the carolinas in what could be the most powerful storm in the area in decades. ahead for a big week of central banks. argentina, to do, russia, and warnst monetary policy as of em risk. the pound continues a rally after a deal could be reached in eight weeks. wages climb with a meeting on deck. to "bloomberg daybreak." anniversary of the attacks. we are looking at the 9/11 memorial. later on, they will gather and read the names and have a moment of silence and the national anthem. alix: 17 years. david: i cannot remember -- believe it. i remember it well. we came in and it felt

like a calm day. futures up by 85 points. the headline from reuters came that potentially china could seek some kind of ability to punish and retaliate against the u.s. .hat trickled to markets euro-dollar lower. a mixed dollar story. 2/10 spread over the auction over the next few days. china's president and russia's president meet at the eastern form. they will talk well bilateral direction. thinking said that -- the u.s. treasury will sell $35 billion in to your notes. at 4:00, argentina will release their rate position. alix: maybe not a lot expected,

but they have the in -- highest rates in the entire world. we will be watching this. let's go by first take. this is with rachel evans. i went to kick it off with hurricane florence. let's get in here and show the hurricane passed. one week ago, we were taking about florence going off into the east. now it looks like it will have a direct impact and remain. there are a ton of industries that could be severely impacted it or not used to being hit during hurricane season. >> you are already seeing shutdowns. refineries get shut down and utilities and energy. we are already seeing impact felt in a some stock as retailers going up and insurers going down.

and also affect in the bond market. david: what affected hurricanes typically have on gdp growth? carolinas isf the in tourism. that is one of those things that as soon as you see a hurricane, people will go. the impact itbout has in the run-up to the hurricane and the aftermath and the cleanup efforts, it could be a bit of a hits for the statewide economy. alix: things i did not know, they are the number one to give producer in the u.s. lng is only exporting two locations, one is in cold point. the question becomes, how quickly can you ramp up after something like this? : you are- romain looking at prices for poultry

lean hard. there are up 14% in the past week there is anticipation that the impact and not only the damage to the farms but shut down effect could have a huge impact on prices. david: what about oil? romaine: this is different. alix: but there will be an impact in particular to gasoline. as a colonial pipeline that goes up to the northeast from their. if power is - there. dealing with lng is the real question. the last time it had been tested and now it is the second year how will that filter through? david: let's go to the british pound. it is spiking up. we know why that is happening. it is first time against u.s. dollar because after all the back-and-forth, it is said there is hopes for a deal. it is said they are we able to

firstan agreement on the stage on brexit. is this real? rachel: i think it is real as far as it goes anywhere looking at the agreement and not everything being spelled out. this is about getting an agreement in principle, the first stage before they hammer out the issues. still it stay coming of island whether you have a hard or soft border between the north and republic. we are seeing testimony by the bank and committees and parliament talking about bill have to move stock. all of that will still go on despite the move towards an initial deal. david: even if they could still do the deal, theresa may has take it back to parliament. they will live by the rules of the eu while they worked everything out and that is not a foregone conclusion. romaine: this will be like the softest brexit in history exit.

passed fromget this and she has to convince them this is a brexit which it does not look like right now. the strings that will be attached to this man out please a lot of folks. i do not think she is out of the woods yet far as protecting her job and her legacy. alix: the market reflects that. and now rally yesterday we pause was sterling down against the dollar. euro sterling flat on the day. that's a short covering straight out. this is an emerging market currency. romaine: rachel pointed out that equities went reverse course and she mentioned the banks testifying. a lot of damage has been done here. this will not be reversed once i get a done deal. emerging markets, last week it was where you want to buy. this week, you have banks being cautious. goldman sachs saying their

coming emf exposure and worried about contagion risk. jp morgan something similar. bank of america also saying if they see a big crisis that really will be europe and the epicenter. when you get these kind of calls, is that a bottom sign? rachel: looking at what we are seeing in markets, not necessarily. if you look at where stocks are, they haven't hit a key momentum indicator. normally, when you see a reversal for em stocks from lows, you see that hits a certain mark indicating they're about to rebound. we have not gotten to that point and there could be some weakness. when it comes to fx, we are close to lows of 2017. we have key central bank meetings coming up. we'll see what they can do to stabilize sentiment. will be a tall order considering

the issue with argentina, turkey, and russia have. have big meetings with the central banks paired with argentina, russia, turkey. do they have the ability to reverse it? romaine: what happened the last time argentina did it? the peso fell. same time when they restate up to 45%. withaw something similar turkey. the issues there are much more structural dollar strength is not going away. that is the root cause of a lot of this. at some point, just raising rates will not be enough. though a lot more need to be done that some countries don't want to take. alix: you have trade risk. you saw how sensitive markets were. potentially, if china goes to the wto, that leads to the question, how do you hedge against that?

rachel: one of the interesting things about the trade conversation is that we talk about it every other day because there are new headlines. when you look at investors, many have not changed position yet. we have seen people like apple come out and say that the price of a iphone may have to go up. ford has said they are not going to make things in the u.s. when we see this translate into earnings is what will see trade impact become clear. we'll see where it ends up. iphone.y $1000 for bostickvans and romaine . you can go to gtv and check out the charts we will news -- use the next two hours. coming up, more on emerging

market calls with troy gayeski, a senior portfolio manager. this is bloomberg. ♪

>> this is someday.". i am emma chandra with your bloomberg business flash. the largest supplier of semiconductors is looking at beyond the automobile sector. the california company will help expand into data centers and communication devices. the price represents a 60% premium. china is gearing up for the olympics by going up against one

of the major makers of ski equipment. they own an atomic ski brand and it sells winter sports were in china. the chief financial officer of dutch bank is stepping down in the wake of a money-laundering investigation. he will stay in his position until a successor is found. he has agreed to settle nine man --lars into an investigation $9 million into an investigation on fraud charges. british pound surged after it was said a deal on brexit could come. if we are realistic, onwill reach an agreement the first stage of the negotiations, which is brexit treaty.

