day, hike priced into the market. investors wait for the 2021 projections, the word accommodative day and its debate over the neutral rate. president trump and president rouhani throw accusations against each other. president trump asked allies to isolate iran. auto angst, the latest in a string of profit warnings from top automakers. we will speak to jim hackett of ford. happy wednesday. welcome to "bloomberg daybreak." david is down the street at the plaza hotel, killer lineup out of the bloomberg global forum. >> it is a killer lineup. good to see you. we are here for the second annual bloomberg business global forum. , titansremarkable time of industry, investment, and heads of state. jim hackett is the ceo of ford in the middle of that problem you referred to come and we will

speak to the ceo of tiaa. alix: trade front and center and how you mitigate that risk. i was struck by the headline that china will cut import tariffs from november four 1500 goods like textiles and paper products. there is no question that trade will permeate every discussion here, certainly with jim hackett. has reallydustry been affected in europe and the united states by trade. a lot of other decisions are being affected. alix: it is going to be quiet heading into that fed meeting. s&p futures up six points. old-dollar -- euro-dollar lower.

the dollar stronger on the margin in the g10 space, the 2-10 spread, flatter as she goes. this is the first decline in yields and seven days. brent crude down .3%, in the crosshairs between the u.s. and iran. ,avid: at 10:00 eastern time new home sales numbers for august. also, president trump will be presiding at the un security council. coming out of the global business form, the yuan secretary-general come the president of the world bank, and michael bloomberg will host a summit. aix: we are joined for discussion. what are you going to do? >> today is a done deal.

we will get these new dot projections for 2021. the projections for the below where the fed sees the fed funds rate in 2020. , butmably 2021 by be lower they will have to say inflation or growth will be down. that will be an interesting dichotomy. to the lyleeads us brainard speech a short time back. nothing new, but factoring short-term into policy is. withu are seeing unease bond traders from the options this week. they weren't that good. >> they were also not on the right day. it was on monday. >> even so, the bid to cover ratios were the worst this year are the worst in 2008.

it shows a lack of demand, even as yields rise to the highest level since 2008 and reflects a deep uncertainty about what is the endpoint, the bigger risk, heating?ng or under these are fundamental, existential questions we have not answered. >> talking about the bond auctions in the last two days, that is where the fed has more influence. highs, rates are near but it is where to's and fives are an market expectations for fed where it will be priced. the fact you didn't have a lot of demand says we don't know if they will be more hawkish. the market is pricing in four hikes for next year. what about five or six? those to your notes have to be reprised. alix: how much flatter can that curve get? coveraged for special

on the fed decides, starting at 2:00 p.m. eastern time. david: as you said, it is all the fed. yesterday was about iran with president trump and president rouhani exchanging strong language. president trump said iran was sowing chaos, death, and destruction. president rouhani said what the u.s. was doing was economic terrorism. where is this going with iran? the rhetoric just get stronger and stronger. >> perhaps not so much with some of the other developed nation leaders. you heard as they were trying to work out behind the scenes and trying to figure out how to keep the iranian deal in place to keep the peace. it seems like there is this escalating rhetoric between the u.s. and iran. president has made it his agenda to lower oil prices ahead of the midterm elections. he said these are horrible

prices and blames opec and a lot of people, but sanctions on iran will raise oil prices without some kind of other action. we are hearing this morning about president trump considering unleashing some of the reserve, but this is an existential problem. this creates this conundrum where you don't necessarily have an easy resolution. alix: oil price leads to 10-year breakevens. >> exactly. oil prices matter to headline inflation, not necessarily core inflation. oil prices are almost attacks on the consumer. you can see slower growth because oil prices are high. the president is saying it is opec's fault, part of it is his fault. when you create an environment where global trade is at risk, you will have prices that will go up.

we have seen inflation go up and a lot of the goods coming out of asia because of the tariffs he has put on. a largede tensions with oil producer matters and will affect prices. up,d: four third set automobiles. a big shakeup when the longtime head of daimler said he would step down and is being replaced by a non-german for the first time in the history of the company. price this year has gone down 24%. this due to trade issues and emission problems. >> daimler is in a strange spot. they have a key brand and key footprint. they have made huge investments in electric vehicles. they have not been reported in the same way tesla has. they have a huge truck-making

business. they will be splitting up some of these units. the question is whether they will ipo and unleash the value of some of these units. they are hoping for some big move. alix: i will pick it up from here. there is a lot of turmoil going on. low interest rates have given the automobile companies a break. what will happen? >> unit sales might be challenged as credit conditions are tighter. they are still low enough that will be the issue. one of the questions a lot of people will have is are we at peak auto sales, business sales? that makeof companies

fleet sales, trucks, and the like, can they keep that up or will they try to extract value now. those are some industry-specific things that will have to be considered by a a lot of these companies, general motors, daimlerchrysler, or bmw. alix: thanks very much. it will be an exciting day. david: if you haven't had enough, i can never have enough. coming up, jim hackett, the ford president. we will talk about a lot of things we discussed. alix: looking forward to that. you can find the charts we are using and more at gtv on your terminal. browse those features and savior charts by running gtv . coming up, what markets are watching in today's fed rate decision. with ourreak it down guests. this is bloomberg. ♪

>> this is "bloomberg daybreak: americas." shares of nike lower in premarket trading. the company reported gross margins that missed estimates. nike posted other numbers that beat expectations. the quarter closed a few days before the headline-capturing ads featuring colin kaepernick. surveymonkey raised $180 million in an ipo, sold above the market price range. surveymonkey is still losing money. it has begun partnering with companies.

it begins trading today on the nasdaq. become an unwelcome annual tradition for delta airlines. one hour after a system failure, it resumed systems and restored flights. alix: the federal reserve set to raise interest rates today. markets don't think they will stop there. surveyed economists say the central bank will pick up the pace, raising rates and 25% every quarter through june 2019. septemberine is the difference. joining us now are our guests. emily, let's start with you. the biggest thing today you are looking from the fed? >> the dot plot. it is certain they will raise

rates by 25 basis points. we are looking for what will happen going forward. we will be looking for clues we might be seeing a more hawkish morel today and for increases next year, having meaningful consequences. alix: if you come inside the bloomberg, 2018 hike expectations. look at that regrading and that yellow line. we are basically at two rate hikes. what is the market re-rating fourtial if we moved to next year? >> the markets have priced in this next rate hike and are looking for more coming up. you could see a meaningful market reaction in fixed income and on the equity side as investors start to price in the fact we are getting towards the latter part of this economic cycle. we will also be looking closely at the dollar. surprisingly,see,

the dollar breaking below its 50 day moving average, which is a conundrum. we will be watching closely to see which way the dollar goes. that, is this the time you want to get defensive and sectors and other asset classes? >> we think there is another leg up in terms of u.s. economic acceleration. we are still risk on in terms of the sectors we favor. backup ina meaningful rates in oil prices continue to accelerate, you could see a case for a rotation from growth into value. we are waiting for that. for us, it is hard to that against growth. i hate to be on both sides of the fence. there is a lot of momentum behind technology names. wellyou look at what does in the 12 months leading up to

an economic, market peak, really momentum and quality are where you want to be, and technology is dominant. alix: key to that rotation is the neutral rate and how far they go above it. here is what lyle brainard said about the neutral rate. "with government stimulus providing tailwinds to demand, it appears reasonable for rates to rise higher than the longer rates." using it to set monetary policy is new. what do you think? >> what is key to the conversation is inflation. there is a narrative that inflation is starting to take off. are we look at the data, we seeing that 12-month rate of inflation steadily move higher. you look at core pce. we have made it to that target.

