-- warn of the chief executive there does not step down, their pro-democracy demonstrations will get bigger. toentists in texas try determine if the ebola patient infected anyone else as the tourism industry scrambles. good morning, this is "bloomberg surveillance." it's thursday, october 2. washington ahead of the imf meetings later this week. he will be speaking with christine lagarde at noon. we will bring you that interview when it occurs. 12:00 p.m., tom keene with christine lagarde print i think we need to start off with that data check because it was quite it day yesterday. >> it was nasty day and continues this morning. we were down 238 points yesterday on the dow. how much theook at s&p 500 has fallen from its heights, and it's only 2.5%.

up th andeis going vix is going up. at 2.13.res are lower crude is 92 which is low. in spite of the headlines coming out of russia and iraq and syria, oil is down because we are not growing to the extent we were. >> the supply issues in the u.s., we have plenty of it. let's go to the russell 2000 index. this is a 10 year chart. you can see would get annualized gains of about 4.8% which is better than the s&p 500 but here is that correction. people warned that that might be the canary in the coal mine for -- big caps.start in >

>> we've got small caps down four percent and you look at in --hart -- can we bring i want to show you on the 10 year chart, this is the scary thing we are seeing. in the long term that is not scary. that says we can go further down. our twitter question of the day -- is the u.s. stock market on the verge of a correction? you can tweet us. >> we don't want to be alarmists. it has been three years since we have had a correction of more than 10%. >> some people say we are a long way off from any kind of bear market in the u.s. you up to date with stocks overnight, extending losses in japan which was down 2.6%.

europe was down about half a percent. in the u.s., we were just talking about brent oil and it dipped below $90 for the first time. we got a lot of economic data coming out today. job claimsd weekly are at 8:30 a.m.. the weeklyw you jobless claims versus the s&p 500 and the correlation is incredible. bloomberg consumer comfort insect -- index is at 945. >> that will set us up for the jobs report friday. >> the ecb press conference which we will go to at 7:45 a.m., we will find out what happens. finally, constellation brands are reporting earnings. they bought corona beer. be speakingama will in chicago at northwestern

university on the economy. at some point this morning. >> we will give you those details when they occur but we want to give you the latest stories on the front page. start in hong kong where students are threatening to invade government buildings unless hong kong chief executive steps down today. pressure is mounting on him to at least open a dialogue with protesters. mayednesday night, they have seen the biggest said and so far with more than 3000 people and the crowd thinned out a bit thursday which was a public holiday. the communist party newspaper, people's daily, published a commentary setting -- saying the government was satisfied behind the chief executive. we want to bring in andrew davis -- do we have him? he is remote in hong kong. you have been monitoring the does -- of these developments. the commentary from the chinese

newspaper accusing hong kong protesters of dragging the city into chaos, i cannot feel if there are shades of may, 1989. >> it's hard to talk about student pro-democracy demonstrators in the streets and china in the same breath without thinking about tiananmen square. they rehash the same kind of language over and over. until now, everything has been very peaceful. there is no real fear here that even if things escalate they will bring in the army. that happened 25 years ago. for now, that does not seem to be a possibility mostly because of the scale of this thing. has enoughhink thela people here to confront it -- i don't think the dla has in a people here to confront it. it does not appear that the chief executive will resign. beijing has just read endorsed and they will not hang him

out to dry and the students and the police seem to be girded for some kind of confrontation. appears the hong kong government strategy was to wait it out and let the protests drag on an inconvenience the rest of the city. hein kong is a high functioning business center. are people getting tired of this? are starting to see signs of that. you see some of the protesters being confronted at the protest site by people who are really angry about this. some of the taxi drivers are complaining and others say they are making more money because buses are not running. a lot of small businesses and the big luxury retail brands in the area of the protests have been sure -- have been forced to shut down because they don't have shoppers or people can get to the stores and workers cannot get in and i cannot bring in supplies. that area, it could be very inconvenient.

reallygest areas not disrupting business is very much because most of the people are on a wide highway. the roads are shut which is inconvenient but there are other areas that are more densely populated. >> thank you so much. >> andrew has been tweeting and you can follow him. @abdrona. >> he's got pictures and live reports. our second front-page story as health officials monitoring a potential second ebola patient in dallas. they are monitoring people who are in contact with the first and they say he came in contact with five kids.

they say he was in contact with 12-18 people overall. united airlines says the bulk of the man's trip to dallas was on its plane. we saw how the airline stocks sold off yesterday. >> when he got on the plane in liberia and then in london, no signs whatsoever. tore was no reason for him be suspicious but it was not until he landed. someone who is not contagious, it it does not pose a threat until he poses -- until he shows symptoms. >> we've got congressman michael burgess, a republican from texas who is a licensed physician so he will talk about his experience and he represents texas as well. story -- aront-page former presidential bodyguard will now run the secret service on an interim basis. joseph clancy was in front of

presidents protection and is taking over for julia pearson, the director who resigned yesterday. there have been a bunch of unbelievable breaches of security. >> there were two in the past week where people actually got onto the white house lawn. >> the one man got into the another one was permitted to ride in the elevator with president obama in atlanta elevator. we will go now to washington, d.c. where tom keene is. you will sit down with christine lagarde from the imf? certainly, the discussion surrounds what is happening in washington with the secret service. you mentioned you ran into a couple of secret service guards? to observenteresting one of their first store tease. i did not know if the daughters but it wasr pizza

amazing to see our secret service working in real time. they had about 11 black cars in the assistance of the washington police. it took two hours or so to get restaurantto joe's on 15th street. i will sit down with the managing director and know better time than one week before the imf meeting. move,he markets on the there are many ways to go with christine lagarde. down andading the way global economic slowdown and disinflation, markets on the move this morning, is the managing director >> we want to bring in our guest house for the hour, ian shepardson.