this weapon within six or eight weeks. alix: joining us is our bloomberg brexit editor. what kind of deal could be realistic? >> what we are looking at is a deal on the divorce and a deal that will put postpone -- will postpone what it really means for the brexit exit. 80% of that divorce agreement has been drafted, and the sticking point is the irish border. a positive tone from the eu side, a definite shift in tone. onre is a big summit september 20, which may give momentum to the talks. we are not out of the woods yet. we don't have a deal on the irish border. it will have to bring -- theresa

may have to bring it back to parliament and it is a question of whether she can get it through. david: thank you for being with us. meanwhile, the u.k. wage growth accelerated in july, giving a post-brexit rate hike very much in the picture. gayeski,s is troy skybridge capital senior portfolio manager. welcome back. troy: good to be here. david: we have the boe and the ecb on thursday. i want to compare and contrast are u.k. versus europe and growth rates. we have a chart that shows the rate of gdp growth. how you analyze the difference between the u.k. and europe? people forget europe had a spectacular growth last year. all that happened is that you came off of cyclical highs. the growth path still look strong.

as discussed prior, if you start seeing progress on brexit and if you start seeing more normalized see ary policy, you can significant rebound in the pound which would hold back inflationary pressure. david: what progress on brexit does that mean? and say weit vague will keep going along. is that progress? will that be enough for markets and investors? it is progress in the sense that there may be light at the end of the tunnel. it is similar to what is going on with the u.s. and nafta. with that being said, when you look at broader markets, there has been far less consolidation in merger activity because of the overhang. as optimism increases, you can see more mega cap m&a. alix: the backdrop is the central bank policy and the

question is do you think central bank divergence or convert it? troy: diversions will continue. alix: the story was convergence and now it is not. neverthis year, we can understand why people were geared up on the dollar given the likely path of accelerating convergence. we will continue to get accelerating convergence -- divergence. the u.k. may hike once. you will see continued divergence. alix: the same thing for earnings estimates. troy: yeah. earninge white line is estimates from u.s. and the yellow is emerging market for u.s. -- european equities. how long can that last? has: how many times consensus been that you do not want to own u.s. stocks because of lower valuations.

sometimes things have higher valuations for a reason. america is efficient right now, benefiting from tax reform. we do not see a major sector rotation or country rotation overseas soon. forgive me for interrupting. mr. carney is going to extend as boe governor until the end of january 2020. this was foretold in the testimony. now we know officially that mr. mark carney will remain into 2020. troy: that is important from stability. the last thing you want in negotiations is instability at the boe. alix: it is pretty much doing nothing. troy: there was strengthening yesterday. alix: how do you play the divergence bank story? troy: you want to focus on primarily u.s. assets.

the dollar which had a great setup, markets are more in your favor. in the short-term, position yourself to benefit from higher rates. we still like financials and consumer assets where economic strength in the u.s. will drive returns and the downside risk is low. skybridge gayeski of is staying with us. mark carney will stay to the end of january 2020 and see them to a turbulent period. will it be over in two years? i don't know. now he says he's going to stay longer. alix: bracing for florence. for u.s. states declare emergencies. it can be the strongest storm to hit the carolinas in years and we look at the effect on the market and insurance world.

this is bloomberg. ♪

>> more than one million people living in the past of hurricane florence have been ordered to leave their home. joining us is emma chandra. at the path looking of the storm. to hite is expected category five strength and hit landfall late thursday early friday, somewhere between charleston, south carolina and norfolk, virginia. it has the potential to be a record-breaking weather events. this model suggesting the damage could run to $20 billion. it is having an impact in the market. .nsurance fell yesterday 2% yesterday. agile -- aig fell 1%.

we are seeing some company set to benefit. this is land star, a trucker on the move yesterday up 4%. it hit a new high with jb hunt. both home depot and lowe's indicating higher today. both hit highs yesterday. the expectation of diy spending once the storm passes. much. thank you very still with us is troy gayeski. when you look at risk, how do from florencek and how does it relate to other risk? impact for the small hedge fund industry will be insurers. they had a tough year last year because of harvey and premiums did go up slightly which created optimism but not that much.

we do not have exposure. another area is on the agency crt market. they are credit risk transfers that investors take at the bottom of the capital structure for new issuance. people forget when you have big disasters you have impact in housing. not all losses are insured. dore is some subordination the last year's hurricanes and you will do that more because risk you needre to be compensated more. feed intodoes that the broader brisk market? we know this is coming and the areasit could hit -- the it could hit. how do you deal with that when you make the shorter and and longer-term decisions? in terms of a hurricane or natural disaster, it has to be something large to have a meaningful impact on portfolio

decisions based on 618 months. with -- six to 18 months. surerade, you want to make they would guess that you want in areas that are punished by that. u.s. equities benefit from a stronger economy in the u.s. and a stronger global economy. multiples are not excessive. there will be some disappointment if the trade war escalates further. you have had progress and nafta, progress with europe, so the question for u.s. investors is, does china -- do we go full low with -- full blow with china? there will be an impact on tech and industrials. of thatthe probability happening, is it 20% or 25%? it thant 70% but much higher

5%. it is difficult to evaluate how much that is risk in. david: troy gayeski is staying with us. alix: you brought the question of yesterday is there asymmetric risk? is there enough negative news to be priced in that you will see a pop after that? david: it could go the other way. alix: how do you hedge it? troy: markets would be higher today without the trade rhetoric. david: troy gayeski will stay with us. are they of ceo looking for, we are talking to k -- >> this is bloomberg. ♪

alix: this is bloomberg daybreak. a bit of a risk off feel this morning. the s&p 500 off by eight. a report china could go to the wto to complain about the u.s..

