francine: president trump says it would be bad if the kingdom's leaders knew about what happened to jamal khashoggi. popular in shares soared in extended trade as user numbers trade -- crushed even the most bullish forecast. theresa may heads to the summit to break the deadlock. donald tusk tells her to come up with something creative. ♪ hello everyone, this is bloomberg surveillance.

these are your markets. there seems to be some presumption of quiet on the markets. 600,ng at stoxx euro-dollar not moving. overall, giving it impetus is earnings, a lot of them beating expectations, looking at tech stocks. it got a lift due to what we heard from netflix, but that may also filter through the opening in the u.s.. overall, do we have the same tensions? lot of foreign direct investments, money we expected to go to saudi is now in a wait and see mode as we hope to have more news about the outcome of the investigations over the disappearance of journalist come all khashoggi --jamal khashoggi. and, the lingering budget lull between italy and brussels president of the

united states saying his biggest risk is actually the fed. coming up, we will talk brexit and the u.k. with the jim o'neill, former commercial secretary to the u.k. secretary. coming up shortly. first, bloomberg first word news here in london. donald trump says it would be bad if saudi arabia's crown prince knew about what happened to the missing journalist, but he expressed skepticism over the growing criticism of the saudi rulers, comparing it to allegations against supreme court justice brett kavanaugh. republican senator lindsey graham lashed out at at mohammad bin salman. >> this guy is a wrecking ball. this guy got murdered at a consulate in turkey, and to expect me to ignore it, i feel used and abused. i was on the floor every time defending saudi arabia. there's a difference between a country and an individual. the figure is toxic.

he can never be a world leader on the world stage. >> christine lagarde has deferred her trip to saudi --bia, where she had a plant planned to attend the devil's summit. she did not get a reason for the change. several companies have pulled out of the future investment initiative event as media partners. donald trump has called the fed his biggest threat, criticizing it for endangering economic growth by raising interest rates. the central bank has hiked three times. news, trumpfox ratcheted up his rhetoric. >> i am not happy with what he is doing. because inflation. and i get. it as well as any president who is ever been here. i get it really well. but right now, that inflation is not here. if we start to see it, then you start to go.

in the meantime, i would like to pay off debt. mcconnell says the fight over brett kavanaugh's supreme court appointment has given energy to republican voters. that comes as the battle for control or the senate enters the last three weeks. he told bloomberg that the timing could not have been better. >> cliffhanger races we have like arizona and nevada, montana, north dakota, missouri, indiana, tennessee, north dakota, virginia. i think it has been like a shot of adrenaline, and hopefully, we can match the democrats in enthusiasm. >> theresa may has been told her latest proposals would be thrown out. they say chief with julian smith told top ministers that the current guarantee to avoid a police border is not have enough votes.

they had to a summit in brussels to try to break the deadlock. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. frenzied. -- francine. francine: global stocks are higher this morning. the s&p 500, mastec, and dow jones enjoyed their biggest rallies, driven largely by strong results at the start of earnings season. meanwhile, trump has lashed out at the federal bank, just a week after calling it loco. fed, biggest threat is the because the fed is raising rates. they are independent, so i do not speak that, but i'm not happy. they go too fast. francine: so what are the biggest risks? joining us now is jim o'neill, formerly goldman sachs chief

economist as well as commercial secretary to the u.k. treasury. it is also served as the nonexecutive director before returning to private ownership. there are some big risks out there. jim, when you look at world growth, do you worried that there are these idiosyncratic risks that could all come to the four -- fore? jim: yeah. [laughter] the five orlance at six indicators i always believed in -- francine: which are? jim: we are slowing. francine: what are the indicators? jim: korean exports. exception.n else, subcomponents of that. and chinese indicators.

they are showing signs of slowing. francine: is that because of trade concerns? or is it overlaid with politics and populist? the biggest surge to growth earlier this year in the previous 18 months have lost some of its natural momentum. you look particularly in parts of europe. it is showing signs of slowing, even without any of this. , deliberately, it has slowed down. before we hading these interconnected and independent risks come on the scene. the slowdown, is it a possible recession? what just a gradual slowdown? jim: these are generally only useful for the next six months. at is the sortok

