nejra: good morning from bloomberg's european headquarters in the city of london. i am nejra cehic. manus: and i am manus cranny in dubai. this is "bloomberg daybreak: europe," and these are today's top stories. arabia isdi reportedly preparing an explanation for the disappearance of journalists jamal khashoggi. china inflation accelerates again while the pboc strengthens its fixing by the most in three weeks. credit agricole says the central bank will defend the currency. pessimism. he says are no deal brexit is more likely than ever before even as the u.k. and france sprague positive -- strike a

positive tone on the deal. manus: a warm welcome to this show. let's give you a quick benchmark in terms of your trading notes this morning. dollar-yen flipping it around, near the one-month high. you are seeing a softer tone. a slight skittishness to this market. going toi know you are talk about dollar-yen. cable is really prevaricating. what will it take to unleash cable above 1.34? 10 year government bond yields, new england above 3%. not if you listened to barclays. they would say you have to reassess your bond market risk. they seek economics in the united states of america as one of the main drivers for them. they say 2.95% by the end of the year. bid.is bid -- brent is

the market is trying to assess the saudi-u.s. situation. a tight market and inventory numbers today. brent up .4%. nejra: strong yen was the story last month. insaw some yen strengthened yesterday's session. the dollar, more broadly, near a two week low, strengthening against the yen. dollar-yen, up .3%. proper is selling off. it is more complicated than the risk-off.isk on, goldman says, look, the market is too negative on this. they are targeting 7000 by the end of 2019. they do not really seed festering trade being a risk. we did see the u.s. close yesterday. -- lower yesterday. we sawtek lead the client -- saw tech lead the declines.

we could see a bit of a recovery in the u.s. equity market in this session. back to the yen, citi says it is the only safe haven currency. we will bring you our exclusive headview with dw's -- vw's of sales. let's get the bloomberg first word news with deadly humphrey -- dudley humphrey. isdonald trump says he uncertain whether his administration will participate in a saudi investment conference. that follows the disappearance of journalist jamal khashoggi. secretary of state mnuchin will decide whether to attend the meeting and riyadh. microsoft -- in riyadh. way to end.ceo he said it is counterproductive to the progress he had hoped to see in the country. >> i think it is a real step back because i was very hopeful for saudi arabia in terms of the

opportunity for the citizens there, the women and small businesses and reforms were going to be put in place. has tensionsis with beijing, saying washington is not out to contain china. he said that america is cooperating on issues including north korea and the united nations but conceded there would be times they would step on each other's toes. china's consumer inflation accelerated for a fourth month in september. cpi rose 2.5% from a year earlier. that is as food prices jumped by the most since february. air20's, 24 hours a day, on -- global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus and anna. manus: let's get into the markets now.

a certain sense of tension. juliette saly is in our london studio. juliette, good morning. juliette: yes, we are seeing pretty good strength coming through in the nikkei in late trading, up by .7%. a little bit of weakness coming through in the hong kong and china markets. bang inhina came in line with expectations. australia's market looking quite good. they were essentially saying they see a lower aussie dollar supporting growth but rates will definitely be staying on hold. you're seeing a bit of a rebound coming through in the tech players in taiwan. the taiex up by .4%. stocks have been contributing to some of the weakness you are seeing in the chinese session. this is after morgan stanley warned against their earnings, saying the weaker yuan and higher oil consumption will start to play on their earnings. softbank having a bit of a rebound. it had been year 8% drop

droprday -- near 8% yesterday. a little bit of a jump coming back. nowhere near the 8% rebound we saw in the selloff yesterday. rio tinto looking quite good on the close. third quarter iron ore shipments did the klein amid this is -- did decline among their review. nejra: juliette saly, thank you so much, with us in london. cnn says saudi arabia is preparing to admit that missing journalist jamal khashoggi -- they did not have high-level clearance. president trump he was assured by king salman that saudi arabia had no official involvement in jamal khashoggi's disappearance. he dispatched mike pompeo to riyadh and floated the idea of rogue killers. manus: he said he is uncertain about whether his administration

will participate in this conference. steven mnuchin, who is scheduled conference,e riyadh will decide on friday whether to participate. we have bloomberg -- my cohost and jodi gamal el-din, schneider. does the decision to send pompeo innal much more of a crisis terms of where we are jodi: yes, it -- where we are? jodi: yes, it does. now, the decision to send the secretary of eight himself to saudi and -- of state himself to saudi arabia shows that the situation has intensified. president trump himself is in a complicated situation. saudi arabia is his most important ally in the middle east in terms of the relationship that he has. it has really been the

cornerstone of the relationship -- his relationship in the middle east. he has made clear that he wants to try to continue that relationship if he can. a reallyis really important moment for not only the trump administration, but for the president himself, and that is why he is ending his equity area of state. -- secretary of state. he is also giving us a bit of a mixed message, saying it could have been the rogue killer, a flat denial from the king. but then we are also hearing the u.s., he is sending out members of his administration, saying the u.s. will take action, that if there is evidence that the theis did contribute to disappearance and anything else that may have happened to mr. could show the -- to mr. khashoggi/ . nejra: what are some of the likely retaliatory tools the u.s. might realistically use?