emerging-market indices are picking up a touch more steam to touch more steam to the down turn. that mark carney will be extending his 10 year into 2020 and he will do all that he can. it seems that any kind of boost to sterling after mr. barnier said there could be a brexit deal within eight weeks. what's that three year yield. -- watch that three year yield. crude overall a little but flat. -- a little bit flat. david: let's get an update on what is making headlines outside the business world. we welcome and -- emma chandra here with "first word news." emma: president trump is open to

another summit with north korea's kim jong-un. the white house says the president received a very warm very positive letter from kim seeking a follow-up meeting. there is no evidence that the regime has taking meaningful steps toward illuminating its nuclear arsenal since the first meeting in june. iran chicken nuclear chief says he hopes atomic deals -- he warns the program will be in a stronger position than ever. the associated press that president trump ticky decision to withdraw the u.s. from the nuclear record could put him on the losing side of history. china's president and russia's vladimir putin -- putin is hosting is future economic forum. russia and china began seven days of joint military exercises today. global news, 24 hours a day, on air and at tick toc on twitter, powered by over 2700 journalists and analysts in more than 120 countries.

this is bloomberg. alix: thank you so much. apple is set to unveil a blitz of new products tomorrow. the company is set to launch three new iphone -- three new iphones and other new products through the rest of 2018. i can finally get my new phone. joining us now -- it is the smallest phone ever. our bloomberg is intelligence telecom analyst. is it going to be enough for markets tomorrow? matt: it seems to be there is a huge amount of concern about what they're going to reveal. what is critical is how they can drive both volume and upward selling pressure. they have seen huge growth in revenue but volume has slowed down. they had a surprisingly good

quarter on the apple 10 last time around so they will be open to convince -- hoping to convince people that these upgrades are going to bring people with a five back in, is this the year that you upgrade? there are going to be some changes. going from a five to attend is going to be quite a culture shock for you. alix: it literally stops working. i cannot even find the 4g network to operate my phone. ubs upgraded apple's price target. revenue thatware is going to come with the replacement cycle. what is going to be that next catalyst? matt: there is the whole wearable segment which we will see with the watch that has been

successful but i think that is a huge opportunity there for the likes of apple to dominate that segment going forward. the other area is the low end of ae phone market and you have five sd out there, these old devices and what do they do with that product does they need that low-end device to drive volume in markets like india. alix: thank you very much. make fun of me but troy has a blackberry. troy: i have two blackberries. [laughter] alix: still with us is troy gayeski. there are a few small m&a positions that our managers have but in general, u.s. tech is a very -- sector -- high rate sector.

we don't see any value being added by us or other active managers so we are more focused -- reas we are not bearish on tech but people have to remember that high beta sectors get hammered in bear markets and corrections. when that eventually occurs, there will be meaningful downside. alix: how far do you take that? troy: substantial performance and momentum earlier this year. we have more of a financial bias in the credit security so we do like to see that value rotation. we are cautious about how long that will go on given the strong fundamentals of the u.s. economy . david: troy gayeski of sky

bridge capital is going to stay with us. cbs.oonves is out of the search for the new ceo will be faced by the challenges the company faces including how to compete with netflix. there is a look at the outperformance of netflix stock versus disney and cbs. is kay koplovitz, koplovitz and company founder and ceo. it really shows the problem. netflix has done exceptionally well. if you are running disney or you're going to run cbs, you have to look at that with some envy. kay: yes you do and netflix is outperforming everybody in the marketplace because they have a worldwide subscribership. they are huge. they are not encumbered by a lot of old technology and regulation of broadcast industry, which cbs

is. fightinge internal between cbs and viacom has really colored their performance in the stock, not the viewership of the stock performance. they need to move and they need to clean up. you talk about a new ceo. first they have to stabilize what they have inside. a rush to bring somebody in might not be the best thing to do right now. , thehem to get a grip board to get a grip on what cbs represents, and it might be assailed. david: and they appear to have put it to one side, their fights with their owner. they have a truce on that. they have a new board, six new members. if you are going onto that board and you are looking at the situation, what kind of person are you looking for in a ceo? is it informed by the possibility of a sale?

kay: it might be. let's look at what cbs was looking to do during this fight with national amusements. they wanted to stay independent because did -- they did not think they would get their true value in combining with viacom. here they have a stand-alone business and it is a small business compared to some of the others. it is a $20 billion market cap valuation. it is not as big as these other competitive that competitors -- these other competitors on the tech side. who else might be out there? you have to look at john malone. butounds like old media john has been saying we have to combine content assets. is that something that would be interesting? david: also a dealmaker. john malone has interest in a couple content companies. he's got lions gate, and discovery. do you see something like that

perhaps in the wings? kay: i think it might be. i don't see the tech companies coming in and buying a broadcast company. it is a totally different animal than what they are used to and what their valuations are at. it is interesting when you look at combining content companies. david: les moonves is one of the greatest we have seen. ending is an unfortunate to a career. people have consequences of their behavior. david: when it comes to consolidation and putting content companies together with tech or distribution. troy: the position we have right now is with mj holdings, a classic content company. content is king now. for the owners right now, the question is do you let the fx

acquisition and distribution side of that run and grow and have a netflix type valuation at some point and a much smaller footprint, or do you just monetize the content over the short term? mgm is a classic hedge fund restructuring play, bankruptcy rolled into equity and let the growth of the company mature and hopefully sell it. alix: kay, another name that has been batted around has been verizon. cbssaid tech might not buy but what about verizon? kay: rising could be one of the companies looking at this but they said after they acquired john who they were going to restore that and not get into the wars over 20th century fox and so forth. i think they might be rethinking that because it might be an advantage for a company like verizon that has various distribution channels. david: and you have a new ceo.

it appears the move they made was not big enough. enough contentat to get them in the media business? kay: it could be. they do have a lot of original series. they can license it out to themselves or other people. it is a possibility. that is the other company that was on my list. i am not surprised other people are bringing it up. outd: troy, why has mgm the -- been out there for so long? troy: it is interesting to talk about the combination of lions gate, mgm and a few others into a larger entity that could lead to someone like comcast acquiring that higher entity. the valuation when you look at would implyr sky massive upside for those positions, particularly mgm. david: mgm has been talked about

for years. at some point when the houses on the market too long. -- when the house is on the market is -- on the market too long. troy: you have to strike when the iron is hot. are in this acquisition wave and consolidation wave, you want to monetize those assets. alix: kay, we talked about the m&a banker and content guy running cbs. if you wanted to pick somebody who would be better in the distribution side, able to facilitate online content, different channels of investment, who would that be? kay: that is a good question. if you have the content, you want to distribute it in as many channels as possible. you don't want to align yourself with one distribution channel. i don't really have a list of people i think would be more valuable than broadcasters.

