tv Bloomberg Surveillance Bloomberg November 26, 2019 4:00am-7:00am EST
francine: trade fatigue looks for direction. u.s. and china officials say they are staying in touch. alibaba stock jumps and its debut, a welcome victory for carrie lam. deals top $70 billion in 24 hours. how many more takeovers in 2019? welcome to "bloomberg surveillance." i am francine lacqua here in london. down 0.1%, euro-dollar
at 110.18. asian markets were volatile or a little mixed mother has to do with the trade war and how markets interpret whether we are closer to the deal. 1.7u.s. 10 year yield at flat. coming up we speak to jim o'neill, former commercial secretary of the treasury, , that kingdom conversation in just a couple of minutes. let's get to the first word news in new york city. u.k., the chief rabbi suggest people avoid voting for the labour party due to anti-semitism, he says sanctions from the top. he is not calling on people to vote labour party, but he says british are concerned about a labour government, and the labour party says anti-semitism has no place in the party or society.
the president claims donald covered by presidential immunity, but he has been ordered to testify to the panel as it investigates, carrie lam isong, not offering any new concessions in her first public comment after pro-democracy forces won a landslide election. lam is calling for dialogue in line with the plan she outlined two months ago, but it has already been rejected by protesters. us is toiority for properly follow up on actions proposed including community dialogue. after these five or six months, hong kong people have realized that hong kong can no longer tolerate this aortic situation. everybody wants to go back to their normal lives, and this requires the concerted efforts
of everyone of us. firstbaba jumping on its day of trading in the city, a win for the company and the hong kong exchange. about $11 billion, the biggest stock offering since 2010. global news 24 hours a day powered by 2700 journalists and analysts in more than 120 countries. this is bloomberg. matt: thank you francine: third-quarter net income getting the highest estimates, coming in a 190 billion rubles. on to our top story, the u.s. and china have agreed to stay in touch to resolve remaining issues to get to a phase one deal after a phone call in which the trade teams discussed core
concerns. now is our chief asia correspondent. are we close? least it suggests the sides continue to talk. it is one of these and criminal signals we have been getting over recent weeks. they are moving toward an initial or partial agreement. the positive signal out of beijing comes a few days after the government said they would crack down hard on ip violations. compensationout for those getting hurt by i p's. in terms of managing expectations, the common refrain from beijing is that they are in the market for a deal, but they
are suggesting -- we do not have much more detail beyond that. francine: do we have any specifics when a deal may be signed? we are into thanksgiving week in the u.s., and then into december. mid-december is when the next batch of tariff increases are meant to be infinite. if we do not get a breakthrough logicalk, the next deadline will be mid-december, and whether the 15% increase on the tariffs will go ahead. there will either be a flurry of activity to get some kind of agreement by year-end. maybe around ip protection and market access. or it ends and we go back to where we were, and president trump and the chinese side walk away from a potential agreement.
if that is the case, there will be more talk of tariff increases. there will be more on the talks in the coming days. francine: now joining us for the hour is jim o'neill, former commercial secretary of the treasury, united kingdom. the chinese officials say they are keeping in touch on the trade deal. is that a good thing, at least they are talking. waiting for godot" t hing. jim: will it get so watered down that it is meaningless in terms of markets thinking about where is it really going? i do not quite know. francine: what does this mean for the world economy? could we live with this kind of lukewarm phase one deal for the next 10 years? jim: i think from the short-term
cycle, we could. leaves seem to suggest the world economy might be stabilizing at a weaker level. some kind of resolution would almost definitely be helpful, not least because many economies of the world have come from expanding trade. if people can take a breather about further tariffs, that probably would help. structurally, i am not sure about that. hasone weird thing trump managed to unify washington on fight with china. i am not sure this is the end of u.s.-china issues. francine: even if there is a phase one deal, you think he could go back to talking tough
on extra tariffs? jim: i think politically it is so superficial if u.s. politicians do it. you can blame everything with the lights going out, it would not cooking properly on china. it is kind of silly. the only way for it to shift is for the u.s. economy to get recession, when the u.s. wants friends around the world. francine: the trade war must impact the u.s. consumer, and it is risky before christmas to take that chance. jim: we are clearly getting some kind of deal. it is also concluded that we cannot afford what we were having a few months back in
terms of the interplay with the economy slowing and going into an election year. otherwise they would be toast. part of me thinks we might be safe through the first half of next year, but egg picture, i am picture, i amg not sure. francine: if you look at it from the chinese side, what does president xi do? jim: that is a tough question to answer. some belief asis to how they should be terminally -- permanently, and my view is what is coming after the next election, and crucially, i think -- theyways they save
see this as an advantage and it is allowing them to get closer to some of the countries. the chinese enthused , i am not sure if it led to much. i think the chinese are seeing this as an opportunity for them to be marginally close to other countries at the expense of the u.s. and of course whatever they hope to achieve will also depend. francine: does it have an impact on the belt and road initiative? jim: i would hope it adds to what i thought was necessary for the chinese to be a bit more open and imaginative about the belt and road initiative. it adds to the importance of the belt road initiative. i think you will see more of that going forward. francine: jim o'neill, former commercial secretary of the treasury, united kingdom stays with us.
facilitated child abuse. in the u.k., bp is looking for broadband supplier to lessen its reliance on huawei. u.s. based vendors will likely be among the bidders. google firing employers for violations of the security policies, part of the escalation between management and workers. it comes after staff protests and union organization. -- googlel email declined further comment. francine: thank you so much. the fed chair jay powell is confident policymakers can extend the record economic expansion in the u.s. powell says the glass is half-full. the central bank chief is mayaling interest rates
remain on hold. there are a couple of people who think president trump is talking tough on china goes that is one way to get the fed to do what he wants, lower interest rate. jim: that has happened many times this year. francine: that would mean he is harder on china to make sure the fed moves. it was might now realize a naive strategy beyond the immediate impact. what it does is guarantee exports and business investment spending, and makes the u.s. even more dependent on the consumer than ever. it is not a savvy thing to do. signs, there have been until the past couple of months, that that was his partial purpose. having seen what powell had to say, the very latest tea leaves in the u.s.
are themselves surprisingly strong, including for the labor market. jay powell also pointed that out . growing signs of accelerating wages for the most low income people. it is a glass that is at least half-full for now. very symmetrically dependent on the consumer. francine: longer-term there are so many uncertainties. jim: huge uncertainties. francine: do you think the glass is half-full at the moment? jim: is it the fed's job to focus on the underlying structural issues? you are right, would i have confidence the u.s. could escape a recession in 2021? no, because if something went wrong with the consumer and we have not solved the trade issues, the u.s. will quickly be in trouble. markets,eans for the
-- we will not be easing forever when there is no purpose. and the market starts to backup in terms of bond yields, mortgage refinancing becomes a challenge. think -- it is half full now, but i do not think it is structurally very half full. francine: what you do with the flattening yield curve? should we look at that? jim: it is happening again, which is another sign below the hood, even though we hit new highs on equities, people are nervous, and i can see why. francine: what would you look at to understand there is something wrong with growth? we are kind of in a holding pattern. jim: i am looking forward to
sunday, december 1, south korea will publish its trade data for november. november showed a 14% drop. i have a suspicion they might but if they weaken further, things are progressing downwards. francine: who has the most to lose in the u.s.-china trade war? the neighboring countries could win. vietnam, it has been a huge winter. -- a huge winner. to lose, in the short-term it has been china, but i would argue against convention that medium to longer term is the u.s. the u.s. is fighting off -- it
is biting off its own nose. the only way it can structurally improve its economy is through exports and investment spending. you cannot get there i beating up on the second largest economy in the world, particularly the one that is more important to the consumer. it is not a smart permanent strategy at all. francine: what about germany? it a small open german, given how policymakers think, that is kind of true, but it is ridiculous because it is the fourth largest economy in the world. one would hope what has happened with germany the past 12 months, german policymakers would wake up and smell the coffee, and shift policy priorities, and become more active on fiscal policy.
