a warm welcome to "bloomberg daybreak." i'm jonathan ferro alongside david westin and alix steel. futures positive. up 20 points on a dow. positive three points on the s&p 00 as we count you down to a u.s. g.d.p. print. and treasury fields just coming off the highest since may at 185 on a 10 year. alix: after this hour, u.b.s., c.e.o. sergio armanti alleging to cut cost after the swiss bank reported a drop in management. .b.s. saw 68% plunge in profit before tax. and shares of amazon down in the premarket after forecasting holiday sales that may miss estimates. they began offering prime free service in china. and global bonds are set for their worst month since 2013 as investors see central banks moving closer to reining in stimulus. a 73% chance a federate hike in

december as investors await their g.d.p. numbers out. and that is what you need to know. david: for more on those g.d.p. numbers, we turn now to carl, chief of u.s. economist. so we have five quarters of slim pickings. what are we looking forward to? >> it's growing at 3.3% five quarters ago. now we're growing at 1.3% which is below the fed's neutral growth separate and that's problematic for the economy. consensus going into today's number have steadily deteriorated over the course of the quarter from north of 3%, 3.5% we'll say at the start of the quarter down to only 2.6%. and i think there's a risk maybe that consumer spending which was the major growth engine in q-2 could fire on a much softer level in the third quarter.

alix: inventories. we saw it drop on the second quarter which is unheard of when you're not in a recession. when is the payback for that? >> that subtracted about 120 basis points off the headline growth figure. and the expectation was well, that will turn into a significant positive in the third quarter. that hasn't really materialized. so when we look at today's number, sure the headline growth number will look better in q-3 as it does in q-2. t is that the absence of the inventory drag? david: is it a timing issue or real growth? how much of it is consumer spending, particularly the amazon numbers? and amazon is warning it's not going to be as good. how much of that can read through? >> the consumer spending numbers are absolutely critical to g.d.p. they were the dominant growth engine in q-2. consumer spending has been the

dominant driver. talking about amazon and the holiday spending, it'll be a decent holiday season in 2017. because in 2016, the income numbers just haven't turned the quarter yet and that's the other data we're watching this morning is the employment cost index. we're close to full moment but we're not getting the wage pressures just yet and those wage pressures are going to be what really buoy consumers. jonathan: you sound like the fefment always promising something. [laughter] >> it's a good forecast and the right timing for that forecast. alix: final sale demand. what number do we need see in order to continue to see it taking up? >> so you need to see -- not so much final -- you can look at final sales or the headline number but you need to see g.d.p. growth that's turning back towards the 2% growth rate. you get the 2.6% that the consensus is looking for, that yearon year trend which is more important to the fed which is

about 1.3% right now should stabilize. and then start to edge higher over the course of the fourth quarter if we get 2.6% now for the fourth quarter, then we'll be right on target for the fed's full year growth forecast of 1.8%. jonathan: thank you, carl. we're about 86 minutes away from the g.d.p. the backdrop of the market is a global bond routes. treasury yields heading high. burns heading for the worst months. things have stabilized but what's the message. joining us is a street gist. what is the message for you? >> the message for us is we're going a significant change in terms of inflation or expectations in the world. we're not saying that we're moving to some kind of extremely adverse inflation but we're normalizing. so we're moving away from this expectations of very high

deflationary risk and low g.d.p. growth. we still have a long way to grow. we've steepened about 20%, 30% of the move of the past year. so it's only the beginning of the process but i think it tells you something about it. a little more optimism about the global economy. jonathan: we're talking about six-month ranges. if you go to 40,000 feet and you take the 30-year approach, president draghi spoke about this. he note that the whole bonds market is south of 1%. and he noted that he doesn't think it's central bank policy. it's normal yields. and then real yields crushed by demographics. and we can have a look at the demographic story and how much populations have aged. if you look at the percentage, it's above 65. we're talking 27%. all the other major country, germany, u.s., china, it's all going in the same direction. that's the savings club. the structural story is not

going to change any time soon, is it? >> it is quite powerful and it has been with us for a while. policymakers have certainly noted demographic issues, issues with excess savings, issues with policy, issues with low productivity growth. we know all of this. the question is have we pushed the story too far and it's a reason for more optimism and that's why the markets are leaning right now. alix: but not all yield curves with created equal, at the end of the day, right? certain ones are higher and certain ones aren't. can you explain why? >> this is a g-10 move. it's pretty good base. we're seeing it in u.k. yields. the story is different. we're seeing it in treasuries. we're seeing it less in j.g.b.'s. it's the bank of japan is targeting 0% yield. there's a certain amount of anchoring in japan. and if you think about bank of japan, they're the essential

bank that's furthest away from hitting the inflation target. we're not going to get to 2% inflation at japan any time soon. this relative rise in yield curve is making a complicated story in terms of the effects market. but we think the yen is the one that's going to lag. jonathan: you're looking at dollar-yen and at the yen hedge cost, they're coming into the united states and buying treasuries. talk me through. >> this is a good picture of what's happened to the dollar-yen. so what we showed here us the 10-year yield adjusted for hedging cost by a japanese investor. so a japanese investor would buy a treasury and yield it in the forward market to avoid currency risk. so basically as the yield curve flattens, this return in a 10-yield becomes less and less attractive. and it's picked up nicely this turnaround point earlier this

year when the yield curve started to steepen and the yields have become more attractive for japan. and the steeper u.s. yield curve is something that's driving dollar-yen higher. it's there's been a big debate over that and we said it's about the 10-year yield. it's about whether the yield goes to 2% or 1%. and it looks like the 2% view is prevailing at the moment. david: pull back to me from the larger picture. how much of the steepening yield curve is because expectations of inflation which might be a good indication that global economy is growing as opposed to being tcherned central banks are just taking their foot off the accelerate. >> it's a little of both, you're right. when we look at the u.s. story, you have headline inflation and current inflation. it's not dramatically below the fed's 2% target. you have other places such as in

europe where inflation is well below that, but we're getting a sense that the central banks are running out of assets to buy. and that's causing a steepening of the yield curve. so the story is looking different but it looks consistent across the g-10. alix: have a lily, great to have you. thank you. let's get an update on what's making headlines outside of the world. emma chandra is here. emma: safety investigators will determine whew the plane carrying republican vice presidential candidate mike pence skidded off the runway at new york's la guardia airport. the plane tore up concrete before landing on the grass. hillary clinton enters the final day with a huge cash advantage. according to government filings, the democratic candidate had $153 million as of october 19. donald trump has $68 million in hand. trump has repeatedly pledged he

would spend $100 million or more of his own money in the election. so far, he's spent a little more than half of that. and a judge has rejected two challenges to the brexit process that released one obstacle to the prime minister's plan to start cutting ties with the european union by the end of march of next year. he said it was beyond the power of the court to interfere in the process. global news 24 hours a day, powered by more than 2,600 analysts in more than 120 countries. i'm emma chandra. this is bloomberg. alix: equity futures grinding higher but the name to focus on is amazon. the story was the profit badly missed estimates and operating in margins for the fourth quarter could just be break even. the company's increasing a lot of white house buildout and video content and weighing on its operating margins. but amazon web services was up

55%. the other big tech name that came out after the closing bell was google beat on earnings, beat on revenues. the two big numbers we always like to watch here. fell 11% but they made that up in terms of volume. the number of paid clicks rose 33%. this is the second straight quarter with 20% revenue increases. an unbelievable number when you consider the huge market side that alphabet is. and also rounding out the earning story is a.b. inbenefit. that stock is up by 4%. it missed some sales in brazil. it is the second biggest market even before the price increases came this quarter. david: who of the biggest names in tech have two different quarters. amazon spooks investors but it's a beat for google, parent alf benefit.

we take a closer look at the numbers. that's next. this is bloomberg. ♪

alix: amazon getting hit in premarket. down over 4% on an earnings miss. worried investors wasn't the profit margin. operating margin would be a break even in the fourth quarter. at part, the issues expectations are just really high. take a look at this chart. this is operating income at the street expects from amazon in 2017, it's supposed to double. and in 2018. it's supposed to double again. bezos made no mystery of the fact that he wants to spend to get customers but investors on the street seem to have a very different opinion. that 1.8% operating margin for

the third quarter. the best one for the third quarter since 2010. but that didn't seem to matter. the other positive part of amazon's quarter, i mentioned earlier is amazon web services. it's their cloud division. revenue was up 55% and operating margin there was over 30%. in fact, operating margin rose in that cloud business even though it had competition from microsoft as well as from google. not necessarily hurting its revenue or its margin but for some reason, investors not willing to refleck that on stock today. besos sat design with charlie rose talk about his strategy. >> the thing that connects everything that amazon does is the number one -- our number one conviction and idea and philosophy and principle which is customer obsession as opposed to competitor obsession.