jodi: president trump is under increasing pressure from members of his own party that he would use to halt arms sales as one of those tools. it is multibillion dollars of has sales that the u.s. with saudi arabia, however, president trump has shown that he is reluctant to do that. he has said that if the u.s. did not provide those arms, someone else like china or russia will. he is pushinging back on, although there is increasing pressure from congress. there are other diplomatic tools like sanctions. those could be used. manus: ok, jodi, you stay with us. you and i spent half an hour talking about this. we had a whole variety of guests. where do you and i look most for risk in these markets? take me through your thinking. yousef: you have got what is happening in stocks where we had a major selloff initially off the back of the news and then

you had a big relief rally in the past 24 hours. saudi stocks were up 4%. you have to consider a lot of the buying that is taking place is being suggested being done by some of the government-linked funds. we do not have quite the clear picture we would usually have on a regular trading day in saudi arabia. you had saudi on the affected as well. yields are rising a little bit. keep an eye on what is happening with the saudi riau forward. those are the highest levels we have seen in two years. reliablescinating and indicator of risk. manus: she said look at the cds, our guest. they moved yesterday, but again, this is the prism of risk that our guests are talking about. yousef: absolutely. it's very critical to this conversation. we have to see what the next few hours bring as we get more clarity on what happened. we have two theories that are floating around and there is a

lot at stake. confidence, in terms of the wider vision of the kingdom and trying to lock in foreign capital. nejra: are investors realistically expecting that to saudi could use oil as a weapon? it is worth asking again because the last time this happened in the early 1970's, global demand took a huge hit and it has not really recovered since in industrialized nations. yousef: it is maybe an entertaining thoughts for a few very patriotic saudi nationals, but the reality is it has not happened since the 1970's. last time it happened, vivid images of people waiting outside the petrol station. saudi has a global responsibility. you heard from the minister. saudi arabia is a reliable supplier, they are making sure. they are picking with the rest of the world. this is no longer just about the united states.

manus: manus: thank you very much. yousef gamal el-din, cohost of "daybreak." middle east and jodi schneider -- "daybreak middle east," and jodi schneider. let's talk about some of the companies we are referring to. bloomberg is part of that group. we have pulled out of the future it investment initiative as a media partner. with all of that in mind, you above $72 perg barrel. u.s. and saudi arabia really -- pompeo is heading to saudi arabia. prices are creeping higher. $100 oil is being talked about. what impact does this have in the fx space? fx strategist at ing. lots of stories in terms of political risk and commodity risk. where does this play into the commodity complex?

we will talk about the havens in a moment. >> oil is exactly what we are watching, one of the four risk factors we look at in this dystopian world. you mentioned $100 per barrel oil prices. the also have rising real rates in the u.s., selloffs in global risk aversion, and you have got basically political risks. onn we look at what is going in the trade war, all of that points to a pretty bleak environment for global markets. to some extent, the question we ask is if these risk factors are somewhat independent? we are monitoring them on a case to case business. these are independent risks and we are having to treat them as isolated factors. nejra: that is interesting. is there one currency that wins like the yen or du have to be more deserving than -- or

do you have to be more discerning than that? viraj: they are going to lose out. mixed becauseit one of the things with the yen when it comes to that, it drags currencies lower as well. fact, you think about world we just pointed out, you would want to be long petrol currencies, short these high yields. it looks pretty good. the fundamentals look quite good. it is a relative value play, one that potentially in the worst-case scenario in that dystopian world, it could went out -- without. -- win out. manus: dystopian scenarios have become reality. this is yen and swiss franc. swiss franc with the historical benchmark. of takes on the haven status

choice, which goes slightly against what you are just said there. political risk is rising. if you have to have a protector in place, is its width, is it yen, is it gold -- suisse, is it yen, is it gold? viraj: what we're trying to say is there was a bit of nuance and caveat. out of three worlds in which the yen winds. if you have got uncertainty, the yen wins. if you have u.s.-china trade tensions, maybe downside risk to the asian economy or economic complex, then the yen is not necessarily win out here. lower initially. what we have seen in 2018, it has been a u.s.-china sort of trade war. if that were to transition to global downturn, the yen slips into the safe haven of choice. nejra: i want to keep it separate from the fed, but in terms of the safe haven, the

dollar has won out for much of the year. how does the dollar fit into this this topi and world -- dystopian world? viraj: we have the trump fiscal stimulus. it has made the u.s. asset markets look relatively stronger at a time when the rest of the world is weakening. that cannot last forever. we think divergence trades only have a time-limited stamp on them. transitionto and this gets worse, than the dollar loses out against major reserve currencies like the euro and the yen, and you are back looking at national investments. that is why we have reserve currencies against the dollar. manus: khashoggi, thank you very you verypetel, thank much. he stays with us. coming up on the show, we will bring you our interview with the ubs global wealth management cio . he leads the team, he leads the dollar, the swiss, the pound.