narrow, andically realize they need to be terminally dependent on domestic demand, and not so vulnerable in terms of exports. ourany, even despite self-imposed brexit chaos, we are growing more than germany, because germany is the complete victim of what goes on with world trade. goes crazy on the positive side, germany immediately starts doing better. if we carry on the way we are, particularly the structural factors, germany has problems, and the only way out is to take a more imaginative approach to fiscal policy. it seems beyond the capability of anybody sitting in berlin or frankfurt, other than the new ecb president. francine: we will talk about
from hong kong. successful it was so . 6.5% jump is impressive. it was a good day for alibaba and for investors. it closed up more than 6.5%. during the day it rose as much as 7.7%, and impressive day. good to have forss to trade, and good the listing, the biggest since 2010, the biggest in the world this year so far. the fact that it performed well is good, and good for liquidity in hong kong, and shows you can do large listings despite the unrest over the past six months. francine: what does it mean in
terms of expansion? how much bigger do they want to be? they are now sitting on $43 billion worth of cash. that is an awful lot of money to spend. they have been competing fiercely with online food delivery. it will compete with tencent which is also listed here in hong kong, and many other tech companies. cloud computing is a new business venture. it is definitely one of the most cash-rich tech companies out there. francine: thank you so much. ♪ whether you're out here on lte.
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alibaba stock, its hong kong debut, a welcome victory for the city after another illegal defeat for carrie lam. deals top $70 billion and 24 hours per how many more takeovers will we see in the rest of 2019? good morning, good afternoon, and good evening depending on where you are in the world. this is "bloomberg surveillance ." let's check in on your biggest stock movers. >> i want to start on the upside this morning. this comes as they explore the potential sale with a lot of interest from the private equity industry and apollo global, one of those companies potentially interested in one of those buyers. plunging down more than 21%. this company had a lot -- a rough year, painting more as a gloomy picture. they are suspending dividend payments are this comes after two profit warnings this year. and compass group down 5%.
that is the biggest decline in the entire morning on the stoxx 600. this was due to a weaker environment in europe, so that was really the cause of what they are seeing, and they are talking about a deteriorating macroenvironment, francine. francine: annmarie hordern with the latest movers peerless get to first word news with viviana hurtado. viviana: qe is becoming an option, but we don't expect to need it. this according to australian central bank chief philip lowe. he says it bond buying program 0.25%, but rbat is a long way from his threshold from its meeting on quantitative easing. jerome powell is confident policymakers can extend the already record economic expansion in the u.s. powell says the glass is more than halve full and with the right policies we can fill it further. the central bank chief again signaling interest rates will probably remain on hold. mustmer white house lawyer
appear before a congressional committee. it is probing president donald trump, the order from a federal hege p the president claims is covered by potential immunity, but he has been ordered to testify to a panel, as there is an investigation over whether president trump tried to obstruct the investigation by robert mueller. out fors being called selling copy sneakers for a third of the price. no comment, by the way, from amazon. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianatries, hurtado. this is bloomberg. francine? francine: thank you so much. boris johnson a jeremy corbyn are taking messages to help with
the december election. conservatives are thought to be playing on fears. corbyn's labor revealed a 10.8 billion pound package for social care and that the tories could not be trusted to look after it. most polls give him a double-digit lead, but u.k. pulls over the last several years have proved unreliable. i guess joins us from chatham house. we have been talking about brexit for three years and now we have fresh elections december 12. do you trust the polls? >> well, i think it would be a bit daft to get too trustworthy pointed outew just the past four years. boat else have we got -- but what else have we got? my presumption right now has been a small tory majority. i am not quite sure about the move over the last three days that it could be -- i think there is a lot of things going
toryat are helping the position, so obviously for a large shift for the brexit party, that has helped. i would suggest that the lid dims, being so aggressive about revoking. i think that has stopped some people who would vote for them who are tory, sticking with the tories, and virtually everything that comes out of jeremy is -- the scale of the fiscal that we are talking about is sort of mad. it is a shame because some of the things that they stand for -- for example, true social housing, i think would be good. but the scale of the fiscal numbers we are talking about -- it suggests to me that it is a bunch of people that don't
actually really want to have power, they just want to be ideological noisemakers. it is kind of crazy. francine: what does this mean for the markets? a lot of this things -- i do not know if it is just brexit fatigue on the markets or policy fatigue? i don't know if the u.k. can figure out exactly what this means. think if boris johnson goes out, thens the deal it will be better for the market. what is interesting is that this particular unrest is not only in britain, it is in everywhere. we see this polarization of the economy, the political arena, which varies on the left side and others that vary on the right side. there is nothing left in the center. your --urope and -- in
in europe in the u.s. also. jim: i am going to perhaps controversially take you on for a bit. the thing that stands out in the euro -- in the u.k. in this jumpedn, the tories have to the middle, and they are almost like old tony blair labor with the fiscal labor that the tories are talking about. arecine: certain sections going the right way. jim: not on economic policy. francine: well come on social issues. policy, not inc the slightest. significant intervention, not getting a lot of attention. white appropriately, in my view, a major further boost to minimum wages. not the sort of stuff a radical right wing thinking economic wise tory party would do.
the second thing where i find myself differing with many people is that even if you ignore what i have just said and they have moved to the right, which i think socially they have, and corbyn is obviously way out on the left, to some degree i think it is kind of normal. if you look at the past 20 years and the failing of globalization, or the fact that there has only been a small number of winners, it has coincided with the political movement going to the center. the people that are dissatisfied have not had anywhere to address their democratic views. so when you have for roche -- farage and corbyn and five-star movement and trump, why would it not be? francine: what you are describing is certain conservative party members that would be happy with the no deal brexit. is this compensating? be ait would also
perfectly sensible cyclical response to an economic negative shot -- shock from a trade deal. by the way, within months of the tories and everybody happy about this deal, they immediately start worrying because there is no chance of them getting out in a year. it would be an irrational response to boost this policy. francine: weather is -- you that it tell will take longer than a year to do these deals there, and the more the u.k. will want to be different than europe, the more difficult deals will be to negotiate. by putting itself in a sort of a timeframe, boris johnson will maximize his bargain power. francine: the thing is with the majority, and i don't know if you look at these kind of things, but the bigger conservative majority, i'm told
that boris johnson can be softer and get the deal through so he does not have to rely so much on the erg. if you look at the candidates, is that true? jim: personally, i hope it doesn't cause major consequences, but if you get a big majority, he will renege on his election commitment, not extend the transition. because that gives him the flex ability. flexibility. gets a trade deal in this year, he has to extended. if he has a big majority, he can do that. francine: between u.k. -- difficult,ill be negotiations between the u.k. and europe. as long as it is a fair deal and the u.k. does not want to move so much from europe, there will be negotiations. if not, it will. i guess --
francine: i guess on the other site, the french, the germans, the italians, maybe want to know that that person they negotiate with is strong enough to pass it through parliament. that isst, i think true. but they are not going to blow away everything they believe in just because there is a guy that might get it passed. they kind of know that the u.k. clock will be ticking down toward june, so it immediately puts the u.k. negotiators under huge pressure. fiona: i would think that there is a brexit fatigue also in europe. francine: is there brexit fatigue in the market? is there worry that they are mispricing it? fiona: if corbyn goes out, the plan, we are not in the worst-case scenario that u.k. gets out of europe without a deal. anticipatingw positive outcomes from this
scenario. haveld say that markets more positive momentum since a few months. francine: jim, what scenario could we still have no deal? jim: i agree with that, by the way. i think a lot of people, i suspect quite a few pundits thinking exit are and a deal and the u.k. improves, the pound goes to 1.40 or something. but each time they get to 1.30 it kind of struggles a bit. question, i think for the first month after eddie johnson big victory, the markets abouttart to worry again a no deal brexit he will play to his gallery about the stuff that we will not have an extension, we will have a deal, but they will not get a deal unless they give in on all the things that they would stick with, which is,
why would you leave anyhow? i think we will go to a period in february or march where people will worry about no deal. francine: there you go, jim o'neill from chatham house. we will talk more about that shortly. a poker player -- that is how one analyst describes charles schwab's cfo after the deal with ameritrade. this is bloomberg. ♪
first day of trading in hong kong. companyost of bill raising $11 billion. ands a win for the company also for hong kong's in exchange. the chief executive resigning, brian hearts are, ending to investor pressure after allegations of the biggest violation of mentoring on it money laundering laws in chilly history. the financial crimes -- in australian history. the financial crimes authority accusing the westpac ceo of 23 breaches. employeesing three because of violations of its latest security policies. afterpart of -- it comes protests in union organizations. bloomberg obtaining an internal email describing the decision, google frank -- confirmed the meadow but declined further comment.