we want to satisfy what we perceive to be future customer needs. alix: so do investors need to rerate their inspections on bezos's customer expectation? the securities managing director and analysts joins us now from california. he's an analyst on the company with a 920-price target. neil, basically, amazon was very clear about their margins. what did investors not get about that? >> i think the big concern that investors have is amazon really moving into a deep investment cycle like we saw over the past few years, where margins really compressed and was over a very long period of time. and it doesn't seep like that's necessarily the case. and in this instance, amazon is making some very targeting investments to drive outside's

revenue growth and more importantly, to drive outside's margin growth. they're investing in fulfillment centers and meeting the third parties. very high margin business for them. they're investing in india. big growth opportunity down the road for amazon. and they're contenting in content. content will really drive prime subscribers and based on our survey work, prime subscribers typically shop loot more on amazon and those are the really high valued loyal customers that amazon wants. jonathan: this is a rare public company where the crow doesn't check the stocks and wouldn't care. they added 40,000 positions in the third quarter. they're investing a ton of money in white houses. -- warehouses. so when people speak to you

about how to f.c.c. where the stock price is going, what do you tell them? how do you model your forecast around amazon when you can't really gauge what they're going to do at the bottom line at any given time? >> yeah, it's a good question. you know, what we do is we try and take a bottoms-up approach. we try and think about how the different regions are going to grow, how the different segments are going to grow and we build our model that way. you know, for instance, at least for the next quarter, we're looking for operating margins to come in close to about 1%, you know. and that's going to be down sequentially. but we do see a path for operating margins to improve. gross margins have been tick up for the past several quarters. you know, in third quarter, it was the smallest growth margin we've seen in faux years. but as they start to build out the network and spread out the

costs over time, we'll see that gross margin expand again. so amazon has -- their stock has done very well when their stock has gone to the early part of their investment cycle. again, this may be spooked invest arrest little bit but i don't think this is going to be a prolonged five, six-year cycle . david: performance centers are one thing. it's related to their core business. it's selling things and delivering things. content is a different matter. that's not been historically something that amazon is known about. people put a lot of money into that. are you concerned at all that they're getting beyond their core confidence? >> no. if you asked me this question three years ago, i would have been concerned. but they've taken a very methodical approach in investing in the prime video and has been

the key driver for prime users to sign up for prime. you know what, they've done is they've taken, you know, a simple approach of just getting syndicated content and building kind of an early netflix type service. and now they're really going deep after the original content and we've seen success. they've won emmys on the original content side. they're now moving into movies. and i think the more they push into that, they will get more prime -- more members signing up for prime here in the u.s. as well as in the international markets too. for example, prime in japan -- david: ok. >> costs about $35 a year versus prime in the u.s. which is $100. alix: neil, thank you so much for joining us. coming up, the banking bonanza continues. a slew of european banks topping estimates helped by their debts. we will break down those numbers

next. this is bloomberg. ♪

jonathan: from new york, this is-daydale. i'm jonathan ferro. a big week for bank earnings in europe including u.b.s. which reported a drop in wealth. however, c.e.o. pledged to continue cost cutting. >> on the cost side, i think we ave a very comprehensive and quite ambitious cost reduction target with a 2.1 in net cost which doesn't include any reduction of cost or benefits from exiting businesses or any reduction of cost you to available compensation by financial performance.

the story begin in 2012. they decide to pivot away from the debt trading business and go towards wealth management in a big way. this quarter, that doesn't look great. but over the horizon, is that still the strategy from here? >> absolutely. i think with u.b.s., we've seen he volley in the volley -- volatility from the fixed income business. where wealth management is u.b.s.'s strong suit it and makes sense to focus on that business. the challenge for u.b.s. is trying to reverse the steady decline in gross margins in that unit. the bank has been quite good in cutting costs just recently. that was a big positive this quarter. so wealth management absolutely remains a key focus for the u.b.s. david: how do you cut cost to

the degree that sergio ermotti wants to cut them? cutting into the relationships that drive that wealth managing business? >> it's difficult. i think one of the things -- obviously, that's head count but also i think just being smart in terms of improving the technology, cutting or outsourcing costs. all of these things have a big part to play in producing costs. jonathan: thank you, arjun. there was a bright spot but the net new money that came into u.b.s. from asia. most of it coming from asia. bernstein said it might be a read across the credit suisse. they are trying to do the same thing with the wealth management side of the business. they report next week. maybe that's a story to look out for. lix: the net inflows into asia

pacific working on both levels. how do you fix that? cost cutting isn't going to do it at the end of the day. we have the ultra high net worth individuals. their margins are less. if they pull back, how do you fix it? david: that is the relationship business. that is the person who is managing their money and that is long-term relationship you have to watch for. jonathan: the last quarter did not want to trade. alix: yeah. jonathan: profit was a little bit low. we will continue to cover the bank. german heading for their worst month since 2014. we go to blackrock and a postal manager for high yields bonds. that's next. from new york, this is bloomberg. ♪

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sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. alix: this is "bloomberg daybreak." i'm alix steel. here's what you need to know. u.b.s. c.e.o. sergio "modern family" planning more cost cuts.

and the securities unit was hit by a slump. u.b.s.'s investment bank saw a plunge in profit before tax. shares of amazon are down after a forecasting holiday sales that may miss estimates. the giant begins to offer prime free service in china to compete with ali baba. investors sees central bank moves closer to reining in stimulus. 73 chance of federate hikes as investors await the fourth quarter g.d.p. numbers. and that's what you need to know. jonathan: head for a week of losses in both united states and europe, the situation is positive positive, up 23 points. these are the levels right now. dollar index close to a seven-month high. 186 the yield on the 10 year, 12919 is where the cable rates are today.

a softer sterling story. david: we will probably continue saying that. bloomberg's out with an exclusive report which gives ours morning must-read. we've known about some major banks accused of fixing rates for some time now. now, u.s. state and federal officials are investigating whether some middleman have been rigging off auctions and submitting fake bids and currency options. according to a bloomberg report, the investigation began more than a year ago when the new york attorney general subpoenaed several brokers over concerns they were skewing markets by fabricating bids and offering to russell up markets in less widely traded currency. e're joined by allan katz. it doesn't sount good. how far along is this investigation? >> no, it certainly doesn't sound good. the investigation has been going on for more than a year. we don't know yet how long it

has to run. these things, as you know, whether it's d.o.j., d.h.s., they tend to take multiple years to get finished. so i'm not sure how long this investigation has to go. but it's not good. the idea is that some of these brokers were sort of inventing bids going to clients and saying we have this offer. when they didn't have the bid on the other side. david: is this related to the prior investigations and actually some of the $1 billion paid by the big banks for fixing? is this relate ordinary different? >> it's related. it's sort of a different segment of the market. so one of the things that authorities looked at first was the banks and bank efforts to fix tor manipulate the currency fixed prices. this is a look at the middleman part of the market and is there an effort here to effect some of

these -- in this case, currency option prices? this is the part of the market where it's the voice brokings. they try to make the market and so it's more susceptible to manipulation than maybe electronic markets that more transparent pricing. that's the way thofrle currency market is moving anyway. but this piece is still a pretty ig part of the market. david: do we have any sense of these brokers are cooperating? have they turned over the evidence or are they resisting? >> well we know at least some of them are cooperating. we don't know for all of the people we spoke with said there have been interviews of these dealers. there has been some cooperation by some individuals. and so there has will be information turned over. in general, most banks, especially at this point in these investigations going on for quite some time now, very --

you'll find very few banks or brokers or businesses in general that will try to resist these kinds of investigation at this point. they've all learned they're better off cooperationing. david: thank you, alan. alix: the news in the market is it the end of a bull market or a start of a bear market? take a look at the bloomberg here. this is the total return index. global bonds are looking at their worst month in more than two years. so why is that happening? joining us now is jim keenan. he is a postal manager -- portfolio of the black rock high yield bond fund. is this the start of the bear market or the end of the bull market? >> now i think that we're in a continued long phase of low rates. and you are going through what i would say more cycles and there are going to be more miles

upside than downside. if you look at what happened in the third quarter and fourth quarter of last year, you saw the commodity weakness, you saw a global slowdown. you moved into brexit and all of a sudden, you saw fears of growth and people buying rates and duration. right? as you start to see what the markets start to do better, there's restocking in the economy. expectations are starting to ping. if you just look at where global bond yields are around the world, it doesn't take non-have a negative bond yield. jonathan: they were down in the depths of doom. my question is ok after marginal recalibration on the outlook. but the structural issues of the last 30 years, they're going anywhere soon? >> i don't think so. if you look at those structural issues, i mean, whether that was from the early 1980's all the way through the mid 2000's, it was an aggregate debt that was built up in the system. so a lot has been done.

but the structural issues with regards to all the headwinds from demographics and all the debt in the system certainly have shifted from so much the private sectors in the banks on to government balance sheets or on to central bank balance sheets. but those will still be a long term headwind. alix: when will buyers start showing up? are we seeing the demand show up even though the long end is still struggling? >> structurally, the majority of clients in the world have a longer term liability that is going to be somewhere between 4% and 8%. use start to see yields back up, it will start to be interesting for many clients who start to buy into it. because everyone still has the same problem. with all the negative interest rates in the world, it is less than 3%. and structural liability people are trying to earn is 4% to 8%. it's a positive for many investors to start to be able to buy into that.

right now, you're in a bit of transition. central banks are starting to tweak their policy a little bit. growth and inflation expectations are starting to pick up. so people are pausing as it starts to increase. david: talk us to about olatility. do you expect not change. do you think there will be a pickup in volatility and if so, why? >> i completely think volatility is picking up. you've seen enormous amount of monetary policy cha chaz come in with certainty. the markets like certainty. use start to shift some of that policy you move even towards data dependency, you start to move a little bit more volatility. and i think central banks will start to be more regional focused. and you're seeing that in currency and volatilities.