he is joining us in new york this morning and rich lesser. this ecb meeting that will happen today, it's a big one because mariano draghi had promised to step up his asset buying. is there a bigger step up? >> not today. eventually, it could. it's a big step. it's potentially too big for germany to accept so this will be the short term focus. i don't think it will work because the fundamental o problems of the europe are very deep. we could see a full shift on sovereign qe. >> let's defineabs. that is asset backed securities, and makes a loan for a car then bundles though car loans together. in theory, that should help consumers but you say it won't. >> it's not clear that the

problem in europe is the level images rates which have fallen a long way. purchasesng these abs and driving rates down is not really the problem. the european problems are structural like in france and italy. everything is tinkering at the edges. it will not fix the fundamental problems. rich lesser, you just got back from asia, step -- tell us about the state of the economy's there? >> the important context is that there is challenges in china where they will go through slower growth as he gets back on a track for the medium-term and housing sales over the last three months are down substantially -- substantially be awareeally have to

of the emerging market in china which is flattened but the affluent consumers are growing substantially, those making $25,000 per year or more are expected to grow 12% through the end of the decade. the classic fast food and consumer goods are seeing limited volume growth. on the other hand, travel, auto, health as people get wealthier, they are expected to grow substantially. on, we will be discussing ebola and its impact on the tourism and travel industry. we will be right back and we will head over to washington where tom keene will speak with christine lagarde later today. first, he's got some commentary on the midterm elections. ♪

>> good morning, everyone. and here in washington scarlet fu and adam johnson are in our world headquarters. is out in service force this morning and they will be running 40 miles to get ready for the day. it's a new regime at the secret service and it has been the topic that pushed aside the washington nationals they look for a world series. the secret service is front and center and peter cook joins me. i witnessed seriously what these good people do every day. the president went out for pizza with some people that won a contest? >> he had a quick visit to a restaurant right next to the white house. this is stillnats territory, i don't -- this is still nats territory.

the president met with a couple contributed who had to a campaign and 81 dinner with the president. you saw firsthand what we see every day. the secret service provides protection to the first family. we sawot an adequate and heads roll, a political story play out yesterday with julia pearson's departure. i think of the james garfield monument coming down from the capital, this is serious business in washington. what does the secret service need to do to move forward? >> first of all, it has to restore some sense of normalcy and some level of competence. the last tidbit about what happened in atlanta with a security contractor with the gun on the elevator, our understanding is that event shared with the

president of the united states and that may have been the final straw. could the first lady have said enough? >> it's interesting that the person they picked as the interim head of the secret service, joe clancy, headed the presidential protective detail for several years. as we understand it, she was part of the decision to bring him on board. family about the first where they have children and other relatives in the house. the bipartisan average on capital hill is pretty palpable. >> this'll be focused on the elections four weeks away. right now, why do you want to talk iowa? nowt is a blue state right and tom harkin has held that state for years and bruce braley was seen as an opportunity for the democrats to hold onto that the seat. it was a close race until last week.

this very respected poll resonated with people because it showed her up b. the democrats are holding the senate so it's not the only way they can get there but everything has to go right for democrats to hold the senate. >> what is the likelihood of a nationals-orioles world series? >> that would be a wonderful thing for the beltway community but traffic would be awful. will throw out the first pitch with the secret service. i am in washington for a conversation with christine lagarde. that will happen about 12 noon and i will talk to her about the grave concerns on global economic growth and the imbalances of nations capital flows. that look forward to conversation. let's give you some company news -- coca-cola is trimming its stock compensation lan after criticism

from billionaire warren buffett and other investors. fewer shares we issued to employees and more transparency will be provided into how that are more. warren buffett is coca-cola's biggest shareholder. true is introducing pepsi which uses a natural sweetener. beverage makers are struggling to keep their customers who were concerned about high calories and health risks. an additional title for bank of america ceo brian moynihan who has now been named chairman of the board. succeeds charles chad holliday to remains a director and this will take effect immediately. brian moynihan bounces back. he's both the ceo and chairman of the board. >> only big bank ceo who is not yet chairman of the board is citigroup's michael corbat. corbett.tte -

wrapping up d.c., make sure you tune into bloomberg politics, the debut will be on monday. this is the new show with john heilman. i'm sure you read their book. 5:00 "withober 6, all due respect." you are watching "bloomberg surveillance," on bloomberg television, streaming on your phone, your tablet, and bloomberg.com and now available on apple tv and amazon fire. ♪

tom keene is in washington

well if you will speak with christine lagarde at noon. it is time for our morning must read. this is a morning must listen. >> it is a must listen from the ceo of ford after we spoke with him early this morning and i asked him about growth and what the situation in russia is going to do to sales. our view is that somewhere down the road it will be the largest market in europe. we have been investing. we started two years ago with only two products and by the end of next year, we will produce 11 and want to serve the russian customer. it's a big important market. two main stories out of europe today -- one is at the paris auto show where everyone is fighting for market share because the pie in europe is

not necessarily going to get better. in naples, mariota drahi will be talking there later today. some of the manufacturers are marianoariota draghi -- mario draghi. >> we will go live to the paris auto show coming up later in the show. we have the ceos of porsche and mercedes. this is "bloomberg surveillance." ♪