-- the memo but declined further comment. francine: charles schwab has a group -- has agreed to buy tv ameritrade -- td ameritrade. dani burger has more. is indeede up industry changing, and this is the deal that has only been made possible in a zero-fee world. first the details, schwab will be purchasing td ameritrade in an all stock deal, valued at roughly $26 billion. already schwab owns about 50% of market share when it comes to certified custody assets. td ameritrade, 20%. that means they are already a behemoth, having over $5 trillion in assets. when you have the zero commission fees, it is all about economies of scale that is what will get them the income they need. because of that scale, analysts warn this deal may draw antitrust scrutiny. i want to go over what i personally think is the most
fascinating part of this deal. that is that schwab essentially broke td just to buy it. in the deal announcement, schwab said they would pay a 70% premium to where ameritrade was trading. when you look at the prices in the past year, you can see that ameritrade was more expensive. so paying an additional 17% to this would have been very pricey for schwab. but schwab announced they will cut these and other brokerages followed suit. commissions are so important to their income structure. so now it is vastly more cheap for schwab to pay the 17% premium, and when you crunch the numbers, schwab saved 6.8 billion dollars by that move, cutting commissions to zero. francine: thank you so much, dani burger with all you need to know about the brokerage industry. and fional joins us
frick is still with us. i don't know if you think the mna dale -- deal is a -- the m&a deal is a good thing. aona: the good news is that few m&a deals yesterday are quite sizable, showing the industry is getting more comfortable with the economy. we were lacking some investments from companies, and these deals showed that perhaps because the global trade has been going down, perhaps numbers have been stabilizing, and there is a more positive environment and that companies are profiting from that. before perhaps next year, when there will be some a and they will be as they will be more security above the stability of doing emma day and antitrust -- m&a and antitrust rules and things like that. is it because shares are a little bit depressed, it is more affordable, or is it
because the big companies want the last remaining jewel in their sector? fiona: i think the big companies understand they need market share, so they are buying it. it is a segment where the m&a was not so present, so it makes a lot of sense. it is asay that positive sign about what companies think about the economy. it still can grow and make this deal work. jim: from my perspective, you have to distinguish a little bit between -- a little bit between some of these. if i understand it correctly, schwab will have a 70% market share. issue, i havee told you about it before, how does it fit with the business principles? so many industries in the u.s., you essentially have
oligopolistic control, and it is helping this sort of taking of the profit share, meaning that the productivity benefits remains a major challenge. and i think a lot of the social issues in the political ones we touched on earlier actually relate to all of that, and i worry when i see that a flurry of emma day, which is all very the businesses not really get it. we cannot persist with the capitalist -- the application of the capitalist model that the game is being rigged for the largest companies, and you're not really getting the full benefits getting through either to the consumer or through productivity. you see some of that in this u.k. election campaign, and i worry a bit when i read about all these m&a deals because it
seems to be a very much kind of old school -- i am not sure it is true with -- i am sure it is not true with all of them, but when you look at what schwab is acquiring, it is like, whoa. for once in the last 10 years, market indices have outperformed -- it shows an environment where the big ones take all. for thesenefit companies, which are big in the market share. jim: that is the game. that is why they are doing it because they are begetting -- they are getting marketing payoff. but a societal benefit, ultimately what capitalism is supposed to be about, it is not obvious to me that it is entirely rational. francine: regulators will be looking at this closely. jim: i would be surprised if
francine: economics, finance, politics. this is "bloomberg surveillance ." let's get some final thoughts from fiona frick and jim o'neill. what would be the one or two priorities you want to look at? fiona: one of the two priorities is that we understand interest rates will stay low for a longer time no matter how you allocate money in april to where interest rates will stay for a longer time, everything looks expensive for now with growth assets. yen -- it is a different period allocate in the portfolio. we are still depended on growth assets. -- we will remain
positive on equity, and we had ourselves for collection. francine: jim, in 20 seconds. jim: you know, over the next five or 10 years, i think we are coming to a change in the policy mix. hardlylearly delivering any benefits anywhere, and we will have non-activist fiscal policy. it could be an end to the bond market rally. how can markets do so well? francine: this is fun, we will do it again. a rematch. this is bloomberg. ♪
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amid mixed signals on trade. u.s. and chinese officials stay in touch. alibaba with its hong kong debut, a welcome victory for a city with another political divij -- defeat for carrie lam. good morning, good afternoon, good evening. this is "bloomberg surveillance ." i'm francine lacqua and london, tom keene in new york. alibaba, their trading debut come up 6%. we look at the fed and what markets look for in the trade concerns. tom: really important comments by chairman powell. he talked about they glass more than half-full. francine, that seems to be the zeitgeist we are seeing in the beginning of the year. it dovetails nicely into what we are seeing. brian levitt will join us from invesco in the next hour. francine: a great opinion piece
saying that longer term there is so much more uncertainty. let's get straight to the lumber first word news in new york city with viviana hurtado. inching forward on the first phase of a trade deal. beijing says the two sides have reached consensus on properly resolving relevant issues. still, the lack of a deadline and comments from donald trump have led to speculation that talks could last into next year. federal reserve chairman jerome powell says the u.s. economy's glass is more than half full. he has also addicted what the to spreadcies can do more broadly to american spirit at the same time, he signaled interest rates will probably remain on hold. to hong kong, that is where on ae searched protesters campus of a university that has been under siege for 10 days. they only found one. police will enter the campus to diffuse explosives. shares of alibaba jumping in
their hong kong debut. that cap to an landmark sale that unfolded during violent antigovernment protests. it is also hong kong's biggest -- it is a triumph for alibaba and the hong kong exchange. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more i am vivianatries, hurtado. this is bloomberg. tom: thanks so much. equities, bonds, currencies, commodities, what you need to know, dow 28,000 look at the double-digit returns. oil, it is off the bottom, but there we are. let's go to the next screen, with the vix showing lesser volatility. looking at the vix is an interesting opportunity. 11.98, under 12 on the vix. i know yen as well making a big move yesterday, under 1.09. francine? francine: if you look at my data
check, it is all about trade. i know i say that every day. it is difficult to find a way forward. bonds edging up today, treasuries and european bonds edging higher. tom: this is not my chart of the year, but i will tell you folks, it is the chart of a recession of a decade of even 12 or 15 years. this is the karl case, robert shiller housing index, and in red, adjusted for inflation. it is a stunning, stunning chart of what we used to know out here yeara return over 12% per in the boone years. down we go. what is so important is for one brief shining moment we got back to what used to be normal, and it has been a rollover with the real housing yield back down to 0%. francine, this is a huge part of the american psychology. francine: i just wanted to spend
time on alibaba. this is thanks to hilary clark, who did this fantastic chart looking at hong kong shares trading at a slight premium to the implied intraday price. this is based on the atr's in the last close. you can see compared to what we are speaking, it is much better than expected. the u.s. and china have agreed to stay in touch to resolve remaining issues to get to a deal. it comes after a phone call this morning beijing time during which the vice premier and robert lighthizer and steven mnuchin discussed core concerns. bryce inined by geneva. what do we know that they can agree on? bryce: in this trade negotiation, tariffs are a bit concerning for both sides. the chinese are looking for the u.s. to roll back.