this is bloomberg. ♪

manus: humphrey joins us in dubai. >> paul allen, the billionaire who cofounded microsoft with no gates, has died at 65. according to a statement from his investment firm, he died from complications of non-hodgkin's lymphoma. dear friend. personal computing would not have existed without him. singapore's state investment firm has held talks with chinese authorities about a stake in anbang insurance groups. they have been examining a potential deal for several months but separate sources say

the investment firm is not currently in active negotiations with anbang. it is shaping up to be a big year for global mergers, but that has not been enough to boost of america's investment bank. decline, twice the drop that had been estimated. revenue downerall 18% compared with the 1% decline at jpmorgan. crazy rich film asians will they view in china months after topping box office sales in north america. bros. says the romantic comedy will screen in the world's biggest cinema market, starting on november 30 after receiving approval from the country's regulator. it has selected $230 million according to box office mojo. that is your bloomberg business flash. nejra: thank you so much. china's consumer prices rose for a fourth month in september,

driven by the cost of food and it comes as the pboc most inened it by the three weeks amid speculation that the u.s. treasury may name china a currency manipulator. our ethic strategist at ing is still with us. your notes that actually china is what we need to be watching more than anything else at the moment, even more than the dollar? viraj: when it comes to china, this week is pretty. the report should not go understated. use thearter, we technical process to judge whether currencies meet that criteria. i think we have been doing that quite a bit now, but this is different. given what we have seen this year when it comes to u.s. trade in foreign policy, given when you look at the scope and dig deeper into u.s. trade law, there are some loopholes, discretion here. anything can happen. we had to put it out there. there is a trivial risk it could

have been this week. it is not something we can fully will out. manus: you also the want to make the point that when it comes to currency manipulators, mnuchin could squeeze in something. i wonder, from a market perspective, we have this other chart in the gtv library. this is about the yield differential which is u.s.-china , and that differential is being squeezed to a 7.5 year low. i wonder -- hsbc and citigroup say we are obsessed and that it is really an excessive emphasis. does the yield differential matter at all? viraj: 100%. when we look at what has ispened, a lot of it fundamental. it is a textbook depreciation, not anything that is being manipulated, not anything that has been preemptive. when you look at the fundamentals, rate differentials, that just points to a weaker one. there is a bit of a session to

some extent and maybe overstated, because we could see that world, but at ing, we are trying to say it is the fluctuation around seven and we think the fundamentals where we are now is fully reflected. take 10 bigr figures. that could happen but we should not get too obsessed. nejra: ing, would you advise to otherhe yuan directly or currencies related to it and how they might react whether it weakens or not? viraj: we are starting to see the correlations. one thing worth mentioning is the speed of the move. if you look at the seventh month -- six month change, that is the case. we cannot complain that the currency is becoming more flexible, more responsive to the economic environment, but that is just the bit that caught markets off. a marginal move above seven will not change the game.

manus: i know that there are attached on this earlier, but i want to circle back to the dollar. u.s. debt is going parabolic. they say that the equivalent u.s. debt payments will be the equivalent of $1600 for every man, woman, and child in the united states of america. consider thato deficits and negative numbers like that will begin to be taken on the left-hand side in u.s. consideration versus the debt pile of china and italy? will debt become the dominant force of 2019 when we rerate the dollar? reasonst is one of the we are fundamentally negative on the dollar. we cannot ignore that. when we look at this twin deficits story, you know, we have to put context in. it is only a difficulty when it

is difficult to finance. that is when you see currency and financial markets react. at this moment, it it has not been difficult given the overlay of tax stimulus. once you fall off the fiscal cliff, once you start to see the diminishing returns of that, that is when it becomes a huge deal for the dollar, and it is one of the things where you could see a bit of a seismic adjustment. i think reality is you start to see a gradual depreciation. we expect the dollar cycle to turn lower in 2019. this is something where you want to keep your eyes open. as soon as the growth stimulus goes, that goes. manus: viraj petel stays with us. quick snapshot of the markets. the sea of green has dissipated in terms of the msci asia-pacific. equity markets just holding on to the green. dollar-yen, slightly more risk on this morning. futures pointing a little bit higher as well. we are looking at crude higher, and wti.

keep an eye on tv . of course, you can follow the show and all of our charts and also ask the guest of question. this is bloomberg. -- guest a question. this is bloomberg. ♪

6:30 am in london, 1:30 in the morning in new york. tech lead to rebound on friday and it led the selloff yesterday. u.s. futures pointing higher. nasdaq futures up .6 percent. we did see muted gains in asia as well. let's check in on the broader markets. here is annmarie hordern. >> in asia, stocks just this hour turned positive across the board. japan leading the way, up .9%. the csi in china up slightly. we are seeing center volume -- thinner volumes in asia. they are grappling with geopolitical tension.