use go into the next 12 months, vol is going to increase and that's going to create opportunities for clients to invest tactically. but i don't think it changes the structural issues that we're still in a longer term trend that vol is going to be around but still on low expectations of return. alix: the vix or the 10-year treasury market. that's where the safety is supposed to be. but volatility is so low that it has been spiked. the safety is risky. jonathan: typically, we associate low vol with some kind of complacency. i wonder why so much cash is not put to work then. and if you believe what's happening in the bond market right now, is the recalibration of growth and inflation. then why so much cash sitting there on the sideline? take the bank of america-merrill lynch survey. i believe in growth. that money has got to work. why is it not? >> we agree. you should put it to work but some of the issues have been --

there's been a lot of uncertainty whether with regards to election or different policy decisions and when you look at fixed income rates around the world, you know, the cost of not buying into a 10-year german bond that's trading at zero is not that high relative to cash. so i think that is part of the reason why investors sit on cash and wait for the expectations to be able to buy better opportunity. that being said, we're in this prolonged period of time. so as investors continue to sit on cash, it's a different risk profile, right? because the negative advertised where 5% or 6%, you compound that year on year, and all of a sudden, it's a risk profile. we do think there's a lot of opportunities in market and structurally, people should be putting their cash to work. alix: we're going to talk about weather. earnings for the high grade issue are coming in 2.3% for the third quarter but leverage is so high. 2.5 times. do you feel like fundamentally,

earnings are strong enough to support this kind of leverage that we're seeing? >> it's very different. you look at leverage in the corporate sector over the last 15 years, the mixture is very different. prefinancial crisis, they were putting significant amount of their balance sheets. if you look at the last three to four years, a lot of the leverages has really been on high quality investment grade companies. and that's a very different situation. and so really, it's been more about mna activity on the investment grade side. you have seen dividend repurchasing and companies that have a lot of cash offshore that are issuing debt onshore in order to bite. those companies are very stable. have significant cash flow trend. when you get to the finance sector, leverage has been benign. where you seen leverage up is

the commodities sector. and so leveragist has spiked but that's really specific to one sector. regulation around the banking system is really capped. what you've seen on the leverage about being able to really put a lot of debt on that and most of the activity as either been refinancing mna but you haven't seen l.b.o.'s picked up. david: there's no tenure to investment grade. where are we in the investment cycle? will they be begrading? >> yeah, go back to the other point, i do think that you are going to see more cycles and there would be more miles to the up sexide downside. and structurally, i think the amount of stimulus or even support from both capital and monetary policy and you've seen that in the last eight years where there's been periods of weakness or expectation of further weakness, you've seen shifts in the systems.

that's part of the overall de lenching. and the last 12 months, we've had weak earnings across the board. credit becomes more attractive and equities, you're looking at high multiples as well and more risk and volatility. jonathan: sovereign, high yield. i want you to understand how you navigate this space. when spreads were super tight, the u.s. was knocked to 4%. now, spreads, aren't as tight as they were. but the yield on the u.s. 10-year was south of 1.5%. so the nominal in high yield was still low. but flatter than looked

attractive because of where the treasury yield was trading. so how do you trade this when spreads don't looks like tight but at the same time, the actual risk in the yield that you're taking is incredibly low and the risk is high. so how do you navigate all of that? >> i would even say west of 2007 when you looked at high yield, they're like 7.5%. so the ability to go and hold cash or take incremental risk in buying high yield debt was significant from a risk profile. i think when we look atnaf investigating is you have to have a longer core term view and this goes back to your structural views on the market. jonathan: yeah. >> tactically, there's going to be volatility. there's going to be transitions in the market. there's going to a lot of volatility quarter by quarter or uncertainty. and those are going to create tactical volatilities to invest or go up and down the risk spectrum. we still like credit because you go back to those structural issues and over the next five

years, there will be volatility but rates are going to remain at low levels in aggregate. equities are at high multiples. if you're thinking about your goals over the next five years, we like all forms of credit not because we think they're cheap necessarily but we think the economy's stable. policies supportive over the long term. and we think earnings are ok in order to create that return profile. david: jim, great to talk to you, thank you very much. and coming up, investors checking in to choice hotel. shares coming off their best day in nearly three months after sales jumped 11% from a year ago. we will see what's ahead for the holiday season with c.e.o. steven joyce. this is bloomberg ♪

emma: this is "bloomberg daybreak." here in the hewlett-packard enterprise greenroom. amazon and alphabet discussion next. david: choice hotels the company that oversees major brands such as comfort inn and quality hotels report an 11% rise in third quarter and also revenue per available room that's rev par that beats the industry average by a good bit but the company warned the fourth quarter might not come out quite as well. stephen joyce of choice hotels joins us. stephen: i will correct one thing. we think fourth quarter is going to be better than third quarter which is better than second quarter which was better than fourth quarter. david: well there we go. stephen: we're pretty excited about where we're headed. david: let's talk about third

quarter first. you've had a good quarter. you're 120 basis points above where the norm is. what's cause that? stephen: a couple of things. one is we are doing a lot of things for the franchise using owners that are helping us drive better results. we also have a situation where we are heavily leisure. that business has held up better. and we're adding a lot of new units. so the combination of all those things led to a really strong quarter for us. but the exciting thing is sort of it's always good that you're doing well in the industry but it's always great when you're also taking share from others. david: how much of that is taking share of people as opposed to you bet getting a bigger piece? stephen: it's about two thirds of the pie getting bigger and about a third of us taking share from others. alix: in terms of the rev par for the fourth quarter, do you expect not be later? stephen: no, it's going to be better. we had a very strong except

october has looked really strong so far. as we've gotten into the year, our in business has accelerated. alix: the issue is a growth in the economy that is slightly improving but sluggish and a drop in business travel. so what's your read true on those two fronts? stephen: you've got the cycle which has peaked but it's moderating very slowly. but what is noticeable is ohon the business side and on the group side, there's been some softening. we don't participate a lot on the group side. and on the business, we're building system of our share but it's the leisure component that's holding up so well. david: what about consolidation of your business? there's been a lot of consolidation. we just saw an investment coming in from china, right? alix: yeah. david: that is -- are you open to consolidation? stephen: we absolutely are. david: are you a buyer or a seller? stephen: a buyer narcotic seller. we already have scale. we have 6400 hotels, 40

countries. however, the definition of scale is changing with some of this activity. so our view is we're going to look for opportunities to create a larger set of inventories that helps our customers, doesn't change our competitive position with our brands but at the same time, gives us scale to deal various distribution channels, not all of which are friendly. alix: so put this in perspective in perception for your business. are you going to hire more people? stephen: we're in expansion mode. alix: can you quantify that for us? stephen: we're looking for about 200 people at this point which for us is a fairly significant size. and we're also adding a lot of hotels. so those hotels and a lot of new construction hotel, those hotels are a major employer in the community. so we think it's actually going to be strong and next year will be a good year. we'll see how good. alix: what's the supply looking like?

stephen: it varies. alix: is it tight or easy to find? stephen: it has gotten tighter for skilled executive positions. on the hotel side for the hourly associates, it's actually still fairly good. there's a lot of wage pressure though given everything that's going on in the country but our folks are enjoying record profitability. so we're in a very good spot. but we feel good about but we are doing things to attract other associates too. we just changed our leave policy where we're given from maternity ty 12, we're we're giving the partner 12 weeks and leave for people taking care of their parents which is really helping us attract the right kind of executives. alix: steve, thanks for joining us. coming up, g.d.p. data 40 minutes away. this is bloomberg. ♪

alix: we are 30 minutes from the third quarter g.d.p. numbers here in the u.s. this is really g.d.p. vs. consumer spending. consumer spending is that blue line. real g.d.p. is that white line. what we've seen at this point is five quartered acceleration in g.d.p. from the first quarter of 2015 all the way to the second quarter. we're now at 1.3%. on the flip side, consumer spending as also fallen but is now pick back up at 2.7%. just how strong and how much will it wind up holding up? and to dig deeper into just how important that consumer spending is to g.d.p., this is a contribution into growth. this yellow line is personal consumption contradict about 1.8% to growth. the weakest area is that white line. yes, it's been improving but still in negative territory. the weakest area, you have to focus on is that blue line.

that's non-residential fixed investment. as you can see here, it started to roll over and dip into negative territory. those are three big components you're going to want to watch in about a half-hour. the second prong of this has to do with inventories. the idea is you're a factory. you make products. a business steve youngs its products to meet final demand. what we saw is a huge in flux into inventory. so inventory to sales ratio rise as demand didn't materialize. last quarter, we got an inventory drop which is really rare. so the question is do we get paybacks? is the demand there? are factories starting to work? will we see inventories doesn't fall? if not, this will continue the risk to be a drag on g.d.p. going forward, john. jonathan: thank you very much. we are about 34 minutes away. we'll bring to it you right here on-daydale. coming up in the next hour, the

tale of two tech report. alphabet and amazon headed in opposite directions. piper jaffray analyst breaks own the numbers. the markets looks like the markets looks like this. futures, positive. up 24. dow, 4 points the stage is set with the $index close to a seven-month high and treasury yields close to the highest since may. as we bounce off the session lows, it's the weaker pound story and a stronger dollar. we've said that so many times. from new york, this is bloomberg. ♪

jonathan: from new york, good

morning on this friday, october 28. i am jonathan ferro alongside david westin and alix steel. u.s. futures positive. a stable session in london. get to the other asset classes we are testing some levels. the dollar index near a seven-month high. lix: sergio raman to you pledging more cost cuts. bank saw a 55% plunge in profit before tax. shares of amazon are down after reporting holiday sales that may miss estimates. global bonds are set for their worst month since 2013 as closer tosee banks