delaying its plans tariffs for december 15. for the u.s. side, this is really a focus on changing policies and china regarded to intellectual property theft, and state directed funds to domestic industries. tom: give me the news from the ,ultilateral geneva switzerland. is there anyway of getting back to multilateral neede meetings,t every nation for itself? possible, butg is we are certainly headed for fireworks at the end of the year. the u.s. is increasing pressure on the wto by threatening to block its budget. heart of thisthe argument for the u.s. right now is the wto appellate body, which is a panel of jurists that have the final say. the chinese want a recent
wonute to authorized debt -- says it is exceeding its mandates, and it wants to tighten the budget strings. francine: when do we have an update on whether we get something by december? if we don't get anything by december, does it mean that we will not get a phase one deal in the next three months? soon to say.s too there was a call last night between the top trade negotiators from china and the united states. they agreed to continue talking. i think there is obviously an incentive to get something done, or at least to delay the december 15 tariffs. if not, this kicks into an election season where things get crazy. francine: thank you so much. bryce baschuk there in geneva.
thank you both for coming on. -- the market is moving on every single phone call. when does the market say i am going to wait for something to happen? continue tohey will try to trade what is effectively noise right now. we're looking for and veterans that we have a forcing variable with a summit meeting between the two leaders. logistically that has become challenging before year end, so in my mind what we are hoping for at this stage is some kind of agreement between lighthizer, mnuchin, on what might be called the preliminary phase one deal and then having an agreement signed in january. francine: does the phase one deal make a difference to what will happen, because it is the status quo. for now talking about preliminary talks or even the phase one deal. does it not give you much hope
of anything happening? bethere probably will not anything beyond a phase one in the election year. phase one will be sort of a truce to help markets in 2020, really. tom: thrilled to have both of you with us today, really with a good look on fixed income in 2020. before we get to that, if we get a phase one, jean freda, is that , is that -- gene enough -- --e: we were probably phrase frame it as how much of a down payment you get on phase two? to the extent that you give the market a sense that phase two will be associated with a substantial rollback of tariffs come and you get a decent down payment on that in phase one, then i think the markets will be quite pleased nonetheless, i agree with what jim said. we are looking at a truce scenario going into the election
season, and frankly, it feels like you are squeezing blood from a stone in terms of risky asset returns. tom: in the last 90 days, jim, how far have you extended out over -- not only over trade worries, but everything else? how longer is lower at deutsche bank? jim: there is great debate about that. the only thing i would say is at the moment fiscal policy apart from the u.s. is not part of the global policy agenda. offiscal policy became part the global policy agenda. i think lower for longer would be weston. the problem is you probably need a downturn, a recession, or a crisis to get that fiscal agenda. it would come before you get the fiscal. tom: we are much happy to have jim read with us. we are much happy to have gene frieda with us. really to dive in here, the view out to 2020.
chairman powell delivering more than many expected in his providence, rhode island, speech. he is talking about glass half-full. i am talking about the 6:00 a.m. opening. mr. powell saying at this point it is a long expend -- long expansion. i see the glass as much more than half full. much conversation, gene frieda, jim read. we do that next. this is bloomberg. ♪
some supporters of the fired workers say organizing activities led to their dismissal. some google staff protesting companies work with the military. they are also happy with its on hand as its handling of executive is accused of sexual harassment. shares of hewlett-packard enterprises are lower in premarket trading, sales falling short of estimates. signaling corporate demands of data center hardwire still stuck in a slum. hpe reaffirmed its forecast for its fiscal 2020 profit. to australia, that is where a giant money-laundering scandal led to the downfall of the bank ceo. he quit under pressure from investors. he is accused of committing the biggest violations of money laundering laws in australian history. francine: thank you so much, viviana. jerome powell is striking an upbeat tone, saying policymakers can outstanding record of expansion in the u.s..
he says the glass is more than half-full, and with the right policies we can fill it further. the central bank chief signaling interest rates will probably remain on hold. we are back with jim read of deutsche bank and gene frieda of pimco. the chair of the fed -- basically saying the u.s. economy is only good footing. but there is some uncertainty, 12, 18 months down the line. what does that mean for what he should do now? jim: i have never heard a central bank governor anywhere around the world that wants to think the economy might move into recession well ahead of time, so it is not in their interest to highlight that. .here are many risks powell has made a relatively confident approach and he has made it in a good way and is trying to persuade the markets in a good way. gene: i think he is right to say it is half-full, but half-full
of what? that is really the question. at the moment, they have said something about they are on hold until there is a material deterioration in the outlook and we are asking ourselves, what constitutes material deterioration? we get immaterial deterioration between the first quarter and the fourth quarter, and then there is easing again. tom: there is a belief that out of the caution of pimco there will be a better midyear 2020. it is -- is it accommodative monetary policy that gets the job done? gene: i think it is a little bit of both. you have had immaterial easing and financial conditions coming from monetary policy, but you're also getting a modest fiscal easing in most parts of the world, x the u.s.. a lot of this is really about alleviation of uncertainty around trade. have had downturn and
manufacturing their there is not a strong reason to believe you're going to get a massive bounce, a modest balance, so everything we are saying right now about the second half of 2020 assumes no additional shocks. tom: that is where i wanted to go. jim reid, no additional shocks, and that speaks to the idea of david folkerts-landau of rivas concern over negative interest rates -- of grievous concern over negative interest rates. if chairman powell says they are setting up a framework for a better america, a better global economy, is the financial system solid enough to wait for that to happen? jim: i think negative interest rates are a problem. no central banks around the they are seeing the example of europe, they are seeing it would take an awful lot. europe has put in a lot of countries off their negative interest rate policy, and i suspect the fed would be very difficult to see negative interest rates in the fed in the u.s. because you have fiscal policy that is moving much
quicker. if we needed a scenario where negative rates were deemed to be necessary, fiscal spending would be higher in the u.s. than it has been in europe. tom: what do we make of the of the grind in short-term? the everyday grind to a reversion to flatness? what does that signal? signals that powell has anchored the front end, and the back end is behaving as the market does. i think the debate about the yield curve, people get it all wrong. if you look through history, the yield curve leads the economy by 18 months. it does not have any impact real-time, so people talk about a statement or a flattening in real time, but you should look at what happened 12 to 18 months ago. the risk for 2021 perhaps is that the yield curve is been five or six months inverted in 2019. francine: we are getting a couple headlines from cctv, the
chinese network. president xi is urging reform in the communist party meeting about deepening reforms. jim, when you look at what the fed does next, how does the profile of the u.s. economy change if we have a trade deal? i'll quickly does that change? ite: again, i think a lot of depends on the tariff rollback. there is a tremendous about of -- amount of skepticism about the forward outlook. there is an expectation that this trade war will be with us in some way, shape, or form for years to go. it is not about phase one. it is basically about phase 5 or this is very unlikely to alleviate, no matter who becomes president of the united states. how does that relate to china? it relates to china being much more conservative in terms of how it reacts to growth slowdowns or that is really what we have seen over the course of 2019. it will be much more
conservative in easing fiscal policy come in easing monetary policy. it means you are not going to see china as the same kind of engine of global growth you expected them to be in the last 10 years. tom: it has to be extraordinary. we will keep the two of you with us with your views on the economy and the markets as well. chinese headlines are extraordinary. presidentbackdrop as commonest party meeting. we will visit hong kong throughout all of "bloomberg surveillance" today. coming up, we will speak to the admiral about the path forward for the secretary of the navy and the secretary of defense. this is bloomberg. ♪
tom: will you clip a coupon next year? let's look at the chart. i have shown this many times -- london inflation, five-year guess forward, and in europe, what an ugly picture, with europe a recent rollover in blue. jim reid of deutsche bank joins us, and gene frieda of pimco. we seem to be embedding disinflation in our system. how should we react to that? don't think disinflation matters if you do not have a lot of debt. if you have a lot of debt, which the global economy has. disinflation
matters immensely. this is an occasion where you have to hold your nose and try to replace the size of the economy to grow inside your debt. i do think we need more fiscal policy to try to generate inflation. word,he dreaded r "reflate." gene frieda, is there any evidence that the central bank can reflate? jim: i think there is -- gene: i think there is a lot of evidence, actually. we would have had much worse outcomes of central banks had not done what they have done. the optimistic on what you said is that inflation has done that has been reasonably well anchored on the upside and downside. we would like inflation to be higher, but we did not see it de-anchor on the downside. it kind of stuck. that is more a function of secular forces than cyclical. cyclical is ok, but potential growth is weaker than it was. francine: what will central banks do? what can they do in the next
five to 10 years? does it move to fiscal? banks have been fabulous at inflating asset prices, so we are leaning heavily on asset prices to get demand up. that does not work very well and it has deteriorating returns over time, so it really does come down to fiscal. fiscal has to be a bridge to somewhere. fiscal has to still -- the e.u. still needs fundamental reforms to happen with a lot of these economies. if you look at the u.s. where productivity growth has been week, you do not that has been weak, you do not fix that with fiscal. it is not as effective as where we see increases in spending. francine: will we get more spending e? jim: probably not until we have a reason to have it, which is if we get a recession in europe, and that is not on the immediate horizon. then i think things will change.