of circular thing involving global financial conditions. rightlyets insist quite sensitivity. if you have an ongoing surge of bond yields everywhere, and that in equity a decline markets, which would clearly , has its, in itself own consequences to add. you can see some of the potential warning signs. francine: treasury yields are higher? is it just a product of normalizing interest rates? jim: of course! if we could have a world where bond yields rose, but equities were immune in the u.s. and elsewhere, then we could relax. but if we have rising a bond yields, the result in the fed formulas, this collapse in

earnings growth and predictions, certainly, the momentum is gone. then it's a bit more challenging. as you know, one of life's more optimistic people. learned not to ignore things you have to be objective about. so there were definitely some things that made me a little cautious, but for the past three years looks hunky-dory. francine: jim o'neill stays with us. but let's get to our other top stories. muellercounsel robert is expected to issue findings on core aspects of his probe soon after the november midterm election. this as he faces intensifying pressure to produce more indictments or shut down his investigation. that is according to two officials who spoke to bloomberg. for more, let's get straight to jodi schneider. this feels like a big deal.

--s is a bloomberg school scoop. they have had so much pressure that we should find out the fate of this in the next four weeks. jodi: there are talks that this could come very soon. it could come right after the midterm elections. there is intensifying pressure on robert to come up with something bank. -- big or shut it down. president trump has been very critical, so there is a great deal of pressure. this is in one of two areas that we think there may be some or that they may be closing in on indictments. francine: what are the two

areas? there are multiple investigations and things that are looking at. but what are two specific things he may be closing in on? jodi: one would be pretty dramatic, as he said. -- you say. one is on whether russian officials colluded with u.s. ,andidates, in this case, trump to interfere in the 2016 election. the other would be obstruction of justice. whether president trump or any member of his campaign at the time did anything to obstruct the inquiry. either or both of those would be big headlines. in any indictments related to those would, of course, be much more dramatic than we have seen. but what do we understand about the findings?

will they be made public? jodi: not necessarily. this may happen and we may not necessarily know right away. of afteralso the issue presidentm election, trump has made clear he is not happy with his attorney general or the acting fbi director. so, at that point, if they were to be fined, there is the question of where the investigation would go. all of this gets pretty interesting and somewhat muddied after the election. francine: thank you so much for the update. up next, guilty until proven innocent. donald warns against russian to blame saudi rulers with the disappearance of jamal khashoggi. we are live in the region next. this is bloomberg. ♪

francine: let's get straight to bloomberg business flash. here in london is juliette saly. added almost 7 million subscribers in the third quarter, for more than expected. they also issued an update outlook for the current three months, saying they plan to add a record number of users in total. will soothe doubts about global prospects after its stumble with previous result. asml reported earning forecasts that beat analyst expectations. they predict sales of 3 billion euros in the fourth quarter and

a growth margin of 48%. they have also announced five new orders, which they have been pushing to clients including samsung and intel. drugmaker be sales estimates in the third quarter, and overall income was $14 billion, up 7%. showed little change in the face of competition from a new wave of cheaper copycat. new medicine a group but missed analyst forecasts. francine: thank you so much. expressedmp has skepticism over the circumstances of disappearance of saudi journalist jamal khashoggi. , the u.s.rview president cautioned against rushing to blame saudi rulers compared the case to allegations against brett kavanaugh, say, here we go again. with your guilty until proven

innocent. crownalso said the saudi prince has denied knowing what happened. it depends whether or not he do about it. number one what happened, but whether or not he knew. if he knew about it, that would be that. if he did not new, bad things can happen. francine: joining us for more is gulf economy reporter, who has been following all of the developments very closely. where are we in the investigation francine: the timeline was we should have something by the end of the week. the saudis have not actually told us or the media when they expect to release the results of their investigation. secretary pompeo is, right now, in turkey, meeting with the president. in the investigations from the

turkish said, which yesterday they concluded the search of the consulate. they said there was evidence that mr. to show he was killed there. that is ongoing. we also heard that the counselor general has left turkey, that is ahead of a search of his house which the turks requested. far, and alternative event or narrative that was supposed to be emerging has not materialized so far. instead, pompeo says they promised a thorough investigation, which many will be doubtful of. francine: did mike pompeo actually report to the saudi rulers? is it thorough or is he going soft on them? in the u.s.ve

amongst democrats and republicans alike is that trump is being played. he is going extremely soft and not pressing on them for answers. has beento ever, it nearly two weeks since this incident happened, and we are still not hearing any saudi official line. there were leaks to the media over what they might say, but they have not come out and said what the crown prince originally told bloomberg , that he came to pick up his papers and left within an hour. now, the entire narrative is shifting. nobody is debating the fee was killed, now it is whether the crown prince knew about it or ordered it. so this version is not being bought by a lot of people in congress and the u.s.. many are very angry, including senator graham, who basically