rating in stimulus. investors await third-quarter gdp, out in just a half hour. are focusing on u.s. gdp numbers and we turned to our colleague, carl riccadonna. the table for us. where have we been and where do we think we are going? carl: we have been in a multi-quarters wide -- slide in the first half of this year gdp was essentially 1%. speed forose to stall the u.s. economy and that is why the fed is as concerned about downside risks to growth as they are about the potential for overheating. likebeing said, it looks things are accelerating into the second half so consensus is .ooking for two sic

what it does to that underlying growth rate that is about 1.3% or 1.4% in year on year terms, that is a very slow pace and it should start to accelerate heading into the end of the year . i think the fed forecast of 1.8 on that growth rate is obtainable, but just to put that perspective, last year gdp was growing at 2.2% in year on year terms. this year we will be at just 1.8% so this is not a fed that is falling behind the curve. jonathan: let me jump in with german inflation because the backdrop of the story may be a recalibration of the outlook globally. excited, wet too have a very low bar. the backdrop to all of this is somehow in the bond market on the margin, some people saying inflation is coming. the growth story in the u.s.,

put that with the inflation story. carl: if we plot inflation along with gdp, we can see the best fit is with a six quarter lag. what is happening to the gdp numbers is what is happening to the real economy a year and a half ago. given the slow growth environment we are not going to see a significant flareup in price pressures, i would argue maybe not until 2018 assuming the economy doesn't fact accelerate. the fact that corporate profits are effectively a function of the speed with which the economy is growing is embedded. there is a correlation between corporate profits and gdp. given the slow growth we have been suffering under for so many quarters, this has taken a toll on corporate profits which are in negative territory. to the point in the earlier segment, it is hard to see a pickup in investment if the

profit numbers are suffering. we do not get the profits today, we will in november, but it is hard to see things turning around just yet. david: what goes into this overall number? what are you looking at? what are the component parts driving this number? carl: the biggest moving parts, there are three. one is consumer spending which has dominated the growth landscape over the last four quarters. the problem is consumer spending was ok and the third quarter but significantly downshifted from q2. that is the key underlying fundamental. ember two is the inventory drag from the second quarter, should disappear in the quarter, but that is just something bad going away. it is not something good coming about. the third factor will be the trade numbers.

jean bankruptcy disrupting flow into the ports. that is not like what we does unlike what we saw in 2015 when there was a dockworker strike in california. imports and exports can be thrown for a loop so that is one other variable. alix: take a look at the bloomberg, this is the market implied probability of a rate hike. this yellow line is what the rate hike's expectations were for 2015 back in 2014. two years ago, what the market was expecting. that green line is what the market is expecting today for next year. we have re-rated expectations lower for longer for so long that there is a theory we cannot price it out. carl: this is in a market that is second-guessing the fed. a said they would deliver for rate hikes, the gdp numbers were

significantly weaker. in q2 we had the repricing so those numbers disappointed, and there were extensive revisions showing that growth was on much less stable footing. gdp numbers this morning could be a significant market moving event for fed funds expectations. david: that is carl riccadonna, chief economics. alix: exxon was just reporting at the top of the hour, the company beating on earnings and revenue. they may 2 .7 billion dollars in the quarter but it was pretty much status quo. reduction came in light and they blamed nigeria. commentary on these countries likely be area -- liberia and nigeria will be interesting. year.5% year on it is still $4.2 billion, but that is a tremendous decrease

which is more impressive because they were able to hold production relatively high. we will dig deeper into the numbers and follow the story. let's get an update on what is happening outside the business world. emma: islamic state militants are said to be using people as human shields. the u.n. says it is taking place in the city of most all which is under siege. state uses civilian hostages to make sure certain .reas are not attacked hillary clinton and tolls the final days of the presidential campaign with a huge cash advantage. she had 100 $53 million as of october 19. donald trump had $68 million in hand. donald trump pledged he would spend $100 million of his own fortune on the election but he

has put in half of that. the largest marine protected area and ocean will be created by 24 countries and the european union. area in the ross sea that is about twice the size of texas. scientists will be able to catch fish in certain research projects. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: u.s. equity futures continuing to grind higher, but amazon not helping things, down by about 5%. you had a profit the last quarter trailing estimates. the problem was the increasing on warehouses and spending more on programming. the company is opening new fulfillment services, about 18 in the third quarter to help with the holiday season. taking a look at alphabets,

a.k.a. google, beat on this bottom line. the volume really picked up. the number of paid clicks rose .3%, and unbelievable number it is the second straight quarter with a 20% revenue increase for this company, and it shows how a big company can continue to grow. had an earnings miss and a bigger revenue mess, and cut its full-year -- revenue mess, cut its full-year forecast. jonathan: amazon's spending spree as they spook investors ahead of the holiday season, ,hile alphabet beats doubling down on the cloud. gene munster joins us next. this is bloomberg. ♪

jonathan: from new york, this is "bloomberg daybreak." i am jonathan ferro. we count you down to the gdp in united states about 18 minutes away. futures up 21 on the dow. index, close to a seven-month high. a very strong index at the moment. yields going back to may of this year. at 1.10. rate alix: in the u.s. equity market it is amazon front and center, down by about 5%. the big miss was operating margin. looking atically

they are expecting margins to double in 2017 and again in 2018. that 1.8% operating margin in the third quarter was the best foreign amazon third quarter since 2010. they ramp up for the holiday season and that weighs on their margin, but if it continues to get light or break even, it will throw these estimates off. the other part of the story is more the positive side. amazon web services, the cloud revenue grew 55%, but check out these operating margins up by over 30% despite the competition from google and microsoft. for more on amazon is gene munster joining us. he is overweight on the stock with a 9% price target. how did you interpret their forecast? gene: i had flashbacks to two

years ago when we went back to this. thesecond thing is that areas they are investing in our the right areas, the same areas that have yielded this incredible return to growth we have seen. their unit growth has grown from 20% and has been steady at the high 20% for the last few quarters. it brings back some bad memories, but they do invest in the right areas and i'm confident these investments are going to yield continued impressive market share gains that should cause the stock to bounce back. jonathan: when someone calls you and asks how to value this company, given that jeff bezos emphasis on the investor and all the focus is on the customer, what do you tell them to look for on the balance sheet? gene: we look at the ebitda

earnings and we think that is more or less in line with more broader internet. the pushback i get from investors as we have an impressive improvement in margins in 2018. while the multiple in 2014 is low and understandable they may take issue with our margin expansion. alix: when you take a look at the other part of the story which has to be there valuation, we talk a lot about pe when it comes to apple. amazon traded at 46 times earnings, almost twice the valuation of the nasdaq 100. take the case for why you should be paying up for that when you continue to have the operating margin story be a stress. gene: you have to look past the next few quarters and look at what the potential of these margins could be. we start effective that in, it is much easier to get a multiple in the mid-teens like we were talking about. i think it comes down to, do you

believe this business has leverage? that is a core question investors debate and we think there is leverage. the valuation is very reasonable if you assume that. what about their international expansion into india and china? how important is that to their vision? gene: it is important. they have not done much outside of the u.s. and western europe. they have 22 fulfillment centers in india and about 150 in total, so this is an important part, but this is kind of a 10 year play. even the india has a big population the purchasing power is very small, about 1/5 that of a person in china. an investor who wants to invest in longer-term themes, i think india is nice but it will probably take five plus years. jonathan: we have spent the bulk of this conversation talking

about what the investors are focusing on. amazon is devoted to media and music, so let's talk about what the company is trying to talk about. how do they leverage their message in a material way that it means something to the investor? gene: the way they do that is they are investing a lot in content. they are saying it is going to double their content investment, right around $4 billion next year to netflix $7 billion. we think that progressively consumers will value the content offering when i think about prime, and they can break that out and sell it separately, which they do. at the end of the day the content piece is important because it reinforces prime and when prime is reinforced, consumers spend four times as much as a non-prime user. david: there was another tech company that reported yesterday

called alphabet. there is one thing that particularly jumped at me. a had a -- they had spectacular announcement. they went up 42% the number of ads clicked, it seems mainly because of youtube. is the sky the limit? is is a remarkable number. gene: that is exactly right, that is well put. it is hard to imagine a $74 billion advertising company continues to grow at the pace it .oes 23% on the fx, similar to the growth rate in the june quarter. you are right youtube is a surging factor but the core tends to be stable as well. there are still major areas that usese, google products we that are not monetized that they will start to monetize. do not worry about a bunch of ads coming up when you do a google map search but they will

become more aggressive. alix: thank you very much. good to see you, gene munster from piper jaffray. financials,nking on ubs reports a drop in its wealth management business but shares hit a one-month high. from new york as we count you down to u.s. gdp, futures are firmer, the dollar is stronger and yields hit a may 2016 high. ♪

jonathan: from new york, this is "bloomberg daybreak." we are eight minutes and 30 seconds away from the u.s. gdp but our attention goes to europe. ubs reports a drop in profit. the ceo pledged to continue his

cost-cutting strategy. >> on the cost side i think we have a very comprehensive and cost reduction which with a 2.1 net cost does not include any reduction of cost or benefits from exiting businesses, or any reduction of costs used for variable compensation that is driven by financial performance. jonathan: that was the you ebs -- ubs ceo speaking to bloomberg. michael moore joins us from london. , thisg the cost lever story began in 2012, the pivot away from ib. this will not capture the brilliance of that move. do the year after and the following do that? michael: i think they have a lot