>> good morning -- eric weather question of the day -- -- our twitter question of the day --

us.t this is "bloomberg surveillance." tom keene is in washington attending that ahead of the imf meetings where he will speak with christine lagarde at noon today. adam has our top headlines -- the pimco fund estimated 25 billion dollars in withdrawals, it's worth month ever for withdrawals in the largest cash exodus occurred september 26, the day of his departure. the head of argentina central bank is stepping down. his resignation comes after whoicism of the president called up the bank for leaking inside information allegedly. he has been in the post since only november last year. health officials are retracing the steps of an ebola patient from liberia to texas in an

effort to do tech whether the virus has spread. on unitedjourney airlines at spam for airports across three continents and the world health organization says the death toll in west africa has topped 3300. hoping thatainly ebola would be contained in the shrinking but that's not the case. >> it's coming to the united states and we want to bring in the president and ceo of the world travel and tourism council. adam was telling us for airports across three continents. givew it's early on to numbers but what kind of impact will this have on the global tour is an industry? >> it's too early to estimate. it will not have a dramatic impact. you have to put it in the context of africa which is three countries and only three countries out of the 47 across the whole of africa. if you look at the landmass, you can fit the whole of the u.s., europe, and japan into africa. people need to know where the

problem is. >> what about europe and the united states? now that it has crossed the borders can i feel it is dammed if you do and dammed if you don't about security. people get freaked out when they see nurses or doctors at the hospital with masks. >> it's a bad perception when you have these out right. we saw this with the sars outbreak 10 years ago. the key is information. is very clear information about how these diseases spread and how they are being stopped and what it is consumers need to worry about. you are with the world travel and tourism council. for those of us who have been reporting on this, i was concerned earlier in the week when the government would not tell us which airline and now we know it is united and which airport and now we know it is dallas. /fort worth. i understand the government did not want to let the cat out of

the bag but how do you react that the government did not cooperate initially? is one isolated case of one individual and we hope it is the only one. what's important is the governments on the ground in these countries giving the right information out about was happening and what is happening to prevent the spread of the disease and giving people confidence that it's only operating of those three countries. that is critical because we see tourism number starting to drop in places like gambia. there is no impact and laces like africa. that is the silver lining. er, the united states is developing a global response plan? inwhat the u.s. and has done this situation is a ordinary. governments around the world

were slow -- what the u.n. has done in this situation is extraordinary. it has created the first health by 134mission sponsored countries which is not happened before and is the first time it's an all agency coordination. they have put a 30, 60, 90 day plan. artie days to get as a sonogram, 60% to get it under control, 90 days to start to turn the tide. >>? mean?t does that we have one of our project leaders on the plane right now going to visit the governments of these countries. the u.n. has made a priority to get the governments on board and make sure this is being done in a coordinated way. without the african countries on board, it does not happen. it is an all hands on deck, unique mission for the u.n.

because it's a massive global challenge. in just the three countries affected, it is doubling every 20-30 days. it is justabout how those three countries now but it is moving beyond that in terms of the perception fear. "the new york times" wrote -- you mentioned sars and how we have experience from these outbreaks. what are the best practices from how asia and the airports and the hotels dealt with containing sras? >> it starts with the government to restrict the spread of these diseases and then it comes down to information. it is a limiting the perception out there and talking about the reality. amounties learned a huge

and we also have terrorist incidence and natural disasters. when we attack these problems head-on, the industry recovers very fast. mentionedsras - -- we mentioned sras sars. what didsras do? onit had a visible hit growth and the economy and a stop people moving and services being delivered. it scared potential consumers and potential tourism and scared business travelers. it has significant impact but it was contained in everything return to normal but the danger of ebola is not knowing how far it will go and how rapidly it could spread. the case in the u.s. is different than 3000 cases in west africa because the infrastructure is here to deal with it. >> which is more frightening,

the fact that a bullet to jump to the u.s. or the fact there are 3000 in africa? >> you should be scared in west africa but if you are in dallas, you should not be scared. herempetus to deal with it is very big. victimsrrible for the in africa because there is no infrastructure to deal with it. >> this creates an economic crisis and its a social and cultural crisis with thousands of orphans and rape ports that the liberia gdp could be down 50%. the need to bend the curve in the outbreak rate is essential and the mission is incredibly hard given the dynamics and the lack of health systems in those countries. the world is now on it and if there is optimism, unlike a couple of months ago, governments around the world whether in the u.s. or china or europe or cuba are putting doctors on the ground. it's a huge challenge. >> like with the u.s. did with

sending over the military. you are still fighting a perception industry. we need to look at how airline stocks performed yesterday, tumbling because some investors are worried. >> it's a perception issue. the flights canceled going in and out of these three countries are like two percent of the flights daily in africa. we employ about 19 million people across africa, nine percent of gdp, so the key thing for us and the airlines is specific about what the problem is and why people are not flying temporarily and the economic tort-term impact and then climb out afterwards buried once this is contained, he comes back to normal fast. >> this is not like the movies. thank you so much. lesser is our guest host this hour. >> there is the new car watch.

porsche has a hybrid and there it is. we will take you live to the paris auto show to talk about this thing. it is fast and electric. it's not cheap. we will be right back. ♪

>> you are watching "bloomberg surveillance." is antoday, tom keene washington, d.c. talking with christine lagarde from the imf and we will get her take on markets and the turmoil and tepid gdp growth which is flat in europe and its japan, about 4.6%. we will bring that to you live at 12 noon right here. em schappert sin is with us this morning. -- em schappert sin is with the

-- and shepherdson is with us. what is your take on auto sales numbers? >> the numbers could not be sustained so i'm not bothered about the september numbers. the trend is improving and we are seeing pent-up demand that is coming through. the market is getting better and incomes are ticking up, the conditions are there for that trend to carry on rising. --ust was so spec secular was so spectacular. >> what about automobile loans? >> credit conditions are improving but the quality of the borrowers is going up with more people with better jobs for years ago. you should be able to get a car loan and lenders should be able to make those loans. i don't think we should panic about this.