alongside this, they are looking for corporates, whether we will see stronger growth or not. the fed will be in focus tomorrow. we have the fomc minutes and the futures in london pointing towards a writer start. i want to look at iron ore. we heard from rio tinto. for said they are on track a record annual shipments which follows the industry leader as well. what you can see happening in iron ore in china is it has been diverging with chinese equities. it looks like it is being shielded from the drop in china. this may mean that iron ore is able to shield itself from the border complex and can really shake off these drops we have seen in china and any volatility we have seen. i wanted to look at what is happening in saudi arabia. droppedange traded fund 9% in four days. after we, it sank 2.6% heard from the report that the saudi's are preparing to say khashoggi'sst jamal

death was the result of an interrogation that went wrong. ,his story will be a focus especially with mike pompeo headed to the kingdom. manus. manus: good to see you. ,ood analysis on the markets from markets news flow. your first word news with deadly humphrey, right here in dubai. says he isrump uncertain whether his administration will participate in a saudi investment conference. that follows the disappearance of journalist jamal khashoggi. mnuchin will decide on friday whether to attend the meeting in riyadh. microsoft's ceo has weighed in on the disappearance of journalist khashoggi. the saudiports government kidnapped and killed him is sad and counterproductive to the progress he hoped to see in the country. >> i think it is a real step was hopeful for

saudi arabia and terms of the opportunity for the citizens there, the women in saudi arabia, and small businesses and reforms being put in place. your secretary -- defense secretary james mattis has downplayed tensions with beijing, saying washington is not out to contain china. he said america is cooperating on issues including north korea s buthe united nation conceded there would be times they would step on each other's toes. china's consumer inflation accelerated for a fourth month in september. cpi rose 2.5% from a year earlier according to data from the national bureau of statistics. that is as food prices jumped by the most since february. spurred by floods and disease. ministeracting prime is getting the next chance to

form a government. the social democratic leader now has two weeks to sound out his colleagues after the opposition failed to find a coalition. but it will be a difficult task. last month, the leader led his party to its worst election results in a century. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. manus and nejra. manus: i will pick it up from here. theresa may says the brexit deal is still achievable despite the differences over the irish border. the you commissioner, president donald tusk -- the e.u. commissioner, president donald deal isays no likely. he tried to rally lawmakers just two days before a crucial brexit summit. we are entering the final stages of these negotiations. time, this is the

time, for calm heads to prevail. and it ise time -- the time for a clear eyed focus on the few remaining but critical issues that are still to be agreed. nejra: joining us now is the director of data and polling at rasmus global and viraj petel, still with us. what is going to be more difficult for theresa may here -- getting a deal with the e.u. are getting it passed the parliament? >> all of the problems have to do with domestic politics. what has been decided at that you level more or less -- the e.u. level has more or less been decided. britain is not heading into a position where it will be economically better off than where it was before, but that was always inevitable. d-day, deal may,

day, deal making week, she has to present herself as having put up a hard fight in front of parliament, so the optics look like domestically -- but make no mistake. her biggest challenge -- remember, britain have to leave by march 20 19th, passing all of , and passing all of this through parliament. manus: she has got to execute how to use keep no border between the north and the south of ireland? i thought it was interesting. we put together a couple of comments from macron and theresa may and from an e.u. diplomat. we are paused in these negotiations. how important are they to this scenario? has got a take on this, but how important are they in this? viraj: it's really unfortunate -- nina: it is really importunate timing for theresa

may that she happens to be leading a government that is dup, and theirhe vote will be crucial. eileen foster has already made her views known. the issue about the irish border is that this has been an impossible square which they have been trying to circle the past two years, and ultimately, the only way they can circle that northern ireland has to remain either in the customs union or the single market, and given what was agreed at last december's summit, that means the u.k. -- the u.k. remaining in the customs union as well ad infinitum. she wants to get the support of labor in peas -- mp's. it is going to be a very adding,ted thing, subtracting, lots of lobbying to get the right parliamentarians on side. sterling will rally, but only if the deal is politically

viable. how much is the potential upside if it is viable? viraj: if it meets the parliamentary math, then we're 136,ng at one point -- at 138. any deal has got to have a few tests. grease anything on towards. i don't think it will be that story anytime soon, but that is certainly where the risks are. it has to meet the short-term noise. the pound is cheap. it is a value play. does the political backdrop make it cheap? the answers that question changes every day. the sentiment is sentiment, and we have to just judge that as ebbs and flows. we put that big story out there. manus: could i ask you what you make of nina's proposition,

which is that we could remain in the e.u., in the customs union, and infinium -- ad infinity. i cannot see them remotely countenancing that in the british parliament. e.u. infinity, is that a scenario that is good for the pound or bad for the pound? for the poundood as long as it is politically viable. that is where labor comes into play. thecan get a deal and parliament if labor backs it. it is the politics here. when you're looking at politics, it is all subjective. if you think about it, if we think when push comes to shove, come march 2019, is there going to be a massive economic regime change that could send the pound plunging, we do not think there is consensus. the poundthing that is pricing and much more

vividly, but think about the way the balance of risks suggests, that is just a risk on the table as a negotiating tool, not necessarily a realistic scenario, so that is where we sit here. nejra: we have got you are question. isn't this fantastic? i will put it to you. it comes back a little bit to what you were saying earlier, nina. the question is, how likely is the reinstatement of an irish border? viraj: i think that is the nuclear -- nina: i think that is the nuclear option, and nobody wants that. the e.u. has been consistently committed to making sure that there is no return of a hard border. you see that first of all to give northern ireland special status, which if you want to look at it and a very strict way, is cherry picking. they are giving northern ireland the benefit of the customs union. the dup is a different interpretation. they see it as a political weapon to divide northern ireland from the rest of the u.k.