of -- higher baseline from their peers, and a rough quarter for them relatively, their returns looked fairly favorable when you compare it with a lot of the investment banks. those moves over time have helped them and helped the shares. the cost-cutting going forward could give them another lever for that. jonathan: a wealth management business is a big focus on margin. net new money out of asia, how critical is that? michael: they have put a lot of their eggs in that basket so seeing that come through, and they had $9 billion in that new money up from $6 billion last quarter, that was a step in the right direction and a lot of that was driven by asia which reinforces why they are driving a lot of the business to that region. david: they brought in some new

money but it is clear if they win they are going to win on wealth management. do we have a sense how they are doing relative to their competitors? are they taking market share or losing? they are not the only ones at this point in that game. michael: it has gotten to be a crowded space, especially going after the very high-end of the wealth spectrum. we will see credit suisse next week and that will give a lot of indication how these are doing relative to each other. you are also seeing a number of the u.s. players try to push into that wealth segment. so i think we will see once all the banks have reported how they fared in that, but over the last couple of years have certainly made up some ground. alix: you mentioned the high net worth individuals being there key clients but they come at lower margins. what is the solution? michael: i think the hope is to

get them in the door and then continue to build the relationship with them. cross-selling is an ugly word in banking these days, but certainly trying to get more lending with the bank and as many products as possible to kind of take it over time, held up that margin, as you say attracting the clients can squeeze that margin. jonathan: michael moore joining us from london on some of the banking news we have had on the continent. a look at the top stories terminal readers are reading on the bloomberg. i am combining tech and brexit. apple is raising its products in the u.k., in some areas as much as 20%. you will pay 500 pounds more for the mac pro and the mac mini, almost 1000 pounds more because of the weaker sterling. the filter through is finally here. jonathan: a conversation we had

about the inventory turnover, they are importing a lot of the stuff. they are going to have to roll that over and import new stuff with the pound 20% weaker. that is when you will feel the price pressure. david: that is maybe why we have not seen the inflation pickup and apple is on the leading edge. alix: 20%. u.s. third-quarter gdp data is on deck. what it means for the feds, the market, and the election. this is bloomberg. ♪

jonathan: from new york, this is "bloomberg daybreak." i am jonathan ferro. futures up 21 points on the dow, up two to three points on the s&p 500.

treasury yields go back to way may 2016 high, up one basis point on the 10 year. inlar index is the strongest almost one month. the euro around $1.09. david: it has come in and it is 2.9%. survey. the last month was 1.4%. 2.9% which is a nice beat on what they expected. alix: we learned the employment cost index that takes into account things like wages and salaries and benefits, came in at 6/10 of 1%, paying in line with one -- in line with expectations. 2.1% and for the second quarter it was almost

double that so with personal consumption is so key, what does that mean? jonathan: a marginal reaction in the market on the back of this, yields pushing up marginally. things have really stabilized. the dollar index pretty much remains dead flat. the market reaction in bonds and fx, relatively muted. alix: digging a little deeper, the real weakness within gdp was equipment and nonresidential and structure spending. that fixed investment keeps moving lower and dragging gdp down. i'm trying to look for some inventory numbers and when i find them i will bring them, because that inventory drawdown last quarter was a big drag on gdp. david: there is nothing in these numbers that would deter the fed from moving in december? jonathan: no. paul mortimer lee is joining us. it does not look like the trend

has changed much, from the figures we have seen. paul: there's a bit of difference on exports because el niño killed the soybean crop and we exported a lot from the u.s. inventory is probably a bit different from expected. the consumer is slower but still pretty solid, 2.1% from the consumer keeps us going above trend into q4. the worrying thing is fixed investment, and that is really, we have seen four quarters of non-res investment in that reflects a squeeze on profits. jonathan: it is the longest such stretch in the current expansion so is that a red flashing light for the fed? the read across most of the market will be slow and steady as she goes into december, but that stretch could be a warning

signal. paul: it is an orange, not a red. this is a continuation of a slightly concerning trend. all we say is tread very carefully because there is not something absolutely right in the corporate sector and you must not give the economy a big shock. alix: for the third quarter, coming in at 2.9% in terms of growth. the employment cost index up 6/10 of 1% and you can follow all the details as our reporters and economists break it down. i want to focus on the inventory number. inventories rose by about 12 billion after a draw we saw of 10 billion in the second quarter. how much more payback to you expect to see from inventory or is this it? paul: i think this is, that sooner than i expected and there are questions on whether this gets revised even the strength

of net trade. it is unusual to have strong net trade and inventory. they tend to offset some that probably will not be a strong in the fourth quarter, and we can anticipate the fourth quarter numbers will be quite a bit weaker. not week, but not as good. there is going to be some give back. is of the odd things nondurable consumption was down. you do not normally see that. that looks a bit odd and i would expect that to correct going forward. i think it is a good number. certainly better than half one. the economy looks to be moving on trend but the nagging problem is the investment side. david: does this say we are more or less treading water? we are not moving forward as if

you are not having the investment spend you are not adding to productivity and growing the economy fundamentally. paul: the economy can still grow above trend if it is dragging extra labor in, and the economy is growing above trend. it is dragging the unemployed workforce.nto the why people are investing, they do not feel confident about the future. it is very difficult to grow project -- profits. if you cannot grow profits you have to cut shares. jonathan: let's talk about how the story is captured by the fed because you have painted the output, lower, productivity, lower. the projection at the far end comes a little bit lower. be 25, 50 basis

points over the next couple of years. how do they manage that? paul: i think they edge forward. this has been the loosest tightening cycle we have ever seen so i think they edge forward in december and signal they are not going anywhere in .he first half of 17 -- 2017 i think the economy is slowing because inflation is going up, is a good thing from the fed perspective, but it is going up faster than the wages. next year i think we will. -- see consumer numbers of one and a half. jonathan: the corporate investment environment has rolled over and consumer purchases decelerated from the three previous months, and that is what has been driving gdp. alix: the final sales number was the second quarter it was 2.6%, so is not enough to pick up the slack in the market? paul: i think it is.

2.3% is still above the potential. we have got to get productivity up to raise living standards in this economy. lee, bnp paul mortimer paribas as chief economist. alix: we are going to take a look at what the gdp number meaning is for small cap funds. you are looking at the gdp trend for the third quarter of 2.9%. what does that mean for domestically exposed stocks? >> it is a little better than forecast. i think the big thing is we need to see an acceleration or continued acceleration of gdp growth actually drive the bottom line for smaller cap companies. to thee very exposed u.s. economy and earnings growth has been pretty weak.

it has been a little troubling for me. alix: you make a good point as we take a look at the earnings beats for the s&p, they are significantly higher than for the small cap aims. -- names. what do you make of that? 15%en: there was only about to 20% of small-cap companies reporting so i do not want to panic, but that is still a really weak number. usually you get 50% plus. the other thing that is troubling is it has been broad-based. if it was in one particular sector that is not a big deal, right now it is across a few sectors so it makes me a little bit nervous. small-cap stocks are expensive. you really need earnings to kick in to get the stocks to move higher, so we have had a bit of a correction, ounce 6% from the peak. i continue to see weakness. alix: how much more?

how much more downside could there be with these numbers? steven: if you look at the forecast, the earnings growth is supposed to be about flat to potentially up 1% to 2%. i was thinking of getting 3% to 4%, so we do not necessarily get that kind of growth rate we are at flat you are going to see fourth-quarter numbers come down substantially and if you see another 5% or 10% correction, i do not think that is illogical given that you have small caps trading at 19 times forward earnings. alix: we have the election season less than two weeks away and that will change how smaller companies in the u.s. can do their business. what historically have we learned about small caps in election cycles? steven: they do fairly well in the next year after an election, a lot of it due to the fact that

you have an election, and then the 2009 performance, and going back to the 1930's you have had pretty good market bounces. the only problem i have is that valuations look really expensive. if you look at the fed potentially raising rates in december, this is the most expensive small-cap stocks have been into a second hike. that is a little bit more troubling for me as well. alix: thank you for being with us, steve. david: next we're going to talk about politics. hillary clinton's towering cash advantage, extending her financial advantage over donald trump with just 11 days until the election. this is bloomberg. ♪

emma: this is bloomberg daybreak. i am emma chandra. funds up, up and hind are -- oppenheimer funds chief investor. this is bloomberg. david: this is bloomberg. i am david westin. 11 days to go until election and support -- some important economic signposts will influence that. u.s. jobs numbers coming out next friday. marty schenker joins us from washington, senior executive editor -- editor for government.