this is not a rerun of the housing catastrophe or anything like it. >> the optimism about the u.s. economy around the world is in direct contrast to what you see when you read the papers here. there is a lot of belief that the combination of the strong underlying fundamentals like labor and energy costs and innovation should create a good foundation for good medium-term performance. >> at least in the u.s. >> sometimes and direct contrast. ian referred to france and italy and there are big challenges in other parts of the world but i think the u.s. fundamentals are quite sound right now. >> we want to address those challenges and go to europe. it is green, luxurious, fast -- this is the new porsche cayenne hybrid debuting at the paris auto show. i was horrified when you offered the automatic transition but i like this one.

it's clean and green. we may not have the ceo. we have some audio difficulties. are you with us? >> hello, i can hear you. >> wonderful, we are going to take a very quick break and sort this out because it's not fun dealing with a five second delay. >> eric twitter question of the day -- our twitter question of the day -- ♪

>> this is "bloomberg surveillance." tom keene is in washington world viewers speak with christine lagarde at 12 noon. we will take you there live. we were trying to take it to paren -- paris moments ago. we will go live with the ceo of porsche. we could not get it together. >> you are hard fight by the automatic transmission. we just completed a look at chinese automobile owners. 75% of chinese automakers say when they get their next car, they want to trade up in trade brands in the main beneficiary of that are the german auto ofnds for chinese owners

lower end cars. both wagon was the number one beneficiary and the midmarket foreign car owners who want to trade up, it's the german auto brands in general. that's where people want to go. the whole auto market in china is in play. generation the next as people get their next car, they want to move up and they will change brands. >> it's amazing to drive around china. it has been two years since i was there but the aspiration of the chinese consumer, you know it better than i. >> it's hard to drive around because there is so much traffic. it's in contrast to what we see in the west. it seems like the younger generation does not want to buy a car or own a home. all that is affecting the way our economy grows. >> especially in europe where we heard that the market is pretty saturated. in the u.s., the market is growing. there are some distortions admittedly.

young people are not involved but maybe that changes as we finally see a proper return to a normal labor market. >> is mario draghi doing enough or too little for europe? >> he could do more but the more he does and the more the french and italian governments say we , marioed to reform draghi hasblinked. yearudget numbers for next came out but they can get away with it because they know that mario draghi cannot take the chance. >> the banks did not take the money which we learned two weeks ago. >> they may take more next time. that was the first one. the estimates were establishing the dark so we will see how it goes. i don't think the banking system is the problem in europe. they have deep structural

problems that the ecb cannot fix. wolf fromn keep the the door but the french and italian governments are not reforming, the ecb is forced to do more. , you havegard to jobs said that history indicates we could get to f said-scaring fed-scaring level of job growth. millions of people part-time want to work full-time and those who have left the job market will come back in but in the meantime, they have to pay more. manufacturing, there has been a number of studies talking about american manufacturing resin -- renaissance. what is the conclusion of the latest study? >> that there is a lot of cause

for optimism in the u.s.. the latest global manufacturing competitive index said u.s. plus mexico, we are among the most attractive places in the world to the global manufacturing. jobs coming with it but not in the way they left. when they left, there were often thousands of people in factories. when they come back, it will be hundreds. it's good for the economy we should not think this is a return to the 1980's. it's a different manufacturing world out there. >> what about the dollar strength? does that hurt competitiveness? >> the dollar is still very competitive in historic contact. -- context. it's a good position to be in a doing business overseas. if you are up against a german or french company, you are in a much better position. the dollar is a marginal thing

and i don't see it as a big problem. say that you are a manufacture in china and you want to sell in the u.s. but because of the rising dollar, do you relocate factories here? is another global manufacturing powerhouse. will be veryope competitive. when you talk about manufacturing toward the u.s. market and you can save the shipping and transport and not thereg with currency, will be foreign companies that see the benefits of manufacturing locally. in some sectors, the u.s. is an export market. poweris a manufacturing even though the gap has closed but china has a massive position. >> let me bring in tom keene in washington. he will be speaking with christine lagarde from the imf at the 12:00 p.m. our.

what are your observations on our discussion on the economy and the markets? >> the jobs report is being pushed aside and that jobs report will be important on friday. far more important are the market dynamics. we have adam parker in the next hour. the linkage of equities in the dollar dynamics in interest-rate dynamics is critical. what i notice other lower yields in germany. they are stunning. the interdependencies are not only important for someone like adam parker but they are critical for madame lagarde as she goes to the imf meetings one week away. let's look at our twitter question -- as you heard, it is when you look at the russell 2000. you have to look at the rest of the market and see where that will go.

we are not there yet. >> it is something we keep an eye on. what will be your first question to madame lagarde? she is looking at a global economy that perhaps is not growing at the anticipated rate. >> i would look at about five first questions. there is unrest in ukraine. oec did, go to her they marked down their global gdp view and we want to get out in front of the imf next week and see how graham more cautious she is on american economic growth. >> we want to thank their guest host for the hour, rich lesser joining uspherd son to take a through the latest on the economy. give us a four x report >> it's front and center. before the important you beast -- ecb announcement. the euro is one dollar 26.