so i think that we will not see that, and that is also why my base case scenario is not that there will be a new deal brexit. if there is a no deal brexit, de acto, we have a return to hard border ireland. they do not want that for ireland. you know, one of the member states of the european union, the e.u., is aligned with ireland. let's not forget that a no deal brexit is almost as damaging for ireland as it would be for the united kingdom. manus: it's a little bit more damaging for the republic of ireland than the u.k.. viraj petel stays with us. now some of the earnings season is underway in the u.s., so let's take a look at what could be in store for europe with our markets reporter, juliette saly. juliette: yes, let's start with the energy sector, because it is expected to have the strongest earnings growth. rent surge -- brent surged 20%.

see the correlation between european oil stocks and brand. now at a two-year high, mining companies expected to do well as investors bet that chinese will remainetals strong. let's have a look at the financial sector. it will be in the spotlight, too, because of a global rotation. what we are amid these concerns about slowing growth -- analysts have raised their expectations for european banking earnings from 3.9% in april to 5.3% in october. this as the fed pushes on with its interest rate increases and strategists really recommending buying the region's shares on these low valuations as the market anticipates the ecb will increase rates next year. and finally, we are just looking at some of the headwinds you could see here because the head of european strategy at barclays says that third-quarter results

will be a bit of a reality check for the market, and this chart here has sending -- citigroup's earnings revision index. they have been starting to sla s sh. down with not voting well for european equities which have been struggling to keep up with the u.s. market so far this year. nejra: thank you so much. as the world awaits an exponent -- explanation for the disappearance of globalgi, several companies have canceled their participation in the investment conference next week including bloomberg as a media partner. and as the u.s. government said, it may skip the summit. is is missed feeling effects softbank, the biggest outside investor in its $100 billion vision fun. for more on what it could mean for softbank, let's cross to tokyo and peter elstrom. great to have you with us. thanks for joining us. does this put masayoshi son's

grand plan in danger? peter: we saw this affect into your yesterday, softbank's shares took quite a big hit, the more than twoe in years as concerns were raised about what is going on in saudi arabia as well as the general downturn in technology shares. the issue here is that much he cut a deal.- it is the biggest outside investor. that is the money that son has been using to make investments around the world, the u.s., and china. one of the questions asked political pressure grows for saudi arabia to come up with a clear explanation for what happened to khashoggi is what that will mean for the existing regime in saudi arabia and whether from softbank standpoint, whether they will still be able to get access to that.

promised $40 billion for the next fun. -- fund. it raises a question of whether softbank will have trouble is as it tries to technology companies that may have seconds thoughts gone taking money that has back to saudi arabia depending on how this plays out. manus: do you think that son would expect a chillier response inextricablyvalley linked to saudi arabia, the bulwark of where he is getting his swag bag from? is there a contagion possibility? viraj: it depends on how this investigation plays out, in exactly what kind of explanation is given publicly at this point. as you mentioned, there are many executives pulling out of the conference. saudi arabia is hosting uber -- one of the portfolio companies. saudi arabia --

softbank pulled out. masayoshi sonn -- is supposed to go. questions about whether softbank will be a with the get the same warm reception it has had over the past year now that at has -- it has had the fund. it is the biggest investor in silicon valley and other markets. questions about whether startups will want to do business with softbank, and it depends on this investigation. manus: peter, thank you very much. managingtrom is our director. just a quick disclaimer, several companies including bloomberg have pulled out of the future investment initiative event as media partners. that was set to take place next week. coming up, manus, the big banks report. we will get you the lowdown on the winners and losers of the last quarter, and we will look ahead as well. this is bloomberg.

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nejra: let's check in on what is trending across the bloomberg universe. of teens suedroup the u.s. government for exacerbating climate change. the suit is heading to trial. to find out more, head to twitter. manus: we have the u.k. prime minister who struck a anciliatory tone on brexit day after negotiations broke down. may told lawmakers she does not believe "the u.k. and the e.u. are that far apart." mr. macron, one of the most vociferous critics. nejra: manus -- manus: and -- nejra: on the bloomberg terminal

over the past few hours. the u.s. budget deficit grew to a new high. in second place, the idea that rogue killers might behind the disappearance of journalists jamal khashoggi has been suggested by trump. as 40ld be as high , theion renminbi or more s&p global rating says in a report. as u.s. bank earnings get underway, who are the winners and losers of the last quarter and what can we expect from morgan stanley and goldman sachs? joining us is dani burger. what have been the positives and negatives? >> the economy is still strong in the u.s.. tax cuts still fresh for the banks, and raising interest than they helped more have hurt, so overall, we get a positive picture. hadou morgan, for example, a record net interesting, 14 billion.