you see the number, 2.9%. how does donald trump use that number or defend against it and how does hillary clinton? marty: i was keeping an eye on donald trump's tweeting this morning, and he may claim that this is a rigged number. there was the infamous tweet from jack welch years ago where he questioned the veracity of economic statistics and in keeping with the tenor of his campaign, it would not surprise me if he questioned whether the labor department is using it to boost her candidacy. inside those numbers, there is some themes that donald trump has used. consumption is weak and that speaks to a weak consumer. david: we have also been talking about corporate investment, corporate spending which is a week number. a lot of the reason for that economists think, is because

people are hesitant about the future. companies are not confident the demand will be there in the future. might that give donald trump something to talk about? marty: it might. he has continually said that number is going down below zero. this report would counter that. he may very well say that his being elected would boost the confidence, but to be honest, i think either candidate once these elections are over, that piece of uncertainty is removed so you may see a pickup. david: as we go through history, one thing that tends to indicate how it may come out as the job approval of the incumbent. president obama's job approval numbers are above 50% now. does that give us any

indication? marty: there is a real disconnect. we had our consumer confidence number yesterday which had the biggest jump in almost 18 months. consumers think the prospects are improving, yet they say we are on the wrong track so there's a disconnect. david: there is an article out on the bloomberg today about hillary clinton's advantage in terms of her cash on hand, which is pretty stunning. as of the last report she has $153 million left and donald trump has only $68 million. is that something we will see in terms of ad in these last 11 days? marty: the money has to go somewhere so it is an unprecedented advantage for hillary clinton. the role of money in this election i think is overstated. 40%ld has got a solid throughout this campaign and he spent virtually nothing. that is staying where it is, so

it may influence the undecideds. david: what do you think of the people that voted already, 15 million americans have already voted. do we have any idea which way they are going? marty: in iowa and north carolina the democrats have an advantage and in ohio and colorado the republicans do. something like 50 million americans will wake up tuesday morning and have already voted, which is an unprecedented number. david: another way this election is different from every other. that is marty schenker. time now for some other stories making headlines. here is emma chandra with your bloomberg business flash. exxon mobil has extended its longest streak of profit declines in almost 30 years, falling 38% from a year ago.

profit still beat estimates. exxon has been hammered by the prolonged oil slump. shares of novo nordisk plunged by the most in 14 years. the world's egg us maker of inulin slashed its profit half because of -- they have been negotiating aggressively for discounts. expansion, overseas they have agreed to buy seven 747 jumbo jets. their international unit has risen 8% in the last decade, more than three times the u.s. alix: we have big earnings trickling out this morning from big oil. we have exxon and chevron beating estimates on the top and bottom line. we will dig deeper into the numbers and what they mean going

forward. this is bloomberg. ♪

jonathan: from new york city, this is "bloomberg daybreak." 40 minutes away to the cash open. features positive, up 25 points on the dow and three on the s&p 500. following an upside surprise at u.s. gdp, 2.9% for the third quarter. the median estimate of the bloomberg survey was 2.6%, and improvement but yields remain unchanged, and the dollar kind of goes nowhere as well. the cable rate at 1.2150. there are subtle stories within the headlines. the continuation of business spending declines and on top of that, it was the consumer holding things up. david: those are the two themes. the consumers supporting us but

the businesses are not investing which means we will not get increased activity and that is not a good message. alix: the third prong was inventory. hold up doesnot that remove a support for the third quarter? storyan: and the capex feeds into that as well. alix: down 45% in the third quarter as exxon continues to try and trim its output. it is the longest streak of profit declines for exxon in almost three decades. chevron is a different story, the stock up half a percent. they have their first profit since 2015. it has now stemmed as oil prices have stabilized. with this is the senior vice president for raymond james joining us on the phone. here was the story last quarter.

you need to raise your cash flow, cut your capex and try to save your balance sheet. what is the narrative this quarter? pavel: very similar. you noted that capex has been falling off a cliff for these companies and that is visible in what is happening to production. in the case of exxon which had a really rough quarter, when we look at the operational result production at its lowest level since 2009. in fairness there were some outages in nigeria, which of course we cannot blame the company for, but nonetheless, even adjusting for that production we barely beat the flat year to date or year over year. inis not a healthy result just this patch test passed march -- past march, gaston

guided to halt production for the rest of this decade. flat production would probably be a victory. they also disclosed, this was the biggest surprising revelation today. up to 18% of the company's reserves are at risk of getting debunked because of low oil ooked because of low oil prices. it is almost 1/5 of their asset base. alix: chevron reporting something similar in that they are production coming in at 2.5 million barrels equivalent a day. what helped them with their downstream operations and refining margins. when one area goes bust another can help. what they made for a product was like $14 for it.

that is no good. where do they get the growth? pavel: raymond james is looking for oil in the 60's by the end of the year and higher levels in 2017. as that happens, of course that , but exxon andt to a lesser degree chevron are not the best ways to play that i think exxon is one of the worst ways to play the oil recovery because virtually anything else that you could own will give you better leverage to that oil recovery. precisely because exxon is the world's biggest refiner and the second biggest chemical company, a lot of people forget that point. this is not a business which is really going to benefit all that ifh relative to its peers oil does get into the 60's. alix: thank you very much for joining us.

guys islem with these that they produce so much oil, they would have to run so hard to a in place because you have reserves that declined so you have to keep putting in money to keep your base stable. excited about asking michael mckee to come on this program and give us the ..s. gdp number soybeans, a big part of that we need gdp soybeans which means michael mckee has to join us. this is bloomberg. ♪

jonathan: good morning from new this a warm welcome on

friday, october 28. i am jon ferro alongside david westin and alix steel. futures are 33 point higher on the dow, up four to five points on the s&p 500. here is the state of play in other asset classes following the u.s. gdp play. the dollar index holds onto a seven-month high. alix: the u.s. economy picks up in the third quarter, growing by 2.9%, the biggest rise in two years. the data is in sync with the feds view that the economy is making slow and steady progress. sergio ermotti pledges more cost cutting after reporting losses in his wealth management business. tax -- in profit before tax. amazon is down after forecasting holiday sales that may miss

estimates. they have decided to offer prime shopping in china to compete with alibaba. david: with us is krishna memani. also joining us is michael mckee. let me start with you, krishna. so 2.9% the consensus is better than it was. is it good news are not so good? krishna: anything north of 2% is good. question is, doesn't answer all the questions that i needed answers for? is the consumer weakening or not, that is the key in terms of sustainability of the current growth trend. that question did not get answered. inventories and exports were up and those were the primary drivers. whether the consumer is going to

continue to grow their spending at the pace that they have been historically, i think that needs to be answered. jonathan: let's talk about what picked up and what is going to last. what picked up his net exports. there is a soybean story i want you to break down. what softened was the consumer. michael: that is the problem with this report, it is not as good under the hood as it looks on the top line. we saw exports rise and according to the commerce department, a big rise in soybean exports. that probably will not be sustained. earlier in the year we saw the dollar weakened and that may have helped with the export sales but the dollar has gotten stronger. the inventory swing accounted for about 6/10 of 1% of the rising gdp so if you take out inventories and net exports, you end up with a 1.4% growth rate which is where we have been

growing. we could slip back in the next reports in the next couple of quarters if consumers do not pick up their spending. alix: let me come in on the soybean part because exports have exceeded 2 million times in the last few weeks. over 2 million tons. jonathan: stripping out the story,eings -- soybean business and consumer spending are not good. how do those stories reconcile? the consumer softening and the same with business. does that concern you? krishna: i think that is the crux of the .ssue if profitability stalls out and investment is not taking place, eventually consumption will slow down and that will drag the u.s. economy down. if the fed was looking for something in the gdp data to

support their urge to raise rates, they can certainly find some but i think if they look deeper they have to be very concerned. michael: you look at the real file sales to domestic purchasers falls. if you were on the fed and data-driven you would say this will not compel me to rise. david: let me push for a unified field erie. is there a connection and it is wages? as the wages go up you have more consumer spending and companies are more likely to invest because they think the demand will be there. missing that has been the animal spirits part getting the consumer demand into investment business. wages have been rising at a reasonable pace. it is not the number most economists look at to represent wages but overall it has been higher. it just is not translating into the extra business investment

that everyone is waiting to see. jonathan: let's talk about what you would do on the campaign trail this weekend. michael: if i am hillary clinton i am holding up a sign that says 2.9%. jonathan: if you are donald trump you would say you cannot get businesses to invest. michael: the average american is just going to read the headline that says 2.9% and that is much better than next vacations. -- much better than expectations. alix: they do not care about soybeans? david: it is being on the neck of business, we are over regulating people and that is why businesses will not invest. krishna: you can make that point and whether it will get traction is the question. i think on that count 2.9 wins. that is a positive number rather than a negative number, any which way you look at it.

jonathan: 2.9 wins. d you think anyway the election is weighed on business investment? michael: yes, he had sort of cnet. yesterday the bloomberg consumer comfort index was up and if you do a correlation between that and hillary clinton's poll numbers, there is about a 60% relationship which is significantly -- statistically significant. if people feel she is more comfortable to be the likely winner people feel better about the economy. david: not so much because they like hillary clinton but because they want certainty. if she wins by too much could you inject uncertainty concerning the house and senate? krishna: i think so. if the democrats take over congress as well as the presidency, i think there is a really good case to be made that at least in the near term the

net impact on expectations is probably going to be negative rather than positive because of taxes going up and other sorts of other things going up. jonathan: michael mckee and krishna memani. an upside surprise for the u.s. gdp. for an update on the news outside the business world, let's get to emma chandra emma:. a judge in northern iowa has rejected two challenges to the brexit process -- a judge in northern ireland has rejected two challenges to the brexit process. e.u..a departure from the reports that vice president joe biden is at the top of the list to be secretary of state if hillary clinton is elected president. politico says she and her aides are trying to figure out how to approach biden who almost .ecided to run against her

instead he has campaigned for her. an international agreement will create the largest marine protected area. 24 countries and the e.u. agreed on the deal. it covers an area about twice the size of texas. commercial fishing will be banned but scientists will be able to catch fish in certain research situations. global news 24 hours a day, powered by our 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. alix: u.s. equity futures moving higher this morning, the s&p 500 at the highs of the session. the s&p has been on a three-day losing streak. global stocks and european stocks lower, so can the s&p grind higher? earnings represent a huge portion of the market cap. card volume was up by about 5%.