stay with us in new york and washington, conversation with adam parker morgan stanley on the strength of these equity markets. stay with us on "bloomberg surveillance." ♪

u.s. small caps are in

correction while stocks around the world decline. what will be the ecb next move? protesters are warning in hong kong that if the chief executive does not step down, their pro-democracy demonstrations will get bigger. and texas are trying to determine if the ebola victim in dallas affected anyone else. good morning, this is "bloomberg surveillance." it is thursday, october 2. is in washington before the imf meeting and he will speak with managing director christine lagarde at known and we will bring you that interview. let's do a data check after the selloff in u.s. stocks yesterday. extendingseem to be in that futures are not bouncing back. >> s&p futures, when we got in, they were down several points

and we have crawled our way back to flat. was at 2.60 not too long ago. you told us earlier that brent crude remains -- >> crude around the world is down. in the u.s., it's trading around 88 dollars which is the lowest in 17 months. that helps if you're going to the pump but it is a reflection of slower growth. macet's bring you to the monitor where we have the russell 2000 going back 10 years. there was a correction. >> that's amazing, that's 10%. >> that is inspiring panic among some investors. over the long term, the russell has had an incredible run and it has outperformed big cats as well. -- big caps as well.

let's get a morning brief. world,night around the stocks in japan lost and europe was down half a percent. the dow futures were down but they seem to have come back flat. oil is a key theme. there is a lot of eta that we want to get to today. jobless claims come out at 8:30 a.m. and the bloomberg consumer confidence at 9:45 a.m. and the ecb will be having an announcement at 7:45 a.m. and we will go live to london for that. constellation brands is reporting earnings, the company that just bought corona beer. president obama is speaking in chicago at northwestern on the economy later this morning. >> it also happens before the big jobs report.

let's get to our top headlines -- an unceremonious and for the first woman to leave the secret service. amongpearson resigned fierce criticism over several high profile security breaches in the man accused of jumping the hype what -- the white house fence pleaded not guilty. in an effort to detect whether ebola has spread, they are retracing the steps of a man who came down with ebola in dallas. the world health organizations as the death toll in west africa has topped 3300. a sixth day of pro-democracy protests in hong kong with students threatening to invade government buildings unless the city's chief executive steps down today. last night may have been the biggest city in to date with more than 2000 gathering. those are the top headlines. let's take you to hong kong were andrew davis of bloomberg news has been tracking the protests and giving us collar.

-- color. accused the protesters of dragging the city into chaos. it reminds us of may, 1989. have they shut the door for any kind of compromise? think there were any expectations for any copper mise on the beijing side. beijing is not compromising with makes the situations are difficult to resolve. yes, the students are calling for the chief executive of the city to resign. maybe that could happen but the ultimate goal of the protest is to get beijing to change their plans to vet candidates for the 2017 election for chief executive and there is little hope that beijing will suddenly say you can choose your own candidate. unlikely.y >> the students have made clear that today is the deadline. how does that work?

if the chief executive does not step down, what happens? threatened to take it up a notch and hinted that they will try to occupy government buildings or at least the space around the government holdings where the protests started last week. tensions are really rising as a result of that. we have seen police -- it does not look like they were trying to be very discreet, carrying in canisters of tear gas and what look like rubber bullets. we are seeing images on tv and from our photographers in the field. it sounds like the police are girding for a potential confrontation. the students handed they may make some kind of move tomorrow but the police seemed to be prepared is something -- for something as early as tonight. it's golden week for china because it was a national holiday yesterday so there are a lot of tourists on the mainland.

they must be be wilted by this. >> we wrote a story about that today. we got mixed reaction. and people were thrilled were saying we wish we could see this in beijing. all they care about is getting into a good school in making money and then we saw other people who were disgusted with it and taught the students are being very naive and felt personally put out because they came here on vacation. we had a real mixed reaction with the people we spoke to. >> thank you for providing us with color on the ground. we will speak with you again shortly. >> adam parker joins us from morgan stanley. there comes a time in your modeling and recommendations to u.s. investors were everything is happening up wrought -- is

happening abroad and that starts to bite. when does that happen? >> i don't think the s&p 500 goes down by 10% or more ever unless apple are afraid of and earnings recession. what governs me is, could i see earnings declining? even though i think there will be some companies affected by the stronger dollar and some impacted negatively by oil in the energy sector, i think earnings are growing. what i am asking people is how long you think this economic expansion will last. >> and how real is it? >> yes, i have a list of milestones. to look atcause me this cycle? it could be the fifth inning are halfway through and maybe it' could go as far as 2020. >> so you are taking the emotion out of it. >> that's how it works. >> adam parker is our guest host

for the hour we will continue this discussion. let's go to paris where hans nichols is standing by. can you hear us? there is a ghost in the machine in paris. we tried to go to porsche the last hour and want to go to mercedes now but we will figure this out. auto sales yesterday declined and they were better than forecast but they also declined from what we saw in august, any cause for concern? >> we have been recommending auto parts but not auto oems. i think the credit standards will begin to decline as people access the credit market to buy cars but i don't know the exact rate of the oems. that is growth at a reasonable price. >> you probably not -- were not

surprised by the ford ceo to reduce their forecast. >> morgan stanley has had a good so we aree auto oem, not surprised about what is happening. >> some people say the easy money has been made. let's go to washington where tom keene is standing by. i know you will be speaking with christine lagarde today not just him what the european central bank has been also the state of the markets because there is turmoil there. >> i don't think she will, directly on what mr. mario draghi says at that press conference. before i speak with her, one week from now will be truly radical meetings of the international monetary fund, the backdrop is simply the geopolitics. you see the ukraine this morning. it's somewhat quiet this morning but front and center for her. within that is the slowing economy.

imbalances it's the and the lessening of economic growth, almost a new normal, new neutral. that's what we will talk with christine lagarde about later this morning. >> looking forward to that. >> our twitter question of the day -- it was ugly yesterday but we are steady this morning so please, tweet us. you are watching "bloomberg surveillance." we will the right back. ♪

>> this is "bloomberg surveillance." we are going to take you out to paris and hans nichols is standing by with the ceo of porsche. >> thank you very much.

