for concessions on everything from north korea to reining in the trade deficit. in the househanges leave a revenue hole that needs filling. prime minister may losing her grip on her team and brexit strategy. wall street banks may be running out of patience. good morning, this is "bloomberg daybreak." i am jonathan ferro alongside david westin and alix steel. record highs and then we pulled back at the close, snapping a five winning streak on the s&p 500, futures softer about 1/10 of 1%. market, yields lower by one basis point on the 10 year but that spread, twos versus tens now just 67 basis points. alix: it is like 20 basis points in a matter of weeks. portugal again having a killer bond auction, record year low.

1.96 is how they print on their 10 year yield. i want to highlight sterling, 1.31, down 3/10 of 1%, banks worried increasingly about brexit. copper hitting a one-month low. chinese imports really fell. gold at much, on a day of a lot of news. annual yearberg's ahead summit starts at 7:45 this morning eastern time with speakers including michael corbat. we get the weekly jobless claims numbers and that at 10:00 the testimony from the interim equifax ceo and former yahoo! ceo marissa mayer. that is coming up in the united states but in china president trump is holding meetings with his counterpart. we welcome our chief asia .orrespondent, enda curran

we just got chinese data out on imports and exports. to what extent does that form the discussion? enda: it is very interesting the timing, president trump arriving in beijing. china's exports continued to do quite nicely, but china's exports to america rose 8% in october. rall the talk and rhetoric and disagreement over trade, the deficit in the merchandise has not moved at all, has barely budged. the has not been much progress on that front. president trump is in beijing and the expectation is that he will raise the issue and try to get more market access for u.s. companies. there have been some deals announced but not much by way of details. while trade with north korea is on the table, we have not seen much tangible progress. david: when the president went to saudi arabia he had somewhere

upwards of $40 billion of deals. enda: this is true. we had 9 billion deals announced today, ge, and honeywell among others. interestingly, one of the companies mentioned was smithfield. .hat is a chinese owned firm the commerce secretary wilbur ross has promised more deals and tomorrow we get -- we may get more details. there is a degree of skepticism about just how much these deals will advance in terms of reducing the trade deficit between the u.s. and china. there is much more we need to do in terms of opening market reciprocity, which is a term that has been used. jonathan: this is slightly unfair of me, but i want to pull away from the trump tour and talk about something in hong kong. a big stake inng

snap but in hong kong that was not the news. it was an ipo of its e-book unit that did massive things in the market that i find completely unbelievable. give us some color. enda: it was a massive ipo that soared 90% in its first day. this is considered to be a chinese version of kendall. dell.n it speaks to the chinese tech story and the potential of what is going on, as well as massive pent-up demand among retail investors in hong kong. jonathan: enda curran, it is great to catch up with you. in interbank up higher, one 20 want into this ipo. david: when was the last time you heard a deal? jonathan: i have never seen anything like that. alix: more than 5% of the city's

population. jonathan: wanted a piece of tencent's e-book. i find it remarkable. david: i am a conservative kind of guy and that makes me nervous. alix: is it a really bad strain on tencent or is this the fervor? jonathan: i imagine the regulators are looking at this with slight concern. let's bring in steve major. wonder what we have learned over the last 12 months. the president of the united states is on a trip to china and 12 months ago it would have been a scary one for emerging markets. i do not think people would have anticipated the year. what has happened and what are your thoughts? steven: the key to the performance of all the risky assets has been the low risk-free rates. the fact that treasury yields

stayed low helped. the fundamentals have actually been pretty good in many of the large em countries. i think the difference now compared to a year ago is valuations, because back a year ago at the time of the u.s. election many of the em markets were much cheaper than they are now. in fact, the event of that election resulted in a repricing of countries like mexico, so the peso fell quite dramatically after the election. in fact, the president effectively repriced mexico, made it even cheaper. the last year should be put into in many casesse valuations were much more attractive a year ago. i think what has called many people out to have been reluctant to invest in em is how the rate has stayed low so developed market yields have stated very low as well.

if you combine good fundamentals and external backdrop that is benign, it is good news for em. jonathan: as a team you guys downgraded your outlook for what will happen with dm. are you more selective now? what is behind that call? steven: much more selective, because there are situations arising. .ake your pick, really in turkey, the inflation rate is close to a 13 year high. we have got some uncertainty in south africa which i think is scaring a few people. there are central banks in the em -- some of these countries are not even em. south korea and the czech republic, i do not think they are particularly em but they have hawkish outlooks. the check us -- czech republic is in a full stage of tightening. we have looked across the piece

here and there are some countries we still quite like -- mexico, brazil, indonesia, and russia actually. all of those countries have a more benign backdrop and monetary outlook here others we are more concerned, turkey and south africa and the ones that are hiking like the czech republic. alix: you think inflation will be more stable and therefore the central bank can cut rates? steven: exactly. russia has been under owned and not much loved. the inflation backdrop has been very favorable to a fixed interest investor, and the central bank is responding to the inflation outlook by cutting rates. when you look in the region, in the central and eastern europe, middle east, that group of so-called emerging countries,

russia stands out as being the best value so we think there is potential for rotation for countries like the czech republic into russia because of good value. alix: what about latin america? months ago it was all about latin america with the exception of mexico. what is it like now? steven: your has been the election in argentina. there is then after concern. -- nafta concern. that could be like a hard brexit kind of thing. we have to be careful with what is happening there. i do not know what the outcome will be, but that has clearly scared investors in mexico. mexico has been repriced, and when we look at the valuations, we are actually still favoring mexico and brazil in that group. it is key to look at the valuations because these markets on theing very fast

scare around nafta a few weeks ago. mexico cheapened 50 odd basis points. it is all about the valuation and the outlook. it seems to me that we have enough countries still worth favoring and keeping what we would call a moderately bullish view on em as a group, but being very selective. david: as you are selective, how much is about politics? we have mexico, and election next year and how much is undermining fundamentals -- underlying fundamentals? because you is key, could apply the same concerns and truths to developed markets, which again is what makes it interesting. here we are trying to talk about spoken aboutld've politics and technology and demographics in the developed markets.

i could have spoken about those three themes. in some cases, these emerging markets are quite well-placed because they have better demography and some of these countries, the standout one historically has been saudi arabia. the demographics in these cases are favorable. lots of young people coming through, the opposite of japan and italy. them a can be favorable in em. can be favorable in em and technology gives a late movers some advantage because these companies -- countries can benefit from cheaper technology. it does not strike me that we have to worry as much as we might have done in previous cycles, because i think these factors apply to dm and em and in many cases, em comes out on top. jonathan: next up, republicans

and their effort to get the tax cut through looks like they may be stumbling. the last minute changes in the house opened up a bit of a revenue hole that may need filling. from new york, this is bloomberg. ♪

alix: if you have earnings that wall street does not like, how do you get your stock up in premarket? get tencent to buy a 10% stake. this is what happened to snack. -- snap here at growth is like 62% still, but that is not enough to justify it. tencent comes in on the open market and buys 10%. .onathan: the classic gap fill

i wonder how long before we look at the fundamentals of this company and their numbers and the fact that instagram is kicking it to death at the moment. alix: and rethinking their business model. everyone under 30 likes you, everyone over 40 does not. why do you want to rethink that? david: tencent see something. jonathan: can we reflect on the fact that they thought they would sell so many spectacles they had to take a 40% charge on stock for spectacle sitting around? that is just involving bad management in what is going on with this company. david: they are a camera company, after all. jonathan: apparently the app is not aligned with a good camera. david: today is the third day of the house markup of its cap bill and they said they will start an hour earlier and made go late into the night tonight.

coming from washington is michael mckee, where he will be interviewing steve mnuchin later . are they going forward or backwards? they limited the excise tax which created something like a $150 billion whole. they are $75 billion over the $1 trillion. will they make that up? michael: maybe they are doing the tango. a few steps this way and that way and then they dip. they are in a $74 billion whole -- hole. they do not really have a good idea to fill it. one of the things they have been talking about is eliminating the individual mandate in obamacare. that give them $416 billion to play with but asked her last night -- after last night's elections, pollsters told people

they did not like what republicans were doing with health care so they are in a box . other areas they will have trouble with on a populist electoral bases, carried interest and getting rid of the estate tax, two things the senate may not touch. david: ted cruz would be happy if you eliminated the individual mandate but we have been up and down this road at least two or three times. is that a ground war in asia? michael: that is a good analogy. if people are old enough to really remember what you were talking about, they will have a problem on the other side of the capital because that is one of the things that sunk the health care bill when i got to the senate, the idea of doing something on health care that would disadvantage people. this provision certainly would. with a nonstarter for enough republican senators they could not get the health care bill passed.