if you look at the three-month rate of inflation, it is moving sideways or peeking out. we could see an environment where inflation moderates, and the fed will be very dependent , inflation, so i think inflation is the key in terms of that neutral rate going forward. alix: how does that deal with the asymmetric risks? >> the risks are the fed makes a mistake, right? if they move faster without that inflation ticking higher, then that comeing to see further than many are expecting. alix: i want to get back to the dollar and yields. the 10 year yield is the white line. the blue line is the dollar index. they have broken apart in the last few weeks. is that idc story, -- a dc story, or perhaps a stronger

euro, yen, and convergence story? >> i think it will be a while until we are converging. the ecb is talking up inflation. has it far down the road. so you still have central bank diversions, which makes the dollar story interesting. you are seeing global growth bounce around and tick higher overseas. the u.s. is continuing to accelerate as overseas economies are shifting gears. i don't see a meaningful change to that story. that is why it is interesting that dollar has not reacted. alix: what is the trade for that? barclays said u.s. equity inflows are stretched. no flows in european equities. is there an opportunity for catch up?

that sounds like no. >> we are not ready for that yet. we continue to like the u.s., earnings remain strong. forxpect positive earnings 2019. we look at earnings estimates overseas. it's important to look at the bottom up. earnings estimates are moving sideways. they are ok. em equities, and the talk is about whether em is cheap enough at these levels, we are seeing earnings estimates top out. we will need to see a bottoming process in order to be more positive on risk assets. with what is interesting emerging markets is you have negative news, brazil, argentina, and yet them market reacted in kind. this shows the risk appetite

looking at 18 different indicators. risk appetite is moving higher and it seems like we are is orbiting risks. -- are absorbing risks. >> investors are moving into riskier areas because the worst may be behind us. we had a 20% correction in em equities. 22%,ally they are 18% to sell at this point it does not make much sense to sell. that is why we are neutral, waiting for earnings estimates to turn around, but the worst of the pain is probably behind us. alix: thank you so much. emily rowland will be sticking with us. tune in to bloomberg tv later today. from our guests. a full lineup for you at 2:00 p.m. eastern time. a war of words yesterday.

the u.n., president trump slamming iran, saying leaders some chaos, death, and destruction. rebutted,rouhani calling u.s. sanctions economic terrorism. we are joined by phone leading are bloomberg national securities coverage. set the stage for us. >> right. president trump will chair an unusual session of the united nations security council today. he will probably be joined by the french president, the british prime minister, and the foreign ministers of china and russia. they say this hearing will focus on nonproliferation, which is something the world can rally around, but the president himself has said he wants to focus on iran. i think we will have more of that war of words.

president rouhani afternoon has a press conference scheduled. he will be back reacting to this. the backdrop to all of this is sanctions on iranian oil exports that come online in five-week. -- in five weeks. david: if you listen carefully to the president speech come it is more than objections. it did smack of regime change, which was picked on by president rouhani and others. is the president calling for a new regime in iran? iswhen ever the president pressed on that issue, they say we are not interested in regime change. we want iran to behave like a normal country and stop meddling in yemen and syria. but when you look at the actual policies and the pressure iran ,s under because of sanctions it is hard to see it as anything other than an attempt to squeeze

the government. what people who look at iran next?ay is, what comes if you lose this government, don't you possibly end up with a government that is even less likely to work with the u.s. and is more right wing and reactive? endgamerd to know the and how this plays out, but the threat of oil sanctions coming on in five weeks is having a significant impact on iran's economy already. david: as far as the meetings at the security council, there has been reporting that if president trump does put iran on the agenda, iran has a right to respond. is that correct? >> right. the first notice we got was they said it would be on iran, but then there was backtracking saying it would be

nonproliferation. if it was iran and president directlyould respond to president trump, that would be a dramatic showdown. that is why they walked it back and said we will talk about nonproliferation, something everyone at the table can agree to. if the president kept it on iran , he would be sitting there with france and the u.k., who also dump back his strategy on withdrawing from the nuclear deal, so the u.s. would have looked more isolated. when you focus on nonproliferation instead, it is something generally people will agree with the u.s. on. alix: it's not just agreeing with the u.s., european countries are presumably trying to avoid not doing business with iran. you have an eu proposal for a special purpose vehicle with russia and china where they can work in trade independently with iran. how does this work into the conversation? >> that has been heavily

criticized by the u.s. the europeans are trying to create a euro-denominated investment fund that would allow companies to continue to invest in iran without having to integrate at all with the u.s. financial system? it is probably a long shot and not clear the europeans have work out the mechanics. not clear that a lot of companies faced with the choice of investing in iran but risking access to u.s. financial markets in the u.s. consumer market would go along with that, but john bolton yesterday said the european union is much better at its rhetoric than followthrough. the u.s. is clearly concerned this idea might get traction. we haven't seen enough details to know if it can work. alix: we appreciate the reporting. it will be an interesting security council meeting, no doubt. lots of things from the

geopolitical to the fed, s&p futures up six points, european ,tocks in the green, however automobile stocks hit hard as daimler management changes. china will potentially lower tariffs on 1500 goods like textiles november 1. no details on countries and cons we are talking about. -- kinds we are talking about. weaker, the dollar on ponce, and the 2-10 spread at 40 basis points, buying everywhere in the bond market, in particular italy with yields down eight basis points as markets wait to digest with the fed will do. now we get to david westin life at the number global business form. david: we want to welcome our audience from bloomberg television and radio. we are joined by michael bloomberg, former mayor of new york and founder of bloomberg.

we call him our boss. he is the united nations secretary-general special envoy for climate action. that is a lot, mike. are at the second annual global business form. what has changed? is global business better or worse? the world prefer laughed with us rather than at us. things have the tariff war is starting. hard to see how it doesn't continue or grow worse. it wasn't there a year ago. things,the fundamental worrying about technology taking away jobs, not understanding the environmental challenges we have , those kinds of things were there a year ago, two to three years ago.

they will influence this midterm election and the 2020 election. david: we have climate, technology, but what has changed is trade. we saw that at the united nations, trade restrictions, china, iran and the whatever. how much is the u.s. hurting itself? >> i think the u.s. will get hurt. that anythingg you do to china has a minimal impact on the country, and only on a long-term basis. a lot of people in china don't buy american products. there are 500 million people in china who have not come out of poverty and are not affected by this. the government social programs do better in down times because they don't get cut, where as anything you have in the private sector may go down in value and less.ension may be

they don't have that. i think it is fundamentally different. it is very worrisome. whether you are republican or democrat, this is a failure of our government, and maybe we should look in the mirror, a failure of ourselves not to demand more from our elected officials. david: does the trump administration have a point when it comes to china? >> everybody agrees china has done things that aren't fair. administrations going back have not done anything about it. it's not donald trump is wrong fighting it, it is the ways he has fighting it, because it doesn't work. he puts people on the other side where they can cave. they have their own worries. second, he is going after the wrong things. ,e need access to their markets to open companies and compete.