called for a new leadership in saudi arabia, another crown prince, saying the current prince is a wrecking ball and a toxin figure-- toxic figure. francine: have we seen a lot of foreign investment coming out of saudi? or have we seen the contrary? an extremely difficult position the saudis find themselves in. of trying to find foreign investors, you are seeing executives pulling out of the conference. was reported that saudi arabia pulled out of one investment because they were upset about comments about them. but so far, they have bigger problems. they have an unemployment issue, defecit.it -- a gdp

and in attempt to move away from oil dependency. many of those reforms plans will now face a setback, as more investors will be skeptical of saudi arabia's push and the political fallout and possible sanctions. francine: thank you so much. course, quick disclaimer, several companies, including bloomberg, have pulled out of the future investment of it as media partners set to take place in react -- riyadh. still with us is jim o'neill. jodi: was that real? is this real? francine: what does it mean for oil, for investments, for foreign policy? this is such a complex thing for all of the policymakers to deal with.

some part of me can see why the u.s. is being a little bit careful before jumping in. , iback a few hundred decades did my phd about oil prices and opec during the second oil price crisis. thathe whole planet knows the saudis are the key marginal player in world oil supply. they can turn the tap off pretty quickly. whatever the rights and wrongs of what they've done, and it doesn't look too good to me, if they get pushed into a corner, that has to be something one would fear. so the u.s. and others need to be fully cognizant of that. however, for something as apparently badly and blatantly done, it is at a time when western countries are trying to hang on to some kind of belief

in credible global order -- credible global order. westernpossible for leaders to not have issue with some of this. it is extremely complex. there are so many angles. we were chatting off-line that the whole flow of money going there, they are a huge funder of some of these small, slightly adventurous and ambitious stuff. what on earth will happen to that? you can go on and on. francine: and we will go back to it. jim o'neill stays with us. we also need to talk about netflix. those shares rallied in trading after crushing third-quarter earnings. users,ded 7 million easily beating estimates. they now plan to add a record 29 billion customers, and it

appears their record-setting programming is pulling off -- paying off. they have released hours of new movies, and specials, helping attract new subscribers. joining us now is alex webb. first of all, this is a huge surprise. from almost nowhere, they are doing well. they have been doing well, but the concern is could they sustain this rate of spending? shows,said, hours of new the first time ever breaking the 500 hour mark. that was the skepticism, they spent all this money, can they deliver subscribers? it seems yes. they have good analysts. they have worked out that if you put in a certain amount, you get a certain amount out and it is paying off. francine: we had concerns going in. are they dispelled? that,a big concern is

even if they deliver, how many people are willing to subscribe? secondly, can internet feed sustain? the ceo says he sees another decade of growth. he will obviously give the most optimistic projection, but that seems to have assuaged. concerns. -- assuaged concerns. francine: content is king. alex: content is king. there was a story yesterday about the saudis attempting to buy manchester united. in that world, despite my opposition, what they do is that manchester united is the world's greatest live media content player. it's not even a football club. francine: true, but they have to win games. alex: some of us would like that.

be manchesterto united of bobby law, but the guys who own it, i would not be surprised if they were having conversations with netflix and apple tv about the next iteration where they started doing deals about things like that for content. there are jokes made that if apple is serious about content issues, i every nfl team -- by every nfl team. francine: coming up, we talk brexit. theresa may brings the brexit battle to brussels as she is even more cornered. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ."

let's check in on what is trending. we break down the details of a dutch project returning artwork back to jewish families. 170 pieces have been given back to their rightful owners. the secret to your next great ski vacation maybe club med. the hospitality company is trying to revamp its image. our most read stories, and third-place, global stocks rebound on earnings season optimism. netflix soars after posting better subscription growth. president trump says it would be bad if -- we're getting breaking news out of the u.k. the inflation figure for the month of september falling to 2.4%. do you worry about some of these headline inflation's? >> my immediate reaction is that

the earnings numbers are showing some positive growth for the first time in quite a while, which is important for the beleaguered u.k. it means the consumer is not being pressurized to draw down on what little savings they've got. that is good news. francine: we will also get back to some of the things that boe could do. juliette: donald trump says it would be bad if saudi arabia's crown prince new what happened to the missing journalist. the u.s. president showed skepticism. speaking to fox news, republican senator lindsey graham lashed out at the crown prince. >> this guy is a wrecking ball. he had this man murdered in a

