catholic -- week outlook around concerns -- weak outlook around concerns. even though that forward guidance is lower than expected, it is still going to be a decent they have aear and strong sleigh of content mind up. nejra: how worried should it -- lined up. nejra: how worried should investors be about the competition? >> they have a strong sleigh of content mind up. apple is effectively giving away its new service free if you purchase the new iphone or a new tablet. ney service is relatively cheaply priced so i don't think it will be a direct trade-off for the netflix subscription. when people are able to weigh out the content they get from build -- from these different platforms, that's when people
4:36 am
start to cut off. that's why you see netflix invest into their own original content. nejra: we were talking earlier about how you have a preference for u.s. equities generally. how much of that is down to the tech sector? there is a lot of difference below the surface. does tech have a part to play in your view on u.s. equities? ann-katrin: tech is one of those areas that is interesting when it comes to structural growth. it is an area where we have to be very selective. some companies are driving innovations and will continue to grow from structural levels. more independent of the cycle. i think that is why it is an interesting sector. be more selective in the tech sector. nejra: on the selectivity and the difference, we also got numbers from ibm. that was a bit of a different story in terms of how investors might take that. >> that's right.
4:37 am
and theyon of red hat bet on that essentially to get them back into the cloud market, which is dominated by the likes of amazon. i think what we see in these results is that the integration is going ok, but management a little bit cautious about how quickly momentum will improve next year. the jury is still out, essentially, on the acquisition. they really need to make it work given how much it cost. nejra: great to have you with us. and ann-katrin petersen stays with us. francine lacqua will sit down with the bank of england governor mark carney. do not miss that interview tomorrow. president trump says a deal will be likely when he meets chinese president xi jinping in november but tensions continue on multiple fronts. we will have the latest. this is bloomberg. ♪
4:38 am
4:39 am
4:40 am
♪ nejra: this is "bloomberg surveillance." i am nejra cehic in london. let's get the bloomberg business flash. >> we begin the business flash with breaking news. hsbc may partially exit soft trading in some? it's. in france, germany, the u.s., and the u.k. are likely to be scaled back. it's asian operations will not be affected. this after a cost-cutting drive by the interim chief executive. he wants the job on a permanent basis. nestle plans to return $20 billion to shareholders by 2022 to help grow faster and maintain better profit margins.
4:41 am
it may look at acquisitions. the swiss food giant is flush with cash after the sale of a german unit earlier this month. it is starting a new share buyback program along with special dividend payments over the next three years. volvo cars launching its first electric vehicle as part of its broader plans to shrink its carbon footprint. the company is coping with the global sales slowdown. it merged its engine operations with the chinese parent company. >> from day one, it will be profitable. of course, in very low volumes. you have to understand that the cost level will be higher. it might be a lower profit margin initially. i think what comes is more midterm. we definitely believe that an ev car will have a higher value for the consumer and long-term is
4:42 am
absolutely right thing to do. >> that is your bloomberg business flash. nejra: thank you so much. we are seeing cable move back above 1.28. we were lower earlier. this after an eu officials saying that michel barnier has ind that consent is agreed any brexit deal and northern ireland consent is no obstacle to a deal. makingly, michel barnier these comments and talking about a legal text, a brexit deal text is almost completed. it is interesting that michel barnier is saying that northern ireland consent is no obstacle to a deal, because yes, that would be a true -- true to a deal between the u.k. and brussels but it still needs to get through u.k. parliament. we see cable trading unchanged, bouncing off the lows earlier. we heard from the dup that they could not support the current suggestions on customs and consent.
4:43 am
president trump has said a u.s.-china trade deal probably be signed when he meets with xi jinping next month and chile -- in chile. the new state department rose on chinese diplomats violate the vienna convention. aining us now is kevin zhao, lead portfolio manager at ubs asset management. ann-katrin petersen from allianz global investors is still with us. thank you for sticking around. kevin, great to have you with us. thanks for joining. you talk about how nimble you could be in your strategy in the dynamic bond fund. getting soin -- been many headlines on u.s.-china trade. what strategies have you been employing or are you about to employ with the latest headlines? kevin: thank you for having me here. for the last three years, we have been very focused on the trade war. and all the internal investment
4:44 am
strategy meetings, i said trade war is number one. we have been well prepared for that. long allrategy, we are the countries involved in the trade war, the u.s., china, austria, and new zealand. that's one of the ways we have been benefiting from this intensified trade war. nejra: what are you doing at the front-end if you are expecting the fed to try and offset these trade war risks with cuts. year, at the end of last the fed overreached by tightening too much. we openly challenged the fed language, their monetary policy. internal rates are showing that monetary policy is to type. with the rate cuts this year --
4:45 am
too tight. with the rate cuts this year -- i think the fed will continue to cut rates. nejra: if you are long duration, that suggests you do not see a resolution to the u.s.-c hina trade war anytime soon. if by the end of the year we come to some truce, maybe the tariffs are rolled back, which china has been asking for. come to some sort of truce by the end of the year, would you be may be changing some of those longs at all are putting money in risk assets elsewhere in the fixed-income space? kevin: normally are asset strategy is mixed strategic asset strategyur allocation.ategic i think a short-term suspension of the trade war may be pushing
4:46 am
up by 30 basis point. the uncertainty will continue to dampen investment decisions and continue to put downward pressure on global growth. nejra: do you share that view in terms of a continued downward pressure on global growth and perhaps therefore, it is sensible to belong duration -- long longer duration -- duration? are severalthere factors including a slowdown in global growth and political uncertainty, which will likely continue to persist. .his has been faced by variations on markets yes, i would say that u.s. treasury yields, for example, will trade range bound for the time being. nejra: how would you position on emerging markets? some people have said if we get positive news on the trade war, this is the first place they
4:47 am
would want to put their money come in terms of emerging-market debt. ann-katrin: emerging market debt would benefit a situation in which we see some relief intention concerning the global trade picture. this coupled with continued fed easing would be supportive for emerging markets. let's be clear, you have to be selective here. there are some countries that investors have to keep in mind. nejra: on emerging markets, kevin, how are you positioned? kevin: for the emerging-market, we are saying we should go from g7 to g20. g20 is much more global. that is our catchphrase. bonds.lion i have been telling investors, lack of a yield in developed countries, particularly in germany, switzerland does not mean lack of opportunities. we just need to be more
4:48 am
flexible, thinking out of the traditional box. nejra: i am so glad you brought up negative yields. we have just got more headlines coming through on brexit. an eu officials saying that the -- to weigh aw brexit delay if there is no due thursday -- deal thursday. here, they are talking about brexit delay if there is no deal thursday. eu leaders. plan to discuss brexit at. 3:00 p.m. today. let me come back to you on negative yields. i was talking earlier this morning about a strategist from jp morgan refusing to buy way because insane negative yielding bonds. heerestingly, even though doesn't see a recession in europe and a significant slowdown in the u.s., he says negative yielding is not fixed income investing, it is fixed a
4:49 am
loss investing. i am talking about a jp morgan veteran. i am guessing you have a totally different view. tell me how you take opportunities in a negative yielding world. kevin: it depends on your reference. rate is -80, so -50 could be attractive. , actually,y we have we systematically shorten the countries where 10 year government bonds are trading negatively. say, --han just to central bank more likely to cut rates. mexico,ong u.s., china, new zealand. where short germany, switzerland, depression we are short germany, -- we are short
4:50 am
germany, switzerland, japan. nejra: do you see any time soon that we could move out of this negative yielding environment? ann-katrin: not anytime soon, i'm afraid. central banks have shifted into a more easing mode. nejra: ok. just finally, kevin, as we keep getting these headlines on brexit. what positions are you taking based on what might come out from the brexit negotiations? kevin: at the moment, we are neutral on the currency but short the 10-year gilts. since the brexit decision, we have been lucky. we traded sterling. we were short sterling against japanese yen and took a profit last week. i think the prospect with -- is the best since november of last year -- with a deal is the best
4:51 am
since november of last year. nejra: ann-katrin petersen from allianz global investors and kevin zhao from ubs asset management, thank you for being with us. francine lacqua sits down with the bank of england governor mark carney. don't miss that interview tomorrow on bloombergtv. up next, the latest on breaking news of cuts at hsbc. this is bloomberg. ♪
4:52 am
4:53 am
4:54 am
♪ economics, finance, politics, this is "bloomberg surveillance." i'm nejra cehic in london. let's bring you the latest on a breaking story. hsbc could partially exit stock trading in some developed? it's. this comes as part of a cost-cutting drive by the interim chief executive. trading units in france, germany, the u.s. and the u.k. are all likely to be hit. let's speak to our finance reporter. great to have you with us and great work on bringing this scoop.