tom: thank you both. they will stay with us. coming up, the ml chief executive, coming up that 6:30 a.m. in new york, and 11:30 a.m. in london. we will ask him about whether germany could do more in that space and the appetite for consolidation in the sector as well. we look at bonds, we look at what is going on in the trade war. investors searching for signs of progress between china -- and china's comments about a trade deal. this is bloomberg. ♪
thanksgiving turkey, day off thursday. i am not cooking. francine: are we putting sentences together or just throwing out words? tom: great football, detroit lions. she knows the detroit lions and the dallas cowboys. here is viviana hurtado. viviana: speaking of thanksgiving, shortly after the holiday the house committee will submit its impeachment report. chairman adam schiff says there is still the possibility of additional hearings. the next step would be to send -- donl -- impeachment mcgann to testify to a house committee. committee is investigating obstruction by donald trump. don mcgann is covered by immunity and the justice department plans to appeal the ruling.
testng fast in turkey to and they are deficient -- a russian air defense system, nato is looking to sanction them, freeze, limitsset on credit, and restrictions. in the u.k., just what jeremy corbyn does not need. andparty publishes its race withmanifesto, dealing anti-semitism in the party. insists they are a longtime campaigner against anti-semitism. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am viviana hurtado. this is bloomberg. francine: boris johnson, jeremy pastn taking messages from
campaigns to win the december 12 election. theur plays on the fear of conservative coalition. a lot of people have ideas about the polls and it is unclear whether a larger majority for conservatives means boris johnson can extend the transition period. jim: a large majority gives them the flexibility to do that without the hard-liners in his party. i would imagine a base majority believe this will be extended if needed. francine: have we taken the risk off thedeal wto rules table? gene: not entirely. our view would be there is still a 50/50 possibility. even in the context of a solid tory majority where brexit is delivered in the next month or
two, we have a question about the future trading relationship between the e.u. and u.k. pessimists would say you have pushed the cliff out. it is unlikely, but nonetheless still a question mark. tom: for next year, and given all of brexit, is it a year to clip the coupon on gilt or can you have total return without relief of price -- yield down? -- price down? jim: they couldn't be more different. the manifesto promises a huge amount of spending which would issuance, whereas the conservative manifesto is actually fairly benign in terms of new spending. winspect a conservative
would keep gilt in the global framework where labour would be more questionable about gilt yields going up. it is not a political, it is just a fact of issuance. tom: on equities, we are getting a cross-section of opinions. of u.k.tand a partition multinationals versus u.k. domestic. is there an opportunity in u.k. domestic shares? gene: i look at it through a lens of currencies, which i know better than equities. i would say to the extent that we get some alleviation of uncertainty out of this election, there is upside in u.k. energy -- equities. in the context of a more adverse outcome, a hung parliament where the uncertainty persists, i am not sure you get a lot of downside. it is a case where you have asymmetry that returns.
on both sides of the distribution, it is not super exciting. case scenariobest for the economy is what? is it a hung parliament? gene: i think the best case for the economy is a clear sense of where we are going with this relationship between the u.k. and e.u. it seems more likely you will get some parity on that sooner under a tory majority then you would under a hung parliament. at least the option of a referendum comes back on the agenda with hung parliament, which could deliver a better outcome. we think that is a lower probability. the decision to stay in the e.u., that would by far be the best prospect. francine: do you agree? jim: uncertainty is the key problem for the u.k. economy.
people are reluctant to invest when they don't know the future relationship and brexit. takeaway the hard brexit i think will be a small positive for the u.k. economy. what is interesting about the conservative manifesto as it did not lean towards -- which would have made the future relationship with the e.u. more difficult to negotiate. esther johnson has kept his options open by keeping everything quite neutral and he -- all options are there if there is a mature -- tory majority. tom: we are going to stagger to december 12. what happens the morning after? gene: i think the morning is really about what i said earlier, do we get a clear tory majority where we can see some
alleviation of this uncertainty, or a hung parliament where the market has to go back like it is groundhog day, i have seen this before and i have to wait and wait? what is really important for the future growth prospect in this to whichs the extent there is a trading relationship with e.u.. that is what matters for the secular outlook. francine: thank you both, jim reid and gene frieda stay with us. we are getting breaking news out of saudi aramco, abu dhabi is to $1.5 billion of aramco investment. we will have more on aramco. there is a roadshow going on at the moment. the irishtion with finance minister focusing on the
turkey dinner. alibaba jumping on the first day of trading in hong kong. the strong showing isn't only what the company but with the hong kong exchange. they raised $11 billion, hong kong's biggest stock offering since 2010. great to have you on the program. because it has been such a success, does it mean bolder and broader in terms of the market share they want around the world? >> yes, that is to be expected in many ways. i think they have raised an 11 billionf money, dollars, the biggest listing in hong kong since 2010. that means they are sitting on $44 billion worth of cash. that is about double the firepower that their main line
in an so they can expand everything from artificial intelligence to cloud computing to online food delivery where they have been involved in a spending makes them one of the most cash rich companies in that world -- countries -- companies in that country. francine: on the first trading debut day, a lot of companies under delivered but this one, 6.5% higher is not bad. julia: it is not bad at all. it is not necessarily a gauge as to how they will price, but certainly a sign that the market here is healthy and functioning and there is still demand, and they have not completely shied back. definitely a better year than
2018 in terms of hong kong listings. up, andtings were held that would have bad -- been a bad occurrence. the play in america as they have apple-like cash. alibaba is not apple. what is any indication of what management will do with cash? buy, ae a twitter to foreign company to buy? we don't know what they will do, but they have apple level cash. what will they do with it? julia: it is hard to say. as you say, we don't really know. indications as to the use of the proceeds, such as drawing user engagement. they could buy back shares or sit on it, although that is not an efficient use of cash.
it is probably in terms of expansion, expansion and trying to compete with baidu and tencent. they have been expanding in cloud computing, entertainment, and artificial intelligence. that is the next big thing. those of the places to look at. tom: as they use tape on the cardboard box, that seems to be the intelligence of moving products in china, as expected. thank you, alibaba and the equity offering. jim reed is with us. this is a mystery but shows zillions and markets. gene frieda, hong kong in protest. business gets done, doesn't it? gene: that is right. hong kong is going through an awful lot, but we think we will get a de-escalation in the months ahead.
it is certainly a tenuous situation where some real questions are being asked about one country, two systems. francine: jim? company thatas a has proved itself so if they want to raise money, it will probably buck any geophysical problems outlet really. tom: interesting to say the least. jim reed will stay with us, and jean freda -- gene frieda. if you are interested in retail, the turmoil with tiffany's, how about we move down fifth avenue? the gentleman widely acclaimed to have saved saks fifth avenue, sivan -- stephen sadove will join us in the 6:00 hour. ♪
access without tariffs. the big reason -- the african swine fever that devastated the chinese heard. prices rising 69%. 60% tariff on frozen american -- imposed a 60% tariff on frozen american pork. dell hoping to get at least a million dollars for rsa security, which it acquired during its 2018 takeover of emc. tesco is hitting back at amazon with one of its sound tactics, a subscription-based loyalty plan. customers pay a monthly fee to receive special deals. jane is trying to find a way to boost sales. that is your bloomberg business flash. tom: jim reed with us and gene frieda as well.