in a broadcast marketplace today with the skinny bundles out there, these people still have beachfront property. they are on all of these distributions with skinny bundles. they are in a good position for that. david: the name we have not mentioned is the acting ceo, les moonves's choice. is it he is not big enough or he may be sadly tainted with the moon does a administration -- ves administration and they have to move on and make a clean break? kay: i think joe is very confident -- competent on the distribution side and they would be well served to make a transition with him in place. judgment ifrush to i were the cbs board. i would take time to find the

right person to bring in, the right mix. some of the has to understand this whole new market. it is a fight for direct to consumer and the one thing that cbs does not have is it has the viewership but not the direct to consumer link and i think that is the future of this company. koplovitz of koplovitz and company, and also usa network ticket founder and troy gayeski of sky bridge capital, thank you both for staying with us. coming up, decorating a yacht. if you're a u.k. tycoon, you might start with one of your country dick kaegel most famous painters -- one of your country's most famous painters. ♪

emma: this is bloomberg daybreak. coming up in the next hour, an ,nterview with dan tarullo former government -- former governor with the federal reserve bank. this is bloomberg. now to your bloomberg business flash. plans to consortium drop its feud with -- business conditions has -- have worsened since its approach. includes china chickasaws and wealth fund and the private equity firm kkr. american automakers are losing ground in the shrinking chinese market. the market share of u.s. brands fell from more than 12% to below 11% in the first eight months of this year. the group says the drop was

caused by ford and other automakers not refreshing their lineup has enough. car sales in china have fallen for three months in a row. stocks -- shortrs who bit long and gained 1.1% last month. on average, they are up 3.5% for the year. that is your bloomberg business flash. alix: now to wall street meat. -- wall street beat. the micro-finance fund the only firm out of 251 emerging-market funds bigger than one billion had positive returns this year. ing cfo stepping down, resigning following a money laundering settlement.

david: joining us now is jason kelly, bloomberg's new york bureau chief. let's start with blue orchard. jason: it is micro finance and how often do you get to say a feel-good story about a money manager? this is blue orchard micro-finance. i love this story because it was -- the fund was inspired by this long bicycle trip from argentina to alaska. david: a two-year bicycle trip. if you went on a two-year -- they are making money is the story. not a lot but they are in the positive. jason: what i found interesting, this is making very small loans to low income people for small companies. they have only had a 1% nonpayment rate. the due diligence they do. david: which is consistent with

micro-finance. very small loans to women, and they got paid back at an enormous rate. starting little ortiz in work to provide for their families. it is a great story. -- starting little arches and work to provide for their families. it is a great story. alix: i am going on that bike ride. i cannot visualize. how do you pack for that? our next one has to do with ing. the cfo who was in charge of the unit that was under the money laundering probe is now stepping down. i cannot understand things. they had serious shortcomings with their compliance up until like 2016. how did that happen? jason: i feel like we have been

talking about money laundering a lot lately. david: a lot in europe. jobn: the cfo losing his also jumps out to me because 10 years after the financial crisis and one of the criticisms from back then is nobody really lost their jobs for the malfeasance that went on. there was that great piece about a lot of the anger that turned into political action stemming from that. it does feel like ing shareholders and regulators are saying good, at least a head rolled. the ceo will likely get to keep his job because he sacrificed the cfo. david: that has never happened before. alix: no sword falling on the. -- on that. david: the next story is the name of this yacht -- this yacht

which is a $257 million got. the art on it will not your socks off -- will knock your socks off. jason: just part by the london bridge -- parked by the london bridge. our colleagues who wrote this story, this reporting came from his morning commute. he kept walking by this boat. there is more of a story because --re is this unbelievable one of francis bacon's best-known and not one of his typical pieces. david: which is worth $70 million in its own right. alix: you can't sail it because you don't want to hurt it. jason: so you park it. i feel like i would put it in glass. david: you don't worry about it.

thanks to jason kelly. you want to tune in to jason kelly on bloomberg businessweek every day. coming up, tax cut 2.0. republicans push their latest version of tax legislation. this is bloomberg. ♪

david: this is what i am watching. gop tax cuts 2.0. republicans are putting forward a proposal and they want to extend, make permanent the personal tax cuts. they will add some deductions but the real one is extending salt cap. you and i both know some people who are complaining in connecticut and new york and new jersey about how the taxes got jacked up. some guyss talking to

in connecticut and they were like forget it, in a couple years, everyone is leaving. they are aborting their primary residence being in connecticut. we will have to put a bloomberg station down in miami. david: you can talk to the boss about that. on this anniversary of 9/11, we will be talking about the war in afghanistan, the forgotten war for many people, with karen greenberg, the director of the center for national security as well as a well-known expert on national security from the brookings institution. this is bloomberg. ♪

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the mostinas as one of powerful storms to hit the area in three decades. markets jittery ahead of a big week for central banks. russia, theurkey, ecb looking at monetary policy as investors worn on e.m. risk. -- warn on e.m. risk. leveraged loans making investors worried. dan tarullo ways in. -- weighs in. david: we're looking at a live shot of a was known as ground zero for the ceremonies that will begin shortly. looking up at the liberty tower now. alix: you had a perspective that a handful of people had on that day. you are running abc news. david: i was in my office when i saw the first plane go in at 8:46. we were on the air nonstop for five days with coverage.