abby actually missed estimates by $100 million. in big oil trickling out, it is a diverging story. you have exxon up half a percent, its first profit since 2015, and earnings coming in at $.68 a share. eight straight year on year profit decline but the number was the potential. might have to write down 5 billion barrels of reserves, 72 percent coming from the canadian tar sands. .avid: the bomb dropped how investors may be getting ready for tighter voluntary policy. -- monetary policy. this is bloomberg. ♪

jonathan: from new york city, this is bloomberg. to the bond rout we go, potentially the worst month in three years as central banks move closer to scaling back stimulus. unds, the worst month since 2015. the backup has been significant. let's bring in krishna memani. because it a laugh is 16 basis points but it was very negative. we have the six-month range and the tactical factors over

central-bank status and the bull market. how does this play out? krishna: we could have a selloff in bond markets, a little more of the selloff. from a secular standpoint nothing has really changed. if you think about it, the primary driver of rates remaining as low as they are or where they have been, is because savings in asia are significantly high. and they remain as significantly high as they have ever been. demographics in developed markets is going the wrong way. they continue to go the wrong way so nothing has really changed for the secular story to be unwound. david: the question of how much a bond is worth is ultimately up to how many people want to buy it and the central banks want to buy a fair number. is it up to the central banks to decide when the market turns around? krishna: if they were not buying

them we would probably be buying a lot and taking rates to send -- negative levels. banks are supporting growth in a perverse way. david: so there are enough of us to make up for the central banks? krishna: absolutely. jonathan: your point who is going to buy this, it is a demographic shift. the percentage of population above 65 and it is all going the right way. the aging population bidding up safe haven assets. that is going to continue, isn't it? krishna: absolutely. i their in the emerging markets has to go up meaningfully to be able to absorb all these capital that is sloshing around. what we are finding out as we with respectr wad

to china and it is only in the left to be able to absorb any of it. the rates will remain low for the rest of my career and i am looking forward to having a long career. alix: if you are an investor and you want to buy on the dip, where do you do that? krishna: if the two-year backs up significantly i think that is a good opportunity. if because ofand, inflationary concerns we have significant steepening, the opportunity may be in the long end of the curve. it has deep in some but not to the level i would like to see. jonathan: that looks like more flattening to me because inflation concerns might prompt the fed to do something on the margin. going to be more aggressive and obsess over the inflation story and the headwinds remain, that just grains flattening. krishna: that is probably right. down the road it may be bullish

flattening all around. alix: when it comes to issuance, the treasury had a ton this week and you could say that is what we saw the backup and yields. ins issuance play a part backing up yields and the selloff continuing? week over think on a week term or month over month term it can play a role. at the end of the day, the bond market is deep enough and has to be driven by things like inflation, inflation expectations, and large flow of funds. those still point to lower rates rather than higher rates. david: i am a long way away from a bond trader, but i have observed that when you have too much money you make bad decisions. is there a risk of inflating asset values, encouraging companies to buy because there is so much access to capital? these might cause riskier behavior. krishna: there is some of that

risk of taking place in the corporate market for sure. as we saw with fracking when , wetal was easily available had a bit of a crisis to deal with. if we look at the rate of debt growth in the corporate market, it is high but not as high as it was before the global financial crisis that led to the blowout. yes, if the strength continues for another two to three years we will have those kinds of situations. are we there yet? probably not. alix: you do not have that strong of earnings growth, up tda. and 2.5% ebi his growth enough to support the debt we are seeing? no, we: the answer is are definitely levering ourselves. the question is heavily levered

ourselves and the trend is strong enough for us to blow up, and the answer is not yet. if this trend continues we will certainly get there. if people are watching this program right now and truly believe in the growth inflation story and that is what we have had in the bond market, let's say that what it -- that is what they believe. and you explained why cash holdings are so high? the highest since 2001. if i believe in growth why am i in cash? krishna: i believe in safety and far more anything else and that is pervasive, and that is why rates are low. if you go out and look at what is happened in the marketplace, effectively we have basically gnawed down anything with any sign of safety beginning with government bonds, credit, safe stocks, and that tells you what

people are looking for. the world wants a good bond. because everyone wants one we're not going to get one. alix: was it australia that issue that 70 year bond? it did not do well yesterday. coming up, exons profit slides, shares down. they are seen their longest streak of profit declines in nearly three decades. this is bloomberg. ♪

alix: the exxon mobil conference call is about to begin, down one and a half percent after reporting another quarter of declines. at the heart of this, and the

question everyone is going to pose, what is up with the potential $5 billion write-down? their company had better than expected results, however they are significantly lower than a year ago. there is a lot of right off because of the low oil and gas prices. alix: in chevron's case, it was the opposite. aey had written down foreign half billion dollars over the last months and they did not. where is x ongoing versus other big oil? going versusxxon other big oil? fadel: we do not really consider it a part of their operating results, so excluding operating results the adjusted earnings for both companies were significantly higher than expected. one of the reasons is that

because they fell into a much slower tax bracket because of the week earnings. tax rate is exxon's about 20% and usually it is about 40% so they benefited from a reversal of taxes. having said that, when you look at what happened to both companies, they are in the worst financial shape in their history. their debt level is the highest ever. they are borrowing money to feed the dividends. i have been following these companies for 30 years and this is the first time i have seen them dipping into their bank accounts to pay the dividends. the good news is that i think the worst is over. i think we have already seen the low in earnings. so going forward, these companies will probably have that are earning outlooks,

however the negative is that they will still be in a cash flow deficit. alix: when do you expect that to turn around? fadel: when i see $60 oil prices. alix: it seems like big oil is stuck between a rock and a hard place. have refining margins and downstream operations continuing to suffer. which turns first to help the cash flow? fadel: their earnings come from upstream to 80% to 90% of the company. their downstream which is chemical marketing and refining, their distribution is about 10% to 15%. when you see the upstream business, it really hurts badly because of the lower oil prices than they downstream segment appears better than it is. normalized earnings going forward, these companies

desperately need $60 plus oil for them to be cash flow neutral. alix: what guys break even at $50? fadel: none. i cannot think of any company that would break even at $50 oil. alix: is there potentially one that will be able to be the best way to play a recovery to $60? fadel: they are hunkering down. the capital was spent to a level that will impact their production and their outlook going forward because at the end of the day, we need a minimum investment in order for us to replace the reserve from the ground. chevron, i am and talking about the industry in general including opec. everybody is happy with the low most ofes but obviously

these companies cannot survive on $50 oil. some might not be able to survive on $60 oil. alix: thank you very much. from oppenheimer. jonathan: a big week for earnings. apple, twitter, google, amazon. apple is the old strategy and tim cook will not tell you what the new one is. twitter does not have one, google has investors, and amazon does not care. david: google is doing pretty darn well. jonathan: we will bring you the opening prices and bell. ♪

jon: from new york city, this is "bloomberg daybreak.'s futures up 39 points. upside to price for u.s. gdp, a

big boost from asked arts will bring that -- a big boost from exports. cable rate at 121.60. trading higher since may. crude rolling over. commodity market we go with debbie -- commodity market we go with wti's -- potentially heading toward a week of losses. alix: the dow jones up by 1/10 of 1%. not a lot of movement either way. energy stocks -- oil rose over. andh material stocks industrial stocks. take a look at some of the intraday stocks. seeing big moves. auto off 5%.

the takata airbag recall had a negative impact. goodyear taken to the woodshed off by 12%. shaving 10% from the top and of its 2016 income. on the flipside, baker hughes up by 5%. it cannot yesterday that ge is looking to buy parts of baker hughes' business. baker hughes feeling on its merger with halliburton early this year. ; dr. maker is hiring goldman mi-conductoerse maker is hiring goldman sachs. wanted take a moment to take stock of where we were at. 78% of companies within the s&p have reported an earnings estimate that they did better. beat caine earnings

in 5.5%. sales,s of the average some beat on revenues coming up .7%. 7/10 of 1%. surprising to the upside on earnings as well as revenue. david: we are willing to the earnings season. we want to go a little more granular. we are joined by a stock export. how are we doing? >> it is a big quarter. pretty solid. in terms of a symbolic change into positive earnings, pretty good. we are on pace to continue. if we beat rates, we will see pretty good progress. getting up to 4% or 5% and earnings growth year after year in the sectors that have done well. it will be an important quarter.

david: beating revenues and earnings growth? what is driving that? topline growth? more efficiency? >> great question. a lot of the growth has been driven over the course of the past four or five years by improving on those margins, cutting costs. part of it right now is very helpful comparables. space, at the energy some of these countries dealing with a stronger dollar and lower oil prices. they are comparable, their year or year -- their year on year growth is easy to achieve. jon: you point out energy and financials. the question is they are favorable. where is the strength going to come in the coming quarters? >> when you look past the energy stuff, it is dubious. there have been sectors doing pretty well. when you look at earnings

growth, energy materials part is doing well. you get that rebound in the cyclical space and see the technology companies do well, some of the financials -- a lot of it depends on the economy. if you have an economy that chugging along, you will see straight from the consumer stocks. there is not a lot of clarity to be honest. this is a symbolic moment turning into positive earnings. the question is what will sustain this? alix: on the conference call, what is the number one concern ceos stress? makes you wonder because it was smaller impact that it this time last year when you talk about strength in the dollar. when you talk to investors on the other side of it, it is interesting when you look at companies are being rewarded. you are seeing a barely interesting -- you are seeing a

very interesting comment on -- companies missing on both are getting whacked pretty hard. are losing 3.9% compared to an average 3%. people are quick to selloff. david: when you talk about earnings, are you talking about earnings per share overall pretax profit? attypically, we are looking the micro top dollar earnings per share. that is a good point. you see buybacks this year at a record pace. it is keeping things the float. you have to do something with your money. the ceos will we see talk about favorable conditions? alix: we never do.