let's dip into the cross-section of opinions for 2020 and beyond. that means a cautious view from pimco. reframe for us the pimco caution on potential gdp and on a potential interest rate path. gene: i would frame it as a scrooge outlook in the sense that i think our expectation is that the near-term path for global growth is actually up. markets and rate markets are trying to front run that, and we do not see a lot of reason to believe the turn in the cycle will be strong, even with monetary stimulus in the pipeline. we have used up an awful lot of insurance over the last three years in the one economy that seems to be able to deliver growth. a lot of rate cuts and rally in the bond market and fiscal in
the u.s., that is all gone. what happens with the next shock? tom: chairman powell with an optimistic speech yesterday, with the glass more than half full. are we on a path to ultra accommodative? re: going back to an ultra accommodative monetary structure -- are we going back to an ultra accommodative monetary structure? ofe: i think we are because all of the tools that have been used in the u.s.. it is the one place you can see monetary policy work doing something globally. you have the australians talking switzerland,an, and europe negative rates. the fed is the only major central bank left. francine: if you look at central banks and the end of what they
can do, what comes after word and what does that mean for bonds -- afterwords and what does that mean for bonds? jim: i think fiscal policy has to be used more. hard on the creative destruction guys. debt that is too big should collapse, but we have built a system that is too reliant on debt and if it collapses we will have a collapse in the economy, so you have to try to reflate that debt using fiscal policy and have monetary's -- monetary policy support that. nominal yields will be below nominal gdp to support that. francine: who has the fiscal space to do that? jim: when central banks can print unlimited money in theory, every country has a space. it is not a good idea but it is inevitable that is the way we go. tom: what does it mean for the
rate market in the year forward? am i going to clip a coupon or get a shock of the total return we saw this year, particularly in longer maturity paper? jim: i am hoping we run out of time before i have to answer that. tom: we will accommodate that because it is thanksgiving. jim: i don't think we will get a major policy move before the next downturn, so anyone who wants fiscal spending in a hurry will be frustrated. i think rates stay in this channel until you get a downturn , then rates go lower and fiscal spending goes higher and eventually rates go higher. i do not believe you are in a low yield environment forever, but you need a downturn or crisis to change policy responses to get us out of this low yield environment. tom: what is your gdp run rate?
are you sub 2%? gene: we are sub 2%. around 1.1owdown to percent in the first quarter 2020 and a re-acceleration over the balance of the year, but you still end up with something sub 2%. i would want to add one point, if you get to a point where u.s. yields are competitive with its g10 peers, you have a world where the dollar is depreciating, and that might be, if you want to call it, marvin exporting -- more of an exporting easier monetary policy from the u.s. to the rest of the world. that is something we have not seen but is potentially in the pipeline. it requires a more accommodative fed. francine: if you look at the funding yield curve, does it spell trouble ahead? gene: the market is skeptical
about the amount of stimulus delivering the outcomes we need to keep nominal growth above nominal interest rates. francine: thank you both for joining us, jim reed and gene frieda. weing up in the next hour, will be joined by brian levitt. we will look at trade concerns and how markets should position themselves as trade is still left right. looking at what is happening in the u.k., looking at pound. the glass isying more than half full. this is bloomberg. ♪
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chairman powell voices his zeitgeist. this is the bottom, the fed helping the economy recover. the glass is sort of half-full as the chinese telephone, ms at theing rays-ra white house. you are in cash. your glass is so empty once more, down 28,000, ryan leavitt with us this hour. live from our world headquarters in new york and london, francine lacqua. yesterday was merger this and that. you wonder if there will be a lot more mergers globally through the end of the year. francine: on the brokerage side of things, we spoke to jim o'neill. he said look out for regulation
because if you have two huge groups that may be marriage because of scale, it is unclear scale,e merge because of it is unclear whether regulators will take offense to that. tom: may be money at zero cost having a little to do with it. viviana: china and the u.s. are inching their way forward on the first phase of a trade deal, beijing saying they have " reached consensus on properly resolving relevant issues." comments from donald trump had led to speculation talks could last into next year. jerome powell says the u.s. economy's glass is more than half full and predicts with the right policies, the benefit can spread to all americans. he signaled interest rates would probably remain on hold. in hong kong, police searching
for remaining protesters on the university that has been under siege for 10 days. they only found one. they will enter the campus to defuse explosives. shares of alibaba jumped and they are to be you, and they announced -- during their debut. it is hong kong's biggest triumphthis year and a for alibaba and the hong kong exchange. 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. tom: thanks. let's turn to the market, interesting dynamics to say the least. a little bit of news flow with future slot. over the last couple of days, euro stasis with 109. showshe next screen which the under pending equity market,
1.97 on the vix. curve flattening, yen stronger under a 109. francine: stocks are slipping in europe. traders are trying to figure out what the signs of progress in china's comments about the phase one trade deal mean for their portfolios, treasuries and sovereign bonds a little bit higher. tom: my chart of the year is on the trade war. this is my chart of may be last 13 years, housing in america. the case schiller index, it is jaw-dropping. nominalhe crisis, return of well above 10%. adjusted for inflation is the red line. the crisis, down we go, one brief, shining moment in 2013 when we edge back to what we knew as normal and then down, down.
the real rates are at zero before you fix the roof on a given home. with us right now, not on a tangible asset of a house but the intangible assets of the market is brian levitt. how many pages is you are year ahead look? 85? brian: give or take. tom: you are in a meeting with a really smart guy at fixed income at invesco. what is the theme? brian: it is more of the same. this is a slow growth environment, benign environment. it is a good backdrop for risk assets. ashave dealt with volatility policymakers attempting to tighten too early or stimulate growth. incrementalear of improvements in policy and modest gross for rick assets --
growth for risk assets. tom: we are going to make single digit returns. how about up 25% year to date spx on the ugly q4? in double digit in equities? brian: i don't know, but it should be another good year. we are still in this environment where investors have not gotten overly enthusiastic about equities. stocks are cheap to bonds, policy is accommodative. that thision fears has been going on for too long, this cycle is not ending anytime soon. it is an elongated bull market and should go on for longer than people can expect. francine: what if it doesn't? what if we can't reach a trade deal? brian: there will always be
uncertainties and i suspect we will be dealing with trade for some time. the key thing investors should be watching for is incremental progress on trade. i don't suspect we will have a fully baked trade deal by the election. you will see incremental progress, better town, some , somelity -- better tone volatility in the markets. if we make a policy mistake, the fed gets too tight or we go back on trade, we will see what we strongt december, a dollar, flatter yield curve, financial conditions tightening. i expect incremental improvements in policy. you are seeing that in financial conditions and markets continue to go higher. francine: what happens to dollar? brian: the dollar should be relatively stable. you would normally think a
better policy mix in the united states would lead to dollar stabilization and we seem to be there from the federal reserve. the u.s. is a trend growth economy so we are not raking out significantly, and the u.s. will be running some large deficits over the next few years, so the dollar remains range bound as it to 2016. 2012 for you get major credit saying shut up and stay in the market. this is the s&p 500 broader market index and over on the right side, 25% up. i need to sell the end of april. i really need to sell june-ish. then we get malaise in august and the rocket launch of the last couple of months. there were x number of reasons to sell this year.
how do you find the courage to stay in? brian: this is a secular bull market that started at weak sentiment and low valuations, demographics are generally favorable -- tom: i don't mean to interrupt, but rotation is the big word. we are not rotating. own amazon, buy more apple. this is not normal. brian: you go in the summer, rates are at 1.50, yield curve is inverted. tom: go to cash. brian: immediately you get a better policy mix, rates go to 1.90 and everyone gets excited this is the value rotation. ,n order to sustain itself growth would need to get higher and it doesn't happen. you have policy uncertainty around trade, rates come down. it is a growth market.