taxes, it becomes that much more of a lead weight. david: thank you so much for joining us. later today he will be interviewing united states treasury secretary steven mnuchin at 11:30. jonathan: that is one to watch. spread, a 57 handle this morning. 10's.versus still with us is steven major of hsbc. what is behind that spread which is getting flatter and flatter, and what is the signal you take from it? steven: the 10 year yield is not moving much, despite all the talk of it breaking higher. 10 year treasury yields are lower than they were this year. the story here is the rising two year yield, which is really down to the awkward path of the fed's rate. as the fed hikes, up goes the

two-year rate. 2004, 2006,t like and we know what happened afterwards. in aurve is flattening completely logical fashion because the fed is still tightening. i do not think the fed has much further to go in the guild curve is basically confirming that. bearhan: this is classic flattening and a lot of people are saying, it is different this time because so much has changed with the term premia at the long end because of what the central banks have been up to. what would you say? steven: there is value in the curve. there always is. and you know that when you say it is different this time, you normally get a slap on the back of the head so you say it carefully and look behind you when you say it. you know there is consistency here. the fact is, this is the cost of money for different points in time and the market sets that

price. it is not wrong. it is what it is, and to dismiss it and find anomalies to explain why i think is just nonsense. sorry. jonathan: carry on, steve. steven: a lot of people have been called out this year because they are looking for higher treasury yields and will use whatever narrative they can to explain why they think the yields are going up. they will say things like the fed has been buying, and when the fed starts ran test stops reinvesting the yield will go up. that is just wrong. when the yield curve is flat, and it soon will be very flat or completely flat, the term premium is zero. by definition, there is no term premium so this idea that the term premium has to go up, i do not know where it comes from. it is missing the point.

the fed is tightening and the way they tighten is pushing the short rates up. looks like they have one or two more hikes to go. jonathan: we are going to carry on this situation -- this conversation. looking in the bond market, year .nd, 2.3% we have the same journey we had in 2017, expectations for high yields in the beginning of the year and fading in the middle? steven: the forecast is pretty close to the spot, but bear in mind, that is a good 20 basis points below the forward. bonds are different than equities. you have had the coupon and 20 basis points of carrying role so you were talking about a potential return that is well above the coupon level. you could look at close to 4% total return without being unrealistic on treasuries. here, that they are rich

i am struggling to see why people think that. our forecast is currently set at 2.30. obviously our 2017 forecast was 1.9. we have not reached that but now we are talking about next year because by definition, our end '17 forecast is weeks away. i guess the yields could be a bit lower but i doubt we will reach our original 1.9 target. the important thing is that the yield is lower than it was in the first quarter this year and that is all you need as a bond investor, because the potential return has been positive. jonathan: steve major of hsbc in london, thank you. alix: argentinian president told mickelthwaitohn that his country will be vulnerable to global debt markets in the coming years. >> we should try to find if it

[indiscernible] now on the table we have two subjects -- beef and biologics. i expect to sell beef quite soon and we should agree, the agreement should come from the private sector's. down willo have shut find their way because at the end, the state still means to import. it is a question of finding the americanons private sector will accept to the continuing import by argentina, so they need is there. still, with the help of secretary rose, i am still optimistic that we will find a

solution. >> do you see donald trump is a free trader? >> donald is trying to find a way to protect local jobs. in that point, i may not have the same view that he has because i do not think that the challenges or the threats are outside. it is the technological revolution that is destroying traditional jobs and creating new jobs, so we have to be open and we have to be enough to give new capabilities to our citizens to be ready, to be part of the digital era. it is creating new jobs in different places. >> so for the sort of things you want to export, does america now

look more protectionist than the european union and china? >> similar, they are all similar. at the endraders when you sit down at the table, they start taking out cards and saying this not. we have to keep talking, keep negotiating step-by-step. it takes a lot of time but what is clear, when you analyze the , 20 20 to 30 years countries achieved more growth, the ones that have more poverty at home are the ones that have traded more. it is clear we have to go in that direction. alix: that was the argentinian -- jonathan: that was the argentinian president. governmentext, u.k.

editor eddie barker will join us to discuss shakeups in theresa may's cabinet, intentionally putting her brexit strategy at risk. theirl street banks lose patience, theresa may is losing her grip on her cabinet and hurt brexit strategy -- her brexit strategy as well. from new york city, we turn to the markets. futures at the moment in the united states are doing this. we are weaker by about 1/10 of 1% on the dow. the s&p 500 futures negative about 1/10. this is bloomberg. ♪

♪ jonathan: from new york city for our audience worldwide, this is "bloomberg daybreak." from the cache open huge yesterday we snapped the five-day winning streak on

the the 500. futures just a little bit softer, negative three points on the s&p 500. down around about 20 on the dow. treasury yields grinding lower throughout the morning, now unchanged, but the real story is what is happening with the treasury curve, twos versus tens. when you see the fx market, the dollar unchanged against the euro but slightly stronger against the pound. the cable rate coming down to about $1.31. let's get you some headlines outside the business world. emma: president trump is -- taylor: president trump is in china. later they will have on topics ranging from north korea to the massive trade deficit with china. chinese companies have signed business deals they say are worth $9 billion.

the democrats saw some election results to cheer about. ralph northam has been elected governor. spieeat republican ed gille and what was seen as a test on whether democrats can win in a swing state ahead of next year's election. the mayor of new york, bill de .lasio, was easily reelected british foreign secretary boris johnson will try to keep the u.s. in the iran nuclear deal and save his job. he is flying to washington to meet with congressional leaders. president trump said he will not certify that iran is complying with the deal. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg. jonathan: we are going to keep it right on the u.k., theresa may's brexit strategy is looking

to be at risk. wall street banks may be losing patience. eddie barker joins us from london. talk about pretty patel with prime minister may's team, who is she and what has been happening? eddie: that is the international development secretary, one of the more junior members of the cabinet who has been in trouble because she made a visit to israel in august, ostensibly as a family holiday. it has emerged she had during that visit quite a lot of meetings with israeli government officials and a meeting with the prime minister. she did not tell theresa may about it and did not tell the foreign office about it. have emergedings and the details of what she has been discussing, she has been in more and more hot water. she set off on a trip to east africa yesterday, but this

morning she has had to turn around and she is on a flight back from irb to london -- nairobi to london, and presumably will be going to see theresa may. jonathan: more and more details come out about this, and as the prime minister grapples with her team wall street banks are said to be losing patience with the brexit strategy. may we be approaching the point of no return where banks have to make a move? eddie: david davis, the brexit secretary, will be back in brussels this week on friday for another round of talks. most talks get underway again tomorrow. desire, i think on both sides, to get a move on in these discussions. i need to reach a fairly swift agreement on britain's divorce bill from the european union and

on the european union citizens rights in the u.k., and u.k. citizen rights in the e.u. before they meet, and if there is agreement they can get on to talking about trade and transition, the transitional arrangements towards a future trade deal. it is the transitional arrangements that i think banks and other companies are keen to find out about. jonathan: thank you very much. majorbring back in steven of hsbc. it does not feel like the right time to be looking at sterling credit but if we bring up a chart of sterling credit versus euro credit, sterling credit has missed out on a bit of a rally and you think this is an opportunity. we have identified sterling investment grade credit as an opportunity, especially versus the rich eurozone. it is especially compared to

cash, you have more than 2% yield at the moment. a couple of rate hikes do not really bother at the corporates that much, and as our team has pointed out, many of these can issue in foreign currencies anyway and are quite diversified. if you are really worried about the brexit risks or whatever risks in the u.k., then you can probably play them more on a sector basis. there are obvious sectors like retail that would suffer in a or big brexit uncertainty, but to me the interesting thing is that ig sterling credit has lagged so much. we know why the eurozone is so rich, because of the ecb's buying of the csp be. that will probably stay rich for some time, but it is the opportunity to go into sterling when in fact -- it is one of the

better opportunities. jonathan: as you look at sovereign, and let's take a look at gilt and how negative the real yield is. how long can that chart look like that with a deeply negative gilt yield? steven: it reflects the bank of england's stance. , it is now being called, they might manage one more hike for all we know. it seems to me fairly unprecedented for a developed market central bank to be hiking with a flat yield curve. earlier we were talking about the flattening of the u.s. curve , a function of rising short yields but in the u.k. you already have a flat curve so how can they hike? i am assuming the u.k. is a developed market, which is why i made the comparison with historic precedents but it may be looking more like an emerging market.

they are not going to go very far given the shape of the curve. the real yield is also going to be a function of what happens with inflation. the real yields are negative when the nominal yield is so close to zero at the front end because upper levels of inflation. inflation could well be peaking. if there is a floor under sterling at the moment, the inflation is purely transitory. it will wash out next year so actually the real yields will become less negative overtime. that does not need to say the nominal yield will go up. jonathan: across the channel and in europe and further south, the spread compression that we still see. italian yields are moving in a direction that many might find strange given that we are about to go through some choppy political waters and the ecb is beginning to move back, but you are writing that wave. i'm trying to understand why. steven: the ten-year forward for

italy and spain, what we are showing as both of these yields went under 4% and have moved down toward 3.70%. both of those markets are plenty of local uncertainty. we could discuss the risk around italian politics next year and we could discuss what is been happening in spain in the last month. the long ends are looking through this. rate isond, a 10-year beyond the near-term noise, isn't it? it is looking beyond the disruption of what is going on locally. so to me, it is the search for yield which is akin to what has happened on e.m. and credit market, that comes with the clarification from the ecb that they are low for longer. jonathan: what are you looking for? steven: they can go a bit lower. people will feel they have missed out in the last few weeks