we don't need to stop them from selling of products. quite the contrary. if they want to sell us products atprice than we can produce ourselves, our consumers benefit from that. but we have to make sure our workers don't get hurt by that. they don't get hurt if you create other jobs and other markets for us to sell our goods into. no matter where you work, you will get hurt. go on,how long can this this dispute with china, before permanent changes are made? whether it is companies changing their supply line, or companies and countries reaching out to other partners? flexible, they are up otheropening plants, readjusting their pricing, how they manufacture. the supply chain can change, literally in the middle of the night.

ship to gol a somewhere else. when much harder to change people, antagonize people, make enemies. where you say one day they are bad and the next day they are good. david: given people, antagonize people, make enemies. the challenges we face, is it time for another business leader? we have one in the white house now. >> i don't think we have a business leader now. donald trump is a real estate promoter. i don't know if he is good or bad, he owns a lot of real estate, lots of golf the challee face, is it time for another courses, but he is not a businessman in the sense that he has run a big organization, how you work together, attract good people, adjudicate disagreements, how you deal with other companies come in this case, other governments. it shows. clinton and bush had some

management experience. executive jobs, it's not about policy. we keep asking about policy but policy will be set by advisers they bring in. trump'sis to manage, in k's, 4 million people who work for the federal government. that is not his expertise. michael bloomberg, coincidentally, from the bloomberg global business forum. in the markets, we are still waiting for the fed. what markets are doing in lieu of that. dow jones futures up by 45. european stocks flat, but european autos consistently getting hit as dialer changes its ceo, speeding up that timeline. its loweredrom forecast from yesterday.

euro-dollar, interesting to watch. you have italy saying they want more spending for the budget in 2019, however, you are seeing buying coming into the market, the euro holding pretty steady despite those headlines, what we're seeing in germany, a shift in angela merkel's party. a flatter yield curve. gruden not having that geopolitical risk premium yet until that unt security council and any word about iran from president trump. let's get first word news with emma chandra. china is taking steps to lower cause for consumers and companies as the trade war with the u.s. escalates. in beijing is cutting the price of a number of bids. in july, china lowered tariffs on a wide range of products.

president trump is back at the united nations where he will chair a meeting on nonproliferation. the president's address drew laughter when he said his administration had accomplished almost any in the history of the u.s. british prime minister theresa may has a plan to make the u.k. a post-brexit powerhouse. hoday she will pledge to slas corporate rates. she wants to make the u.k. one of the most business friendly economies in the world. she will make those remarks this morning at the bloomberg global business forum. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. rosenstein,ugh, mueller investigations.

taking away focus from other domestic items like infrastructure, but that has not deterred private investment in the space. last investment surged year. kkr recently closed its fund focusing on telecom midstream sectors. joining me is the man in charge, roger agarwal. >> thank you for having me. alix: the opportunities in the u.s. and western europe, what is it? infrastructure has been massively underinvested for decades, so we are investing in midstream telecom. we are also investing in renewables, water, social, transportation, across the spectrum. alix: when you talk about the public-private partnership, that is polls, roads, bridges. that is not what you are interested in. >> about 5% of what we have

invested. invested $4 billion of equity capital last year, a lot of that going into midstream telecom and renewables. alix: how much of this fund have you been able to allocate? >> 10%. if everything goes right, 20% shortly. alix: would this change if the government tries to help, is this irrelevant to how you invest in your strategies? >> it is very relevant and we are grateful that the government is promoting infrastructure. s, we can unlock more ppp' there would be significant growth in the opportunity set. alix: how do you understand the macro, geopolitical risk, how does that feed into the project you want to invest in? >> we have the advantage of products in assets -- that have already been delivered, trade risk, tariff

risk does not really play into what we are doing. alix: let's get to the midstream. there is a lot of private equity coming into the pipeline business. what types of deals are interesting to you? be all.e a lot of midstream assets are owned by mlp's. there are two things they need help with. typically, since they are retail investors, they can only raise 300 or $400 million of capital at a time. when they want to make a big acquisition or investment, they often the private capital to do that. the second thing we do outside of mlps, we are often investing with oil and gas companies that typically a drill for oil and gas but don't want to spend the capital to build the pipeline to take it to market. alix: you are not alone in that. the mlp world separating from oil and gas. there is so much money in this

space, what does that mean for you in valuations? >> competition actually has not been the big issue with evaluation. consistently over the past decade, half of what we do we are not competing with anybody. we are using our network relationships and coming up with creative ideas to find opportunities. valuations are high. what has driven that is historically low interest rates. interest rates would make you happy because valuations would come down, more to buy? >> it would make my job easier. alix: when i think of infrastructure, china. what is the opportunity set in china, how are you positioning for the? mostly in north america and europe, but china and asia more broadly, has 60% of the population and two thirds of economic growth. if you want to be an investor, you need to be in asia.

we have the strongest private investment platform in private equity in asia. we don't have people on the ground today focused on infrastructure, but that is a market that we will be exploring. the hardest thing about making an investment in asia, investment in china when it comes to infrastructure? >> it is not one market. china is different from india, different from southeast asia, different from japan and korea. it takes localized knowledge. you cannot take a few infrastructure people and say do it. you need deep, embedded knowledge in the markets. we have an advantage because of have an existing business there. alix: good to get your perspective, looking forward to the allocation. back to the bloomberg global business forum. david westin is standing by with jim hackett, ford president and ceo.

you know how much i've been looking to this. whenever i get to speak to the ceo of ford, i'm a happy man. >> great to be here. one of the things that is being discussed front and center is innovation and technology, and transformation, and what it's doing for growth. auto industry is going through transformation, electric, autonomous vehicles. ford's perspective? with have new poll should ford electric vehicles, we have the robotic brains, and a third is the cloud technology that can orchestrate traffic. what is cool about this, the three of these things actually were not planned to come time, butt the same with because they are, we now have solutions for cities. david: you have a specific project outside of pittsburgh where you are investing a fair

amount of money in, seeking investment for elsewhere. how can that help you catch up with waymo and others? >> the great story about argo, we invested in them about 360 days ago, a brand-new company, and now they have over 400 employees, a majority of them phd's. i believe this is the most talented group working on this. they are alumni's of prominent universities like carnegie mellon. is, we havene issue to have the vehicle be able to perceive what is going on. in other words, discernment whether you are looking at a person, a car, or telephone pole. that seems straightforward, and progressmade a lot of in the perceptive area. i believe this technology will be as revolutionary as things

like a telephone were. it is more of a marathon than a sprint. i think we are number two in the race right now. david: will you have the wherewithal, resources to get their? time, the auto industry is under pressure, your stock price is down. it will take a lot of money. will you have the resources you need, do you need outside partners for capital? proud of our balance sheet. we have more liquidity than we did in the height before we went into the last downturn. we learned a lot from that. attractive,y is so there are investors that want to come in and we are open to that. but we don't have to do that prematurely or sell cheap, so to speak. we have the resources to get us through the phases we are in now. the biggest challenge be on getting the technology right is the development of markets.