4:55 am
is it part of a wider view of hsbc's investment banking unit? >> sure. we are not entirely sure what the full escape of this review will be. what we are looking at is a review of the entire bank. you have a new chief executive and he is very much bringing his to how theh s tas bank should be run. then term ceo wants to be the permanent ceo and he wants to show that he's got the -- to deal with the issues at the bank. equities business are in focus because a lot of banks -- for example, deutsche bank has been cutting back its equities business. in this lower environment, a lot of businesses -- low rate environment, a lot of businesses that can hide behind more profitable units are more exposed. atis not possible to look
4:56 am
lossmaking or low returning businesses and say, let's continue with business as usual. you have to get to grips with them. nejra: let's get back to the brexit headlines. it's been a bit of a roller coaster session from the pound, dropping initially on the comments from dup. an eu officials saying that the talks on the eu summit, they have talked about this, they said there is no legal text on a brexit deal yet available but they plan to discuss brexit at 3:00 p.m. today. thatl barnier saying northern ireland consent is no obstacle to a deal and they are weighing a brexit delay if there is no deal on thursday. we continue in the next hour with francine lacqua and tom keene in washington, d.c.. this is bloomberg. ♪
4:57 am
4:58 am
4:59 am
♪ nejra: the dup's doubts. -- francine: the dup's doubts.
5:00 am
boris johnson's northern irish allies say they cannot support his brexit deal as it stands. is an extension now inevitable? a presidential meltdown. nancy pelosi accuses donald trump of hurling insults at her after lawmakers on both sides criticize his withdrawal from syria. no interest in negative rates. mark carney says it is not a policy option in the u.k. and things look pretty close to a global liquidity trap. good morning, everyone. good afternoon if you're are watching from asia. this is "bloomberg surveillance." i am francine from d.c. today. we are here for the imf world bank meeting. tom: good coffee. what do you want? francine: espressos. tom: you don't know the terrible coffee of our childhood. francine: instant coffee. i don't know what the fuel will be for a lot of the monetary policy leaders here. the big question is, what
5:01 am
negative rates do for banks in europe and if it is time for fiscal policy to come and help central banks alleviate. tom: this is absolutely extraordinary, became more so last night with what we see in turkey, syria, house speaker pelosi, and president trump as well. francine: we have a jason furman coming up, a former white house economic advisor. spanish --n,'s the david lipton, the spanish economy minister. don't miss our exclusive conversation with the bank of england governor, mark carney. we will talk about brexit and may be a little bit of monetary policy but mainly brexit. of boris johnson's brexit deal is in debt once again. the british prime minister's allies in northern ireland it worn they cannot support his proposal. british and eu negotiators have been trying to finalize the
5:02 am
legal text of an agreement. the goal was for eu leaders to sign off on it. a white house meeting over the syria crisis ended with democratic lawmakers walking out. pelosiuse speaker nancy said president trump what she called a meltdown. she says he was shaken after 129 republican house members backed a resolution rebuking him for pulling u.s. troops out of syria. the u.s. senate plans to defy china's threats of retaliation over the hong kong dollar. lawmakers say they will -- hong kong bill. lawmakers disable -- they will move quickly to -- to support protesters. companies are close to a landmark settlement the u.s.. it would resolve thousands of opioid cases. end uppanies could paying out more than $50 billion in cash and addiction treatment.
5:03 am
a federal judge in cleveland, ohio has summoned the company's ceo's to a meeting tomorrow. global news 24 hours a day, on-air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine, tom? tom: equities, bonds, currencies, commodities. two days in a row, very quiet. futures pretty much flat. that curve steepening over the last two weeks. euro, a bit ascended over the last two weeks. within the good equity markets, this is extraordinary. the vix solidly below 14. i do think it is important given the theme of a synchronized global slowdown that equities are resilient closing yesterday. the german to year yield is a is ar -- two year yield number that was not in the textbooks of john lipsky or erik nielsen.
5:04 am
francine: we hear from our sources in brussels, it's just one sticking point, but everything else seems agreed on. we need to see whether he gets voted on in parliament on sunday. overall, european stocks are a little bit unchanged, a little bit of focus of course on the trade war headlines. investors trying to figure out what corporate results mean for their portfolios. we are at the imf, the international monetary fund warning that global monetary risks have risen as central banks have cut borrowing costs. the lender says a stronger oversight is needed to ease threats to an already shaky expansion. it comes as the imf and world bank hold their annual meetings in washington. joining us now is john lipsky, and former imf acting managing ,irector and erik nielsen economist.roup chief
5:05 am
is it worse than when you are in charge? we are realizing -- were in charge? we are realizing the limits of monetary policy. itshen the crisis whaas at peak, the downturn was quite extreme. the recession was threatening to become a depression. the causes work relatively clear -- were relatively clear and it was relatively clear what needed to be done. the problem was to get the action going. this time, the objective situation in the economy is not so bad but there is lack of that we understand exactly why things are slowing and what to do about it and some doubts about whether the tools we have used in the past would be efficacious now if needed. francine: is it more troubling times? we are unclear about policy actions and unclear about what
5:06 am
the downturn could look like. erik: it is both more troubling and not so. i don't think anybody realistically forecast an outlook like we had back in the crisis. this will not be as bad in that way. the reason i think it is worse in some ways is that we also i think no to a large extent what -- know to a large extent what causes it. it is donald trump. it is the end of globalization that is now materializing. this sliding away from multilateralism and trade and it seems to be gone. it is not only the trade numbers down. it is sentiment, investment. businesses do not know what to do not. tom: thrilled to have both of you with us to begin our coverage. thank you so much for coming in at this ungodly hour in washington. you mentioned president trump. i saw it firsthand. i was having a beverage of my choice last night in a big,
5:07 am
fancy bar. it was stunning to watch people watch the tv of the news flow of the moment. how is this playing in cedar rapids, iowa? your cedar rapids, iowa, there seems to be almost an elite removal in london, washington, all the places of the fancy people. how was this moment playing across america -- how is this moment playing across america? iowa went strongly for president obama in both of his elections and went strongly for president trump in the last election. so clearly, there was a sense that something was wrong. i think a sense still that president trump is dealing with but great unease -- dealing with issues but great unease about the way. he is dealing with them iowa -- the way he is dealing with them.
5:08 am
iowa been disrupted. tom: you are associated more than anyone i know with the idea of the desire to study macro study macroisk prudential risk and macro prudential, the complexities of the moment. are we at a point now where there are legitimate risks involved that could upset the financial system? or is the politics discrete from our study of finance? john: is complex in the following way. politics is having an effect in a way that you have not seen in markets. i think there are other complex factors, such as demographics, that are having an effect. the globalr from crisis that seems to have encouraged risk aversion and caution. these things are not typical and are not easy to the global crisis that seems to have encouraged risk aversion unders. however, as the imf warned yesterday through the global financial stability report, the based onf carbon debt
5:09 am
the assumption that interest rates will remain low creates a vulnerability. tom: let's get a market forecast now. are interest rates going to stay lower? erik: yes. nothing is permanent. see lower., we will rates as growth starts to come down next year. lipsky and erik nielsen both stay with us. tomorrow, a conversation with mark carney. we will ask him about brexit, negative rates, and maybe digital coins. this is bloomberg. ♪
5:10 am
5:11 am
♪ >> you are watching "bloomberg
5:12 am
surveillance." let's get your bloomberg business flash. netflix delivering enough good news to offset concern about growing competition from disney and apple. onlinethird quarter, the video service added almost 6.8 million subscribers. profit was better than expected and that led investors to overlook netflix's lukewarm forecast for the fourth q. christian dior the latest company to face backlash in china. the french fashion house showed a map of china that did not include taiwan. they have apologized on chinese social media. that is the bloomberg business flash. francine: after days of intense negotiations, a brexit agreement is again in doubt. --is johnson's ignored northern irish allies, the dup, still have concerns over the arrangement for the irish border. let's go straight to brussels, where anna edwards has been covering all the latest.