. those yields have been falling quite sharply banks and insurane companies, they were all waiting for the market to get cheaper recently, and that is the danger . if everyone is sitting on the sidelines waiting to put money in, what happens as the market rallies away from you? to me, this is a valuation story with a benign backdrop for rates. jonathan: i do have a final question -- when is the periphery in europe and the sovereign side of things going to stop trading my credit? it is still behaving like credit in italy and spain. when does that change? steven: you made a good point, it was originally around the 2011, 2012 crisis we were coining phrases like that tion of the rates markets in the eurozone. they are not trading exactly

like rates markets because there is a credit element. quietly, the credit risks are diminishing and as i say, isn't it incredible how we can look through the noise that we have had in catalan and around the italian elections, markets are looking straight through it, and we know from experience in countries like europe right now where there is no -- like germany right now where there is no government, we know from belgium were they have had no government for a year or so, that maybe the politics is being overstated. havenk that in markets we may be overplayed some of the political risks and ultimately what changes, not much. jonathan: there is some noise in east london. we had a question from mark gilbert in london. mr. moyes is is going to change things? steven: what an embarrassing question.

i do not know what to say. sad times indeed. i think that mark may be deliberately referring to the result. jonathan: i think he might have been. steven: too embarrassed to help you. jonathan: steven major of hsbc. alix: if you are an energy company and you need money in the u.s., you are going to this man, david foley. he has invested $6 billion in 2016. part of bloomberg's euro had summit, we will have an interview with citigroup. ♪

♪ taylor: this is "bloomberg

daybreak." coming up, warwick energy group ceo and founder. this is bloomberg. alix: opec finally admits that shale production and productivity is here to stay. they said shale production will keep growing until 2025 and part of that is the capital markets. bill jens have been put to work billionse equity -- have been put to work by private equity. i'm joined by david foley, blackstone energy partners ceo. he has put $6 billion to work in six different companies and last year was the year of oil investments. this year it is about midstream operations. we had a great half hour conversation the other day and we will do it in eight minutes. you have insight into every part

of the oil industry in the u.s. do you agree with what opec said , shale will keep growing for eight years? david f.: it is dependent on oil prices, but we certainly have the reserves and low-cost reserves within the u.s., particularly in the permian to increase production. alix: where are we in the permian? last year it was about the permian. you invest a lot of money and now prices are skyrocketing. there are technical issues, execution issues. what do you see? david f.: one of the reasons we chose to concentrate our energy funds last year's long-lived reserves in the permian, many years worth the reserves and also low breakevens. you could take the low oil price -- we said in 2016

we wanted to buy very quiet -- high-quality oil assets. what i think is best about the permian is how stacked the pay is. if you want to put it in perspective, there's about 3800 feet of net pay, hydrogen bearing shale. that is 10 times the stack pay in eagle for. that is why you are seeing a lot of the rig count and growth in the u.s. coming from the permian shale. alix: is that still the investment you want to make this year? david f.: we have quite a bit of permian exposure, we like that. what we have done is midstream investments sometimes follow where the oil drilling is when their bottlenecks are exposed. we saw a second derivative which is a lot of wells in the permian. the gas has to be processed,

transported, and turned into fuel for your home and national cash -- natural gas liquids. we look as an investor at things that have a very high rate of change, not linear but maybe exponential. if gas production in the u.s. is growing at about 3%, over the permian it will be about 19% so that requires prices seeing -- processing capacity. alix: is that the same thing in 2018? david f.: i think it will be a continuation. we are also looking at different things. you have to stay a little head of the curve. we have done some royalties as well, derivative plays on shale that we like, and we like the u.s. quite a bit as it relates to energy. alix: what are some deliver -- derivative plays? david f.: loyalty is where you

do not have to own the interests themselves. midstream is a derivative. there is oil midstream and associated gas. you go further down the chain and fraction the natural gases and liquids, and our investor is further downstream. we are taking shale gas production in the u.s. and liquefying it and exporting it abroad. alix: we are also seeing something interesting with differentials in the u.s. there is a chart on my terminal, the hub for wti is cushing and they have been dealing with how much oil is in cushing versus other differentials in the u.s. like the bakken, permian, oil in the gulf. this is the spread between those prices and cushing prices, and they are moving higher. what kind of an opportunity set does it make for you? david f.: if it were sustainable

we would do things like we did a few years ago. andwned a petroleum refiner the spread between inland crude in the bakken relative to cushing is huge, double digits. it supported shipping crude by rail because it lasted long enough. now that we can export crude, which is a change in the u.s. over the last few years, there is not a good structural reason why wti crude at cushing should be more than a couple of bucks lower than brent. people focus a lot on u.s. inventory balances because they are observable, it is transparent. when cushing looks like it is getting filled up, that can back up a bit so it might be a cause of the current differential and the sheer amount of crude coming out of the permian is kind of backing into cushing and light,

sweet crude. alix: let's focus outside the u.s. we have a great map that shows how much shale is outside the u.s.. you have argentina, china, russia. opportunity to invest outside the u.s. in shale? david f.: probably not for us. canada, definitely. shale is not a rare mineral. it is plentiful around the world. already six countries have it. the u.s. has about 20% of the oil bearing shale but most of the oil from shale is from the u.s. and canada. there are a lot of reasons for that. there is the pre-existing infrastructure in the u.s., in pennsylvania, texas, the land ownership in the u.s. it is really come together in a nice way and does not have some

of the same geopolitical risk in other countries. it is nice if you get the oil price right and the drilling right do not have aboveground risks make it a bad investment. alix: there is an overlap for investors between energy and infrastructure, and you are involved in an effort for a massive fund for blackstone. do you think you will assess deals going forward? david f.: that fund is being run by my partner who has worked with me for quite a long time. their focus is not just energy. we will take a bit more commodity price exposure but more risk. we might take a bit more development risk building things from scratch. they will be looking at assets that have a more contract of growth profile that may be safer for returns coming from yield, so a nice complement to what we are doing in private equity and

there is certainly a need for infrastructure investing in the u.s. and globally. what we have seen with shale, if you have a resource you also need the infrastructure to get that to market and monetize it. alix: david, always a pleasure to catch up with you, david foley of blackstone energy partners. tomorrow, join me for an hour-long special on the new york -- meteor rise of shale. how it has changed the impact. later today, i will be joined by the conoco phillips president and ceo. this is bloomberg. ♪

♪ jonathan: about one hour and 36 minutes away from the opening bell. futures in the united states a little bit softer after yesterday's very marginal move lower on the s&p 500, down about

1/10 of 1%. dell futures -24 points. in the bond market, treasury yields down a basis point. the real story is what is happening with the yield curve, flatter, flatter, flatter. 10's, is it a signal for the fed to slow down? -- cable a little softer at 1.31. the stock to watch today, snapchat. the numbers come out, ugly, ugly . in after-hours, the share goes crashing and then we do this classic gap phil, turns around completely off the back of news that tencent has taken a nonvoting stake in the company.

in after-hours, it is a premarket, we roll over again and are down by about 10%. the story for snapchat getting harder and harder. david: the thing i do not understand about tencent -- do they see something we do not or is it a notion that being teamed up with tencent will help them in china? jonathan: i just think the market this morning is trading on the numbers and said, no thanks. we totally redoing the business model? that seems to be what the ceo said. jonathan: it was interesting and it is brutal. pain trade brought to you by snapchat. ♪ who knew that phones would start doing everything?

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choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit or go to xfinitymobile.com. jonathan: president trump

touchdown in china, look concessions from north korea to the trade deficit. last-minute changes in the house leave a revenue hold that -- hold that needs filling. wall street banks might be running out of patience. our new york city to audience worldwide, good morning. i'm jonathan ferro alongside david westin and alix steel. the second hour of do -- --omberg daybreak: europe bloomberg daybreak: europe bloomberg daybreak. alix: 2/10, let's take a look at that. a couple of weeks ago, we were 83. unbelievable slide. nevertheless, a killer auction

with the lowest deal on record. feeling a little weaker as the bad headlines role in for theresa may. david: what is making headlines outside the business roles, taylor riggs. china's president gigi and paying here hoping to make some progress on a variety of issues ranging from north korea to trade. as. companies announced number of agreements. it was a big night for democrats in the u.s. virginia, ralph -- was elected governor. he won against a candidate who had trump style issues. trump tweeted still that he did not embrace me or what i stand for.

meanwhile, new jersey's governors race and fill de blasio was reelected. need to findcans another $74 billion in revenue. committeeiting effectively gutted and offshore tax revision. republicans have to find ways to offset the tax cut of the bill stays in line with the resolution and avoids the threat of democrats killing it. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs and this is bloomberg. will turn to michael mckee. we want to focus on the trade deficit. there is a -- a significant trade deficit in china. get anything done to address that?

appear so tot trump's agenda includes north korea appeared to pressure china to much on trade me they may not help the president as much as he wants on north korea. the u.s. trade deficit with , $225 billion in likely going up, continuing for the time being as long as the economy stays strong. the president does not have a lot of weapons unless you would like to try sanctions with them. a quick throw quote for doing something with trade deficit, including easing on selling hide tech goods with the u.s. it does not appear likely. trump has to fall back on the deals. white house officials say this dollars --0 when u.s. officials -- they like

beingk about ideals -- signed. rather than trade issues. david: there was the section 301 and were very concerned. >> it is not clear the president will be able to do a whole lot. he does not want to be seen as backing down. he will ask the chinese to suspend oil deliveries to the north. that is also not considered likely to happen. it really constrains him on trade. david: the president has already said, they should actually -- absolutely cut off north korea. there are no chances of that?