anytime you look at new technology, all the hype is about how magical it is. the will be that, but all business skill is making a business model that can work with that. david: at the same time you talk about fitness, getting the company fit. last time we talked, you have not made real decisions yet. do you have all the assets you need and no more? fitness is not just about cost improvement, which it is, but also efficiency and better design. i have been telling a story about how fast it takes some a to get their vehicle, the same speed as 15 years ago. we decided it has to be faster. we have identified $25 billion in savings in our five-year plan. the fitness thing is going well. what i like about it is the way that the people at four have owned it. marathon ofave the

the mobility move. at the same time, we don't know if it is a sprint or marathon, whether it is a short-term phenomenon, or years in the making. we are seeing this throughout the industry. i firstn you and talked, we spoke at the auto show. i never imagined trade would be at the height of the discussion it is today. trade is a function of equilibrium, business people can , yes,ecisions because sadly a hurricane or a fire can hit you. you are used to dealing with -- i havetrade policy two beliefs about it. first, it has to be modernized. so many things have changed. but it has to be resolved fairly quickly. what we are urging our administration to do, and when we're in china and europe, we say we need to come to agreement quickly. from our perspective emma the

s took about a billion dollars in profit from us. the irony is we source most of that in the u.s. today anyway. we are in a good place right but if it goes on longer there will be more damage. david: are you making changes in the way that you produce vehicles? is not change it our thinking about that. we are more of an exporter in that regard. incoln is a hot product china. we make that in louisville, kentucky. the 25% tariff has made the price of our lincoln mkc not as attractive. we have had to move people in that factory to other operations because of the trade problem. david: one final word, 100 anniversary of the factory tomorrow. at one time, 100,000 people

worked in that factory. waslook at henry ford, he successful. the bet everything to build a that. it was a huge success, and its principles still work today. david: congratulations on the 100th anniversary. back to you, alix. alix: coming up, it is fed decision day. have a bloomberg terminal, don't worry about missing anything. , clickk out tv on our charts and graphics, interact with us. this is bloomberg. ♪

emma: this is bloomberg daybreak. blackstone and carlyle group are among those interested in buying nielsen.

bloomberg has learned the private equity firms may submit bids for the company. nielsen has come under pressure from activist investors. the firm acquired a stake in the company and is encouraging a sale. hathawayago, berkshire agreed to buy a 25% stake in chinese carmaker byd. the investment has soared more than 500% since then and is worth roughly $1.6 million right now. it is the end of the era at mercedes-benz parent dialer. longtime ceo dieter zetsche is stepping down two years early after being in office since 2006. he'll be replaced next year for the first ever non-german to lead dialer. he. c numeral development for the company. dieter zetsche has come under

fire from regulators over diesel emissions. thank you. all eyes are on fed chair jerome powell as they are expected to raise rates today but the trade conversation still percolating. this is what michael bloomberg said earlier. have that yet. anyways, we are joined by michael mckee. by luke,.o joined we have that sounded now. this is what michael bloomberg had to say. >> it is not the trump is wrong in that he is fighting and that he is fighting in but the way he is fighting it. it doesn't work. he puts people on the other side in a situation where they cannot cave. they have their domestic families to worry about. the second thing is, he is going after the wrong things. question to you is how does that conversation come up in the bed today? mike: i guess i'm the

second-best mike on the show today. [laughter] the hard thing to know is exactly what the impact will be. there are a lot of work around that companies can do. in the short-term it is hard to model what the impact of trade will be. all the fed can say is we are looking at the impacts but it is hard to forecast so we cannot react to it. we don't want to raise rates to quickly because maybe it has an impact on growth but we don't want to be too slow because inflation looks like it could be starting to rise. get more inflation from these tariffs. alix: that brings up the question that will be in the market of short-term neutral versus longtime neutral. lyle brainard talking about that issue, saying the government stimulus in the pipeline, it oppears reasonable t

expect the shorter term neutral rate to run higher. using short-term neutral to define policy. ise: the neutral rate something that is felt but not particularly observable. -- johne some models williams from the new york fed put together a model. it does suggest the neutral rate moves higher as inflation moves up, somewhat mechanically. so the fed does not exactly know where it has to stop to get to neutral. of that raises the question do they change their estimate for the long run rate, neutral rate, when they put on their new projections? plotyou look at our famous of where the dots are, if you look at the long run rate, most of the people who are voting on the fed have their rate below -- 3% or below. the closer we get to that, the more people could be satisfied

and thing we should be slowing down. that could be a key area for wall street to look at today. do they move that estimate of enough for are we getting much closer to stopping? alix: that is the macro setup. what about positioning, where are we headed into the market? is between thet bath and equity market. we have had more people in financials, that has been catching up to rates. april piling into financials via etf's. expecting higher rates. maybe expecting a higher neutral, higher oil prices, higher activity. on the other hand, you see this big short in the bond market. at the same time, people have t.en using etf to pile into tl there is a tug-of-war between the etf space in terms of financials and bonds.

generally, people have been pricing in a fed more so than they have ever would been willing to do. last year was priced into this year. it never got higher than two hikes. we are about that way looking at calendar year 2019. euro-dollar,ime, we are seeing 2020 hikes coming back into territory. it is just part of the idea that just as the 2020 recession was talking to be invoked, it is now being shaded by the market. alix: imagine the market pricing the fed. a novelty. stay with bloomberg for special coverage of "the fed decides" at 2:00. that, much more coming up from the bloomberg global business initiative. david, what are you excited about in the next hour? david: a lot. we will be speaking to the secretary-general of the oecd.

to rogerlso speak ferguson, ceo of tiaa. big news is theresa may, prime minister of the u.k., will be speaking in about one hour from now. alix: the telegraph had some information about what she could say, like cutting corporate taxes to 17%, 19% to woe businesses, also saying we are not going to have snap elections. i'm looking for some pretty firm words from theresa may. david: apparently the remark about cutting taxes, remember, ireland got in trouble with the eu about cutting too much. maybe she will say it is good that we are not in the eu anymore because we can compete. it is an interesting move. alix: what are they going to do, get mad at her, push the u.k. out of the eurozone?

that already happened. they don't have a lot of records at the end of the day. david: it will be curious. no coincidence she is coming over right now because her opposition, the labour party, is up their conference right now. alix: good stuff. also coming up, we are speaking digenan, head of u.s. intrinsic value equity at ubs. in the markets, study as she goes. not a lot of movement. buy the rumor or sell the news? this is bloomberg. ♪

fed decision day. a fed hike priced into the

market. investors await the 2019 economic projections and the debate over the neutral rate. economic terrorism. president trump and resident arbs at eachw b other. may's defined act. no early elections, will cut corporate taxes, a few of the things she could outline in her speech at the bloomberg global business forum. welcome to "bloomberg daybreak: americas." i'm alix steel. my calling ditched me, he is down the street at the plaza , talking to big executives and moneymakers. you spoke to jim hackett. saidnd it interesting, he he never could see a trade were coming. david: he said they were prepared for hurricanes, fires that did not see the trade problems coming. at the same time, he says it is

too soon for them to make fundamental changes in the way they make business. alix: i was talking to cfos yesterday off the record and asked, how can you switch the , three months, is that possible? they said not a chance. in the meantime, coming up, we are talking with angelle gurria, secretary general of the oecd. theresa may will be giving it the keynote address in about 45 minutes from now. alix: in the markets, buy the rumor or sell the news? s&p futures up by four. the dollar picking up some steam right now. .uro-dollar up by .2%

you wonder if that has to do with italy. nonetheless, buying bonds is the story of the day, apparently now buy the dollar as well. crude rolling over a little bit. time now for the morning brief. at 10:00, we get new home sales numbers for the month of august. also at 10:00, president trump will be presiding over a meeting of the un security council. this afternoon, the yuan secretary-general, president of the world bank, and michael bloomberg will sponsor a one planet summit with french president emmanuel macron presiding over that. the fed is expected to raise interest rates today and market participants don't expect them to start there. -- stop there.