that was a challenge because we did not know what was going on the longest time. the government had their own problems so we could not reach anybody for the first 12 hours or so. alix: i remember watching on abc and peter jennings until 3:00 in the morning and at that point, he was basically saying we don't know anything. david: and i don't blame them. they were busy themselves. it was a challenge, no doubt and obviously tragic. alix: we will honor those who died we take a moment of silence in about 45 minutes time, herbs and in the first tower hit by a plane. futures off by about seven points. risk off taking hold in the market. euro-dollar down by 1/10 of 1%. of treasuriesrth coming online at 1:00 p.m. crude up by 1/10 of 1%. you could make the argument it will be -- it should be lower

based on trade worries we had that hurricane putting out ripple concerns throughout the market. david: time now for the morning brief. china's president and russia's president meeting today at the eastern economic forum will the -- where they will be setting a direction for bilateral movements from the countries. at 1:00 this afternoon, the u.s. treasury will be selling 20 -- $23.5 billion in notes. alix: the bearish calls are echoing emerging markets. goldman sachs cutting back on its own effects exposure. jpmorgan says developed markets could be vulnerable to contagion. bank of america warns that europe could be the epicenter should emerging markets trigger a global crisis. this is the backdrop for a slew of central bank meetings this week from argentina today to

russia on friday. joining us now is savita subramanian, bank of america merrill lynch head of u.s. equity and quantitative strategy . how do you factor in emerging markets and whether or not it is going to spread to the u.s.? savita: so far the u.s. has been the area of strength. if you look at multiples for stocks that are affected by emerging markets, they have already compressed pretty meaningfully. one thing we noticed was the stock exposure to china, to mexico, to any area of the world with trade friction. massive multiple compression this year yet the earnings have been really strong. i think the disconnect is between em perceptions of trade ,riction, currency fluctuation but despite that we have seen a very strong earnings backdrop. my view is if we see any trade policy rhetoric lesson or go

away -- lessen or go away, that could release a pretty strong positive reaction. david: i am going to put up a chart which compares the difference between the s&p and emerging-market stocks. is earningsne expectations. the blue is performance which would indicate the performances out doing the expectations of future earnings would suggest. what we have seen is strong earnings and u.s. stock exposure. david: this is s&p overall compared to em. savita: i think what is going on right now is the s&p is the one area of strength that has been relatively immune to other areas where we are seeing more friction. one of the areas we are seeing a lot more strength within the

u.s. market are the more domestically exposed stocks. if you look at u.s. companies with only u.s. sales, they have seen a huge upward revision relative to companies with more global sales. that might be the best strategy for the best place to hide in this type of market environment. alix: how long can something like that last? earning estimates for whether or not it is europe or emerging markets in the u.s.. the u.s. is a white line. how long can something like that happen? savita: i think what is going on in the u.s. is this -- is sufficiently different from what is going on in other regions that you cannot justify this divergence. the u.s. is tightening. we had this massive fiscal stimulus package dropped on us in the form of tax cuts at a time when we probably did not even need it. the economy was starting to chug along. if you look at rail volume yesterday, ifn, things in the

u.s. are much stronger, atypically stronger than what we are seeing across the globe. when this comes together and e.m. starts to affect the u.s., currency might be a bigger driver of that and that is what we are watching currently is the dollar. alix: what is interesting is in the feedback loop. everything you just said means in some way, president trump can go out and talk very tough on china because the economy is doing so well. a chief marketer just for bloomberg said the strong market performance has given president trump a tall stack of chips that has emboldened him to press his bets as forcefully as he can, slapping tariffs on every import from china. his will his -- when will tariffs that crept out -- bet crap out? when earnings do. isita: what we are watching

whether corporate america says wait a minute, i was planning to build headquarters, do all of this growth but now with trade friction, maybe we will hold our growth programs and that affects corporate confidence, consumer confidence and that is where it gets ugly. before it hits earnings, it might show up in looking at corporate america. david: is it your sense investors are taking this into account? i will put up a chart with jpmorgan's index that isolates u.s. markets. turning to focus on this and take into account in making their investment decisions? savita: hugely. if you look at february 2 today, massive multiple compression. that is what i think is suggesting we are discounting this risk pretty adequately in the s&p 500 today. alix: did you need to calculate it in different kinds of

sectors? the -- the time to make -- into value for defensive? savita: i don't think defensive is the way to go. moving from economy to old economy within the u.s. this sounds weird because old economy stocks have not worked for a long time. i'm talking industrials and capex. if you look at what is going on in the u.s., you have a bunch of companies saying they're going to increase their spend. -- there capex spend. tech companies spending to build headquarters. this is a different environment from the last eight or nine years were the only thing companies spend money on was tech. now we are seeing buildings, infrastructure. we might even get an infrastructure plan once we get past the midterms.

this is a chance to move from high-growth tech to unit volume sales growth gdp sensitive stocks in the s&p 500. david: what about consumer discretionary, cyclicals? savita: that is an interesting sector because it is done pretty well. retailers have come back to life. i think that is a sector where you are seeing that unit volume sales growth, if the but of pricing power amongst the older retailers that have not had pricing power for a long time. it is an interesting dichotomy we are seeing within that sector. it is no longer just amazon doing all the work. it is these old model retailers that are coming back to life. david: really important. that is savita subramanian of bank of america merrill lynch. she is going to stay with us because she has a great report taking into account environmental, social and governance issues is not just a good thing to do but it will

help you do well in the markets. this is mark -- this is bloomberg. ♪

emma: this is bloomberg daybreak. the world's second-largest supplier of semiconductors is now looking beyond automotive sector. buy idtrenesas plans to for $6.7 billion. the price represents a $.16 premium to idt take a close yesterday. china is gearing up for the 2020 beijing winter olympics by going after one of the biggest makers of ski equipment. a $5.5 billion

approach for -- it has been 10 years since the collapse of lehman brothers and that still is not long enough to restore investor faith in banks. financial stocks are down 8% from 2007. they're the only major group in the s&p 500 yet to fully recover from the bear market. that is your bloomberg business flash. alix: thank you so much. another big change from the financial crisis is the rise of investing in efg. these are the assets tied to those kinds of strategies etf's and mutual funds. bank of america had a recent report out saying conservatively, they estimate the inflows in these types of strategies over the next couple of decades could be equivalent to the size of the s&p today, a huge call. still behind us is -- still with