5:13 am
do we think that we will get some kind of agreement, which actually looks quite different to what theresa may had negotiated? it depends on saturday whether parliament votes for. -- for it. anna: right. it is a very interesting question. the question on everyone's lips right now i suppose is whether we get any kind of agreement at all. you are right to ask if we get a deal, will it look like theresa may still. as it stands -- theresa may's a deal. as it stands at the moment, the dup is holding out as the clock ticks. it seemed like we were very close to a deal but we got these headlines from the dup suggesting they still have areas of reservation around customs, consent, and v.a.t. consent, we thought that was tied up last night. seems it was not. whether we get a deal in brussels is still a big question. tom: the dup, what is their
5:14 am
power right now and how could their power ebb in the coming weeks? anna: yes. interesting question, tom. there are 10 seats in the houses of parliament. if you take away the ones that do not vote, the target that boris johnson you to get to his 320. if he loses 10, that's not the end of the world. if you lose 10 votes to the other side, that increases your gap to 20 in terms of your ability to get through this -- this threw two parliament -- this through to parliament. the diehard brexiteers, he has to rely on them a lot. will they follow the dup or boris johnson fleet? lead? -- boris johnson's now we understand the labour party are moving towards pushing for a second referendum. tom: the news flow absolutely
5:15 am
extraordinary. here at these meetings of the world bank and imf, we turn to erik nielsen of unicredit and john lipsky with johns hopkins university, former acting managing director of the imf. erik, you are a great euro optimist as well. what is the greatest misinformation about brexit right now? when you look at all of the british newspapers, bloomberg, what makes you go, that is not right. erik: [laughter] there is so much misinformation out there so i do not know where to start. there is a notion that this will fall in place and things will be ok. when you ask your colleague about whether it is going to be ore theresa may's deal something, this is hugely different. what boris johnson is trying to do is nothing less than a no deal without the tariffs. there's nothing else in it. theresa may had something.
5:16 am
these are big differences. if we start to estimate over a couple of years what this does to gdp, that is easily two percentage points of gdp. it is vastly different. none of the outcomes are good. francine: we are talking, you know, about a legal text which is almost there, but not there. we have a lot of pound volatility. how bad is that for the stability of the u.k. economy? john: it cannot be helpful. i think there is one aspect that is not understood in the u.s. this deal is a deal for a transition to a permanent deal. this is not a permanent deal. this is just setting the table for negotiating a permanent trade deal between the u.k. and eu. there is going to be a lot of uncertainty for a long time. francine: what does that do for the u.k. economy? erik: it is bad, right. so we don't know -- the uncertainty will not go away.
5:17 am
this is the divorce bill, i should have said this. how we deal with each other as neighbors and trading partners, shared parents of children or whatever is still uncertain in the future. we do not know what the future will bring. if you are buying a car in britain, you still don't know what tariff you are going to pay. tom: you have lived this. there is an acquaintance with denmark and copenhagen. people talk about a denmark solution, norway solution, canadian solution. how do you respond to the idea that a denmark model will save the day for the united kingdom? erik: denmark is inside the eu. tom: it would like to be outside. [laughter] erik: that's a long time ago. that's another big misunderstanding. let's just remember, the canada deal took seven years to negotiate and has no services in
5:18 am
it. it is only manufacturing, right, so no services. what has happened to london? it is a long stretch. the other side that is really important is this issue of the border in ireland. if there cannot be a border in inland, either the u.k. is the central market and in the customs union or you have a border and the united kingdom starts to split up. francine: it does seem like a different deal to what theresa may initially negotiated. john lipsky and unicredit's erik nielsen both stay with us. we also speak to the spanish economy minister. don't miss that interview just after 3:30 p.m. london time. we will ask her about fiscal stimulus and the ecb. this is bloomberg. ♪
5:19 am
5:20 am
5:21 am
5:22 am
♪ tom: good morning, everyone. "bloomberg surveillance," francine lacqua and tom keene from our studios in washington. these will be most unusual meetings of the world bank and international monetary fund. talking about synchronized slowdown. she goes to madame lagarde's synchronized swimming from her childhood. when you look at the report, it is about a synchronized europe. why don't we talk to erik nielsen about this and john lipsky as well.
5:23 am
what i noticed in the vectors of that big, fancy chart is a u.s. up, and everybody else flat down. how synchronized is the european slowdown right now? erik: it is not synchronized at all anyway. it is germany and italy. italy is always slow. off theirhave taken inventories, so stocks have come down, because of the nervousness of the previous government. germany is the big story. it used to be the growth performer and now is the laggard. germany is much more dependent on manufacturing and trade and though are the weak things as the imf points out. that is where you stand. if you look at france, spain, netherlands, austria growing. francine: is the market expecting too much from christine lagarde on trying to convince countries to do fiscal spending? john: we will see if she decides
5:24 am
that is her going -- going to be the --e as the hea fo head of the ecb to be lecturing on fiscal policy. had thehe pleasure -- pleasure and honor yesterday of hosting a presentation in new york. he responded to questions about not doing fiscal stimulus by sink, germany is near full capacity right now and for full employment. the base case for germany is that this is temporary. not just manufacturing, but specifically weakness in the auto sector and is going to do better. for the time being, the answer is yes, but we do not need it if things turn out -- need it. if things turn out worse, maybe we will have to. tom: exceptional news flow into
5:25 am
these meetings. breaking news. the death and not the surprising death, he has been quite ill, this is elijah cummings, the gentleman from baltimore. of course, front and center in the headlines earlier this summer. baltimore is a fascinating city and part of it is the intractable violence, the murder rate. they're great defender has been the congressman of 22 years -- their great defender has been the congressman of 22 years. francine: we know that he had not returned to work following a medical procedure. many mediaported by outlets in the u.s. about the passing of elijah cummings. tom: with the congressional black caucus but much more than that, he has been supporting leadership with his 22 years in congress. ,he heart at the matter of this to president trump and the attacks that president trump made on baltimore earlier this
5:26 am
year was a stout defense by congressman cummings. leader of aath of a democratic party in the united states. he was only 68 years old. the last number of years, he has been quite sick with heart illness as well. we will continue to look at this story. kevin cirilli will get his perspective on this in the next hour as well. elijah cummings, at 68, is dead.
5:27 am
5:28 am
5:29 am
♪ good morning,om: everyone. a'segin our coverage of two
5:30 am
-- two days of meetings of the , a and world bank conversation scheduled with david malpass of the world bank as well as others including jason furman. what is interesting is the burgeoning debt. francine: what we try and get to the bottom of his what monetary policy is doing at the moment, whether it is doing more harm than good. we will also speak to the and emergingter africanwith the south central bank governor. we will speak with mark carney tomorrow who says sometimes the pound be caves -- behaves like an emerging market. let's get straight to the first word news.
5:31 am
president donald trump has called on turkeys president erdogan -- turkey's president erdogan to work out a good deal and not to be a tough guy or a fool. all of that was contained in a letter sent to the leader and trump says that his proof he did not give him a green light. an end to the general motors strike could be a few weeks away. they will decide to whether there have their membership vote on an attempted deal and whether 48,000 striking workers will go back to work before the deal is ratified. breaking news washington this morning, the democratic chairman of the u.s. house oversight committee elijah cummings has died. his office says it was from complications of longtime health challenges.