i am joined by the ceo of porsche, thank you for joining us. we got an suv behind us. it's not a sexy porsche sports car. is this the new face of persia? >> it really is a sports car from our point of view. it is a premium suv and the special of this car e is-hybrid. it has plug-in hybrid technology which we have presented in our sports car. since last year. >> global growth is on everyone's mind. will you sell more porsche is in russia next year? >> maybe, it depends on the circumstances with the ukraine. we're looking forward to do a good business in russia but obviously, we are well-prepared all over the world.

figuresble to fix some with other markets. >> when you look at what mariota marioe says -- what draghi says -- is he on the right path to help the european recovery and the automobile industry? >> may be but we have to do our homework. we have to prepare good products with good quality and good service for our customers. that is our task in this game. we have to see what will happen. >> do you see the european economy turning around and having auto sales getting back to precrisis levels? >> it was working well at that time but growth is slow. how it is for the future. >> thank you very much and we appreciate your time. i will send it back to new york. we thank you for your patience. we will be looking at cars all day. that's we won't buy you

any cars but if we do, it will be on the corporate company card. >> thank you. we will go over to washington where tom keene is standing by with a special guest to discuss ebola. >> thank you so much. the many for e-mails around the world on continuing coverage on the ebola virus. delivering babies is a walk in the medical park until something goes wrong and then the ob/gyn on the staff -- that is all that matters to you. so too with distant tropical diseases. it is their problem on some now it's america's problem. ebola is our rubble and doctoral michael burgess represents the 26th district of texas north of dallas/fort worth. we welcome you this morning. are you pleased with the

response of america to what we have seen with ebola? >> clearly it's a mixed story now. there was an opportunity that was messed on thursday before the diagnosis was made and it was strongly suspected on tuesday and made on tuesday. -- strongly suspected on sunday amid on tuesday. it is an excellent facility and i have full faith in them to take care of this individual and it's a bad disease and is not known whether the individual will succumb to the disease or not. nevertheless, i have confidence in the hospital that is treating the patient. is theger question impact on the community. i am so grateful to the government of liberia that identified this patient for us. bound by somently of our laws and rules in this country.

no one dared speak the patient's name. officials in the liberian government did and i'm grateful for that. i think that has made the surveillance now much more straightforward in the community where people need to be concerned. >> you are known as a rape are known -- -- you for tea party economics. do you think we need to open up the check look and went to budget of massive amounts of money to go after ebola as an epidemic? i have not disagreed with funding that has been requested by the cdc to deal with this epidemic. i have enclosed with the cdc since the about the middle of july talking with them about what their level of involvement and level of preparedness is. theerday was october 1,

first day of the new fiscal year. under the affordable care act, the secretary of health and human services got an additional $2 billion in the prevention fund. this prevention fund should be entirely directed into the surveillance and treatment of ebola. >> dr. burgess, thank you so much. later this morning, my conversation with christine lagarde of the international monetary fund as she prepares for her awesome meetings in washington. look for those next week and we will talk to her about imbalances and the tepid global economy. >> looking forward to that. hostwe return, our guest for the hour, adam parker of morgan stanley will talk to us about small caps and mna. --and m&a.

this is our twitter question of the day -- we will be right back. ♪

>> you are watching "bloomberg surveillance." witheene will be speaking

christine lagarde from the imf at 12 noon. --e for the company news >> we start with facebook apologizing to drag queens. lgbt organizations were upset by them demanding them using their real names. netflix is challenging the traditional model for releasing movies. they have a deal with adam sandler to make for new pictures that will appear exclusively on their service. they will also release a sequel to "crouching tiger, hidden dragon" simultaneously on netflix and in theaters. derek jeter is launching a website focusing on giving athletes a forum for their thoughts. the site plans to publish first-person stories.

they will need a lot of editors there. maybe i should apply for that job. >> adam parker, would you go there? probably not. >> i'm a red sox fan. sox fans gave derek jeter a little bit of love last week. >> that's true but we can move on. >> diehard red sox fan. our single best chart this morning is on the russell 2000 and its relationship to big caps. it's in a correction but more ominous is this ratio -- is the ratio between the two indexes. goes back seven years and shows leadership in the market. when the line goes up, the russell 2000 outperform the s&p plunge on the right of stocks in red shows the under performance of small caps in

2014 in the last time this ratio fell this month -- this much was august-november of 2008. is that an ominous sign? >> i don't think so at all. we know in 2008 the market went down a lot but the conditions are not similar to that now. i tell people to buy small caps right now. have of all, small caps longer margins and large caps are an all-time high. faster.f all, they grow stronger dollar impact the big caps because they are more international. you also have m&a. it has been almost all in version. the fraction of small cap companies that have received a tender offers have been less. m&a has picked up but you don't

like small caps? >> the big caps are up 5.5%. ofwe have had a lot underperforms the last 12 months and my senses the market is going higher. you got the growth potential and expansion but tensile. i think that offsets with people were concerned about nine months ago which is valuation. >> people say also the strong dollar should benefit the small caps. this is our twitter question of the day -- we will be right back. ♪

>> this is "bloomberg surveillance." tom keene is in washington for the imf meeting where he will speak with christine lagarde at

12 noon. it will be live and we will bring it to you exclusively here on bloomberg television. mercedes is reporting its highest ever september sales. that is thanks to the big s-class and its compact line. 0-60 in a new amg-gt, four seconds. the ceo is joining us live from the paris auto show. thanks for joining us. sales are up and so is the margin. mercedes has a tremendous momentum right now and that is based on our great new products you were just mentioning. we have a lot of momentum right now. >> you certainly do. europe has been an area of difficulty and yet china has been going strong.