but when we go to individuals, there were differences. of course, even with this nice overall picture of a strong economy, good earnings, the question always becomes, is this as good as it gets? manus: is this as good as it gets? let's talk about some of the beasts of investment banking, goldman sachs, and morgan stanley. what can we expect? this point, we usually have a very clear picture because we can see what the trend is across banks, but we did not get that this quarter. but what did banks have in common? they had good equity issuance . they have strong commodity trading. both those things are likely to be bright spots to help morgan stanley and goldman as well even if investment banking is not as which we did see. manus: dani burger.

morgan stanley setting the tone for this earnings season. since the fed announced a rate september, the s&p 500 has fallen more than 5%. the markets are under stress and it is likely investors will be especially keen to work out how much more policy adjustments is in that pipeline. today, it takes us to our mliv question of the day. i suppose it comes down to this. the fed minutes, do they matter to you? that is all we're asking you in terms of the question, and what about the fed tying all of that back to the emerging-market? viraj petel is our guest host this morning from ing. ofiously, any kind readjustment by the fed policy could have a huge impact on p.m.. we have a bloomberg survey. -- on e.m.. we have a bloomberg survey. we have hit a bottom in terms of emerging markets. view?t the case in your

have we hit the bottom of the emerging markets fx-wise? viraj: not quite. we see two faces to the dollar. toughnk they have been against reserve currencies like the yen, but we do not think it is quite up against the m, and one of -- e.m., and one of the reasons is we cannot see a light at the end of the tunnel when it comes to u.s.-china trade tensions and that makes us nervous about calling this a great point. so look, there is value. there will be dollar differentiation. we think the space looks pretty good. it has taken its cue from domestic stories. these are short-term factors. when it comes to trends, yams could just run higher if things escalate. nejra: in your research notes, you talk about a neutral broad dollar trend. in terms of the value to be extracted, you mentioned them. how else would you be playing

the space? presumably, you want to be in it somehow. viraj: those are fairly isolated from the u.s.-china trade tensions. .here are pockets of value we have always liked that. they have local stories going on, so there are ebbs and flows. but for relative value, you want to state clear of that u.s. trademark -- stay clear of the u.s. trade policy and those that are more sensitive to that. manus: you get a sense of real relief in terms of the real. bounce had that nice big played into the market. do you begin to reassess something that has happened like that currency at the moment? , turkeyook around em has had a little bit of good news. brazil has had a little bit of good news. the fed has had the market tightening for it, a 5% drop in the equity market, and rates up at 3.15.

where is the relief trade in e.m.? viraj: there are some stories. down toeal, it could go 3.50. off really trading negative fundamentals on a domestic basis. when we look out the dollar, a lot of factors here are short-term and a lot of them stem from what is happening with fiscal stimulus. there is relative economic divergence, equity outperformance, but a lot of that is repatriation flows, and then there is the relative said and monetary pause -- fed and monetary policy. the fed may have raised the bar prematurely in terms of letting interest rates go about neutral and not considering potentially whether 2019 -- what it could look like. france, that story is running out and that is good for yams. nejra: the fed minutes will be taken into context. thank you so much, viraj petel,

strategist at ing. be continuing the conversation with us on bloomberg radio at 7:30 a.m. coming up, more saudi arabia, more markets. this is bloomberg. ♪

manus: good morning from dubai. this is "bloomberg daybreak: europe. nejra: these are today's top stories. manus: saudi arabia is reportedly preparing an explanation for the disappearance of the journalist. may skip the it kingdoms investment conference. china inflation accelerates again while the pboc strengthens its kuan. -- yuan. the central bank will protect the currency.

the european council president says no deal brexit is more likely than ever. even as the u.k. and france strike a positive tone in a deal. nejra: good morning, 7:00 in london, just under an hour from the european equity market open. we saw the stoxx 600 closed slightly higher. u.s. futures are pointing higher today. similar picture in europe. nasdaq futures have been trading higher by 5/10 of a percent. more muted when it comes to the european space. dax futures higher by a 10th of a percent. hard to see any real directionality for european equities right now.

manus: i think that is very reflective of the bond market. there is a big note out. by 330tures down seconds. the days of being in 3% are long gone. the economic data does not support the increase. keep an eye on btp's. relief.moment of the italian coalition reaches an agreement on budget and tax. let me show you how the middle east markets are opening. we saw a repeat -- reprieve. the adx as you can see just a slight relief rally in those markets. what is the result of pompeo arriving in saudi arabia?

what will that do to the story in terms of the disappearance of jamaal? details and facts drive markets. >> donald trump is uncertain whether his administration will participate in the saudi investment conference. that follows the disappearance of jamal khashoggi. he told reporters steve mnuchin will decide by friday whether to attend the meeting in riyadh. microsoft ceo has weighed in on the disappearance of jamal khashoggi. --dns ella said reports satya nadella said reports are sad and contrary to the progress he had hoped to see in the country. >> a real step back. i was really hopeful for saudi arabia in terms of the

opportunities for the citizens there, the women in saudi arabia reforms.mall business mattis has downplayed tensions with beijing's saying washington is not out to contain china. he also says america is cooperating on issues including north korea and the united nations, but conceded there would be times they would step on each other's toes. inflationnsumer accelerated for a fourth month in september. -- according to data from the national bureau of statistics. rose spurred by floods and animal disease. 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. this is bloomberg. manus: thanks for that roundup. let's get your market update. a hint of green.