joining us from chicago is thomas digenan, ubs head of u.s. intrinsic value. also with us is gina smile at. walk us through what the market is expecting today. markets are pricing in a rate hike and have been for a while. people are focusing on the december meeting. got a summer we economic projection, officials were divided between whether or not to go for that fourth hike this year. a lot of folks are expecting them to move into the locking into december can't. and we get her a 16th. today. that adds a little bit of excitement, could lock in december as well. it will be crazy town. thomas, what are you paying attention to today? attention asl pay much to the market reaction as to what the fed says. we know they will hike today,

most people expect another one in december. they will also talk about their outlook on the economy, which people know is strong. if anything, it creates opportunities in the market because people are worried about interest rates, how that affects stocks, and across different sectors differently. the other conversation will be about a short versus long-term outlook. lyleve been talking about brainard all morning, talking about the short-term versus longer term neutral rates. with the government providing a tailwind, it is reasonable to expect the shorter run neutral right to run higher than the longer run neutral rate. what is the significance? jeanna: i found this extremely significant. the fed uses the neutral rate as a policy guide in its meetings. but they usually don't talk about it in public. i think what we can interpret basically ant as is way to explain to markets, the

public why the fed is going to have to overshoot its long run neutral rate in the out years. important,that so she has historically been a dove. now she is making a shift, saying it could very well be appropriate in a world with fiscal tailwinds, to go above that longer run neutral. what would traditionally be considered neutral policy. that is a significant shift, one to watch. alix: how do you deal with that in asset allocation, a hawkish, short-term, unclear long-term? it will be interesting -- thomas: it will be interesting. it doesn't take trade or tariffs into effect. people know about the stimulus, the tax cuts, but now we will have to watch trade closely. i don't think people know how

much that would impact the economy. that is where the fed wants to give themselves some bucks ability. in terms of an asset allocation standpoint, we are still at a point where equities are still pretty attractive. in a near or medium-term interest rates will come back. alix: it was interesting when we saw a rates at 3%, we didn't see a huge selloff in the markets but we saw a rotation into defense of like health care. is that a solution if you are struggling with this trade? if anything, investors have overplayed their hand. you saw shifts into defensive and then a big selloff in tech. you have a real opportunity to be contrarian here. great companies that are still growing earnings, concerns about tariffs.

i would not over interpret what the fed is doing, let my very short-term outlook cloud long-term opportunities. but it is great to parse every word that powell will make. if you look in the bloomberg, it has been a conundrum over the last few days. treasury grinding higher versus the dollar spot index. , is this a d.c. focused thing, or is this a central convergence story in the fx market? thata: i am going to dodge a little bit, it could be either. convergence has been a major theme this year. it will be a more important thing going into next year. we know the ecb is on the path toward ending the extreme accommodation they been doing all these years, the fed is

underway with normalization, boj lagging behind a bit. this will be a story to watch for 2019. alix: if we are still in a convergence world, you want to buy tech and be contrarian, where else makes a good buy? thomas: if you want to complement that, financials. semiconductors and financials, two areas that look cheap right now, and if anything, tend to be negatively correlated. from higherenefit interest rates, tech is on the other side. jeanna smialek, tom dignan, thank you. tune in later today, our fed special, "the fed decides" at 2:00. will have reaction from alan blinder, diane swonk, scott minard, and others. coming up, how are the trade

tensions waiting on global economic growth? we will have the interview with the oecd secretary-general next. this is bloomberg. ♪

emma: this is bloomberg daybreak. it is the end of an era under sadie's bend parent daimler. longtime ceo dieter zetsche is stepping down two years early after being in office since 2006. he'll be replaced next or by the first non-german ever to leave dialer. ola kallenius rose through the ranks. dieter zetsche it has come under fire from regulators over diesel emissions.

anda is offering incentives asking for volunteers. the company is trying to get electric cars out the door. online polling company surveymonkey raised $180 million and an outside ipo. the market above price range. they are still losing money. in the past two years, then began partnering with companies such as google and microsoft. that is your bloomberg business flash. david: we are back at the global business forum where trade tensions are high on the agenda. someoney we spoke with who said he saw this coming. >> we are taking the view 10 years ago that the world would de-globalize.

we need to be ready for a world that is more local. this is what politicians are pushing for. ceod: that was the danone talking about the food industry. with angel gurria, the oecd secretary-general. danone heard from the ceo. have we seen the high watermark of globalization? no way. it will continue, it will get stronger, it will accelerate. intoe going to move greater integration. if you are a chief executive, youth to plan for slowdowns, integration, it

is like technology -- can you stop technology? no, you cannot. it is like communication, the whole globalization process. the question is how to harness it, what to do about it. david: we have individual disputes between countries, groups of countries, but there are also the institutions that are created post world war ii to create the structure of global trade. are you concerned need to be to institution may be undermined? we have language, including washington, that seems to indicate that. the u.s. plays a crucial role in building these institutions, the others of a post world war ii organization. we should continue to strengthen that. can we make them faster in taking decisions?

yes, we can. by taking so long, what happens is some of the clientele moves for unilateral decisions because they perceive they are faster. but the ownership of multilateral decisions, the staying power of multilateral decisions, is much greater. it takes longer, yes, but then it stays and is better shared by everybody, and works better. we have a tendency to focus on president trump. you heard his speech yesterday. backingt just the u.s. away from free trade agreements. we have brexit in europe, elements putting up barriers, hungary, sweden. is this a broader worldwide phenomenon of people there and

pulling back? angel: trade is slowing down. it used to be double the rate of the world's gdp. if the world's gdp was growing at 4%, trade should be 8%, pulling the locomotive. trade should be the power. power.ot the trade was flat, very weak, and now below the rate of growth of the world of gdp. it is not doing its duty. tensions,se tariff retaliations is making it more difficult to trade, for it to play its role. we have to get back. the problems you are alluding to are not about trade. it took nine months for the prime minister to form a government. five months for angela merkel in

germany. then the unexpected results in italy. of thee recomposition political forces in spain. youth of austria. and then you have sweden. that is about the policies and integration and inclusiveness. we have not been inclusive enough. it does not have to do with trade but the fact that we left too many people behind over the 10 years of the crisis, and we have not them up in the recovery stage. david: you are for to the leadership of the u.s. after the burdeni, records, among other things -- angel: oecd. david: who is the leader now? angela merkel has her own political problems back home. is thewhat we need

institutions to be strengthened, for the institutions to be believed, and to perform, improve emma the way they do things. but without these institutions, we have to create new ones. they are already there. second, we have a multi-polar technically, from the point of view of the old world, talking about military, things that have to do with our games, etc. but we also have a multipolar world when it comes to trade. we have a multipolar world when it comes to investment. we have a multipolar world with some leadership in europe. leadership in the united states. therefore, the better way has to be cooperation. word oninally, a climate. where are we cooperating on climate? angel: not too well.