is china and the u.s. where the growth is for mercedes-benz? as the markets are concerned, you are right. we are basically growing everywhere. and you europe, where the market is pretty slow, last month we were growing another 16% based on strong roddick in great demand. we are defined by our capacity. have different classes of cars. are you trying to segment the market so no matter who you are, you can find a mercedes right for you? is that the goal? i think that's the typical development of all kinds of consumer markets. if you don't operate, the competitor well. we have more and more variety in our portfolio. at the same time, we do that

with the system in our production and development which allows us to handle the complexity and satisfy all customer needs. >> what is the risk that offering all those models and price points, you dilute the brand? >> we think the opposite is true. on the one hand, there are new 80% successe have rate which is unheard of. younger customers are coming to us. at the same time, the s-class is considered the best car in the world of this combination gives us more momentum and more dynamics in our brand and the s-class is perhaps the best car in the world. >> how much does that cost? i want to figure out if i can afford it. >> it will be around 100,000 euros.

in the u.s. in dollars it will be similar. direct competitor to the porsche 911. >> some more in there, there is an exchange rate of 30%. are you making less on the one made -- sold in the u.s.? >> strangely enough not so. portfolio is stronger in the u.s. so we sell more s-classes then germany. we have similar contributions. we are more profitable on the s >> in germany. thank you for joining us. >> that looked like a hot car. >> that is a hot car. parker, i won't ask you about what car you drive that you are optimistic on consumer stocks overall?

>> consumer was the biggest underweight in the first six months of the year. we have been adding aggressively there over the last couple of months. it sets up is an interesting trade right now. are telling people to go consumer discretionary stocks and go short on banks. > even though both are cyclical? >> they have commonality of exposure to fundamentals. housing,n is employment rates and those things affect both but i like the consumer rate because comps will be up for -- from a year ago. the pricing and inventory will not be as aggressive. oil being down helps the consumer. banks, thet the stocks have done really well the last six weeks yet the 10 year

yield did not back up the pressure and housing is slowing. of the rather own some retail into black friday. >> it's already october. i'm waiting for christmas decorations. >> a couple of pumpkins first and then we get to christmas. >> retail over the last couple of years -- last year there was a problem with ups getting shipping out and the bad weather that slowed sales and the year before that, the consumer did not have money. >> we have a macro indicator thisshows that some of started to inflect at the low end but the oil thing is crucial. it costs people less about pump and that makes them feel more flush in the holiday season. >> you have been looking also at dealmaking which is good at way for companies to plug the earnings gap. the strong u.s. dollar changes the tone for u.s. companies. >> it could change things a little bit.

i think you'll get more big u.s.nal m&a were companies will buy smaller companies. when i started in this business, nobody ever said [indiscernible] these things are created much faster if not immediately. the acquirers are interested but also big companies are doing by backs in the last year and have been underperforming big companies that are not. the market is sending a message that you have to grow faster. >> you have to use your cash strategically. >> we need growth. you can get morem&a picking up. >> how come we have not seen small andsity in the mid-cap stocks. ? >> the government is trying to do some stuff. >> some of those deals are going

forward. >> because they make sense. capitalyou will see confidence improving. they can also do capital spending, no high cap companies underperform low cap companies. i think it makes sense this is a natural evolution of where we go in the next couple of years. >> two years ago, and when you were up there and you switched to a wall, you're criticized. >> it could be 10 years. > our twitter question of the day -- no. view, to eat us. we will share -- tweet us we will share the responses with you. ♪

>> good morning. look for that show," with all due respect," on bloomberg television. we are watching that with anticipation. that's october 6, 5 p.m. on bloomberg television. good morning, everyone, "bloomberg surveillance." joining me in washington before my conversation with christine lagarde is peter cook. he is focused on alaska. state and it is removed? >> a little bit removed but this time with this midterm election, it's got one of the nastiest races right now. there is an op-ed in "the new york times," called politics alaska style and

it gives us a snapshot of how the race is played out and how nasty it has been. one section describes the fight overriding a snow machine. the incumbent is struggling to hold onto that seat and has a campaign ad in which he rides a snow machine. that's what they call it in alaska. counterpart is challenging whether he is pretending to ride the snow machine. they have gone back and forth and this is a snapshot of how this -- how nasty this fight has become. "the washington times" says about sarah palin -- the one who must not be named. sarah palin is not on the

stump with dan sullivan. some have painted it as a red state but there are not that lots of unique factors of alaska. >> the president goes to illinois for his speech. what are we looking for? >> he is trying to change the subject away from foreign policy back to domestic issues. he wants to be able to fight these fights around the world but he says the u.s. have to have a solid economy. thequestion is whether american public can tune into this president. it will be a tough sell for the chancent that there is a he resonated with the u.n. speech. >> very good, i will speak with christine lagarde at 12 noon today about the linkage of the ecb meeting and also christine lagarde on the locomotive of the global economy which could be the united states. >> we are moments away from the

ecb rate decision and we will go to london for the market reaction. haveutures are now up and been down all morning so we will see with the ecb has to say about this. this is "bloomberg surveillance," we will be right back. ♪