5:32 am
cummings has represented maryland in congress and has been a key figure in the impeachment inquiry. cummings was 68 years old. francine: thank you so much. we are getting some breaking news out of brexit, as leaders meet in brussels for the summit. according to the irish broadcaster, a deal has been signed off on. we have similar reports from a times reporter, saying there is whitesmoke. we need to look at the detail. the dup said they would not support the proposal which is why we saw volatility in pound. from -- that the deal was almost complete, but what happens next? theresa may had a deal three times over. tom: i was reading "the
5:33 am
telegraph" and their dynamics ireland -- the irish republic and northern ireland. francine: we had derek halpin a yesterday and this came out almost last-minute, if you have the island of ireland, and they , the vats has asked for it to be harmonized so there is no unfair competitive advantage. all of these things adding up to make it more confusing for the international viewer. let's get straight to anna edwards, she is never confused. do we have a deal? anna: too early to say. standby for updates. we are seeing drip by drip, a number of media outlets in
5:34 am
brussels and from the u.k. covering this. "e had a report from "the times suggesting there was white smoke , similar to the vatican with the deal being done. we heard rt saying they think a and othereen done newspapers in brussels carrying this, but no firm confirmation just yet. we see the market is reading a lot into it. the last we heard, the dup were holding out. have they caved? tom: we have the headline saying they are on board with the brexit deal, that headline is good as what it says. the news flow is extraordinary. i want to go to first principles erik nielsen mentioned, does change theffect or
5:35 am
piece of the good friday of the good peace friday agreement of many years ago? anna: this has been something both sides have been careful to talk about, how to preserve the good friday agreement. does it preserve it? nobody knows because nobody has seen this deal. the actual contents have been kept closely guarded. there are lots of suspicions about how it might or might not look different from what theresa may was presenting, but we do not know. you are doing this deal in brussels and it will be pages long and you will not have had the time to get proper information or advice. francine: jean claude juncker, the president of the commission of the e.u. said where there is a well, there is a deal -- well -- will, there is a deal.
5:36 am
it dependsnted out, on whether dup is on board. , the prime minister of the u.k. saying we have a great new deal. a few things were leaked, but we seem to understand it is a different deal from what theresa may had. it goes back to political appetite and numbers in the house of commons to see whether boris johnson can get it through. duphe issue is probably the and their power to sway some of the other conservatives along with them, because they are not the deciding factor. johnson has a minority already including them because he kicked out a number of people from his party. this is very uncertain. wereumor was that there
5:37 am
active negotiations with the dup, so my suspicion, if the headline you just quoted that the dup is on board, i suspect they have gotten a couple of billion. they also know that if the opinion polls are right and johnson gets his way, it will be irrelevant, so this is their time to strike a deal. tom: you are nodding, and i would suggest diplomacy 101 and at times you can be overcome by events. maybe the dup is being overcome by the events with the success of the prime minister. macron,e, brussels, mr. chancellor merkel, are they becoming overcome by events because there is a price to them if the united kingdom leaves? john: no, not in the sense you are asking.
5:38 am
i spent a lot of time in europe. on the continent, this issue is not front and center. britain decided to get out and they are out, and we have other issues that are more dominant politically. the fine details of the brexit deal that makes such a difference in british politics seem almost irrelevant to the average e.u. citizen, assuming that is not including the british anymore. francine: how important is it that this has the support of the british public, and do you see movement from jean claude juncker to speak to the british public in a different town to force parliament to force it through? anna: that is one thing to watch. i was going to come back in with regards to the dup. we will wait to see what their official stance is. money went from westminster to
5:39 am
northern ireland at the time the dup agreed to back the theresa may government. i want to see the details of this deal because we want to see how it differs from the withdrawal agreement and the future relationship, how much information there is. for conservative mps like philip hammond who were thrown out of the conservative party over objections to brexit, the future relationship will really matter, how much will they be able to fall into line with boris johnson if there is a future relationship not as integrated as they would like? francine: the pound moving significantly on the back of this. what we see much more volatility in pound? news it is short-term good because it is not quite a no deal brexit but it is long-term bad. this is no way of putting
5:40 am
-- lipstick on a pig and making this good. inthis will be negotiated terms of future trading relationships, there is no appetite on continental europe forgiving britain anything. the opinion polls throughout all of europe have 80%, 90% of people saying give them nothing. what is your gdp delta on unicredit and what this means for the united kingdom? a surging sterling, life is good, problems go away. erik nielsen says baloney. what is the gdp delta the united kingdom will face? 0.3% through 0.5% in a
5:41 am
year and 18 months, and over five to eight years, intentionally four percentage points. it is absolutely huge. dupcine: breaking news, the saying there is no change in their position just yet, according to the bbc. i don't know whether this is a negotiation or if they are watching "surveillance." it is up to westminster to see whether they can sort it out and they need to choose whether they want a deal or not. erik: that is not a given at all that they put this one through. tom: i want to take this further. let's say they get clearing of markets of brexit and the trade war. this is absolutely critical, if we take away these challenges including erik nielsen's comments on the president, if the president is one term, are we away from synchronized global
5:42 am
slowdown and this word "synchronized," can we have synchronized optimism? john: that would be good. i have been uneasy with this idea of synchronized slowdown. the managing director used that term. tom: she said that in the lagarde atrium, they were going to name at the lipsky atrium. is,: the nontrivial point in the sense that in synchronized swimming, the goal is that everybody does the same thing at the same time. the goal here is not to slow down at the same time. everybody is trying to do the best they can for themselves, but there is something in the water that makes it simultaneous , so we are getting a simultaneous slowdown, not synchronized in the sense that that is the intention of all the actors. what is in the water that is
5:43 am
making everything slow down at the same time? constants's business investment and the manufacturing sector globally is slowing everywhere. francine: let me bring everyone up-to-date with what we have heard so far. negotiators from the u.k. have reached agreement from brussels to pave the way for breaking its 46-year-old ties to the e.u. if youster saying that look at nonvoting mps, boris johnson needs 320 mps on his side to win any vote. we look at the erg, the harder brexit faction, the dup, their position has not changed. then you look at the tory rebels that had voted for theresa may's deal in the past. we are expecting to be briefed
5:44 am
from the european union shortly. the devil is in the details. in the past, the european union has said there could be no unilateral exit mechanism for ireland. be inrn ireland should the e.u. customs territory, that has always been the position from the e.u. side, but they probably went softer on that. we have to look at exactly what they agreed to. tom: for prime minister johnson, this is a huge triumph. it makes the union politicians of northern ireland less powerful, that will change things. our studios in washington, markets are they vengeance on it the move -- on the move and it is a risk on feel. 12.res have exploded up
5:45 am
i do not have dow futures in front of me. a curve steepening up to 16 basis points with enthusiasm for the euro, a stronger euro. oil not part of it. sterling doing much better and the vix coming in with a vengeance. that is the close on the dow yesterday. these are good statistics. francine: we are talking a lot about the wall of worry and whether there is anything to be optimistic about. if we have a deal that gets voted through in parliament, talking about brexit, is that a positive or a neutral for the world? john: it is a positive, not a big positive, but certainly positive. that that means they will reach a bigger deal on the side of freer trade, that is a
5:46 am
bigger positive. if the hint is we reached this deal and we will reach another one that is positive, that is good. tom: do you see any lessening of london's financial power? you write your acclaimed sunday note from the shores of the river thames. do you see any lessening of london's power with this deal? erik: i don't think you can escape the conclusion that london will be somewhat less important in the financial sector. in my opinion, there is no conceivable outcome that will challenge london as the preeminent financial center in europe. john: this is true. at the same time, as you have noted for regulatory and other reasons, the europeans have seated investment banking to
5:47 am
largely american firms. london-based are losing out every day. important,s really and i need to understand that erik nielsen understands a major italian bank. this goes back to almost a solomon model of merchant banking from another time. we got the major bank earnings and clearly they have an international expansion. if they do that with profit, can you do all the emotion the american banks want to do include going into europe, with a profit model rather than a revenue model? john: yes, and that depends on the outlook for the global economy in so many dimensions. let me step back and say, yes, i think it can be profitable assuming there is no major disruption in the process of globalization. it is 5:47 inine:
5:48 am
washington and we have not even talked about emerging markets. where do you choose winners and losers? the ones that have fiscal room that will come up on top? john: as you noticed very important in the imf global economic outlook is the slowdown in the largest emerging market economies in china, india, brazil. ,f these are not turned around the outlook for the emerging markets is more questionable in the context in which low interest rates in the industrial economies has produced a favorable environment for capital flows to the emerging markets. .ear-term ok in financial terms, not so good. policies to improve and make that more sustainable. francine: will we have a
5:49 am
u.s.-china deal? will we have something the markets can latch onto? will i don't know, but we not get something that puts this thing to bed. i will bet happily my house that over the next 18 months, you will have the usual sort of twitter war with trump because as the election campaign in this country rolls on, he will need to have somebody to beat up on. the chinese will not take any of it lying down. any time he does something, they will do something in retaliation. john: that should be seen in the context of this broader agreement that trend growth in china is slowing. tom: conflicting headlines, bloomberg is trying to be very careful about the headline flow. we heard from the bbc on a change to the dup tone of a previous headline.