consulate in turkey. i was on the floor every time defending saudi arabia because they are a good ally. there is the difference between a country and an individual. he can never be a world leader on the world stage. lagarde hasristine postponed her trip to saudi arabia. fordidn't give a reason the change. several companies have pulled out of the event as media partners. donald trump has called the fed his biggest threat, criticizing --for the u.s. president ratcheted up his rhetoric of jerome powell. >> i'm not happy with what he is doing. i fully get the whole thing, the federal reserve, i get it.

now, that inflation is not here. if we start to see it, you start to go and do what he is doing. in the meantime, i would like to pay off debt. juliette: mitch mcconnell says the fight over brett kavanaugh's appointment has given bigger to republican voters ahead of a midterm. over thes as battle senate comes. >> in cliffhanger races that we have like arizona, nevada, missouri, indiana, west virginia, florida, i think it has been a shot of adrenaline to republican voters. hopefully we can match the democrats in enthusiasm going into this election. juliette: 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.

i'm juliette saly. this is bloomberg. may's brexitresa headache is far from over. sources have told bloomberg that the guarantee to avoid a hard border with ireland does not have enough votes. she has to a key summit in brussels to break the deadlock. inning us now is maria brussels ahead of the key leaders summit. how tense will the meeting between the leaders be? francine, i have to tell you, today the word in brussels is deadlock. we know the plan is a plan of brexiteers hate. they say they won't work. the two proposals are well be on will subjecte eu

-- this idea of a new backstop to a backstop. it is difficult to see how they come together. none of this is new news. the question is do we have political will to take this forward? we know the technicalities and negotiations at a technical level have stopped. we go back to the story we reported yesterday. theresa may is under some much pressure at home. sources tell us the current brexit plan will not be clear in the u.k. parliament. that is also a source of concern. what we hear is that we need to stop the soundbite and get a clear proposal today to get to a november summit that can hopefully seal the deal. francine: thank you so much. maria will be on the ground for the next couple of days for us. o'neill.back to jim

brexit, do yout think the eu is trying to give the u.k. a deal that can also geither parliament, or do they does not care? -- get through parliament, or are they not sure? for someconsequences , german exports and so on. as always, there is inevitably gains that make all sides play out for the media. one of the things that caught my eye this morning, is that there seems to be a message out of paris that macron is adopting a different strategy from a month ago that he is now trying to push the idea of some kind of compromise on eu redlines. back home, what do i know? i think the fact that michael gove, who was somebody that

caused elections by being a front guy for the league crowd is sticking behind theresa may is a very important thing in terms of where this really goes politically. there is a lot of noise, as always made by some of the noisiest brexiteers. thinking we might be closer to some kind of breakthrough then appears to what is being presented in the media this morning. cannot solve, the reality of the long-term competition of the irish border. some kind of a great statement that will give us more time without this almost artificially marchd deadline of because of one way triggered article 50. as they get closer, there is more and more focus.

francine: how do you deal with the irish border? suspicion, is that we will get some kind of extended stay in the customs union. francine: 18 months, longer? what one of the other brexiteers this morning said, they wouldn't be a first to some additional time. it looks to me that is where this is headed. a lot of people who are passionate about that, flouting the terms of the referendum, going to make a staggering amount of noise. realizing, if we push it too far, we might end up with a second referendum, which they probably don't want either. there is scope for some sensible deal. francine: what are the chances of a second referendum, or crisis next year?

jim: the chances exist. francine: 15% or 40%? jim: probably 40%. i would today think the likelihood of some kind of deal is a bit better than i see being generally discussed this morning. that is part because i suspect being such an observer of brussels games before, they are deliberately feeding the media to make it seem like a classic eu style last-minute smoke-filled crisis. like they are going to have to do with italy. francine: which might be in interest of the europeans. if you look at the possibility of a second referendum, do you think if we had one in the next six months, the outcome would actually change? believed thelways referendum was a mistake because

it is far too complex a question to ask people. to have a second one doesn't make a lot of sense to me unless there is a massive shift in the polls. if we ended up with a result that was 51-49 the other way, what does that do with the stability for the 60 odd million people that live here. iny if we have a big shift regular polls, in my view, is that really sensible. what is more logical is that parliamentarians, with the prime minister and cabinet office take some responsibility and are pragmatic about trying to have the right wording, along with brussels to essentially kick it down the road a little bit until something more rational can be figured out about the irish border. francine: thank you so much.