we seem to have lost the momentum. only 12% of the total emissions have a tax or cost above the $30 which is the imputed cost, the damage they do to the atmosphere. 50% are not taxed at all. we have to recover that. only nine countries out of the 190 that signed the furs agreement have submitted their long-term plan to 2050. just imagine, a lot of homework. go.d: a long way to angel gurria, the oecd secretary-general. alix: thank you so much, david. as they were talking about climate change, this week in new york is climate week. we are taking a closer look at climate change in our weather and climate risk series. today is about security issues. companies are trying to revamp their strategy to combat climate

change. i spoke to someone yesterday to talk than what they are doing in the oil and energy business. the world to approach a zero emission situation and we have to be a part of that journey. climate change is happening. ourave to bed that into strategies, so that has an effect on how we do business. is not onlye change forcing businesses to transform what they will produce, it also poses security risks. joining me from washington is and formerman defense undersecretary for environment for security. climate change, i don't think of it as a national security issue. why is that? change acts as a threat multiplier, amplifying risks around the world. we see this everywhere from the

arctic to more -- which is opening up a whole new region because of climate change, from the more intense storms we see from hurricane florence to the that came last year, and the global address we see across africa, the middle east, amplifying water and food security risks. i'm glad you brought him the arctic in particular. we have a map that shows the global trade routes that have now been opened because of the change in the ice, and how that will change over the next 50 years even. what kind of relationship does that create with russia and global trade, has that changed dynamics within countries? >> the geopolitics of the arctic are changing even as we sit here today. the northern sea route across russia is increasingly able to be transited by ships. china now declares itself and

arctic stakeholder and near arctic power, looking at extending its polar silk road across the arctic. new players in the arctic every extracting the many resources, energy, minerals , opportunities for trade in transit. it is really a whole new ocean that has opened up in our bothime, creating opportunities but many risks. still very dangerous to operate in that region. alix: you also brought up the drought, we saw that in australia, europe. the wheat crop getting creamed. a long-term conversation is lots of farmers are small business farmers. if they cannot get a good crop, a good price for their crop, unrest an economic situation. walk me through what you see. >> i see the instability arise as these droughts puts farmers,

herders at risk. they then become more susceptible to terrorists like isis and others who will take advantage of them and their families, because ultimately people need food and water to survive. ,hese prolonged droughts amplified by climate change, or putting a nations and states at risk. alix: the conversation 10 years ago was the era spring. high food prices, input costs causing unrest. that led to huge unrest. what will be the result of this? sherri: we have been able to reconstruct quite well that the prolonged drought across syria, the middle east, the wheat crop, when russia stopped exporting, led, in part, to the arab spring uprising.

we know that these shocks will continue. it is just a failure of imagination if we don't look forward and see the next shock will be around the corner. but we have the opportunity, with these unprecedented risks, the unprecedented opportunity to prepare. have a responsibility to prepare for those future climate shocks by developing the better predictive capability. which we are close to now, as we look to have better insight into how weather turned into climate, seasonal, some seasonal predictions. that with the right political will, we should be able to better prepare for these risks in the future. alix: preparing for it does not mean that you can change the outcome. that will still not change shipping lanes for russia, that there will be a drought and some farmers will be hurting for income.

how do you change the aftermath, the geopolitical unrest? sherri: we need to recognize we have to operate now inhow do yo, the geopolitical unrest? a climate change world, adapt and become resilient to it. we need to reclaim the climate the u.s. hadat been demonstrating. we need to work with our allies and partners to really reform our energy system, and at the same time, look at the opportunities to make ourselves more resilient. we are not going to be with you change the climate affects that are occurring across the arctic, for example, or africa today, but we can, with the right political will and tools, become more resilient to those changes. and create opportunities to repower those nations, small villages in africa with wind and solar, and enabled them to be self-sufficient off the grid. alix: one region or country is most at risk? sherri: there are so many.

parts of northern africa are er,y much at risk, mali, nig pornographic of africa. pakistan is also very much at risk for increased flood and grout. country, armed unstable, attitude across roads. very much at risk from climate shock. alix: great to get your perspective, sherri goodman. coming up, we go back to the bloomberg mobile business forum in new york. david is speaking with roger ferguson of tiaa. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. david: welcome back to "bloomberg daybreak: americas." i'm david westin. we are at the plaza hotel in new york city, site of the bloomberg global business forum.

alix, you are holding down the fort at the studio. alix: you have had some great interviews, as well as angel gurria, who says global trade is still happening, we are only in the beginning innings. that was interesting to me. he is predicting rather than just hoping. we have a great interview coming up. i'll be sitting down with roger ferguson, ceo of tiaa. we will talk about the fed, as well as where you are with pensions. alix: ahead of the fed meeting, it is pretty much buy everything except commodities. s&p up by four. feels like buy the rumor, sell the news. in other asset classes, the dollar gaining strength throughout the section. euro-dollar down .3%.

the budget in italy, blowing up right now, the five-star movement wants more money but you have investors in the market buying bonds. yields down by five basis points. in the u.s., the flatter curve at 24 basis parents -- point. let's get an update on what make is making headlines outside of business world. emma: china is taking steps to lower consumer costs. beijing is cutting import tariff . on a number of goods in july, china lowered tariffs on a range of consumer products. president trump is back at the u.n. today where he will chair a security council meeting on nuclear proliferation. that will give him another opportunity to blast iran, as he did to the general assembly. the president's address drew laughter when he said his administration had accomplished

almost as much as any in the history of the u.s. bill cosby spent his first night behind bars in philadelphia. a judge sentenced him to three to 10 years in prison. refused to grant cosby bell, which means he will be locked up as he pursues they'll. global news 24 hours a day, on-air, and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. with rogerhere now ferguson, tiaa ceo, also a formal federal reserve vice chairman. roger: thank you for inviting me. of theformer vice chair fed. today it is bad day. there are a lot of people, including economist we polled, who think we are moving faster and farther up with rate hikes. is that the right thing to do? roger: i think it is too early

to say. they are not rushing but they are being very intense about it. ist we're seeing right now two or three things. one is a labor market that is tight. two, financial markets are strong, have had a long bull run. the other side of the mandate is around inflation. that is getting into the 2% range. at this stage, does not appear to be going ahead of it. i think they'll be balancing all of it, trying to engineer what i would call a soft landing. keep the economy going but not picking up inflation. illustrated the situation. inflation is not really driving them to raise. at the same time, those economists say the most likely cause a recession would be going too far. roger: they are aware of that, which is why i use the phrase

soft landing. current inflation is roughly where they want it to be, but the challenge is to look over the horizon and say what is inflation likely to do? cannot wait for inflation to be dramatically above 2% before they start to move. they be concerned about inverting the yield curve? are hearing from the members about that. roger: there are conflicting messages out there. they should be keeping one eye on it because the markets will be telling a story. if the fed moves up to quickly, robust, theys not should listen to that signal, for sure. but there are other signals they should be looking at as well. at the same time they are raising rates, also mining down the balance sheet. the ecb slowing down their bond purchases. liquidity is coming out of the global market. how big of a factor is that with the fed? they areserving how

moving their balance sheet will be part of their process. the first time they have had two separate tool to use. they have been trying to manage both of them. they want to avoid surprises. so far, so good. they will keep working both of them with one eye on how the market is responding, the other on how inflation and labor markets are working. where are we in the business cycle? are relativelywe far along in the business cycle. use sportss to analogies, i don't think we're in the ninth inning, maybe seventh, eighth. there is more to run, assuming the fed moves very gradually. optimism is relatively high