5:50 am
bloomberg with our brexit team saying the position on the brexit deal is unchanged. francine: this is very westminster politics. boris johnson says, we have a great new deal so it feels that he feels confident he can get this through parliament. we have to look at the numbers. he does not have the support of the dup, that is 10 votes lost. he needs 320 mps to vote for this. the base is 159. borisld think that if johnson says it is a great new deal and he wants to take that challenge of putting it forward, he thinks he has the numbers. tom: when is the wind on this? are we flying to london? francine: monday morning could be a pretty volatile day for the markets depending on what is
5:51 am
decided on saturday. tom: so we need to be in london on sunday night. francine: i have football practice so i definitely have to. tom: i want to go back to emerging markets. you gave an incredibly important speech in hanoi at the imf. the great assumption of trump, let's go even more so, neo-mercantilism, this assumption there is no leakages. you lived the leakages at the imf. don't we understand if we end up with a challenging trade that china just exports their trade dynamics to emerging markets because they can't do it themselves? there is leakages, right? john: indeed. one view of the belt and road initiative, the largest infrastructure project in the history of the world, is to provide demand for chinese firms
5:52 am
internationally, to help shore up what would be slower growth prospects in china. francine: how worried should we be about china? gdp figures later today. some of the private sector data makes for pretty unnerving reading. john: you can hear lots of views on this. the growth in china's labor force has slowed substantially, so slower growth from that aspect in china doesn't represent a problem per se. it lowers the growth numbers but there are fewer heads to provide growth for. what is clear is the process of deleveraging in that economy is creating near-term problems of sustaining demand. ago,when, just a few years the answer was reform was going to produce a brief slowdown and sustainable growth.
5:53 am
the reform seems to have reform -- disappeared but the slowdown is here. erik: i would also just point out that we still don't really know what the growth numbers are. if you take any economy and look at the trade numbers where imports and exports are plummeting, how does a company sustain growth of 6%? a bit,know it has moved but something very funny is going on, which i would fund troubling. -- find troubling. this is the issue, china is china, but for the rest of the world we have to look at the trade numbers. to vietnam andts other countries, but if you have double-digit decline in imports and exports, i have never seen an economy keep growing at 6% for. francine: let's recap what we
5:54 am
junckerom brussels, mr. saying he thinks it is a balanced and fair agreement. let's get back to anna edwards covering the e.u. summit in brussels. when will we get more details about the agreement? anna: we are waiting for michel barnier to speak. we have heard the verdict from the dup, and this is crucial because as we talked about, that matters for the math. the dup saying their position has not changed. has boris johnson decided he has enough votes elsewhere? erg is the link between the and the dup? in the past, it was the dup votes that delivered the erg, but if that link is broken,
5:55 am
could boris johnson think he has the numbers? this is all part of the parliamentary math that looms large. ,nce we have seen the details because even the erg couple of days ago are saying, we have in mind what to do but we want to see the details. francine: we will have plenty more from anna throughout the day. the other question is to try to figure out whether this weekend's position going forward. the e.u. kept saying this is nonnegotiable, but the noise coming out of brussels, they were a little more flexible with boris johnson then theresa may. erik: let's see what comes out of it. from a degree of integrated economy's point of view, this deal 100% is not as close as theresa may's deal and is not good for britain. tom: one final comment and we
5:56 am
have to be quick on this. is the era over from the atlantic charter to multilateralism, is it over or can we rekindle that? john: that new post-world war ii order produced best economic results in the history of the example ofwe have no a country that has produced sustained growth without open economy policies. i hope we are going back that way. francine: thank you so much. we will have plenty more on brexit and tomorrow, a conversation with mark carney. this is bloomberg. ♪
5:57 am
5:58 am
everyone uses their phone differently. that's why xfinity mobile lets you design your own data. you can share 1, 3, or 10 gigs of data between lines, mix in lines of unlimited, and switch it up at any time. all with millions of secure wifi hotspots and the best lte everywhere else. it's a different kind of wireless network, designed to save you money.
5:59 am
switch and save up to $400 a year on your wireless bill. plus, get $250 back when you buy an eligible phone. that's simple. easy. awesome. call, click, or visit a store today. ♪ tom: this morning, the
6:00 am
approvable --% butoval rating in the gop republicans say he is wrong on turkey, russia, and an extended kurdistan. moments ago, pound sterling surges on an agreement on brexit. prime minister johnson needs to count tory votes in westminster and belfast. it will be a synchronized meeting. fix things before there is a financial meltdown. "surveillance"rg from washington, d.c. i am tom keene, francine lacqua with me. we must take a moment for the gentleman from baltimore. he will always be for 22 years, the gentleman from baltimore,
6:01 am
elijah cummings dying. francine: he had a procedure and could not get back to work. the passing of mr. cummings is huge because he was widely implicated in the impeachment of president trump. he had quite a lot of influence and was well respected. tom: we will see what happens next with democratic leadership and the politics of his baltimore. can you please go to brexit and explain what i don't understand? francine: the pound is soaring, that is the only thing you need to know about. we heard from the e.u. and boris johnson that they have a deal. we had a number of leaks, which means the agreement was made a little softer in the eyes of the border than they had given theresa may. the pound has taken this as, we are avoiding a no deal brexit,
6:02 am
but if you hear from westminster, this will get voted in parliament on saturday. the dup which holds 10 votes and are crucial, still are not behind it. tom: a special session on saturday is when this gets reviewed and decided? francine: they vote. ands johnson needs 320 mp's it is unclear whether he has that. tom: anna edwards in brussels this morning will have much more on this. let's go to our first word news. viviana: the democratic chairman of the powerful u.s. house committee elijah cummings has died from complications of longtime health challenges. since 1996, he represented maryland. his committee investigated donald trump on a number of investigations and the president called his district "a rodent
6:03 am
infested mess." cummings was 68. house speaker nancy pelosi says president trump had what she called a meltdown. he was shaken after 100 29 republican house members backed a resolution rebuking him for pulling out of syria. threats of retaliation over the hong kong bill, lawmakers will move quickly to support pro-democracy protesters. the house passed a measure that calls for an annual review of hong kong's special trading status. 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. tom: let's get to the data what the markets on the move, very quickly with our esteemed guests in washington, markets totally
6:04 am
different than 60 minutes ago with a real equity left. steepening,, curve risk on attributes including euro 1.11. the vix showing the good markets, 13.44. the dow closed yesterday. the negative rates less negative in germany. francine: in the last 45 minutes, we were told there was a deal and pound is that 1.2897. we are starting to get detail, the political declaration. let's get straight to brussels to anna edwards. before we go to anna, michel barnier is briefing now. barnier: good afternoon.
6:05 am
virtue. is a brexitalready said that patience, so thank you very much. waiting in terms of the time scheduled because i wanted the legal text that way published, has been published and is available to you as of now. at an agreement with the british government on an ordered withdrawal of the united kingdom from the european framework also on the for our future relationship. this is the result of intensive
6:06 am
part of the two negotiating teams, and i would like to thank them in person. obviously the british team and our own team for their tenacity and professionalism. i would also like to point to the result from the european side on the basis of permanent dialogue and real confidence yearsbuilt over the last with the 27 member states and parliament. i can tell you, as you know, we really have built our positions together on our side and this new agreement. this agreement has been agreed between negotiators with cker and this
6:07 am
morning with prime minister present thisill later on at the european council of 27. i would like to offer my personal thanks to him for his confidence over the last three years. i would like to thank president donald tusk on the council side. this text should provide a legal area wheren every brexit, like any separation, creates uncertainty, and in foremostr, first and for european citizens in the united kingdom, british citizens living in one of our member , these citizens have always been and will remain our priority. i can tell you that will be the
6:08 am
case for the european parliament. has been going on for too long. thanks to their agreement, their rights will at last be guaranteed on a sustainable basis. we also have certainty for a whole host of project leaders funding from the e.u. budget in the 27 member states and the united kingdom thanks to this agreementsfinancial will be respected and honored between 28. alllso have certainty for individuals and businesses affected by all the other issues involved in the separation. the first press conference three years ago that the social, human, legal, technical consequences of these various
6:09 am
forviduals is a concern, now more i am thinking there will be more certainty. i am thinking about existing intellectual property rights, geographical protections, and protections of data. this puzzle also covers the thisition period, -- proposal also covers the transition period which will months from020, 14 now. that may last one or two years further, subject to joint agreement between the united kingdom and european union. has one government point in the withdrawal agreement, the key point, the ireland.of
6:10 am
throughout these negotiations, the u.k. and e.u. were fully protected -- committed to protect peace and stability on the island of ireland. we add to reconcile two objectives. arst, include legally solution and the written agreement that would avoid a hard border between ireland and northern ireland, preserve the ireland economy and protect the integrity of the single market. point extremely important to prime minister johnson and the u.k. was that northern ireland remains in the u.k.'s customs territory. discussions over the past days have at times been difficult. but we have delivered. and we have delivered together.