, one ofvita subramanian the authors of the bank of america merrill lynch ticket efg -- merrill lynch's efg. savita: it is a way of looking at companies using attributes or factors we have not thought about as financial analyst. when you go to business school, you learn about book value, earnings, valuations and growth. you don't want about things about board diversity or employment policies around paternity leave, and these are the types of factors we're looking at in this efg report. david: we will look at why that is important but how do i know i am measuring efg? esg?g -- you get into esg. savita: it is very soft.

look at these myriad data items and say what matters and what doesn't. there are all sorts of things we measure in esg. it could be reliance on a part-time workforce. is that a bad thing? the employee does not feel as confident in their prospects but it is probably good for the company because they have more flexibility around hiring and earnings volatility. there are a lot of different aspects we measure and what we found is that some actually drive financial returns. speaking of the financial crisis , we are celebrating -- commemorating the anniversary today, if you look at financials from 2005 to 2007, if you had just watched one metric which was compensation policy for leadership, that would have told you that financials was

deteriorating and it also would have told you which companies were going to stick around and which were going to go away. it was interesting to say that there was a tell them what was going on in a couple years with the financial crisis. alix: looking back is one thing. how do you do that going forward? do you look at a sector you like and then differentiate? savita: that is exactly right. it is a very stock specific call. within the tech sector, there are some companies with very diverse boards and some companies without. that is how you differentiate. a diverse board, why does that matter? there are more checks and balances at the top of an organization and they don't go off a cliff together. some of the bad decisions we have seen that have taken companies under have been a lack of checks and balances at the top level. david: one of the points you make is that esg may be necessary but is not sufficient. it is good to have esg but by

itself it will not get you there. savita: i have a finance person and we are in the business of trying to generate alpha and make money for our clients. what we found is that with esg married to other fundamental factors like earnings growth or actually it is a great way to think about structuring a portfolio. what i find interesting about this theme is if you look at the next generation of investors which are millennials, millennials are very keen on esg . you have a chart. david: that shows that actually. savita: millennial or different trends. david: millennials are the ones that spike in the middle. savita: 90% of millennials either currently invest in impacted oriented -- impact oriented investments or want to. this is the future of

investments. think about the generation that is going to get the money and generate the wealth and start to invest. millennials are very dedicated to investing in good company's. -- good companies. david: in the last 20 years, u.s. corporations have gone from 30% valuation to 65%. things like brand value. hard to -- that must be somewhat alarming because do we know what these companies are worth? savita: it is interesting because we think about the u.s. stock market as the most transparent market in the world and yet it is not. it is kind of a -- it is kind of at record levels of opacity. these softer measures are more important. you can't really trust your

financial metrics anymore. you have to look beyond the finance. alix: what sector has the most upside when you factor in esg? savita: when you look at esg rankings and what those change the most, it is actually financials. financials went from being toxic in 2007 to being scrutinized and regulated and now it is a sector that has a fairly attractive esg rating. another thing we found is larger companies tend to have better esg ratings because they have the luxury of spending money and hiring people to focus on these aspects. that is another aspect you have to consider if you are a mature industry, you are likely to be more involved in human relationships and employee relationships and community outreach programs. those are other factors that are important.

financials are one. interesting theme and i think every sector of the s&p 500, every company right now is thinking about this. david: it is a really good report. savita subramanian of bank of america merrill lynch, thank you very much for being with us. coming up, offices, hospitals and factories shop on amazon, too. more on that next. this is bloomberg. ♪

david: time now for three company stories we are watching today. first, i will stop -- start off with a finnish company i did not know about. they make wilson tennis balls. i thought wilson makes them. they received a takeover

overture from a consortium from china. subsequent reporting says they might take a minority stake because it would be diluted. lower.fit margin is much alix: also just like bundling -- funneling money out of china into offshore opportunities when they are not regulated by the u.s.. david: with no national security risk that i am aware of. alix: i'm thinking a look at amazon. amazon is saying their business sales are going to reach $10 billion. i ordered things like diapers for my kids. this is about businesses like hospitals and factories and enterprise offices ordering what they need, not from staples but from amazon. david: it makes perfect sense once you hear it. as you say, where his amazon not going to take over? alix: researcher say by 2020,

over 12% of that whole market will be online. not that it will go to amazon, but it will be online. david: they will likely have a good share of it. brooks us now is havilland of bloomberg opinion for our third story, companies affected by the path of hurricane florence -- brooke of bloomberg opinion for our third story, companies affected by the path of hurricane florence. >> you are seeing a couple reactions. one is martin marietta and summit materials. those stocks are down significantly. yesterday. almost 8% you areon for that is seeing construction companies that do well after hurricanes, but you can't really do construction projects when it is raining. when you have these big weather disruptions, that causes work stoppages which backs up work

for some of these companies and delays a lot of their volumes. that is why you are seeing a lot of those stocks down so much. alix: also the question is five,r it is a four or a but we don't know how long it is going to be on land. it is going to stay there for a long time. david: one report i heard is that it might be slowing down as it hits land and could drop a lot of water in north carolina. >> and once it moves in land, does it disrupt supply chains, logistics? a lot of these material companies ship a lot on railroads. that is puts more pressure on their business. david: there is a bloomberg reporter out at chesapeake. 23% of all of the shipping out of two places in north carolina and south carolina on the east coast. >> they are also shutting down the ports. they're clearing out spaces in and trying virginia

to protect some of those goods in the path of the hurricane. alix: it is tough to say how quickly that will be fixed. thank you brooke sutherland of bloomberg opinion. coming up, too big to fail. it has been nearly 10 years since the collapse of lehman brothers. we will discuss with dan tarullo, former federal reserve governor. where will the next crisis be and how do you fight it? this is bloomberg. ♪