among consumers. a consumer sentiment index yesterday that was pretty high. same with business leaders. wages are gradually starting to pick up. there are many forces that will provide momentum. i don't think the fed has a this financialh market condition whatsoever. i think they want to let it run as far as they can, assuming no big pickup in inflation. david: what does that tell you as an investor, at what point do you get more defensive? has that time already,? for individualer investors depends on your risk appetite. correction, a 10% then i would really toss and turn at night, it may be time to go more defensive. if you are an investor that can tolerate a correction. i want more of the upside. then you are probably ok be more

risk oriented. but each individual investor has to decide for him or herself what his or her individual risk appetite is. you manage money for the long term, thinking about pension liabilities, 20, 30 years out. are you changing your investment profile right now because of where we are in the business cycle? roger: not dramatically. we are thinking about the investment program for the next two years. we are moving to places where we we cantty sure that evolve over the long term but we are not trying to swing the portfolio dramatically. as you point out, we have to invest over a long time. rusted dowise aggressive market timing. rather, it is the trimming of sales a little bit, taking a bit of risk off posture. david: be more specific. what does that mean? knob, are tweaking the

where is it, debt equity issue, cyclicals versus defensive, international versus domestic, emerging markets? roger: really more in the fixed income, where we move from one is called spread to more credit focus. ladder,to move up the if you will, toward the higher grade investment opportunities. that is what we are thinking about. you seeing any indications of creditworthiness deteriorating? roger: not at the upper end. we have taken note that we are getting more high risk credit starting to introduce into the markets. we are seeing covenants get lighter. so at the fringes we are seeing maybe the beginning of overstretching in terms of the credit markets. together, that covenant light, risk of being taken, with a degree of leverage. there has been a lot of leverage

taken on because interest rates have been so low. roger: no doubt, many individuals and companies have been putting on a lot of leverage over the past few years, in part because interest rates have been low. i think this goes back to the earlier question, the pace at which the fed and normalizes and the shape of the yield curve could play through, for some companies at the edges, maybe seeing a little bit stretched, possibly some individuals. this is more a question of careful around the edges as opposed to a fundamental weakness in society. seen reports that pension plans have made different decisions because of the tax code, there was incentive by the end of september 2 actually go into a lot of debt, which affected the yield. how did that work? not forhe tax code -- my company, but apparently for some -- gave them an incentive extraetch for that

bit of return. i think all pension company should take a long-term perspective. you point out we have liabilities that could exist 20, 30 years. our asset model should think about matching the liabilities and assets the right way. about one thing we hear is global demographics, as the population ages there is more need for long-term money which is suppressing yields. to you see that? no doubt as pension funds and insurance companies try to balance assets and liabilities, it makes sense for all of us to be investing long-term. i think that has had some effect onepression interest rate in the long term because that is what you'd expect. david: does that mean the yield curve inverted does not tell us what it once did? roger: you put your finger on something that is important. there is a debate as to whether

the yield curve is signaling as it has in the past. first of all, it is not yet inverted. finger onyou put your something else. central banks and investors have been crowding in to the longer-term asset classes, therefore, you are seeing the results you are talking about. whether or not the yield curve will be the precursor of the next recession, should it invert. to understandb is the pension situation. we hear stories about public aboutns, horror stories underfunded or unfunded. where are we in the private sector? roger: statistics i have seen be broadly speaking, we may short of retirement savings by anywhere between four and $7 trillion. a is clear to me that we have

retirement challenge that we must confront. otherwise, it could become a retirement crisis. has not done that yet, but it is time for us to take the right actions to stall a crisis. that: who is the us in sentence, private corporations, states, federal governments? whose responsibility is that? roger: it is a shared responsibility. individuals, if you have not signed up for a workplace retirement plan, do that, max out the best you can on your retirement savings. all individual probably need to save more. businesses and institutions, make sure you are offering a retirement plan, the one with the kind of right options in it, including equities and investments. , whichntly, annuities are an insurance product that guarantees against on jeopardy risk. for the government, it is creating laws that will make for

safe harbor for new annuities. most importantly, thinking about -- repair the social security system, which by 2033, trustees tell us the system will be under some stress. david: we can put that on the to do list for congress. finally, one of the changes we have seen since the last downturn is the move toward passive. we have not seen a big downturn. what are the ramifications of that? roger: as we move toward passive, that means there is less money when you have a thefolio manager assessing prospects and strategy for individual companies. so you are going to get bigger movements perhaps. my company has taken a balanced andure thing we are active passive, and importantly, we have a very large holding of alternatives. we have a diversified portfolio so we can smooth out the various cycles, and therefore avoid the

potential big swings that come from one approach. roger, thank you for joining us. back to you , alix. that was fascinating. roger ferguson, tiaa ceo. now for an update in the business world right now. blackstone and carlyle group are among those interested in by nielsen, the consumer data giant. bloomberg has learned the private equity firms may submit bids to the company. the us it has come under pressure from activist investors. 10 years ago, warren buffett's berkshire hathaway agreed to buy a 25 percent stake in chinese maker byd. that investment has soared more than 500% since and is now worth roughly one point $6 billion. byd is his most valuable holding in a publicly traded company

outside of the u.s. it is also china's biggest maker of alternative vehicles. merck has changed a policy calling for its ceo to retire at 65, which will allow the current chief to stay on longer. fraser turned 65 in december and has agreed to stay on. that is your bloomberg business flash. alix: joining me now onset is luke kawa, our cross asset reporter. taking on more risk. this is an index that tracks risk appetite, 18 different components. it's been rising but a nice shoot up the last couple of days. what does that tell you? still feelpeople comfortable in an environment of rising rates, rising real rates. this is not a threat to the expansion. these trade issues, rising oil,

rising rates doesn't matter because the outlook for american corporate's is presumably good. you are starting to get some signs that people are worried it will not be as bright in the near term. theou do a best if yes on s&p 500 index, that is time to roll over. there are analysts out there forecasting, saying that we are next twoif the earnings will meet expectations as much and that you are already seeing negative pre-announcements pick up. thatis interesting, in context, a lot of the divergence trade is more about what is expected to happen in the future. look at forward versus trailing's earnings per between the s&p 500 and the msci emerging markets index, the forward has been trending higher, suggesting we are expecting future earnings to be better in the u.s. the past month has been rising at a much more muted clip. even with the text boost, the

rest of the world has been keeping pace. forward estimates say divergence trade on. you also have bank of america saying they think small caps will start underperforming going forward because we are in a late cycle. that would imply that small caps will underperform here, money will shift elsewhere. luke: definitely. i like to look at the russell-v ix spread. the small caps safety premium thing is not really there now. this is suggesting that we are not as concerned about the rest of the world. rising short-term rates are also acutely bad for the russell because a lot of those companies have a higher share of floating debt, so they'll be hit by that sooner. it seems, you saw the last hike on the russell lend, even as we continue to fight, you have to look at where the cycle will end. leads me to the

emerging markets. not only are we taking on more started the market has to absorb risk in a way that we did not see even a few weeks ago. argentina, brazil over the last few hours. is this a turn? that is the big question i'm wrestling with. when i ask people have we seen the bottom in emerging markets, and when we write about the rebound, what will be fueling it? when you have these kinds -- trash in the space bouncing -- that may point toward and overthrew that has gone too far. i wonder if china stimulus trickling through, a more pronounced dollar trend, commodity up, in those are the ingredients you need to get a sustained em rebound. alix: the calls where we see

money going into dividend, low volatility stocks, defensive like health care, how can you have both? goldman yesterday was saying this is the time to be defensive. seeming have seen it a top in the u.s. dollar trade, people thinking two different rotations. do i rotate away from the u.s., within the u.s.? you have cancer that are doing both. some people on the side are saying this is all had fix, we are going to keep our tech trade going up, the same market leaders. fromion within and away the u.s. has been sort of invoke the past couple of weeks. also waiting for theresa may to begin speaking at the bloomberg global business forum. michael mckee joins us from d.c. he is therefore the fed meeting. theresa may is taking the stage.