>> not at all. the chinese do not want a stable government in north korea as long as they feel they can contain kim jong-un and the nuclear weapons. they would rather live with that than one that they don't know, a destabilized country slowing over the border. they do not want north korea reunited with the south. palace: he sure to catch mike mckee's's exclusive interview at 11:30 eastern time. emerging markets edging lower on the heels of president trump's visit to china. joining us as paul christopher. good to see you. there seems to be a debate about what you do with emerging markets. flipside, we have hedge

funds which is it for you? >> emerging markets will offer sustained opportunities in the years ahead. there will be more opportunities arising especially the company's marginal today, increase the value proposition. they will rise and develop sustainable -- jonathan: we talked about how different things worked months ago while things were working and what it might mean for emerging markets. how long the consensus got things about a year ago. up.rtunities have closed not over the next six

months. about how emerging markets are developing, the composition getting more diversified, becoming more interested in transparency. that will force development in the economy that will allow them to increase the range of the valuations. you might be looking at a 15 sustainable pe 3-5 years from now. jonathan: can we talk about what is happening now where we have significant domestic risk for evaluations as well? do they not concern you? but they are relatively small portions. unless they see the dollar will rise dramatically in pose a risk to other countries that have

dollars -- phil will not take the overall index down. wordu just used the diversified moments ago. basically emerging markets correlated with the dollar and .ith china are they so diversified that you have to do it one by one? classes we were to see the dollar rise dramatically again, we would be worried about emerging markets. china since 2015 has shown us we have the means and the willingness to stabilize the economy if it appears to be moving to quit. the risks seem to have come down at least in probability. long as the fed statist are at -- gradual, we are not looking for the dollar.

it brought basket for emerging markets are probably on the downswing for right now. only was it weaker from september to october but .ou saw it reverberate is that short-term or long-term? >> it is to the upside and we think it continues that way. they are good measures of .entiment around demand we see capital goods at that will help heart of the trade. jonathan: impact -- imports look a little better. paul christopher wells fargo, he will speak to us.

and what willax pay for it. this is bloomberg. ♪

taylor: this is "bloomberg daybreak" and i am taylor riggs. 2700 jobs, almost 6% of the workforce. earlier this year, humana dropped its merger with aetna. stake in has taken a its parent snapchat. shares have erased their losses

after the news came out. the company reported revenue and user growth that missed estimates. apple is looking for a breakthrough product. could ship a product as early as 2020. could run on a new chip and operating system. david? david: the house of representatives, they market their tax will. yesterday had moments that took them in the wrong direction where they ran up an additional $150 billion. joining us from washington wants again this mike mckee. what do we expect today? you're in a hole, stop

digging. republicans are digging themselves a bigger hole. the 20% tax that would have been placed on transfers, foreign subsidiaries, gone from the bill. it leaves them with another $74 billion to come up with it terms of trying to meet the requirement. they do not have a lot of options. just the individual mandate tax from obamacare, but two problems with that. said they did not like what congress did. .articularly voters in virginia and the senate, they do not like the idea of including obamacare because it was so controversial. one of the tasks is to try to thatup with a way to have

$74 billion. david: we will stay in washington and go to capitol hill. gop conference chair kathryn rogers, and she met with light -- mike pence yesterday. the vice president tweeted -- so we welcome representative rogers. are we getting there? it looks like we took a big step backwards. administration, all on board. tax relief to men and women across the country.

we talked about provisions related to small business owners. level for world war ii. the importance is to hard-working men and women. we also need to address the deficit. it is a top priority to make we are cutting spending but also getting the economy growing. it will mean economic growth, which we have not seen. that is why it is so important we move forward. i did not find a democrat or a republican against tax reform. the question is how will you pay for it? if you are $74 billion short, will you eliminate the everett -- the mandate under obamacare?

>> we are working on those issues. they are the very discussions we are happening. we are deciding -- deciding how best to move forward. we are lame -- laying out a .ramework that was agreed to we have to now work on the details. that is the give and take every day. youd: your colleagues that had to deal with, it has been a hot button for some of them whose constituents will really be hurt. everyone to experience the benefit of lifting the tax burden. representmembers that high taxed states. we have added provisions, the impending care credit.

we have listed up to $10,000 per person on property tax. those are provisions that target the very individuals. we want tax cuts and the tax relief to the men and women. we also want to get the economy growing. increasing wages, those are our two top priorities. bringing jobs overseas where we see companies relocating or foreign companies buying them out. these reasons are why it is so important to move it forward. there are a lot of details as you are pointing out. will: we also hear that we have a senate proposal as soon as tomorrow maybe. delaying the time at which the reduction of 20% corporate tax would go in. are you open to that? $100 billion of that.

to getumber one goal is tax relief on the president's. i hope we get the relief as soon as possible. i have concerns about delaying it. it is impacting competitiveness and job creation. that is why we wanted it to take effect immediately. we want to jumpstart the economy and we think that is important. senate and thehe president will work together to a dress these questions. i am most excited the senate remains as quick the sar. onto the president has his desk by christmas. david: thank you. alice: shares making a massive

comeback this morning. the big up move in open market. this is bloomberg. ♪

alix: a really ugly day if you are a shareholder. shares plunging 20% on the earnings and then bouncing back after china's minority stake in the company. the rally lasted for a minute or

falling again in premarket. looks like we might hit the low after earnings are let's bring in paul christopher of wells fargo. this is a very different story than what we saw for tech as a whole. classic council 40% of the s&p gains this year. we are looking for a year-over-year increase. the other hand, comparable year-over-year less favorable. we see a slowdown and a lot of it had been done already. and then there are political , bringing talent to the united states for further development. those will be headwinds going forward. >> let's talk about eu regulators saying that tech is a to democracy.

those are strong words. >> that is probally a shot across the bow. everyone understands artificial intelligence has tremendous application and you have risk. they are not really sure what the risks are. hadthan: they think the eu -- is a threat to democracy. >> one thing that occurs to me is this the -- this is the largest tech ipo since alibaba as i understand it. is there room for a big put behemoth, or is google and facebook soaking it all up? >> you do not know what kinds of applications they will come up with that might further integrate tech and how we think and how we act.

bound to be false starts on the way. think about how long it took computers to become as prominent as today. david: we mean the massive companies that dominated sectors. instagram is killing them, facebook is doing their thing, and they are making a ton of and snapchat just cannot keep up. that is the message here. if you're a big large institutional investor, there is one place at the moment and that is big tech. >> there is probably a point to that. that accountks overwhelmingly for the games. it might even be considered old tech from 15 or 20 years ago. jonathan: great to have you with us on a program. thank you for joining us. coming up, the attorney general

for massachusetts tells us how -- state is having the tackling the growing opioid academic. -- epidemic. about an hour in four minutes away from the opening bell. futures are marginally slower. dell futures negative three points. flat on the day. likewise across the whole of europe. market,line in the bond yields unchanged. pound fx market, a weaker at 131 on the cable rate. for the audience worldwide, in new york, this is bloomberg. ♪

jonathan: yesterday's all-time high. the s&p 500, we are tesla with futures on the dow. not even 1/10 1%.

is really flat yield curve, and you see the 10 year yield coming in by a single basis point. cable, a little softer. the pound against the dollar weaker. the brexit strategy of prime minister may may well be unraveling to from nairobi to london, there is speculation she might be getting -- 22,000 users attracting that flight from nairobi to london. what are you doing with your time? go to work? jonathan: the pound at 131. some headlines, here is taylor riggs. taylor: donald trump is in china. he was with president gigi ping. from north korea to the u.s. massive trade deficit to china. haveand chinese companies

signed business deals. the two sides are worth $9 billion. democrats got election results to cheer about in the u.s. democrat has been elected governor. he beat a republican in what was seen as a test of whether democrats could win an open -- win in a swing state. murphy was elected governor of new jersey and the mayor of new york was easily reelected. saudi arabia is trying use global investor concerns about anticorruption crackdown. onlyovernment says it froze bank counts of individuals and not those of the companies that they own or manage. the saudi's arrested government ministers and businessmen including a millionaire. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg.