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emerging market stocks continuing their flight. shanghai at its lowest level -- 2016.7 it is a mixed dollar story, but turning a little stronger on the margin. get the cable rate, down by 0.2%. staying at will be this pace until 2020. he says he will stand by the economy. about 22 basisy points. you are seeing was selling then we saw before. crude off by 0.4%, caught in the middle of a stronger dollar, risk off tone, as hurricane florence barrels toward the east coast of the united states. david: we turn to emma chandra, who is here with first word news. peopleore than a million living in the path of hurricane florence have been ordered to leave their homes. a storm is taking aim at north

and south carolina, becoming the strongest hurricane to hit the region in almost 30 years. it is expected to make landfall sometime thursday or friday between charleston and norfolk, virginia. damages could reach $27 billion. president trump is open to another summit with kim jong-un, despite stalled nuclear talks. the white house says the president received a very warm letter from camp, -- from kim, seeking a follow-up meeting. the letter says there have been steps to remove the nuclear arsenal. mark carney will stay on the job until january, 2020. he had been pegged to step down next june, but philip hammond ended days of speculation by saying he would help steer the british economy in the wake of brexit. global news, powered by more than 2700 journalists and

analysts in more than 120 countries. this is bloomberg. this comingars ago weekend, lehman brothers collapsed, triggering the worst financial crisis in almost a century. we are focusing on life since the crisis, with key figures who were there through it all. we are looking at financial regulations, starting with tarp. >> today, i am announcing the treasury will purchase equity stakes in a wide variety of banks and thrifts. government owning a stake in any private u.s. company is objectionable to most americans, me included. yet the alternative of living businesses and consumers without access to financing is totally unacceptable. >> we would love to see the opportunity for dodd-frank to be modified to a lasting -- to allow banks to take responsible risk-taking into the markets. >> i don't think this bill is

working at all, and i would like to see it repealed. dodd-frank,cause of the competitive environment in banking -- small banks can i get started. trump: dodd-frank was something they said could not be touched. the complex regulation gave large banks unfair competitive advantage at the expense of neighborhood banks all over the country. the legislation i am signing today rolls back the crippling dodd-frank regulations that are crushing community banks and credit unions nationwide. david: we welcome bloomberg's senior finance reporter. and the federal reserve governor oversaw dodd-frank in the wake of the financial crisis. start with you.

we will get to some of the regulations and changes to the banking system, but what is left in the dna of the economy of the financial system because of this wound we suffered 10 years ago? ken: well, david, i was thinking this morning, the coincidence of 9/11 and the 10th anniversary of lehman just shows how much our perceptions have changed. 9/11 changed our perceptions of our vulnerabilities as a nation, our place in the world. writing the financial crisis changed our perceptions of the the degree toy, which it was dependent upon debt, and the degree to which the financial instability could arise, in a variety of unexpected quarters. i think that legacy is in part one of more caution, particularly among consumers. rather less so with corporate borrowing practices. i think secondly you have seen

better risk management in the regulated banks, and the banking system is more stable. but i do not think fundamentally the problems of the economy that were building in the precrisis period have been adequately address -- problems of productivity, income inequality growth, and racial inequality. in a sense, the legacy of the crisis has been on an occasion -- and amplification and continuation of the secular problems we need to confront, and regrettably are not right now. youd: those problems describe are outside the purview of the federal reserve regulators. they sound more like issues for political students to address. daniel: well, i think when regulation goes wrong, or when monetary policy goes wrong, you certainly exacerbate whatever problems may have existed beforehand. when you allow people to park their wealth -- to put their

wealth into a home, they lose the home, and are underwater for eight years, that is a mistake which creates more problems. monetary policy does have a role to play in the constant trade-off between price stability or inflation concerns on the one hand, and maximum employment on the other. but you are right. monetary policy does not solve all things. my point really is the financial crisis was not solely a failure of financial regulation, or solely a failure of risk management by the banks. something a sense, that came out of a broader set of structural issues in the u.s. economy. david: you have written a terrific he's for bloomberg, giving us an update on where we are today, and what is different than before. what is the difference? >> what has really improved is the risk management and the regulation in the banking

sector. the main, core banking system, which is what collapsed during the crisis in 2008. what has not changed, as dan said --there is too much debt. it may have shifted from consumers who pay down mortgages , or other ways, but companies have been borrowing, and the government has borrowed and not only in the u.s.. goned the world, death has up really fast. china has been borrowing like crazy. there is a lot of debt. it has shifted. be better regulated, but some of the risk has shifted to shadow banks. alix: which we will look at. let's look at the big banks. what i found interesting in your article is that how banks are borrowing money is fundamentally different. and taking some risk off the system. if you look at how much they are getting out of short-term repo rates, short-term debt, and

deposits, it is so much more from deposits, which is more sticky, not as high risk. that is a fundamental shift for the market. yalman: that is partly -- regulation help with that. the bailouts brought confidence to the banking system. people thought their banks would not go bad. replacing so much of the short-term borrowing which was a run on the banks -- people were running when they realize lehman could be insolvent. they ran. those have been replaced with something safer. specifically, go back to shadow banking. ine seen a dramatic increase some of the asset management. we will show you what is happening with blackrock, kkr, blackstone, and others.

is that creating at least the possibility of a different sort of crisis in the future? yalman: -- daniel: well, whenever you see some the in the financial sector that is growing quickly, and in a way that exceeds six store call ranges, you want to stop and take a hard look at it. part of the shift into asset managers was clearly a search for yield in a period in which deposits were paying very low rates of interest. the corporate bond market, particularly the shorter term bonds, have really shifted toward asset managers. you probably do not have the risk of insolvency at the institutions themselves, as they do not have much on their own balance sheets, it is at least worth looking to see if you have the risk of runs. when markets shift, will people pull out, and institutions pull out of the asset managers' funds

quickly, in a way that forces the funds to engage in firesale liquidation that played a part during the 2007-2009 crisis? to bek it is risky certain without more analysis, that that is a concern. somewhat ironically, it is a theern that was raised by obama and repeated by the trump secretary's report. but i am not aware of any follow-up. alix: maybe blackrock is contained, but not really. to thesee exposure kinds of nonbank institutions. there could be some kind of feedback loop. a chart shows how much that kind of exposure for banks has grown. yalman: there are so many different ways banks are connected to shadow banks. chart that shows one of the links has gotten much lower -- the borrowing they used to do from money market funds