michael bloomberg introduced her. let's listen in. the expectation is she may introduce corporate tax cuts but sticking to her guns when it comes to brexit. this week, political leaders have come to new york to discuss how we can work together to ensure the future prosperity and security of our people. and it is right that many of the discussions are taking place at the united nations. but it is also right that i have come here to this bloomberg for him because we will only succeed if we also work in partnership with you. some of the most pioneering business leaders in the world today. businesses like yours which have been great engines of job creation and growth. in my country, here in america, and right around the world. is the embrace of open economies and free trade, as drivers of innovation and growth that underpin your success, and acted as the greatest agent of

collective human progress. where free markets have been properly regulated and trade and investment unleashed, we have seen unprecedented levels of wealth and opportunity, rising life expectancy, greater access falling infant mortality, and reductions in absolute poverty on a scale that would once be hard to imagine. as governments, we have played our part in helping to make this possible, by agreeing and abiding by a global framework of rules, and my opening of our economies to competition. but today, new challenges, including the rapid pace and breath of technological change, are causing some to question their faith in the institutions of global cooperation and the framework of rules which have brought us to this point you they look at who gains from free trade and ask whether this global economic system is fair

and whether it can really be made to work for everyone. growth ofat the artificial intelligence and ask whether their children or grandchildren will have the skills to succeed in the new economy. and a look at some of the tensions in global trade today and ask whether the rules-based totem can be really adapted reflect the realities of the modern world. my answer to all of these questions is a bold and optimistic yes. my message today is that a britain will be an unequivocally pro-business britain, and a global partner that will help to lead the international response to those challenges. to our modern industrial strategy at home, we will create one of the most dynamic and business friendly economies in the world, driving investment opportunities for your businesses and spreading the benefits of new sectors and technologies to every part of my country.

and internationally, as a global burton, we will champion our vision for the future as a global economy, a vision that is based on openness, innovation, competition, high quality, and intelligent regulation. and we will be at the forefront of sustained international efforts to address the challenges facing global trade and to build a dynamic and competitive global economy that can truly work for everyone. i have always been clear what the united kingdom stands for and what we want to achieve as we leave the european union. our relationship with the eu will change with brexit but we will still be neighbors, we will still be part of the european family of nations, and we will continue to champion the same beliefs, standing for freedom, democracy, the rule of law, underpinned by a rules-based global order. that is why i'm confident we can reach a deal about our future relationship that is built in

this spirit. we have put forward a plan for a new but still close relationship with frictionless trade as its heart. there is no other plan that projects jobs and livelihoods and also meet our commitments in northern ireland, while respecting how people voted in the largest democratic exercise in our history. and i believe behind the noise of the headlines and the chattering of the commentators, there is much common ground in these objectives. we know the other models are also not delivering the business who would face increased your for see, additional border checks, or both. so i urge the eu to engage with our proposals so that we can move forward. to be clear, we are not seeking partnership in a single market or in any way trying to undermine it. but we are looking to achieve the frictionless trade which i believe is in all of our interests. further to go in the negotiations. the coming weeks will be critical.

with the conclusion of the negotiations over the coming weeks, the certainty of an implementation period in which to adapt to the new arrangements and the guarantee of frictionless trade with the eu in the future, businesses can look forward to the post-brexit world with confidence. at the same time, looking beyond the eu, we are absolutely committed to delivering continuity in terms of relationships with existing bilateral partners, and we want to force the most dynamic and ambitious free trade agreement with old friends and new allies alike. crucially, we also have a plan to deliver an economy that is knowledge-rich, highly innovative, highly skilled, and high quality, but with low tax and smart regulation. so let me say this very clearly. whatever your business investing in a post-brexit britain, whatever your business,

investing in a post-brexit britain will give you the lowest rate of corporation tax in the g20. you will access service industries and a financial center in london that are the envy of the world. some of the best universities in the world, strong institutions, a sound approach to public finance, and a consistent and dependable approach to high standards but intelligent regulation. u.k., youocating the will also be able to access the talent you need. freedom of movement will end when we leave the european union , but we will put in place a new integration system that will allow businesses and universities to attract those that are best to the u.k.. furthermore, through our modern industrial strategy, we are bending the power of the state and the ingenuity of the private challengesolve four of the future which are enormous

areas of potentials for growth, jobs and investment, across our country. these are the challenges of clean growth, our aging society, the future of mobility, and the challenge of artificial intelligence and data. where we have already seen more investment in the u.k. over the last years than the rest of europe combined. the uk'sntributing to biggest increase in research and development which will help develop new technologies in these areas. and we have set a goal of total public and private investment in research and development reaching 2.4% of gdp by 2027. we will educate and train our young people for the opportunities that meeting these ground challenges will bring. and we will ensure that we have , art, agile regulation dynamic institution which promotes innovation, but also protects people's rights just as

we are doing, for example, with ai, where our center for data ethics and innovation will make as a global leader in helping to ethical, andfe, innovative development of this life-changing technology. our modernt, industrial strategy is about creating a different kind of economy for the future. it is not about seeing business and society as separate entities, where business generates a surplus, government invest to handle the cycle's consequences of economic change. but instead it's about harnessing the enormous power of business as a partner in tech when some of the greatest social challenges of our time. it is not about telling businesses what to do but instead genuinely listening to business and working in partnership with you. it's about understanding what to need and working together shape our economy in no way that will help us make the u.k. one of the most attractive countries

in the world in which to establish and grow a successful business. work with you to create the best possible environment in which to invest in the u.k., i'm also determined that a post-brexit britain will be a trusted partner at the forefront of efforts to address the real challenges facing the future of the global economy. this means playing a leading role in tackling the root causes of the current tensions in global trade with the rules have not kept pace with the modern world. if a global system is going to function properly, the participants in that system need to believe the rules and commitments they make to one another are fundamentally fair pay they need to believe that others are playing by the spirit and the letter of those rules, whether that be in terms of declaring what subsidies are provided, or respecting intellectual property rights. they need to believe any disputes will be done with fairly and efficiently. and the rules themselves need to remain relevant by keeping pace

with the changing nature of trade and keeping pace with the changing nature of trade and technology. a we need to give the wto broad, ambitious, and urgent mandate to reform. to address the areas where it is not functioning effectively, to deal with issues that are not currently covered, and to maintain trust in the system. for example, we need to see new rules in areas such as digital trade surplus. including e-commerce that can boost growth across the dynamic sectors. we need wto reform to increase and global legitimacy and public support for the multilateral trading system including through greater transparency. e.u. effortsathe in this area and we want to work with them and all our partners around the world push this forward and deliver a mandate for change. as a global and independent