tom: i have been in the triple leveraged all-cash fund and i have to have swanson turkey dinners for thanksgiving because i am in the triple leveraged all-cash fund. francine: showing that tv dinner on tv moments ago kind of unleashed memories of childhood in the newsroom. the concern is that the u.s. consumer gets impacted. infected, or she is it is game over, is it? brian: i suppose at some point, but there is little indication the consumer is about to run into significant trouble. the labor market is tight. wages are creeping up some. equity valuations are up. households look good. at some point, we will have an economic cycle. the question is, why would we have one in the near term? mistakes, tighter fed,
none of that appears. tom: is this finally the rotation to international? we will talk about that. brian: you will have a stabilization of the currency and in the u.s. dollar, with some stimulus from the ecb and china, should unlock some of that value outside. u.s. growth will continue to be a big winner. we like the emerging markets. better policy out of the united states. if we get some trade momentum, valuations look cheap. tom: i have been trashing on swanson this morning. they are feeding first responders worldwide. this is my tragic youth. francine does not understand this. this is high cuisine. we say good morning to swanson for all their work.
♪ you are watching bloomberg "surveillance." more tension between management at google and activist workers. employees forfour violations of its stated security policies, but they say organizing activities led to their dismissal. some protests. they work with the military and are unhappy with the handling of executives accused of sexual harassment. shares of hewlett-packard enterprises are lower.
datais the signal that hardwire is stuck in a slump, hpe reaffirming its forecast. in australia, a giant money laundering scandal led to the downfall of a bank ceo. westpac's ceo quitting under pressure, accused of the biggest violation of money laundering laws in australian history. that is your bloomberg business flash. tom: i will speak with the former supreme commander of nato and a vp candidate at one time around. our kevin cirilli, chief bloomberg washington correspondent. i thought jonathan bernstein really captured the moment for this white house, melded in a couple of the themes we have. be aost likely outcome may
close to partyline impeachment in the house, acquittal in senate. stuckvative republicans with nixon in 1974 -- well, they did not, i remember that clearly. thechaos shows that president remains quite capable of doing damage to himself. ultimate damage going to be his secretary of defense? what does the secretary of defense do? kevin: from the president's perspective, it matters more what his messaging will be for 2020, and the calculation that he is making as he wants to stand with the men and women in the military, even when it appears controversial. culture-esqueed a war in the united states about military conduct, and the way that military service members are treated publicly as it
relates to whether or not there conduct is becoming. that is something i think the president is looking at poll numbers for in the sense that from his perspective, fits with the messaging that got him in the white house in 2016. tom: it is extraordinary, and i want to go back to the relationship of the navy and air with the the army secretary of defense. what does the secretary of defense do? where he has to decide is going to come down as it relates to the commander in chief, president trump, and military officials. i would note this is a debate we paradigm a different in the bush administration as it related to the -- iraq war. in this environment, there is a
from london and new york. jay powell striking and up the tone,confident -- upbeat confident that the glass is more than half full. tomonday, he continued signal that rates would likely remain on hold. this kind of goes back to your optimistic view that things will be better for longer. what would a policy mistake look like? brian: we saw it in 2018. the federal reserve mischaracterized the economic environment and believed the stimulus would lead to a higher level of sustained growth and they raise rates multiple times. carville said he would come back as the bond market to intimidate everyone, and it intimidated everyone -- the fed
on having to back those increases. strengthening the dollar, flattening the yield curve, and high yield spreads start to go out. commodities weaken and everyone starts to talk about a recession. francine: overall, are the markets not going to believe what the fed will tell them? brian: i think the bond market does that anyway. the bond market is already saying that growth is still a little bit weak, we need a better mix on trade, probably another interest rate cut. provide market will more guidance to the fed than the fed will ultimately to the market. it is an environment where we should continue to expect easy policy far longer than people expect. in the their elasticity
corporate income statements to still drive earnings? can we drive down the leverage income statement even if earnings are soggy? brian: earnings will be challenged, but the market got ahead of that and businesses have flexibility. i believe an improving economic backdrop amid better policy globally will be supportive. u.s. only, or can you go abroad? we are hearing that interview to interview? brian: you can. the big challenge has been the strength of the dollar, so capital has continued to flow to amid growthtates and tighter policy. 2017, you had more of a synchronized expansion that favored the rest of the world. we needed a coordinated policy mix to get there.
it appears we are getting back to that environment. we disrupted that was stimulus and fed rate hikes. now we are back to federal reserve not doing much of anything, ecb and bank of japan supporting the economy, and china working to stimulate growth. francine: when you look at central banks around the world, does everything rely on the fed? this is a very tom keene question, is the fed the central banker to the world? brian: it is, to the extent that the dollar is the transmission mechanism. what the federal reserve is realizing is having tighter policy in a slow growth, dare we say disinflationary world, leads to a strengthening dollar, outside theht from world that is disruptive to non-dollar valuations and to the
u.s. economy. it hurts corporate earnings, so the reserve needs to be cautious. they can't raise rates to the extent that the dollar strengthens significantly and money comes to the united states . tom: do we see dividend buyback? brian: that continues to be the story. heading isme you're 85 pages? you could have done this in six pages. brian: we will have a more abridged version for you, but that is the story. 2018, good growth, bad policy. 2019, weaker growth, better policy. francine: thank you so much. brian levitt of invesco. we will be speaking to francesco starace joining us from a lawn about what the trade
concerns mean for his investments, and if he thinks germany is ready to do more on the fiscal front. we speak to a number of economists from germany and they are starting to have green bonds , but whether they will commit to fiscal spending depends on what gdp will do. european stocks dipping with u.s. futures, bonds edging higher. a lot of this focuses on china's comments that china and american negotiators have reached consensus and have agreed to stay in contact, unclear exactly what it means going forward. this is bloomberg. ♪
the thanksgiving holiday, the u.s. house intelligence committee will submit the impeachment report. there is still the possibility of further hearings or depositions. the next step would be for the judiciary committee to send impeachment charges to the full house. don mcgann to testify to a house committee, the panel investigating possible obstruction by president trump. department will appeal the ruling. u.s. senator's vowed to work over a punish turkey russian missile system. the sanctions could include an asset freeze, limit on credit, and visa restrictions. in the u.k., just what jeremy
corbyn does not need, the party launching their race and faith manifesto after a chief rabbi attacked his record, suggesting he is not fit to be prime minister. his party says he is a lifelong campaigner against anti-semitism. 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: thank you so much. it is the primal scream of europe delivered, the anglo american returns. the most interesting utility out solidly inrofit double digits. is ahief executive officer nuclear engineer, francesco starace, and he joins us. thank you for joining us in this wonderful time for your company and italy and europe.