has dropped massively, because they have so much more deposits. on the other hand, they are lending to nonbank financial institutions. it has quadrupled in the last eight years. so they are lending to asset managers, non-financial, nonbank financial institutions. and they are balancing not only the lending or borrowing, but if a shadow bank blows up, even if ,ou have left nothing as a bank that asset manager is on a firesale. money in thesing firesale as well. all of a sudden, a contagion can go on. david: dan, on monetary policy, chairman powell said, we are guided by stars, but we are not

sure where those are. a paper which indicated the same sort of thing. how confident are we that we have the tools to make good monetary policy right now at the fed? analytichere are the tolls and the tools you use to affect monetary policy. i think the issue around the stars, which is to say the natural rate of unemployment, -- neutral rate of interest they do shift a bit. real-time, it is hard to know where they are. in fact, i think chairman powell 's speech made reference to some fed incidents in which the thought the neutral rate was one place, and it turned out to be quite a different place. in the absence of the reliability of something like a phillips curve, a precise trade-off between unemployment and inflation, one has to go more in a contingent or provisional way to think about

what is going on right now in the economy, and the real signals i am getting. i thought that was one of the key points in chairman powell's speech, and his reference to chairman greenspan. what i found was missing was his cannot just, if you draw the chart and know where you are, what is going on in the economy right now? greenspan's intuition that one of the big jumps in productivity had change the field. former fed governor, loud -- now at harvard law school. 17 years ago today, terrorism can't america. they are marking the occasion at the world trade center in new york. they are bringing up the american flag. they have bagpipers. we are going to hear the national anthem, and then a moment of silence.

[drumming] oh say can you see by the dawn's early light what so proudly we hailed last gleamingt's stripes and bright stars

fighth the perilous ramparts we watched were so gallantly streaming glarehe rockets' red airbombs bursting in nightroof through the thereur flag was still say does that star-spangled waver yet

freethe land of the ♪ the home of the brave [applause] [ringing bell] ♪

>> quick march. music]e

david: we have been observing a moment of silence at 8:46 eastern time. planers ago, the first flew into the north tower at the world trade center. this is a ground zero. it will proceed to reading the names of the men and women who died 17 years ago today. i want to turn to emma chandra for a look at some of the biggest business stories of the day. american automakers are losing ground in the shrinking chinese market. the market share of u.s. brands

below 12% in the first eight months of the year. the drop is caused by forward and other automakers refreshing -- not refreshing their lineups fast enough. car sales in china have fallen three months in a row. according to the national federation of independent businesses, companies are planning the most capital spending since 2000 seven and hiring intentions have never been higher. hurricane florence is days away from making landfall on the east coast. there are estimates it could cause $27 billion in damage. florence is a category 4 hurricane. be ahester say there could storm surge as much as 12 feet above ground in some areas. that is your bloomberg business flash. alix: i want to stay on hurricane florence. basu,g us now is shunondo a power analyst and

meteorologist. if you could pull up the trajectory of hurricane florence, i highlighted things like plants, terminals, just to give you a sense of how much exposure there is. look at the damage be? shunondo: it is funny, we went nom over -- from almost hurricane activity to three named storms. , therms of the power southeast is still not a deregulated area, in terms of the power merck. -- our markets. it has a quarter of the u.s. nuclear foot. of 73 mph are winds or above, nuclear plants must shut down. robinson is just further inland. those will likely shut down. with demandmath, being completely destroyed from evacuations and down power and as the debtthat,

needs to be filled, coal and natural gas will likely fill the void. alix: with how active the ports are, the only other lng terminal -- it is busy in general. up?quickly does it rev shunondo: vessels in that area will steer clear from the storm. there will not be import or export vessels going to those ports. can anow quickly environment be up and running with that? how quickly can i nuclear plant be up and running? shunondo: with hurricane harvey, we did not see any ship activity going into sabine pass for at least a week and a half or so. ared: not that they typical, but when you have a massive hurricane, how much of it is permanent and how much is

a timing thing. -- timing thing question mark how much does it change infrastructure in the longer term? havendo: flooding can tremendous long-term effects, even reshaping the coastline. that is a major concern here. what is the offset shoot to gasoline? the pipeline that takes gasoline to the northeast -- if power is disrupted, what does it do to supply on the northeast coast? shunondo: that can disrupt the way supply runs for gasoline markets. that is something they are keeping an eye on. basu, thank you very much. the hurricane set to hit thursday evening, friday morning. coming up, argentina's key the firstate -- monetary policy decision following the surprise rate hike on august 30. pesooute -- rout in the will continue with what i am looking at next. check out bloomberg go, and save

charts for future reference. ♪

alix: i am much in argentina. the central bank will have its monetary policy at 5:00 p.m. local time. had 60%. already that is not expected to change, but did not necessarily help anything to do with the argentine peso. that is dollar-peso. you can see record low after record low. the selloff has been stemmed, but what is next? david: what does it take? what else can they do? the imf helping with liquidity. alix: they want to speed the process up. we heard investors last week, whether it was -- they all say they are doing everything right. are doingargue they everything wrong if the currency

still cannot recover. what is it going to take? david: rick is not giving up. alix: he liked short-term debt as well. but nonetheless, the commentary on the financial stability -- david: i wonder if they can do things they need to without causing civil distressed. up, christopher joining bloomberg markets. a bit of a risk off tone. treasuries going nowhere, waiting for the three-year option today. -- auction today. ♪

jonathan: from new york city, i am jonathan ferro. this is the countdown to the open.

coming up, trade tensions simmering, leaving chinese stocks on the verge of breaking through 2015 lows. argentina kicks off a week of central-bank decisions. and more evidence of strength in america. the stage is set, 30 minutes away from the opening bell. strength.ch of dollar here-dollar getting down to 1.1580, off by 0.1%. me around the table here in new york city is michael purves, we men company chief of -- is michael purves, chris for -- christopher ,ilman