jon: the dollar is strong and then it rolls over. it is so good. thank you very much. let's turn to tech. we have had a big weak earnings. apple and amazon reporting yesterday. from more on what stood out, we are joined by shira. that's talk strategy. apple came out. we have this rearview mirror conversation. google is doing it well in the market. put all that together for me. >> what has been clear this earnings season, as has been true for a year, the biggest tech companies are getting bigger and more powerful. you are talking about amazon, google, apple, microsoft is in that conversation and facebook.

they are continuing to extend their lead over their competitors and all the non-tech companies. looking at twitter at the moment, they have not got a strategy. they look like they were going through a sales process. i don't know what they are up to. what this at least for twitter? >> i did not mention them as part of the big five. twitter is a broken company. evaluation on the company is based on continuing to build users in revenue. neither users nor revenue are growing. you some of the active user jump year after year. decrease in the rate of growth they had been showing in prior orders. sawbuyers ran away as we over the last month or so. right now, they are an independent company. david: there was a time that twitter was put in the top

ranked with facebook. they really do verged. who is coming up? for example, snapchat? bigcould tell some of the ones? >> i think snapchat in on that trajectory. if i am snapchat, i look at twitter as a bit of a cautionary tale. that with a company that went public and a lot was expected. they had a valuation that they were going to continue to grow in users and revenue. that has not panned out. that is the danger of going public with these big, fat evaluations as snapchat is going to do. you set yourself up for very high expectations and alix: this talk evaluations. the nasdaq trades 24 times earnings. do the earnings we have seen justify this kind of valuation? >> it is funny because amazon is a company that looks crazy overvalued. it does look that way for 15

years, yet it continues to grow and is the fourth or fifth biggest company by stock market value. amazon is an outlier. what we have seen from these tech companies -- apple, microsoft, apple soft, they continue to turn over enormous market growth. these companies have earning power and revenue growth. jon: the big question for amazon -- it has been down the most since february. what is jeff bezos thinking? the muster of piper jaffray saying, don't look at the bottom line. see what they are investing in. take a listen. >> the areas they are investing in are the right areas that have yielded this incredible return to growth that we have seen. 20%r growth has gone from

and has been steady at the high 20% over the last few quarters. the way i felt about it, yes, it brings back bad memories, but if they do invest in the right areas, and i am confident these investments will yield continued, impressive market share gains that should cause the stock to bounce back. jon: it is a monster, monster company. a market cap down $19 billion in today's session in the last two minutes. my question is, we thought they would pick it toward making -- they would pivot. jeff bezos the psyche is turning back to the old days. >> this is a company that has broken all the rules of being a public company for 15 years. they always seem on the cusp of delivery that profits. been they turned back into investment mode. -- they havesting a track record of investing in the right things. the cloud division started 10

years ago, nobody knew what a retailer was doing in the cloud business. that has proven to be an incredibly valuable business that is broken a lot of business models in silicon valley. david: it may go down in history as the largest startup ever. alix: they are able to continue to do that. that is even more impressive. thank you so much. good to see you. coming up, the week in megamergers. it has been a week since at&t's deal to buy time warner. more on the deal to watch for next week. this is bloomberg. ♪

♪ >> this is bloomberg daybreak. i'm emma chandra in the green room. cyprusay, founder of capital. jon: from new york, this is "bloomberg daybreak." i'm jonathan ferro. here is how we trade at the moment. high on a quarter of 1% on the dow. be bold over on the nasdaq by in their 10th of 1%. let's check up with abigail doolittle. abigail: good morning. one of the big stories today for the nasdaq -- amazon, the big earnings miss. they missed a consistent estimate by 33% to make $.52 per share as operating expenses rose by 29%. of the company is spending --

the company is expecting to grow, but it does not appear investors are giving them a pass. tv, 3735.look at the uptrends a really nice in fact, but the recent congestion near the record high suggests that it is starting to break and we see that action breaking today. because he shares of amazon tode even more between $700 $750 per share. the apple supplier shares are up nicely on a big second quarter. they beat earnings in a significant way. they took their current quarter revenue up as much as 19%. they receive 70% of their revenue from apple. a lot of the strength is driven by the iphone. we do have apple hire of the session. they are on pace to close

at the highest level since 1995. m&aas been a huge week for kicking off with at&t's acquisition of apple -- acquisition of time warner. yesterday, we heard the -- general electric is in talks with a partnership with baker hughes. for more on this week's megadeals, and reporter is joining us. what would be in it for a ge/interviews tie up? ge came out that they are not looking at a full-scale buyout. it is more along the lines of partnership or sharing of assets. or some way of working together that does not involve a buyout. what would be different two when halliburton came in, they were a less significant play. hughes -- and baker

put of -- putting those two of three together was what they wanted to do. they thought it was too much antitrust. for ge, it would be a much lower risk. is itar, their statement is not something you're trying to buy. alix: lower risk, regulators have been very strict on potential mergers. the attentional to be more partnerships? >> it will something be will see play out. we saw so many deals get destroyed by regulators in this cycle. the biggest deals come out very, very quick. there are a lot of issues for the consumer. they are back for pricing. we see them time and time again. the blocked deals make life

unpleasant. the biggest one we have seen announced here is the at&t/time warner deal. that is eating a closer look now. a lot of people say it will struggle. it will go through a tough regulatory process. if that does not go through, it will be interesting is people will be trying. david: it is a vertical deal, which is different. they might put a lot of conditions on it. what are the markets telling us with this deal? >> the markets are giving it a favorable read. the spread is relatively wide. it will take a very long time to close because it is so big. you have that time value of money element in that spread. i don't think you are seeing people processing in huge a likelihood of a breakup. if you see other deals, the spreads are much wider. deals that are seen as relatively good probability of

closing, you are seeing 10% points on the spread. david: thank you so much. jon: coming up at the top of the hour, it is bloomberg markets. vonnie quinn, what is coming up? violent -- icelandic the icelandic private party is going on. -- icelandic pirate party. we are going to know why it is a popular. they want citizenship for edward snowden. they want the decriminalization of drugs among other things. we are going to look at the yield creeping higher after the gdp data in the u.s.. was it a trick or a treat? we will be going to britain to bond funderdeen's

manager appeared jon: looking forward to the program. heard --as i is ever not sure if i have ever heard of a tease for a show beginning with a tyrant -- type it. more on what hillary clinton in the multimedia do as we get into the final days of the race of the white house. what is a -- what is on the agenda? from new york, this is bloomberg. ♪

♪ 11 days to go until the election and the candidates are going to every square into the battleground states. marti joins us from washington and is senior ticket editor for the government. give us an inside? were of a candidate spending

their time and why? statesthe battleground are where they are going to spend most of their time and their surrogates as well. barack obama is going to florida today. that follows up on michelle obama's appearance with hillary yesterday. north carolina, iowa, even new hampshire -- they view it as though a possibility in the trump camp thinks it is, they will be spending time there. is 11 days are critical. -- these 11 days are critical for fell delivering their voter to the voting booth. david: in a normal election, where do the candidates spend their time? hillary will be looking more at down-ballot impact that she might have. of course, a democratic senate would be of great value to her and you may see her stand time

and money not; national campaign, but on helping the down-ballot candidates, which i think is critical for her. david: for donald trump, he has to win in florida and ohio. do we expect to see him in lord and ohio a lot? let's he will be in both places. florida and ohio and takes all the states that mitt romney took in 2012, it does not get him there. it is those states around those places where he will have to make up ground and make it up fast. and without a lot of ground game and not a lot of spending, it is going to be difficult to see how he gets there. david: thank you so much. looking to go because ahead, it will be huge. a big week on earnings. with itsomes out

monetary policy decision followed by the fed's rate decision on wednesday. friday next week, begin u.s. job numbers for october. and earnings, we are still trickling out -- alibaba, facebook, and credit suites. central banks, front and center with the boj kicking it off. jon: and payrolls as well. in the city of london, the clock turned back this week. the early lunch scrapped that an animal come out and ever early. david: we are just a little bit closer to the mother country. my payrolls are important to the fed for december, but gave away from the election. that issue will be key on the eco-front and political front. hillary will want to use the job numbers if she can. jon: the u.s. gdp number, great. effect that business spending has been contracting for the last four quarters, how how do

you leverage that if you are on the other side? david: people don't really get to that level of detail when they are out voting. jon: 26 minutes into the session. , but marginally on the s&p by a 10th of 1%. poised for a week of losses in the u.s. and europe. switch up the board, these are the levels -- the dollar on a seven-month high. cable rate inching higher and yield coming off their highest since may of 2016. done a basis point on the u.s. 10 year. have a fantastic weekend. "market" is up next.

♪ >> it is an :00 p.m. in hong kong. from new york, i'm vonnie quinn. mark: and live in london, i am more heartened. welcome to "bloomberg markets." ♪

vonnie: we will take you from seattle to london and cover stories out of copenhagen, zurich, and washington in the next hour. surpassed wall street's expectations coming in at 2.9%. is that as -- is that strong enough to affirm a december rate hike? biggest maker of insulin plunges in trading after slashing its long-term target for growth. vonnie: amazon did not deliver for investors. revenue for the holiday quarter may miss estimates. bezos tells us why he is focused on customer's of seio