6:11 am
restslution that we found on four main elements. number one, northern ireland will remain aligned to a limited set of e.u. rules, notably to goods. this means that all applicable procedures on goods will take place at the points of entry into northern ireland and not across the island. for this purpose, the u.k. authorities will be in charge of applying the union's customs accord in northern ireland. number two, beyond applicable procedures, there is also the questions of customs duties. northern ireland will remain in the u.k.'s customs territory.
6:12 am
it will therefore benefit from the u.k.'s secure trade policy. northern ireland will also remain an entry point into our single market. square have we done two this circle -- to square this circle? u.k. authorities can apply tariffs on products coming from a third country so long as those goods entering northern ireland are not at risk of entering our single market. at risk ofr goods anchoring the single market, u.k. authorities will -- entering the single market, u.k. authorities will apply the tariff. this night and this morning, we the working on the issue of
6:13 am
-- it is an important subject to avoid distortion of production of the single market. we have managed to achieve two objectives. to integrate the single market and satisfy the uk's wishes. and finally, number four, prime wants it tonson inch -- wanted to ensure long-term democratic support of relevant union rules and northern ireland. for years after entering, the elected representatives of northern ireland will be able to decide by simple majority whether to continue applying relevant union rules and northern ireland or not. this democratic support is a
6:14 am
cornerstone of our newly agreed approach. why? because this newly agreed protocol is no longer to be replaced by a subsequent agreement between the e.u. and the u.k., so it makes sense to ensure consent. obviously, when discussing northern ireland, we talk about the economy, about technical matters, about goods. let me say very frankly that for one, since three years, what really matters are the people, the people of northern ireland and ireland. what really matters is peace.
6:15 am
ladies and gentlemen, lastly, beyond the separation and withdrawal agreement, we has -- have also arrived at an agreement that is equally important in my eyes, to revise the political declarations which should be adopted by the european council and the parliament. this will be a quite precise framework for negotiations which build, rebuildo a future ambitious partnership with the united kingdom. a friend, partner, allied country. on this point, boris johnson's government has made it clear with respect to the future of the economic relationship, that is the choice of a free-trade agreement. any reference of other options,
6:16 am
particularly the option creating a single customs territory between us has been discarded. change, on the other hand, is the geographical proximity which is for the long-term. this does not change our interdependence with the u.k. economy, which is very strong. solide agreed on guarantees for the level playing field to facilitate an ambitious free-trade agreement that is without tariffs. on this point, i would like to testify, having discussed this often when i visited various parts of the european union, that all member states, european parliament, and businesses and
6:17 am
members of the business community -- francine: that is michel barnier, chief negotiator for brexit, gathering in brussels with worldwide networks taking conference on what they agreed on. it seems like the only change to the withdrawal agreement that theresa may negotiated is with regard to northern ireland and that is in the text under what theresa may had. let's get straight back to anna edwards in brussels. your first thoughts as we have more details? anna: just listening to michel barnier, interesting to reflect on what he just told us. the question around northern ireland and how it manages to be in the u.k. customs union but not have an a byerly -- borders on the ironed -- island of
6:18 am
ireland? he talked about now there is a complex relationship where the u.k. can collect tariffs depending on the end direction of the product. if it will stay in northern ireland, the u.k. tariff well apply. if the end destination is in the republic of ireland or the e.u., the tariff would be collected. interesting in the detail. maybe what the dup will not be happy with is the voting system. northern ireland gets to decide after six years and then four years on a simple majority voting basis, which is something the dup might see contentious because they want some sort of veto over the process. tom: within the domestic politics of northern ireland, it is not even in session, does
6:19 am
this agreement and newly -- any way change the reunification of ireland or the difference between the union and nonunion in northern ireland? , you it is interesting travel across ireland and you see posters talking about a united ireland. the dup says this is a fantasy and will not happen. this is a debate going on in ireland as we speak, but politicians have been careful to try to stick to -- or at least the u.k. and dublin government have been careful to stick to what is at hand, the detail around brexit. that is very much part of the conversation. francine: anna edwards in brussels. sidesn hour ago, the two reached an agreement to pave a
6:20 am
way to brexit. shell barnier still briefing journalists about the details. and huw van steenis are with us. thank you for joining us. will we look at the arithmetic from westminster to see whether this goes through, and what happens if boris johnson cannot get it through. the matter is in the balance, but the incentives for mps to support a deal are high. the question is do they want to do it with a referendum tagged on or not? the dup, to what extent some of their ringleaders are holdouts is critical. it will be a challenging weekend. francine: does this impact the
6:21 am
world economy? you had a couple of people or theif you had no deal specter of no deal was still there, it would be a shock. does this mean it is good for the world economy? jason: there is a concentric circle, the u.k. this matters a lot for, ireland at matters a decent amount for, the e.u. at matters a bit for, the united states not much. in terms of global shock, the world is beyond the ability to be shocked by anything the u.k. does related to brexit. the pound what retreat if it doesn't pass, on the gains it just made today and we would be back to where we were. tom: both of you with such different portfolios. policyurman working and and trying to get policy that is
6:22 am
effective and gets done, how interesting. if you cleared these uncertainties, maybe in three weeks we are doing a trade war show, do you assume business investment comes back? , thee gate, the step nominal gdp comeback if we clear these topics? jason: it comes back a bit. people have overstated the agreed to which this is related to trade and uncertainty. the potential growth rate of the u.s. economy is around 1.75 and the european economy is lower and we are asymptoting toward the lower growth rate. tom: very important, this is what they do in washington, they asymptote. [laughter] francine: i do have some breaking news, jeremy corbyn talking to reporters on brussels
6:23 am
-- in brussels. michel barnier briefing reporters and jeremy corbyn unhappy with this version of the deal. i feel like we are going in circles. does boris johnson have the numbers? would he take the risk if he did not think he had the numbers? huw: this is like groundhog day on repeat. we would have to see the details today, but it would be odd for him not to put it to parliament and force the issue. if you look at the polling results, it is striking how the tories inflected and significantly increased their standing in the last few weeks with their strong support, so i assume the deal will be put through one saturday. the extent is to what extent will the opposition tried to tag on a referendum? on: that vote is presumed
6:24 am
saturday. you are qualified to talk about the spirit of finance in london coming out of this mess. your service to the government, with schroeder's, and a small swiss bank, what will be the spirit of london coming out of this either through a direct deal or prime minister johnson being reaffirmed? huw: the financial community is trying to feel its way. i was at a fintech conference on monday and you can see the frustration that people want to grow their businesses. there was a good number of unicorns amongst the community. tom: there is still unicorns? did you have this meeting in a wework office? huw: two were supported by the vision fund. what is striking is how many of these firms, how many people are
6:25 am
saying, i should pivot to the states and asia. tom: will they pivot to switzerland? huw: switzerland has a great backdrop. francine: is singapore gaining? huw: it depends which piece we are talking about. investment banking, the u.s. is in rude health. the u.s. market is growing -- asia is growing somewhat. fintech is really london, two cities in china, and san francisco, they are the hubs. london remains a strong center. singapore is doing a good job trying to make sure the central bank is a platform for innovation, but the u.k. is doing its best. in terms of investment, once we get the distraction of brexit around, we can start investing. francine: what are we misunderstanding about the economy or not paying attention to? is it that her worse than the
6:26 am
market thanks? , tradetwo possibilities uncertainty, slowdown in china is part of a synchronized slowdown and somehow you could with structural policies balance that. i think the bigger problem is the underlying trend productivity growth is very low. the demography is against us as the population is aging. because't noticed that we have been bringing our unemployment rate down steadily, but we cannot keep bringing that down forever, so our challenges are more on the supply productivity side than the demand side. that is a much harder problem for monetary, fiscal, or trade policy to deal with. tom: this has been a very unique bloomberg "surveillance." tom