alix:., you have known for a very long time. what did you think on sunday? >> i was surprised. i had seen him less than two weeks ago, 10 days before his arrest, and he gave no sign he had any inkling that any of this would happen. you might say, how could anybody know he was going to be arrested and if he knew, why would i have in there, but the reality is on be surface, he appeared to very simpatico with the changes taking place. we are about economic modernization and soaked -- social liberalization and made statements to that effect on the record, including in an interview he did with me a year ago shortly after donald trump was elected. i spoke with him about the

ascension of mohammed pass his father in early 2015. nowhere along the way did i get the sense that in any way shape or form he had any reservations about the transfer of power or the direction saudi arabia was headed. what might have been one or two clues that you could pinpoint that maybe this could have been a catalyst? >> i have been racking my brain trying to piece together the elements of the story to see if anywhere along the way, there was a clue. the only thing i can think of is an event that transpired in early 2015. the extentrtly after -- the ascension to the throne after the death of his predecessor abdullah. the billionaire investor whom revamp -- whom we have talked about, for a long time wanted to start an arabic lack -- a news channel based in the gulf region that would cover financial news and general news with a more

centrist or open-minded point of inw than what you might find the saudi arabia news channel or al jazeera, sponsored by the qatari government. i need to explain to our viewers was aart of the effort partnership with the parent of bloomberg television. he set the -- set up the news channel and it was shut down on the first day of the operation and never reopened. government issued a statement saying it had not shown enough concern for the , againagainst terrorism putting all the pieces together, it appeared the choice the aannel had made to interview opposition politician was a mistake and perhaps a misreading of the tolerance for dissent in saudi arabia. that is the key issue here, the

degree to which mohammed today would tolerate this and allow freedom of expression, those who wield influence and are wealthy who have that kind of power may not be so welcome and that may be what is going on p are we are a lot of information out of the saudi government. there is much that is yet to be learned. alice: check it out. we learn what is in his fridge. >> there is a photograph in the fridge, the small fridge in the kitchen. he likes photographs, of himself, and surrounds himself with them. good to see you. david: we will now turn to the opioid crisis. president trump: my administration is officially declaring the opioid crisis and

national public health emergency under federal law. i am directing all executive agencies to use every appropriate emergency authority to fight the opioid crisis. this marks a critical step in confronting the extraordinary challenge that we face. >> the federal government may ramp up its effort on opioids but state and local government are on the frontlines everyday for perspective on where we are look mee we need to go, attorney general for the commonwealth of massachusetts. thank you for being here. good to have you. we have statistics nationwide about how big a problem this is what we will put up a part -- a chart of how many deaths from overdoses in the country and how it compares to other causes of death. nor the dates, gun deaths. how big is the problem and how do you quantify it? >> today alone, there will be

five or six people who will die from the opioid epidemic. dozens more will die and be brought back to life through narcan. this is one of the largest public health crises in american history. it has ravish families and communities and the toll is devastating. yous for that reason that have seen us string together as attorneys general across so many states to get answers to get to the bottom of it. david: you also have the cost to the state of caring for these people as well as potentially lost labor, people who cannot work in the workforce if on opioids. >> you are right and when i speak with families, i hear stories of grandparents raising grandchildren, little babies born addicted, people who have taken time off of work or left theyentirely because

themselves are sick and addicted, or someone they love or care about, a son, daughter, mother, or father is in the throes of this disease or epidemic. the toll is remarkable and i think about the work of first responders and how much time they are spending on the front drug trafficking, prescription pills and heroin, and also how much time they are taking administering narcan and reviving people who have overdosed. it is incredibly serious and devastating and it is why we need action on the local, state, and federal level to combat the crisis. david cohen you mentioned you are joining with fellow attorneys general across the country. is this something to sue our way out of? >> in massachusetts, we are focused on attacking this from multiple angles. we need more education and preventing.

stop it is too stop it from starting. to getched a program prevention, education, to schools, young people on youth opioid prevention. we need that are access to treatment and resources, we continue to combat drug trafficking. we work to change prescribing practices to limit the amount of opioid prescription and also work with pharmacies on dispensing practices. the american people deserve answers and that is weiss he is best to getting. here is the scope of what we are looking at her we know 80% of heroine addicts began with prescription pills. these pills are highly addictive and deathly. i have talked about the devastation they have run across families and communities in the country. thesed answers as to what

opioid manufacturers and distributors knew and when they knew it. did they know that the drugs were addictive and deadly? did they mislead the consuming public or not with respect to what they knew? we need to make sure we understand what happened so that it never happens again. david: as you know, various actions have been taken on disclosure for example. is that enough as a practical matter? let me ask a basic question. should these be banned? there were a lot of positive effects. it was not all a bad drug but negative effects outweighed it. should we consider banning opioids? >> i'm not ready to say that but i will say we know from the devastation that there needs to be serious restrictions and limits and much better prescribing pratt -- practices when it comes to opioids. is there a place for this kind of medication? probably. but the problem has been it has been widely abused and misused

-- misused and we need a handle on this here lawsuits will not cover everything but we need to use the tools available that we have as -- to get answers and understand what happens here and understand of laws have been broken. it is important when it comes to public health and protecting consumers that appropriate disclosures were made in the able to rely inaccurate information. we will pursue our investigation. republicanss and from urban states coming together to do this investigation and get answers. we did prevention, education, and treatment. we continue to work with roast responders and law enforcement to combat illegal and deadly practices. david: joining us from boston, thank you.

will sit withp, i a ceo and owner and where you should be invest thing and energy. she owned one of the largest companies that invest in minority interest. a really fascinating micro perspective. this is bloomberg. ♪

taylor: coming up this afternoon from bloomberg summit, our exclusive interview with michael corbett. >> the big headline, no end in sight to shale's production growth until 2025 so where do you invest? david is looking at shows derivatives. david: we are looking at different things be at you have to stay ahead of the curve. we have done royalties as well. there are derivative players -- plays on shale that we like and we like the u.s. as it relates to energy overall, particularly shale.

a groupining me now is founder and ceo, another type of investor. she makes minority investments in the u.s. and is one of the largest firms in the country and one of the smartest people i known on oil. a pleasure to get you in the studio. thank you. tell me about where you see investment opportunity versus midstream? >> i strongly agree you have to let the tour of it of opportunities are we are in a different phase than 10 years brandsn some name started emerging. it was very much the land grab europe and that is when we saw tens ofmpanies become billions of dollars of enterprises. same thing for big private equity groups. it was launched portfolio companies, by up a bunch of acreage, and eventually drill it. the opportunity is really gone and we have not had a new

discovery since 2013 in terms of real fields. the last a discovery -- it is a totally different phase of investment. people have to figure out how to access the acreage and there is a -- an awareness that not expand forever. they're are very specific and geologically determined. you have to identify it and figure out how to get in. with it through royalties -- strongly agree with that precursor. alix: what will it be in 2019? >> three things were happening now. we are heating up for a major m&a cycle and the u.s. industry almost certainly. any energy banker you talk to -- not slept wept in ages and we are not seeing it on large cats and we do not expect to see consolidation but

we will see small and mid-cap consolidation and there are two reasons. one is there are too many companies and two is a lot of these companies have gone through major rebalance sheet structuring in last two years. thingis probably a third as well, which is you need to be a big company to survive in this cycle because we are in a full development cycle. people are developing full-scale development and it is very capital intensive, very complex, and it means you will have chunkier production growth. it is easier to be a large cap and consolidation makes sense. alix: when you look at anywhere between 60 debt for a five and 65, where do we go from here in who gets out at 45? >> it is in a -- a good and important question.

the important thing about being the break isnow is in the u.s. to come online, if you look at the marginal barrel in opec even the cuts, it is ciro. they can just turn the oil back on. thatone while the expect this november 30 opec meeting will result in 2019, it is important that occurs and it also might be on this event because it already priced in that opec would maintain those cuts. there is a risk to oil now and .he risk to wti that is partly because the u.s. in millionroduction barrel next year. 80% of demand. you buying now? kate: they break even a $30 oil.

that is how we have focused for a long time and we look for creative ways to get into that. we do not focus on 90% majority operating assets. we look at situations where other people's trash is our treasure. alix: wow. such a pleasure to have you on the show, kate richard. if you want to know more, join me tomorrow at 9:00 p.m. eastern for an hour-long special. what its impact will be on the world. it is for oil nerds and nonoil nerds here do not worry. 9:00 p.m. eastern, this is bloomberg. ♪

jonathan: in an exclusive interview with bloomberg news editor-in-chief john, the president discussed his outlook

for argentina he expects inflation to slow to 15% by the end of 2018. he was also asked about salary increase negotiations for unions for next year. >> central-bank? >> yes. runs the monetary policies and they have a target. minas or plus two. we think we will be around 15%. or thirde the second step because we are going from 40% to around 23% in next year, 15%. more, john.r great interview. what is the biggest risk in argentina right now and they said argentina, and that was it.

day or so ago, they were on the list with people like qatar and turkey and egypt. money have lost a lot of betting that argentina would be good this time and maybe this time they could be wrong. could work. far.tty good job so the difficulties he outlines come you talk about a country any inflation down to 15% is a good thing for the rest of the world. the country is still i think the fourth most protectionist country in the world. it has the most a mage in -- amazing business. but they do not seem able to catalog -- capitalize on it. he won elections and has proved inferior that it is back to being normal. >> for investors looking at a complex situation, reducing it down to one person in their

reform agenda, for many people, they might want to stay the leader of argentina for a lot longer. have we heard about his ambition longer-term? >> he gives the general impression he wants to keep going beyond 2019, when the next elections come. ,he idea that he would go back it is not just investors outside argentina. argentina needs these foreign investors the is everyone, when they get some money, they converted into dollars and keep it in a bets because they are frightened of inflation and all these other things that could happen. endless evaluations. let's not get it wrong, he has managed to steady the ship and send a message to the markets that we will deal with problems like that we did not repaid the has got people on his side. that is impressive. jonathan: he has got the investor base on his side and what about people in argentina? do they look up to him the same way investors do?

john: he began by bragging his election result their 41%, obviously not a majority but it was a lot better than he got last time. he very much is the present everyone is trusting at the moment. he is taking most of argentina with him, a rare thing. jonathan: great to catch up with you. great interview to catch in full. thisg up today, don't miss part of the summit, a nonexclusive with michael exclusive with michael corbett. this is bloomberg tv. ♪ is this a phone?