man, put it in context for us. signal.xactly a green and upseeing japan 1.25%. thingsseeing signs of being oversold in the india market. earnings are going to be driving that. rebound, in uso really a we are seeing signs of things could be getting -- today in sydney. we are ending the day up 0.5%. we will fluctuate throughout the day, flat when it comes to the hang seng. we are seeing selling pressure in hong kong. we are down 0.5% here. 0.8% when it comes to some of these large caps in china. we did get that inflation picture. relatively benign, but seeing consumer prices pick up lately.

lightly. -- pick up japan still seeing dollar yen pretty weak. the yen is weaker here today. on a rainy day, citigroup is saying by the yen over the swiss franc. as a safety haven currency, especially when the risk aversion is in europe. given concerns and italy, perhaps buying japanese currency as a safer. i want to show you what we are looking at in terms of movers. luxury stocks getting hit in hong kong. makeras the italian suittaliant talking about how they are getting consumer behaviors changing. we see the likes of luxury stacks -- stocks like product like pradae p --

down. also airline stocks in china. morgan stanley started cutting the price target for the big three because of the higher oil prices. they slashed the price taxes of air china, china eastern, southern as well, by double digits. we see china eastern falling more than two and a half percent. i want to end on softbank. we see the stock rebounding by 3.5%. the stock really has become collateral damage amidst this saudi controversy revolving the missing journalist, jamal khashoggi. the saudi's, the biggest investment in the vision fund. the biggest question is whether this vision of his is in trouble. nejra: thank you so much. saudi arabia is facing a global

backlash following the disappearance of jamal khashoggi . the u.s.ump said participation in an investment conference is uncertain after several political and business leaders dropped out. as the fallout expands it could frustrate the kingdom's plan to make foreign investment the cornerstone of the saudi economy. joining us now, the chief middle east economist at bloomberg. and jodi schneider. let me start with you. does the decision to stand -- send mike pompeo signal how much of this is become a crisis? >> it certainly does. the fact that the secretary of state will be going there is really critical. the complexo how situation president trump is in himself. he has made saudi arabia the cornerstone of his middle east policy. the alliance with saudi arabia

is key to what he has been trying to do. really back to the middle east in terms of the economy, saudi arabia in terms of the economy. he made his first foreign visit their. he has had the crown prince twice to the oval office. this puts him in a competition position and he is getting increasing pressure from members of congress, including members of his own party, to take some stand on what's happening. what will come with reports, investigations, will be critical. that is why he is sending mike pompeo to saudi arabia. let's bring in our middle east chief economist. this is the last in the line of many issues which is a challenge for the foreign direct investment from -- four mohammad bin salman. this is upsetting the global

investment community. >> absolutely. previously saudi arabia had issues in terms of small growth, and terms of the restrictive labor regulations. with have hadyear only a few risks coming up. you need to have the local partners. that local partner now might be implemented in corruption. if you are a foreign investor you have to worry about being shut out because of your nationality as what happened with canadian and german companies. if you are a foreign investor you might want to disassociate yourself from saudi arabia if the allegations of the assassination of jamal khashoggi turn out to be right. let me come back to you and bring in the u.s. side, in terms of the retaliatory terms

the u.s. could use. >> onee the options? that congress and members of president trump's party have been pushing for is to halt arms sales. to hold those as a way to express displeasure with the -- that isce of something president trump has pushed back on. he said if that occurs, saudi arabia will just buy from china or russia. he is pushing back against that pressure. there are diplomatic channels and there are sanctions. the u.s. could impose those. saudi arabia has said they would retaliate. there is that issue as well. the kinds of things the u.s. could do so that they would not face retaliation. amazing,ere was some

spectacular target set by mohammad bin salman. the yemeni war is his, looking everybody up last year was his. how big a mess is it? give me a sense of the number of jobs he has got to create in saudi arabia. >> his target was to make to hit 9%nt for saudi by 2020. we think that requires the addition of 700,000 jobs, and that is a tall order. sdis have declined by 80%. the crown prince said he expected them to go up, but if down by 80% and up by 90%, it is lower than the original level. fdis will be far

away from the target. -- a greateat priest piece of writing this morning. breaking everything down a dubai with our senior international editor, a stalwart of understanding the nuances around the world. several companies, including bloomberg, have pulled out of the event as media partners. breaking news first of all. this is b.a.t., the cigarette company. earnings per share growth impacted by foreign-exchange. they are going to have a knock on effect. this comes back to all the emerging-market moves we have seen around the world. they see the full year, they see the full year being knocked by fx. vat remain confident of delivering good adjusted revenue growth.

this is british american tobacco updating the markets. the s&p 500 resumed its losses yesterday after a brief respite friday. european futures are pointing flat this morning. the shenzhen composition is set for its lowest close since 2014. the market continues to look vulnerable. >> short rates, short stocks. we put in a cycle high and equities. i could be wrong, but it feels that way. the stock market looks very vulnerable right now. i think short stocks and short rates is the right train going through the election and after. nejra: joining us now is the head of ishares and neo-investment strategies that blackrock. talking of u.s. equities, we saw that read on friday after the selloff on wednesday.