give us the strategic plan that allows for a double-digit return forecast, versus a single digit malaise of so many other companies in europe. what is the pixie dust you have that others don't? francesco: basically, what we have done -- first of all, good morning -- is trying to anticipate what would happen. we seem to be having had enough 2015, and, anticipated what was proven to be the dynamic of an industry, the big shift to renewables, renewables becoming extremely competitive and a huge, open, wide battlefield where efficiency in cost makes sense. that is how we were able to wade through this and make money. you know the carnage that
is the general electric company. you worked at ge years ago and went on to alstom and others. they screwed that up big time by overpaying. is there a risk in european industry of overpaying for assets? brian: i think there is a risk of overpaying for assets everywhere in the world. the issue is when you buy an asset and look at it in the future, you always try and project the future, and that is where the difference is. is annk the asset incredible value or can destroy value. worldeve that because the is increasingly accelerating included,, our lives projecting to the future is increasingly difficult. we made a decision a long time ago that not investing anything
that would take more than three years to be built, and that freed us from lots of mistakes and gave us the freedom to use capital in a more flexible way. that was really what moved us into renewables. francine: what does that mean for -- what is the next big thing in clean energy? is it driverless cars or other things? if you only have three years, will you be lagging behind? brian: i think that anything that we look at -- francesco: i think anything we look at today will be accelerated. all, we don't think any more about renewable energy. we think it will be carbonized --decaarbond -- de ca
ized. it is a question of time and the transition is ongoing. 2019 has been quite a tipping point, the first time that renewables are going up and the others are going down. it is happening right now in front of us. the value creation is mind-boggling, really big. francine: is the devastation we saw in venice last week directly linked to climate change, and will we see many more venice type disasters? francesco: you will hear a lot of people saying we always had high waters in venice, it is not something new. it is something we had in the past, and it is true. there have been occurrences where the water was high in the past. which this is
happening is much bigger, so the phenomena is on an acceleration curve. is it related to climate change? rising water levels are the direct effect of climate change and there is evidence scientifically. because venice is a city that is at water level, it would be strange that this would be related to climate change. the frequency of high water events in venice is increasing as we go in the future, too. ask, i am going to do this in fractured italian. -- i hope i got that right, the walls in the venetian lagoon that are supposed to stop the water, are we asking too much to
save venice? of we asking too much engineers in saving venice? francesco: venice is a city that engineers and by preserved by engineering all along. without engineering, there would not be venice. ,ou would be building on water and the foundations on the houses of venice, it is amazing what engineering can do. it is impossible for engineering to save venice. it is perhaps, why we are doing this so we have to try hard at saving venice from waters. we need to stop the waters to get higher and higher as we go by and it will be more difficult going forward. tom: thank you for joining us, the chief executive officer of enel and a great engineer of
eyes and nail people, it is a lot of fun. down,f you throw anything your heritage in retail saks fifth avenue, the question is, are the french going to own it all? and lvmh and richemont on fifth avenue. stephen: they will certainly own a lot. the acquisition of tiffany will be transformational. tom: what will they do, remodel it and make it younger or try to do more upscale or both? stephen: i think they will do all of that. tiffany's is a great band and expand theen able to consumer bases of all the brands they work with. take wavy tall -- louise the
tton.-- louis vi they have a terrific chance to strengthen the business in asia and the u.s., 4 billion plus in sales. tiffany has a great opportunity to expand locally and for louis vitton to expand its presence. i do a lot with the mastercard team, and if you look at the mastercard spending, jewelry is holding up pretty well so investing in the jewelry business is a good one. francine: how much can you change tiffany? knownuy brands that are but aren't huge everywhere. tiffany has a pretty good footprint in asia and the u.s. how can they transform the business? stephen: what you want to do is
evolve the business. tiffany has a good position with silver, but you can elevate the brand. there is a lot you can do in modernizing the business. certainly from even a presence in asia, there is expansion opportunity so i think lvmh can do quite a bit with the brand and i have seen them do it with all their acquisitions. francine: are there any brands that are as big as tiffany's that people will want? tiffany's was the last independent jeweler that could be bought out. stephen: there will continue to be consolidation. tiffany's is one of the biggest, but there are a lot of midsized brands ready for consolidation. retail in general is a story of consolidation. tom: what you did more than anything is you brought exclusive, single items to saks
fifth avenue. now the new competition is rent the runway. good,ill that do to the better, best of department stores? stephen: it is transformational. consumers want product anywhere, anytime. tom: do department stores have to do their own rent the runways? stephen: you are starting to see it. you had nieminen doing it with an doing runway -- neim it with run the -- rent the runway. it will continue to be a part of the ecosystem. tom: what did you learn from the collapse of barneys? stephen: there is an issue that barneys had, it is fundamentally a small niche and it is very hard in a large real estate space like that to support a niche brand. barneys was always a new york
-l.a. brand. in today's economy with all the fragmentation, you could not support a large business in that kind of footprint and what happened is what has happened with a lot of retail, consolidation and a brand like that could not survive. francine: for a lot of our global audiences, italy has very firm brands which tom was saying the french conglomerates are buying up. you have brands elsewhere in europe. what about the american brands? can they ever get to the critical mass like the europeans? stephen: they may or may not have the large conglomerates, but the tapestry, and the coach conglomerate, michael kors conglomerate, i think clearly you have those coming on strong. i don't know that they will be as big as the european ones.
tom: i was thunderstruck when i heard gap took a past three years ago not to have a creative director. you had the second floor, third floor in saks. tell us how critical these creative directors are now as we have seen them regenerate? stephen: there is no question a creative director sets the tone for what the brand will stand for, and can make a big difference. there are examples in the fashion world where you do not need a creative director there but you have a creative team. it can make an enormous difference. tom: what does tiffany do? was a talented designer at coach and brought it to italy. tom: he is going to tell us we have to go to tiffany's. stephen: they have done creative
stuff in the marketing so we will have to see what they do. i want to talk about the consumer. the consumer is healthy but not growing. we will have a good holiday season, 3% to 4% growth, but not as fast as a year ago. the mastercard spending was up 5% last year and this year you have 3% and 4%. you have some winners and losers. is a loser, experiential is a winner. americanou see the consumer still supporting this economy and the good feeling about equities? brian: absolutely. the american consumer is in good shape. the job market is picking up and equity valuations are higher. you see it in the polling data and in the behavior.
people want experiences more than things. we will get to that. we will do that. francine: tom was in a shop room recently and talked about our global experience. brian levitt and stephen sadove stays with us. jumps, a welcome victory after another defeat for carrie lam. what is next for china's e-commerce giant? we will discuss. ♪
dell exploring a sale of its cybersecurity service, hoping to rsaat least $1 billion from security. tesco hitting back at amazon ,ith one of its own tactics introducing a subscription-based loyalty plan. tesco members will pay a loyalty fee to get certain deals. the chain is trying to find a way to boost sales. that is your bloomberg business flash. francine: we are back with stephen sadove of mastercard, the former chief executive of saks. we were talking about the high-end luxury market. how much of this segment will do online? how difficult is it for luxury companies not to have the brick-and-mortar foreign five years from now? stephen: historically, they
thought they should not be playing that line and focused on brick and mortar, which has evolved. saks fifth avenue and neiman marcus are doing 30% of their business online, and even the l -- lvmh'she world have moved toward their own digital channels. internet is important these days. francine: will it all boiled down to amazon? amazon is trying to do a huge play in luxury and we have alibaba in hong kong. just be years will it amazon versus alibaba in the luxury space? stephen: i don't think so. higher-end luxury brands will probably steer away from amazon. you will see other marketplaces
evolve and they will have their own presence. amazon is an important core marketplace. i don't think it will be the primary avenue for the luxury brands. francine: will we see more consolidation in retail? stores department standalone survive? stephen: department stores have been a history of consolidation for a hundred years and that will continue. you still have the presence of a few very large players like the macy's of the world and they are getting smaller. in the united states we have four to five more times per capita square footage than in europe. whether there are too many macy's or too many department stores in general, you will see consolidation. of have seen a deterioration the department store space of 3% to 4% over the last few years,
and this year we are down so you need to see consolidation in an omni-channel world where the internet as comprising 25% to 30% -- 35% of the business. francine: stephen sadove joining us. plenty more coming up. we speak exclusively to the irish finance minister paschal york.e at 8:30 new u.s. equities drifting with u.s. stocks. investors looking for progress in chinese negotiations with the u.s. this is bloomberg. ♪
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consensus on properly resolving relevant issues for phase one. powell's glass is half-full. fed chair jay powell says the u.s. economy's glass could fill up even more any policies could benefit all people. and $70 billion worth of m&a. we speak to kirkland's ceo after gold in one of the biggest mergers of this week. welcome to "bloomberg daybreak" on this tuesday, november 26. we had a record high yesterday, and now taking a little bit of a pause. s&p futures pretty much going nowhere. not a lot happening in the bond market. not a lot of movement in the commodity market. i feel at this is a theme going into a shortened holiday week, also headed into the end of the year and the month end squaring. best buy numbers coming up