>> this is "bloomberg surveillance." the ecb is coming out with this announcement any minute. let's go to london for the latest. no change, no decision to make on the rate side of things with the benchmark rate of 0.05 percent. the press conference comes in 45 minutes time. mario draghi has a mission to

get the balance sheet up and one trillion euros. how does he do that? program funding targeting long-term financing operations. the appetite for banks right now is not very big for that. today is about plan about buying abs in the eurozone. how big is that if i'm going to be at how much risk will the acb put on the balance sheet and how much opposition will come from the bundesbank. >> the lending facility that the ecb maintains for its member banks is -20 basis points. you give us your money, you will be charged. how are banks responding? >> it's not clear right now. loans,look at the they're very small, eddie 2.6 billion euros which tells you something. there's not much demand for credit out there. that pay cut would

have been bigger. >> mario draghi will be 830essing all of this at a.m. new york time. what will we hear? assets about how big this backed security purchase land can actually be. to come outts them with a size that everyone expects him to talk about eligibility. there has been talk about buying cypriot assets which are junk bonds. there is the opposition to conduct in these policies. they are not sure they want him to risk so much on the ecb balance sheet. let's bring in adam parker of morgan stanley. you are the chief u.s. equity strategist. -- wheniota druggie mario draghi speaks, what effect

will that have an earnings potential for u.s. companies? >> i don't know about earnings in the near term but i fear the stop and i think i like u.s. stocks. i like the bigots 50 or 100 u.s. equities -- i like the biggest 50 or 100 u.s. equities. >> but you said you like some all caps. >> i like those even more. you look at the u.s. and you tell me what you think looks better. do you want government bonds that yield one percent in other countries? u.s. -- it'sk the not even the best house on the worst block, it's just the best all-around. 50,ou like the largest that's a proxy for u.s. growth, but you also like the russell 2000 which is about 1200 basis points cheaper? >> i think it's oversold and it will catch up. i don't know if it has an

immediate impact on corporate earnings. epic it makes me feel good about the u.s. economic strength over other parts of the world. >> tell us the earnings outlook for european companies especially as so many investors await mario draghi in which for him to do something more than modified qe. are they waiting for full-blown qe? >> 12 months back, everyone complained about the strength of the euro. a lot of the noise and came not only from the politicians but big export companies as well. the euro has come down substantially and you may see that start to feed into earnings. people are picking out this docks with international exposure to get that translation effect from the weaker currency. weak butn got very look at the economy now. the economy does not look good. >> that's certainly a work in progress.

adam parker of morgan stanley, john mentioned the weaker euro which will be an issue for european companies and will benefit them. in terms of the stronger dollar for u.s. companies, what does that mean in terms of capital expenditures? >> we continue to see capital -- to think capital spending will be somewhat constrained. you should see dollars grow in that five percent range which is not the same rate that revenue will grow so to sales should remain flat. so capex will remain flat. until backlog skied bigger -- until backlog get bigger, capex

will remain muted and companies don't want to risk putting costs in place. >> wiki. about strong aircraft orders but they are not representative of the overall the strong aircraft sales we hear about are not a strong indicator? >> broadly across machinery and semiconductors and networking equipment, the more economically sensitive businesses, i think you need more confidence from their customers in backlog. you've got a very bullish -- inr e inllen ventner ellen ventner. report of you put out a calling for 3000 on the s&p 500

by 2020 which is up 50% from here. are you that bullish? >> we wrote a note together to focus on what could cause the top of the cycle. until we see much more hubris or a debt issues, we so you don't call the top of the cycle so we will buy these dips shorter-term. at the end of the note we said take a six percent earnings growth assumption and you get about $170 in s&p earnings-- >> right now we are $116? >> about 120 so you get 170 and you get multiple chances if the cycle last that long and you get near 3000. if you think about a, the assumption of the 3000 and 50% than, are less aggressive if the cycle will last until 2020.

>> it's clear where adam parker stands on our twitter question of the day -- we asked you all -- here are some answers -- is there a definition of a mini-correction? >> i don't know but people think 10% on the s&p 500 would be a correction but that i think that is unlikely. tell me what makes the s&p earnings go down nine months from now? that's what the work should be focused on. it could be a stronger dollar. oil shocks in the past have caused it. >> your thesis is absent a major correction in u.s. earnings, we are not owing to have a major correction in u.s. stocks. >> that's right. >> next answer --

>> i did not tweet. --here is the final answer not that technical definition but >> we will get the jobs data tomorrow. do we see enough wage growth right now? >> you mentioned entner and we talk about the difference between the market and economy but i don't want a lot of wage inflation. i want the margin profile to do well. the last earnings in july into a sober, one percent upside the revenue numbers and six percent on the earnings numbers. that is an impossible combination. >> let's go over to tom

keen in washington, d.c. >> we will talk with christine lagarde and about the international monetary fund meetings. the idea of where we go to find economic growth, maybe not in the u.s. but far more in europe. there are some fragility's in asia with the backup being geopolitics. and christine lagarde interview at 12 noon. what would you want to hear from christine lagarde of the imf? >> we have so many experts in europe on the topic that would be better suited to answer. >>, on. -- come on. >> i want to know where she gets her tan. focus on what could turn volatility

into corporate earnings and i hope people get that message loud and clear. as long as next year's earnings are above this years and i am not afraid of the bear case and earnings, i can remain constructive on this. >> 10 christine lagarde's imf which focuses on emerging markets and problems there of effectively struggle as the u.s. does not? can the u.s. decouple? >> what could make the u.s. expansion last longer is we don't have a huge synchronized global economy. we have a different monetary policy than different parts of the world and different economic growth rates. maybe it looks worse in france and italy. it's not a big synchronous global thing which makes me feel better about excesses preventing expansion. >> that might be more normal than the last 5-7 years. >> i think it could be healthier for the length of the expansion. parker, chief u.s.

equity strategist joining us this morning, thank you so much. his college ellen zentner will be with us tomorrow. "in the loop with betty liu," is up next ♪

>> good morning. you are "in the loop here: i am matt miller in for betty liu. global markets are royal. europe, asia, all down. the morning after the dow plunged 280 points. a rough start to the quarter. draghi.ident mario there may be some purchases over there. online hotel stocks down 3% fierce --feels -- fears. the company's dismal profit warng