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choose by the gig or unlimited. xfinity mobile. a new kind of network designed to save you money. call, visit, or go to xfinitymobile.com. ♪ >> president trump touches down in china, everything from north

korea to reining in america's trade deficit. republican efforts to find a major win before the year and stumble. a revenue hole that needs filling. 10%company tencent buys a share in snap following a different round of disappointing earnings. good morning, this is bloomberg daybreak. david westin is on assignment. 30 minutes until -- in new york. a slight move away from an all-time high, we snapped that five day winning streak on the s&p 500. market,1% -- in the fx the euro is treading water against the dollar. weakness against most of the g10. in the treasury market, -- the treasury curve that is flat, flat. let's get you some moves ahead of the opening bell. happening in time

warner, that stock is down 2%. the at&t cfo is speaking at a wells fargo conference. he says the timing of the deal is uncertain. he says the doj talks are continuing. deviously, they had the deal closing by the end of the year. now that is uncertain. take to up by 12%. good earnings because they are going digital and it is working. they're looking for record profits in 2019, and a release of red dead redemption 2. i don't set -- i don't play that, but my husband does. digital is now 57% of their revenue. a good number for take 2. this is the drama of snap. after numbers come out yesterday, revenue group 52%. for a mature company, that is amazing. for a stellar growth company, not amazing. it missed estimates.

treading water throughout the night, and you see tencent buying a 10% stake in the company. now we are back. tracing the gains we got after week learned that tencent but the company. -- their their own whole thing planned out. they are rethinking their strategy, goggles or glasses they had to write down. redy question was what is dead detention 2? i was about to google it. >> it's a zombie thing. that in a moment. alex painted a picture of a really big pain train. -- or bring in the managing director of -- the ninth dollar price target on the stock. what is more significant, the earnings or the fact that tencent comes in big? >> to get you straight on red dead, it is a western. >> that is why i've got you here. >> it's a prequel to the prior

game which sold 18 million units. >> there we go. >> the tencent thing is a great headline, and they are pretty smart shareholders. they have made amazing investments, they bought super cell, the best mobile game maker. they have a big stake in activision. stake in abig private company called epic games which has done well, and they bought about the same sized stake in glue mobile which has dropped a lot. it was under two dollars and started to rebound recently. hit and miss. if they bought a stake in snap, they didn't likely do it last night. they probably did it before the earnings results. these results were a with -- we re a whiff. what is more important for a new investor who is considering investing in snap is are they growing? alex mentioned 52%

growth. don't care about year-over-year, because that reflects the ramp in their efforts. look at sequential growth, it was anemic. $27 million. advertising revenue is just not even coming close to growing at the rate that facebook is. facebook is something that is a platform that advertisers understand because they are on it. their spouses are on it, mothers are on it. they are comfortable investing in it. facebook has instagram stories which is a ripoff of snapchat and it is doing better. if you are already advertising on facebook, why would you commit new advertising dollars to snapchat when you can get an older demographic, wealthier, and spends more money, by going on instagram stories? >> i want to make the comparison to facebook -- let's go narrower

. bogota instagram and instagram stories. when you compare the active , versus those on instagram stories, is it came over for snapchat? was 250we heard it million, that was in june or july. they did say it has grown from there. it is not game over because i teenageat very many girls are going to switch to instagram stories. i have 17-year-old twin daughters on snapchat every day. my wife is a bit order, she is on instagram stories. instagram stories was set up to prevent all of us who are over 30 from switching to snapchat. already on facebook, on instagram. our friends lists are already set up. it is really easy to start with instagram stories. you don't have to build a new friends list. that is a defensive move by facebook that has been brilliant.

it is going to curtail snapchat's ability to grow among an older demographic. bentually, my daughters will 40 and they will still be using snapchat. i think it will keep growing, they are not ever going to get my wife. >> bringing the family into this. alix: just a little bit. me an education about video games. i still love the idea that there is a warehouse somewhere with $40 million worth of spectacles? that nobody wants. >> doesn't read that sound what is on victim? -- >> president donald trump is now in china, talks with north korea -- talks about north korea. michael mckee, we are looking for concessions on trade and on north korea, i'm sure. .> it doesn't look like it he left japan and south korea

without gaining anything on the trade front, and it doesn't look like they've made progress on north korea. he tried something new yesterday. instead of calling kim jong-un light nickname, he consulted him personally, saying north korea is not the worker's paradise you say it is. it is a living hell on earth. we will see if that draws reaction. the chinese are of a different mind than the u.s. about this. they do not want to destabilize the north korean regime. they would rather contain it. it doesn't look like donald trump is going to make a lot of progress in his main goal, to get them to cut off the oil supply to north korea. in trade specifically, i want to reflect on the year we've had. it was a year since the election. so many people were worried about this relationship, between china and the united states. time, the at the chinese were more worried than they are now given what has happened over the last 12 months? >> i don't know if i would use

sureord worried, but i'm they were interested to see what donald trump would do. on trade, his bark is worse than his bite. he has not withdrawn from nafta, has not slept border taxes, has not put tariffs on china decide things that were already in the works. he did not follow through on his steel investigation yet. the chinese are looking at this saying we can probably deal with this guy. not likely they are going to do a lot in terms of bringing down their trade deficit or promising to do that. 75 billion dollars so far this year. they want concessions from the u.s. the trump is not willing to give. jonathan: at hate to simplify something when it comes to tax cuts, everyone wants the tax cut, who wants to pay for it? tumbleweed. that is still the situation. what everyone predicted is

happening. the ways and means committee came out with the bill and all the lobbyists got a look at it. yesterday, the committee had to take out the 20% excise tax. it companies would have paid on transfers between their foreign subsidiaries and home companies. that leaves the $74 billion hole in their budget. looks like the senate bill may be completely different. they are talking about a cutting delay on corporate taxes and getting rid of the state and local tax productions altogether. we are still a long way away from getting anywhere on this bill. looks like the house bill is going to get finished, and then die. the senate bill is where the action is. alix: shocked to hear there is more delays. concerns of the future of the house tax bill that way on the had its biggest one-day

decline since august. banks had their worst they can a month. joining us is kevin caron. help me understand the psychology. do you really say that is the headline from d.c., i'm going to buy small caps? is that what's going on? >> you've got value managers looking at prices elevated in equities. credit spreads are tight, lots of optimism. the bad story would be that returns are going to be lower. in the here and now, the data looks good. people get earnings -- it all seems good. the momentum is feeding on itself. we are seeing a wealth effect. it is looking like the late 1990's. until that momentum breaks, it issomething -- important that you haven't prioritized right. that the economy looks good. -- said that they are

modeling s&p operational processes at 10%. propel thet could s&p over three thousand, etc.. what do you factor into your model? looke number one thing we at is the composite data. for us, it is pointing toward near-term growth. nothing in terms of data that suggests we have a problem with the economy at all. it is only when it comes to evaluations. tax relief, a get lot of that is price then. from the lows in 2016, the dow is up 30%, and earnings account for maybe half of that. a lot of that has been financed by the weaker dollar. if there is disappointment, what does that ultimately --? jonathan: on behalf of the guests that have sat at the table and said nothing is price

then, how are we determining whether this is or isn't priced in echo -- priced in? >> you can make estimates of that, but the discount rates that go into it are all over the place. i will tell you that overlong is ad's of time, there good relationship between the value of the stock market and the economy. on both of those fronts, the multiples, either on earnings or on themultiple -- overall economy are premiums, not discounts. you can't say the stock market is cheap today. it is a question of whether or not the stock market is a little bit or a lot ahead of itself. caron, great to have you. coming up, marking one year since president trump won the election. -- what we did call the trump trade. later, on tax reform, a

conversation you do not want to miss. michael mckee's exclusive interview with steve at 11:30 eastern, 4:30 p.m. in the city of london. as we can you down to the opening bell, about 17 minutes away. high,t below the all-time the situation is that flat on s&p futures. from new york city to our audience worldwide, this is bloomberg. ♪