6:27 am
keene and francine lacqua at the meetings of the international -- monetary fund international monetary fund and world bank. the you -- the e.u. explains their vote. we need to hear from the prime minister of the united kingdom. markets doing better. francine: the pound is doing decidedly better, but this could flip if you look at the vote so you wonder how governor carney deals with volatility in the pound. if you have a currency that is jumping around, does it go to the heart of the risk that you are stabilizing the u.k. economy? tom: if you look at trade-weighted sterling, it is back to the time of john major, 1992. huw has lived this with his
6:28 am
service on the buy side. whether the devaluation of the united kingdom over the last 20, 30 years, there is no nicer way to put it. jason: it has been a long, gradual process. tom: how do they turn around that long-term productivity decline? this deal may be better than the uncertainty we have been in. i have not read the deal. unless it is making a lot of trade agreements around the world, unless it is doing more to integrate itself into the world, this will not help, this will hurt. tom: let's begin. we will still stay with mr. barnier to see if there is any critical headlines. let's broaden out the conversation. we have got to go to the turmoil
6:29 am
in washington over the trade war. as the mercantile world bank and imf meetings, are we back at multilateral, are we to a mercantilism instituted by president trump? willin the coming days follow, i have been struck that the wish to understand, will the trade war get resolved but will the tech war remain? the underlying conversations i have had, there is no easy resolution of the tech war because china has been able to steal a bit of a head start on round -- around machine learning nai. around machine-- learning and ai. there is a big tension. tom: do you look at trump economics as a one-off? is it something the republican
6:30 am
party amends and moves back to a previous republican party, or is it a whole new world for a more isolationist america? jason: the trend in support for trade has actually gone up in the last two years. it was high to begin with and it has gone up. there is a set of intensity on the negative side around trade. i am not sure what has happened to the balance between the negative intensity and the positive. there has been resorting between the parties as republican voters trended against trade in the last few years, even before president trump. he seized on something going on in that part of the population while the democratic party has become more international but has not brought that internationalism -- has brought it to the talkback of -- topic
6:31 am
of immigration but not trade. francine: if they are much worse than expected, doesn't automatically mean they want a trade deal to buffer the economy? china is never super different than accepted, and that is the problem with china's numbers. china is hurt economically more by the trade war, but has more political ability, given its system and its ability to direct compensation to the losers of the trade war, to withstand and tough it out. they can play a longer game than president trump, so i don't think a quarterly gdp number will have much of an impact on their strategy.
6:32 am
francine: will they translate? [speaking french] francine: that is the french president, emmanuel macron. sometimes i come in handy. i speak french. he is suggesting we need to remain cautiously optimistic because now he says it is up to the parliament at westminster to decide. pleased by the fact that both sides reached an agreement which shows they can do something. it is not up to us. it depends on whether u.k. and the parliament decides to push it through. he is also talking about the european union and the fact that
6:33 am
they have now taken into account the problems. he talks about the blockages, but we are on the other side, so the e.u. has come together almost with a helping hand. he is playing a conciliatory not -- saying, this is this is the different agreement. he is suggesting they are giving a slightly better deal than to theresa may. french]king francine: i think he had a question on syria. he said his role is to try to figure solutions for the government. i think he is talking more about french politics, but says we need to work together for a common solution.
6:34 am
he has moved away from talking about brexit to talking about more domestic politics. it is interesting to hear from various world leaders in saying, they seem to be encouraged by the fact that they could deliver a deal for the u.k., and it they heard from the italian minister saying it is a little bit of a turn. they were more flexible with the u.k. is not my as long as i am here, i am not the prime minister. this is to your prime minister to deliver a vote. francine: that was a bloomberg question, it is up to parliament. that is maria tadeo. >> do you have an indication from boris johnson that he has
6:35 am
the numbers? >> he is optimistic and that is the final discussions. >> will you get it done today? french]king francine: president macron saying we need to do everything in good order. >> [speaking french] that was the president of france, emmanuel macron saying he is pleased we have an agreement. he was prudent saying it is not up to his job. is up to the prime minister boris johnson to get this deal through parliament. we had confirmation there will be a vote in parliament on saturday.
6:36 am
tom: we heard from maria tadeo with resident macron with her direct questions -- president macron with her direct questions. president macron has had an exceptional number of days, including his candidate moving into be managing director. she was actively supported by mr. macron. he continues his discussion and bloomberg will have the headlines from maria tadeo. teenis with us along with jason furman. has had an awfully good 90 days, i would suggest, within international economics, and yet i read these distressing thatoals -- articles france is challenged to say the least. what is the strength of the
6:37 am
french economy? huw: there is a positive and a negative. in contrast to germany, which is decelerating, probably the biggest loser from the china trade, the double whammy of the china slow down and the automotive problems. france stands out. the underlying momentum of the french economy has improved. it is as much about stability. uncertainty, the business can do what it wants to do. he has had a positive agenda. take the green agenda, he has been very vocal to push through new funds. it is mostly business. tom: this goes to the heart of your research, finding proactive policies to move from the haves and the elites. you can do that in paris and the technology of france, but you
6:38 am
have to diffuse it into the rest of the economy. are we doing ok at diffusing all of our good stuff to those who are struggling? jason: i think the imf has paid a lot of attention to this issue for more than five years now. there is an increased recognition that growth is not enough. you have to make sure that growth is shared and benefits people. conversely, policy that helps s thee get shared benefit economy more broadly. people think it matters for the economy and care. francine: what government is taking this seriously? it seems like there is good well and people are distracted -- goodwill and people are distracted by other things.
6:39 am
are we having adult conversation on bringing people closer to their country, their economics? jason: adult conversation goes on in the room at a lot of meetings, and you look at what governments are doing and it gets more juvenile. placesdency in a lot of is to blame some foreigners for the problem, either the foreigners selling you stuff or the foreigners moving to your country. that is rarely the primary policy, and you need to get beyond that type of thinking to start thinking constructively about what to do to invest in education or raise the minimum wage or have a more supportive tax code or other steps to take to make sure growth is shared. francine: if brexit is dealt with, can the commission finally get on with dealing with the capital markets union? can it deal with the banking union?
6:40 am
what does it mean for european banks? huw: capital markets union as part of the agenda, but there is a backdrop year. they negative rate environment, the demand for yield is so intense and you don't need to do much because the demand is overwhelming for anything with a print. the changes much more about the technology agenda, what are we doing about making payments cheaper, faster, better. went down in jason: abiding the challenge -- huw: abiding the challenge, maybe the central bank should be part of the solution. tom: what is the solution? libra down in flames, mumbo-jumbo out of silicon valley, and a child pornography fitting that was transacted
6:41 am
through digital currency. i believe the grease was bitcoin. how do we do it in a noncriminal way? proposing we here will go all in on digital currency. i am suggesting we make the current system better. tom: how do we do that at the margins? huw: messaging standards, esther it is not just tom keene with such and such a birthday and address -- mr. tom keene with such and such a birthday and address. part of this is messaging standards, basic stuff, and we need to do it with a centralized system. francine: well disruption in the digital space come from big tech or central banks? huw: i suspect we will keep a two tier system. the central banks will be the
6:42 am
wholesalers and the private sector will innovate. and your friends in china alipay. they have three quarters of a trillion of people transacting. tom: why can't we do this in the western world? percent ofden, 65 retail payments are done on the swedish bank app. it is very low in america. tom: what is the american problem? jason: we have credit cards and credit cards are pretty good. there will be digital alternatives that are better, but not so much better. tom: is our digital innovation in the tech world, is our digital challenge that the banks here are blocking the innovation?