u.s. futures pointing higher today. let's talk about volatility. what have you seen in terms of etf flows? what is your take on what has been happening in equity sectors? at the beginning of the year, we got inflows into sectors like technology. a lot of that has given back. at the beginning of the year we saw muted interest in defensive sectors such as utilities. starting to pick up. in --me can be observed has significantly increased over the course of the last few months alongside pent-up interest into momentum is starting to get more muted. manus: very good morning to you. tech has been a very critical issue in terms of the walk the

market took last week. i have put together chinese tech and u.s. tech. there is no denying that china is even more battered than the u.s.. what can you tell me about the flow of money in regards to tech and differentiate that for me between u.s. and china. inflowsr a lot of the that lead into u.s. tech and other markets had more growth in comparison with emerging-market tech because interest in emerging-market assets has been more muted in comparison with last year. that, we also have seen outflows from the tech sector because of the corrections on the price front which many market commentators have said it is because of the significance price action earlier this year.

we continue to like this sector because of strong earnings expectations, especially after the correction opens up more attractive valuations. nejra: you like tech that blackrock. you also like financials. banks have been underperforming despite good growth, higher rates, and respectable earnings. if that trend of banks under performing going to continue? steepeninge curve could continue given the robust growth outlook as well as argue that in the u.s. come inflation should hold for central banks targets. that, banks so far year to date have underperformed versus the broader markets. in our view, that together with regulatory outlooks could make it very interesting to look at.

we would differentiate, it is u.s. banks rather than global. manus: we will see what the others deliver in terms of numbers. us, we you stay with have more value to get from your blackrock team. bloomberg users, you can track with everything am of the charts, they are on gtv . bloomberg tv, you can catch up, build your own library. this is bloomberg. ♪

nejra: it is 7:21 a.m. in london. 40 minutes away from the european equity market open. is setnzhen composition for its lowest close in over four years, down 1.7%. muted gains on the msci asia-pacific index.

u.s. futures pointing higher. we did see losses yesterday led by tech. tech lead the rebound on friday. higher, the dollar on the front foot against the yen. 112.r-yen now trades at manus: our markets are just up and running. lower on the euro stocks. the italians have passed a budget. that is ready to go to europe. 10 year yields unchanged. a slight more proclivity. dollar-yen is a bigger story. nymex crude is coming back. it upak summed beautifully. saudi arabia is in damage control mode over the disappearance of jamal khashoggi . in terms of sending pompeo to saudi arabia. oil is lower.

we get supply data later in the united states. down by 0.25%. let's get your bloomberg business flash. >> the billionaire who cofounded microsoft with bill gates has died. he was 65. according to a statement from his investment firm, he died in seattle from convocations of non-hodgkin's lymphoma. bill gates said paul was a dear partner and true friend. personal computing would not have existed without him. singapore state investment firm has held talks with chinese authorities about acquiring a stake in anbang insurance group. examining aen potential deal for several months. several sources say the investment firm is not currently in active negotiations with anbang. it is shaping up to be a big year for global mergers. but there has not been enough to boost the bank of america investment bank.

the lender posted a 29% decline in debt underwater -- underwriting revenue. that drove overall invest in banking revenue down 18% compared with a 1% decline at rival jpmorgan. that is your bloomberg business flash. --manus: thank you very much. parse them very closely. the question of the day, go on to your mliv screen and join the team. wei li is with us, the head of ishares at blackrock. if we look at the minutes, let's see what we get coming through in terms of the told. -- the toll. we have taken quite a bashing in the past number of weeks.

in terms of the flow of money, do you think it was a rerun of february where we see equity markets draw down but then adjust themselves the echo -- themselves? >> if you look at market volatility, it would appear that investors are not -- they are sitting tight. we have not seen significant outflow in comparison with the increase of trading activity in the secondary markets. it would appear that investors do not think of what's happening right now as an end of cycle correction. fleet. late cycle to clients and investors, people are asking when to enter rather than if to enter at all. the has been the -- has been underpinning the outflow. interesting, people are

asking when to enter. it is happening with the backdrop of rising rates. you talked about curve steepening earlier. does that mean that blackrock you prefer the front end of the u.s. curve? >> we see opportunity on the front end of u.s. government bonds and markets. after adjusting for inflation, for the first time in a long time, it gives you real rates, real yields, making it a very competitive place to park your cash in comparison with the other cash. having said that, because of the rates we have seen the long end of the curve, we could see that asventing opportunities well. matt: thank you for sharing your thoughts with us this morning. a and i.it from nejr

the european open is next. these futures are prevaricating. nejra: i will take you through the european equity market open along with matt miller. tune in to bloomberg radio as well. ♪

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to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. nejra: welcome to "bloomberg markets the european open." asian stocks rising up into the close. u.s. futures point to a higher open. europe ask great britain looks better. the cash trade is less than 30 minutes away.