>> today marks one year since president trump was elected to office. taking credit for the stock market rally, but how did the action this time last year stack up against expectations echo --

expectations? the think you will see marketplace level out with every iteration that comes out of this president-elect. i think that the flow of that will be more consistent, thoughtful, will start calling the fears and jitters of these erratic markets. the market is what it is. infrastructures, and there is not much to be had -- i was still stick to the 1%-2% growth rate of the imf -- that the imf and others are suggesting. i don't think that trump -- will do much there in terms of the policies he is advocating. >> i'm not telling you that overnight the market is going to run away on the upside. i still think there is no question that you don't just wipe out the problems because

donald is coming in january. >> donald trump is pro-business and maybe pro-america, and he wants to see companies grow and do well and create jobs. bring consumer prices down for the american people. it makes me feel a lot better. from favorite story election night, my favorite market story is the idea that -- was at a cocktail party, saw futures drop aggressively lower, went back to work. he must have made an absolute fortune. my question to you, kevin, is that not how many people were thinking going into this? it's not how people were thinking in the middle of the night when the election started to come through. what changed and what have we learned in the last 12 months? >> what changed is right after in his acceptance

speech, he started to talk about stimulus. he started talking about running a bigger government deficit by a combination of tax cuts and spending, and the market love that. that's not what they were anticipating before that. of this about potential trade wars, etc., those have faded off the table. we haven't seen that tariffs, etc.. the market got what it wanted. it got a progrowth agenda without all of the nasty things that might have come with it. things hethese are talked about on the campaign trail. there seems to be an obsession with personality, the individual. i wonder if the market is going to make the lesson -- when it comes to politics, you've got to divorce your preferences from what the individual is going to do in terms of policy and what it could mean for your investment. aat i've seen so far is struggle to divorce your politics from your economic analysis. kevin: i am imagining a graph in

my head. i wish we had it here. if you look at the president's approval rating and lay it out on a chart, you would see a downward looking line. you would see the dow doing the opposite. it sounds silly to conclude that the stock market likes a president that is struggling in terms of popularity, but that seems to be playing out. withi do see is that along the popularity rating, you see something of a weaker dollar. that is translated into an improved inflation expectation, taking pressure off the emerging markets and credit markets. it has allowed the economy to move ahead with the growth trajectory without having the inflation associated with it. -- to you did you think your point, if you take a look at that stocks that have over --

that have outperformed since president trump took the helm, it is apple, microsoft, google, facebook. is that because of president mentioned,cause you a dollar story is a fundamental trade? kevin: two things. the inflation or deflation issues that were starting to crop up a couple years ago. number two, there is a greater sense of investment in trading here. that is going to affect business spending. that is good for technology companies. the third major thing is that technology is the most global u.s. sector. most of their earnings -- best sector more than any other -- that sector more than any other -- alix: you are going to be sticking with us. coming up next, we are going to dig deeper into the report card. sectors like aerospace infrastructure were supposed to do well.

we will see how they really performed. ♪

alix: etf benefited from president trump's victory one year ago. many investors use that to trade on his policies and rhetoric. bloomberg intelligence etf analyst, kevin caron, joins us. what actually did work? kevin: arrow space and defense. this taker, ita, mega hit product. it went up 40%. very difficult to make that kind of stride asset wise. knowing, lockheed martin. financials, xls is up 34%.

financials are supposed to have rates rising. this is largely on deregulation and earnings. here's the thing, both of these did well under obama. is the white house really impacting investment all that much? it seems like it, but green energy stocks were awful under obama. defense companies that great. there is a little bit of a misdirection in looking at this stuff -- jonathan: a lot of people were worried about international trade. the last thing they may have wanted is up big internationally traded company on the -- was an etf that has come out called the gop stock ga.'ker, ticker 'ma seriously, that is an actual

thing. all the companies that donated to trump. due to otheranyway reasons. one trait that did not work out well was shorting mexico. remember on election night, the peso fell? it basically created a billion dollars in shares just to short the thing. in the next six months, it went up 28% and crushed everybody. that was a huge failed trade for the trump trade. . tell us about -- >> tell us about your new show that you are launching with scarlet. >> scarlet fu is anchoring. it is the first etf show dedicated to the universe of etf's. go with the flow, passive aggressive's, there is an etf for that -- and some more obscure products. alix: i swear this background looks like tron. i got super excited. >> if you have a retro 80's

thing going on, you will love the show and the graphics. alix: who doesn't? jonathan: it's great to have you. kevin -- joining us. etf iq coming up a little bit later today. in the market, here is the situation. futures a little bit negative, down .1%. a slow retreat from an all-time high. treasury yields higher a little bit earlier -- cable rates showing the weakness in the defense space against the dollar, the only currency -- the pound at --

>> -- and 25 seconds after closing at a five-day winning streak, and an all-time high monday session. the small retreat on the s&p 500 today could add to that move,

down by .1%. futures are pretty much dead flat. close to all-time highs on every single one of those numbers you see on the screen. the story in the bond market, treasury yields come in a basis point on the 10 year. it is the shape of the curve where the headline lies. , 70 basisat one points, two versus 10. the dollar treading water. it is stronger against the pound, flat against the euro, and weaker against everything else. that is a snapshot across assets of what is happening. alix: a little bit of softness across the board. the dow goes up 25 points, the s&p off by .1%, the nasdaq flat. nasdaq 100 and dow closed yesterday at record highs, so was softer move would be considered. drainial has got to be a

when you have 63 basis points -- as a perspective, the dow jones up 28.5% since president trump was elected. individual movers i want to highlight, one is colgate. some rumors on the financial blog are circulating that colgate could be a takeover of target. may.eo opened the door london club is getting smacked down 23%, these third-quarter estimates for earnings. a revenue forecast was cut after they raised their lending standards, predicting a fourth-quarter loss. time warner is off by 3%. you have at&t, cfo, saying that the timing of the deal is uncertain, speaking at a wells fargo conference. doj talks are ongoing, but the timing is uncertain. the greatest chart of the

morning belongs to snap. this is the drama you saw if you were a shareholder. reports after the bell, you wound up having revenue up 62%. for any other company, that's great. if you are a stellar growth company, it's not what you want to see. stone, treadske a water, then pops after tencent is announced to have bought a 10% share in the company. -- a fascinating chart for the morning. jonathan: ugly, like the ultimate pain trade of the day. target. price kevin caron of washington crossing advisers. brian, the most bullish on the street. let's get our chart back up. i can picture you, no, then yes, then no. >> there is a lot of volatility around these results.

i think you've got to look at at least 12 months if you are an investor in snap. i think selloffs like this morning have proven to be a good buying opportunity. for some, a good trading opportunity. there is a lot of transition happening, i like what the company is doing. through.80% of the way i think that is going to present a nice pale as we move into 2018. jonathan: can i point out how bad it has been post earnings after the last couple quarters? in august, we get lowered by 14%, and this morning, -- it is easy to say things are going to turn, this is early days. , expecting going something, and they keep delivering in a disappointing fashion. why is that going to change? >> one thing is guidance, there is no guidance. when we step into every quarter

as an analyst, there is no guidance. the second thing happening is they are moving to option-based advertising. -- they areramming 80% of the way through this initiative. they were 0% one year ago. 20% caused -- to tank quarter on quarter, 60% year-over-year. although volume surged. .00% year-over-year as we make this transition, for snap themselves, there is a lot of uncertainty. areou get into 2018, we going to be through this transition. they are going to re-architect the application a little bit, which could cause near-term volatility. alix: you mention that it is a strong company, a good company. what doese company? it want to be? i don't know if even the ceo knows. platform for the

imagination. what they are trying to do is provide different types of content, whether communications or some of their lenses or bit-mojis, or geo filters or content. you want to engage with the platform. there is a lot of different things. s is a cooli initiative they launched. if you look at 3-d world lenses, where advertisers can insert their own character or some kind of object into an advertisement. i could see where this goes. this advertising market mobile is going to be -- by 2020. get people engaged and able to monetize. they are still growing very fast. killing it. is visit game over? if instagram keeps doing what they are doing, can snapchat catch-up? >> snapchat is ahead of the game

. while instagram stories is one piece of the puzzle, i talked about 3-d world lenses, snap map. there's a lot of other invest -- innovations. companies can come in, like andosoft did with apple, offer something similar, but that is not the entire portfolio at snap. >> there is a warehouse with about $40 million worth of spectacles. with google, you can throw things at the wall and see what sticks. $40 million, no one is even going to read that headline when the earnings come out. that is in google, this is snapchat. if you make a mistake that cost $40 million, that is really important. >> spectacles is an experiment. it is going to lead to what i think are a art spectacles in the future -- a.r. spectacles in the future. i'm ok with that. alix: you brought this up in

terms of instagram. snapchat daily, each person brought $1.70 of revenue. facebook, $1.67. that is a huge gap. what kind of daily revenue do you think they can generate per user? what is your goal? >> we see it going to over three dollars by the end of 2019, the fourth quarter of 2019. you will have rapid revenue growth. also, i point out that one of the things when they rearchitect this app, it's going to be easier to use in developing countries and markets they may be can't touch. it will open up some advertising and drive user growth. --t is one of the priorities the contentece of and user growth. user numbers could grow a lot faster if you did not need a high and smart phone with the 4g connection. i think that will -- >> this is somewhat of a pain

trade for you overall. you are the most bullish on the street for apple stock. target price of about 235 -- that's a big number. are you impressed by what you are seeing so far with the launch of the iphone 10? >> absolutely. apple is cheap stock. there is repatriation opportunities. changer, and game it plays into our snap story. the lenses they can be created with the new camera system is phenomenal. apple showed it on september 12 at their event. the iphone plays right into the story. >> they raised a ton of money this week, and they did it incredibly cheaply. they have fantastic access to the debt market. they are the second largest -- in the united states, even though they have this massive tax pile.