6:43 am
[simultaneous speaking] tom: are we blocking our own innovation because we don't want to be like sweden? teamed upn, the banks with the central bank to find the solution. payments are linked into identity. i don't think u.s. banks are blocking it. , four timesbout more cash transactions happen in the u.s. than the u.k., eight times more than sweden. it is a long journey. tom: that was wonderful. francine: tom mentioned a checkbook and a lineal's in our newsroom have never seen it. -- glenn ailes in our newsroom -- millenials in our newsroom have never seen it. jason furman stays with us. let's go back to maria tadeo
6:44 am
speaking with president macron of france. mr. macron prudent but happy they got a deal. maria: he says he is happy they have a deal and this new deal answers the questions the europeans were worried about. there was back and forth over what to do with the irish sea and the future relationship for an equal playing field. i asked whether this time he was sure the deal will clear the house of commons and told me, at this point, this is not my problem. it comes down to boris johnson. it is clear they want to get the deal done. the story has gone on and they want the u.k. to leave with a deal. the pressure is on boris johnson to do what theresa may failed three times to do, get the deal cleared by mp's in london. tom: congratulations on your
6:45 am
questions, and i found interesting the body language. give us the tone of this impromptu press conference. maria: the body language that you saw, he was very relaxed. when it comesdeal to a european perspective, gets the questions they were unsure about cleared, and this is a deal the e.u. can live with. will this get cleared by the u.k. house of commons, they feel there is nothing else they can do. it comes down to boris johnson. he wanted to be prime minister and now is prime minister and needs to behave like one and get the votes. since you get from european leaders as they are tired of this story. a new commission will begin in november and they want to move forward with many other issues they worry about.
6:46 am
there is many other issues happening. this is not a one issue continent. tom: maria tadeo, thank you so much for your continued coverage on brexit. we are at the meetings of the international monetary fund and the world bank. issues as they confront a global growing debt. vitor gaspar, we want to have jason furman as well. thistheme in your book time around is a burgeoning global debt. people are saying there is less credit card and household debt, and yet i see burgeoning
6:47 am
deficits. are they here to stay? vitor: the data you are referring to is a preview of the global database that will be coming out in december. this is like a preview, but it is a great preview and we are grateful that you give us the chance. the headline numbers that the managing director has referred are $188 trillion of global debt. that is 226 percent of world gdp. i can even give you what are the for the the number is even higher at 240% of gdp. that is private debt outside of the financial sector,
6:48 am
so households and nonfinancial corporations. 90% is public debt. there are interesting stories of debt accumulation since the beginning of the global financial crisis for advanced economies and emerging markets. tom: this is so important a discussion. in, because this is the cottage industry at boston university. should we do this discrete debt sections or do we want to bring it all in together to an unimaginable 188 trillion? which approach is best? jason: i was about to say this time is different, but you took that line away. i would like to look not just what these debt numbers are but what the debt service is to the relative flow. debt service is an annual cost,
6:49 am
gdp is a relative flow. our interest payments as a share of the economy are relatively moderate. there are a lot of reasons to not be concerned. tom: the opioid of the financial system, is it that the debt service is so small that we are drugged out and will move from $188 trillion to $200 trillion because of low nominal and real interest rates? vitor: things are different across different groups of countries. in advanced economies, what jason said is true. debt to increasing public gdp ratio. above 112% of gdp. at the same time, the flow indicators, the debt service indicators have come down. debt service as a percentage of
6:50 am
gdp or a percentage of tax. francine: well they continue to come down? -- will they continue to come down? vitor: it was presented yesterday low for long. our best view is that low interest rates will stay for long, but that does not mean that they are not risks associated with the accumulation of debt, not risks associated with the accumulation of debt by nonfinancial corporations, and in most countries around the world, this does not apply. for emerging market economies, we have increasing public debt to gdp ratios and increased debt service ratios as well. francine: when does this risk come to the forefront? jason: there is a lot of heterogeneity. different stories in different parts of the world.
6:51 am
in one important part of the world, we need to be more worried about that debt is not rising fast enough. you look at germany and the role it is playing in the synchronized slowdown given the importance of manufacturing and autos. there is no debating germany has fiscal space. the fact that they are not doing a fiscal expansion should be just as much of a worry for the global economy is a lot of high debt issues. chase asme cut to the the managing director said. how do institutions like the imf suggest to the germans to expand their debt and deficit? vitor: we have been arguing that germany has fiscal space, but given the yield curve for germany is below zero at least up to 10 years, there are many investment projects that will at
6:52 am
this point in time satisfy any cost-benefit analysis you can think about. doestments for germany to the transition to a green economy, climate change is important. you can think about the digital economy and the need to boost the infrastructure support. you can think about eliminating taxeducing tax distortions, wedges affecting labor and capital. there are many aspects that can be taken on by germany, but indeed germany would be well advised to expand for short-term reasons and for long-term growth reasons. it will bein -- tom: an interesting set of meetings. aspar and jason furman,
6:53 am
thank you for being with us. i am going to run off to radio. francine: we will head off to the headquarters of the imf. it has been a week of beets for the u.s. bank expectations -- beats for u.s. bank expectations. for morgan stanley's third-quarter trading, declines expected for fixed income revenue year-over-year. that is coming out in about 30 minutes. we are joined by alison williams. the rest of the banks did pretty well. what are we expecting from morgan stanley? alison: the number one thing is their wealth margin. we expect it will hold at the high-end of their target range around 28%.
6:54 am
bank of america came in strong. wealth loads are a sign of health in that business. morgan stanley has shifted more towards wealth but trading is a significant part of their revenue. they are more equities focused. a lot of the good news has been on the fixed income side. banks have beat estimates leading to broadly better -- and on the equity side it has been more mixed. for morgan stanley, the past couple of quarters have performed a little bit. over the last few years, they have gained shares so we want to see if they can keep pace. francine: how are they doing on cost cuts? alison: morgan stanley has been meeting there targets. they have a 73% cost ratio. that is a focus given all the revenue pressure to see if they can come in on the cost side.
6:55 am
we got good news from bank of america as well as jp morgan, less good news from citi and wells fargo. morgan stanley's business is a little bit different. it have the wealth side and is a higher cost ratio, but we want to hear how things are progressing and if they have leverage as the weaker environment continues. francine: thank, alison williams. she will be with us throughout the day. morgan stanley earnings coming out in about 35 minutes. on thep significantly back of this agreement between the u.k. and the e.u. dup says the party's position has not changed. the u.k. and e.u. have reached an agreement that could pave the way for brexit, but boris
6:56 am
johnson needs to win the backing of lawmakers. we expect a vote in satyr -- on saturday in parliament and it is all of -- all about the numbers. boris johnson needs 320 votes in parliament. it depends on whether he can get support from other parts of parliament. this deal changes a little bit on the relationship between ireland and northern ireland, the backstop. pound strengthening. we will have plenty more from the imf world bank meetings in washington, d.c. we will be speaking to the spanish minister, and the bank governor of south africa. this is bloomberg. ♪
6:57 am
6:58 am
from the couldn't be prouders to the wait did we just win-ners. everyone uses their phone differently. that's why xfinity mobile let's you design your own data. now you can share it between lines. mix with unlimited, and switch it up at anytime so you only pay for what you need.
6:59 am
it's a different kind of wireless network designed to save you money. save up to $400 a year on your wireless bill. plus get $250 back when you buy an eligible phone. call, click, or visit a store today. ♪ alix: we have a deal. jean-claude juncker says the
7:00 am
u.k. and eu reach a brexit deal that is fair and valid. cable jumps to a five-month high. a move out of bonds into stocks come out of the dollar. honeywell raises its 2019 profit forecast. morgan stanley on deck. are there green shoots or more warnings? welcome to "bloomberg daybreak" on this thursday, october 17. it was really down to the ninth hour here. sb futures popping on that futures, up 0.3% -- s&p popping on that optimism,. up 0.3%. . money flowing into equities. the dollar kissing that 200 day moving average, catapulting all the g10, as well as emerging markets. is this the rotation investors


info Stream Only

Uploaded by TV Archive on