why does -- change anything when they already have access to this money? >> they don't want to raise debt forever, so i think they have been very clear that if they have reasonable tax rates, they are going to bring it home. for me, i think that could mean a hike dividend, a one-time dividend. there could be acquisitions. i'm not open for a big one, but they could bring that home. alix: are you buying the iphone x? kevin: no. technology -- we invest in more traditional companies that have a longer track record. i remember that atari was at one time a number one videogame maker. aol instant messenger was the best way to communicate. there was a thing called myspace. alix: myspace! obsolescence is a real big challenge. you said it is cheap

-- how to why value apple now? >> i think you still need to -- we have always done that. 13 times x-cash on a calendar 18 number, it is reasonable. i look at the sugar water companies as an example. apple is not going away. it is kind of a stable of the mobile internet world for everyone that can afford it. the sugar water companies still traded over 20 times earnings. you could say they are consistent on -- they go 5% a year. apple has grown 30. that is a good deal. -- i trading at 13 times think that is attractive. i also look at the s&p and the s&p is trading at 18 times. apple goes well above the s&p. alix: -- jonathan: great to get your

thoughts. , l.a. clippers owner and former microsoft ceo -- joins us for a tv interview at 12:00 eastern time, coming up a little bit later. 11 minutes until the session -- a slow retreat from all-time highs for the second straight day. s&p.ive four on the from new york, this is bloomberg. ♪

alix: this is bloomberg daybreak -- coming up in the next hour, a bloomberg exclusive

interview with steve mnuchin, u.s. treasury secretary. >> -- captured worldwide attention. many see it as a consolidation of power from prince mohammad bin salman on. it had an effect on the oil market. the funny thing is, it is something different when it comes to oil stocks. you wind up seeing the oil prices on the top line -- that big rally, 56 for wti. on the bottom line, you are seeing slows of the u.s. so, the oil etf. we haven't seen those kind of flows since last year. an interesting divergence. dicker andis -- dan kevin caron. who is right, the oil price for the uso? >> i think the uso is always

wrong. it is private individuals, speculators and people who know nothing about the oil market. i will not follow anybody in her out. i want to point out the debate -- you have lots of room, momentum for energy stocks. the option market is looking a little bit there. >> that makes a horse race, but i will tell you this. man, you of bin sal could call it a power grab or a consolidation of power, but to me it is all about the bullishness of oil. this move to imprison his 11 cousins, brothers, and take away their power in the government, it is about seeing vision 2030 go off without a hitch. the biggest part is this upcoming ipo -- the biggest component of that ipo is going to be a higher price for oil.

we saw, for example, this consolidation begin a year ago when -- was replaced. that was the first move to take control of the biggest asset, the most important asset that moves into saudi arabia and politics. if you forget about what is , you on with the oil price will forget what is going on. he is 32 years old, he is going to be the next king. that means the political trajectory of saudi arabia is he's got a one name thing. >> he's like a rockstar now. let's take that perspective. all the major banks start to upgrade their forecasts now. the average price forecast is 52. you were looking for triple digit oil, right? this was a while ago. what makes you so bullish? seen, the pattern

took a little longer to take place in this bear market than in others in the past. but we've seen it. we've seen the drop, the ability for -- global demand the for oil continue to accelerate. naturally take place after you get a bus cycle -- a bust cycle. you get lots of bankruptcies and companies, difficulties in raising capital. that always generates into a boomerang effect of a bull market. i see nothing but green lights ahead for oil and oil stocks. jonathan: in the short term, if we are looking at the market -- we've heard a lot this week about one positions looking kind of extended. we build up -- do we look more vulnerable for a movement downside? >> you've hit on it. there's a lot of views on etf

players. fund guys, commodity hedge fund guys, have been going deeply into the futures. flattened the entire curve, which is usually bullish. so if there is a negative on the short term, i would say that would be something to look at, to see a break in some of those getting punished in the short term. >> the opec report that alex outlookwn for us -- the for shale is still massive. we produced 9.5 million barrels of crude a day in this country? what was the forecast for shale? alix: it's going to grow to 5.1 million. you have to admit that at some point, we have to see a significant slowdown in shale to get back to triple digits. sort ofound a regressive analysis on the growth of shale that goes back back" years,oes

and the oil price was higher. the eia has not taken back into the concentration encore acreage. on coreoncentration acreage. the secondary acreage points, 700,000 barrels a day for the next year, they do not have a breakeven price of $40. $70, $100 and some of these areas. you will not see that kind of growth. they are progressively basing it on a growth pattern that goes back to 2014 and 2015. you will not see that again. the growth of shale will never be repeated again at that level. that is what they are forecasting. before we go, how do you invest? do you like energy? >> you invest with the global

economy. investment spending in the past weeks. resistance is going to be higher, so i think you have to go with it for now. at some point, evaluations become an issue. players, the permanent but when we get toward later in the cycle, you want to swap to oil services. they will benefit the most in the second stage of the boom. alix: good call. thank you guys for -- so much. join me for an hour-long special on the rise of shale, how it changed the u.s., the impact on the world -- jonathan: is that you in the white hat? alix: hardhat and overalls. that's my jim. it looks just like what dan dicker was talking about. do you know how site it was their? >> it's never sunny. alix: this was argentina.

stuff thata lot of dan dicker talked about. ♪

>> it is day three of the -- tax bill, and they say they will go much later into the night to get a bill done. michael mckee joins us from washington d c. ,alk to me about where we are what has changed and what needs to be solved? >> we are halfway through the house markup of the tax bill. expected to be done by sometime thursday. there is a hard stop at 9:00 p.m. eastern so everyone can watch alex's shale special. noonwant to get it done by thursday because that is when the senate wants to release its version of tax reform.

we will end up with two completely different bills. three, in a way, because the house bill they are talking about now is getting to be different from what they started with at the beginning of the week. they took away the excise tax, and have a big hole to fill. they will have to come up with something new over the next 24-48 hours. we will have a new house bill and the senate bill. it appears, from what we are hearing, that they will not need. -- they will not meet. >> are there any democrats looking to work with republicans or vice versa? given the election results of the last 24 hours, do you think democrats will feel emboldened to not work with republicans? >> that is kind of a complicated question. if you are talking about democrats willing to work with republicans, there are a lot. willing to work with them -- willing to vote with them on a republican only bill, very few

if any. to pass ins going senate, maybe one or two in trump states would vote with them. but they would be the 53rd and 54th votes, not the ones to put it over the top. republicans don't seem willing to work with democrats. there are moderates who seem willing, but -- this is really a partisan process, and that is very different from 1986 when you had the democrat in charge of the ways and means committee working with ronald reagan from the beginning. it is going to be that much harder to get things done. thank you for promoting the shale special. exclusiveview, an coming up later this morning, 11:30 this morning with steve mnuchin. really looking forward to it, mike. the line of questioning you got lined up for the treasury secretary. talk to him about

taxes and what is acceptable to the administration. they are considering a range of things in the senate that don't meet the administration's particularlyria, the idea of delaying the corporate tax until 2019. we also want to ask him about filled, when they will those open positions on perhaps the most important panel in washington. >> coming up live and exclusive on bloomberg tv. 26 minutes into the session -- the slow retreat from all-time highs continues. a little bit of softness and weakness -- >> retail.

under pressure like never before. and it's connected technology that's moving companies forward fast. e-commerce. real time inventory. virtual changing rooms. that's why retailers rely on comcast business to deliver consistent network speed across multiple locations. every corporate office, warehouse and store near or far covered.

leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. ♪ vonnie: it is 10:00 a.m. in new york, 3:00 p.m. in london and 10:00 p.m. in hong kong. i am vonnie quinn. mark: i am mark barton. welcome to "bloomberg markets." ♪

vonnie: here are the top stories from the bloomberg and around the world, u.s. stocks are lower today as we mark one year since president trump's election. that sent u.s. equities on a huge rally that emerging-market equities on a bigger one. what will it bring for the trump trade? u.s.clusive interview with treasury secretary steven mnuchin and what he says about tax reform and when a bill may pass congress. to the drearys picture for european financials. the bank falling today as the trading slump persists. what banks need to do to turn the revenue issue around. we are 30 minutes into the u.s. trading session. julie hyman is