jim o'neill stays with us. coming up, america's competitive streak. validate trump's campaign. that conversation is up next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." we are getting breaking news after danske bank. they are still searching for a new chief executive. they cannot with a statement a few minutes ago saying that they have decided to update the markets. name,d of giving us a

they said they have withdrawn the fsa application to name mr. anderson as chief executive. we now know who won't be chief executive of the bank. basically, dance cap is saying they are continuing the search for a new chief executive. bank is saying they are continuing the search for a new chief executive. we will get back to that and get to some of the other nordic banks. first, let's get straight to the bloomberg business flash. netflix added almost 7 million subscribers in the third quarter. the world's biggest paid online tv network also issued an updated outlook for the current three months, saying it plans to add a record number of users this year. asml reported forecasts that

the analyst expectations. of growth margin of about 48%. --y also announced guard ofold blockbuster medicines help a drugmaker beat sales estimates in the third quarter. overall income was $14 billion. best seller has shown little change in the face of competition from a new wave of cheaper copycats. lyft are solidifying going public next year. morgan stanley and goldman sachs are seeking to u underwrite theb the uber ipo.te that is the bloomberg business flash. francine: the u.s. has beaten

singapore to top the world economic forum's global competitively for the first time in a decade. this year, the rankings used in overall methodology that focuses more on factors such as ideas, generation and agility. willis validate president trump's call to make america great again? one of the authors of the report. this report is breaking competitiveness. doesn't attract more investment. is there a business case but not donald trump says, look, on top of the list. this means i am doing a good job. >> what this is is the long-term economic case.

we have learned a lot in the last 10 years about what matters for growth. learned a lot from the financial crisis. we know what made economies more resilient. . we know more about the resolution and how countries need to be using pathology to be moving faster in the future. we know more about human capital. francine: i know you changed the way you measure these things, but i'm looking at number one, u.s., singapore, germany. jim: i'm surprised about the u.s. and japan. i played around with embassies that would fit with most of that. the japanese one is particularly surprising to me. i would love to hear more about why that is. the u.s., i can't understand why it should be first.

francine: silicon valley maybe. dia: we're looking at fundamentals and education all the way in terms of what is happening with innovation. the u.s. does incredibly well, along with japan. i would have thought education in particular, the u.s. would have been weaker. saadia: that is where there are signs of weakness. 100 would have been perfect. that is where some of the weaknesses are. japan is really good in terms of long-term health, the u.s. as terrible as compared to other economies. if you look at freedom of the press, the u.s. is not doing very well. when it comes to workers rights, the u.s. is not doing very well. this because it is at the top doesn't mean there isn't a lot of room for improvement. francine: i am seeing brazil at

72. we are taking this broader base to looking at competitiveness and integrating factors like how technology is being integrated, not just in terms of physical infrastructure our business is able to take great ideas all the way through to actually developing them into commercial products? when you look at these kinds of factors, have fought are the hierarchies of businesses, how forward thinking are governments, is policymaking keeping up with the pace of technological change? when you look at these factors, that is why countries like brazil and about the bottom. francine: where is china? jim: 28. i'm not surprised at brazil. up,indices that i look brazil is usually -- russia is usually better than brazil. francine: i have italy and 31.

italy is after china. jim: china has just become higher than italy. you probably way different fosters differently -- weigh different factors. dia: i think it is some of the software factors around innovation and human capital. a lot of people would say these sort of traditionally software factors are the new hard factors. jim: not sure why italy would do particularly well. francine: i have been abroad for many years. why are you surprised about japan? jim: japan struggle for 30 years with an inability to perform its domestic services. because of everything else that has happened, it doesn't have the edge in some parts of international competitiveness

that it once had, not least because of the -- for the last 30 years. but japan needs to do is sort out its domestic services sector, otherwise it will never grow. francine: when you invest that goldman sachs, did you look at reports like this? jim: we had our own. it wouldn't be as good as yours, but we had one. these things are really valuable. the slight dynamic for the most a bit -- most advanced countries, it wouldn't change that much. francine: how much does this have to do with trade? if you are dealing with the u.s. and the u.s. are harassing over trade, you're probably going to be heard. what becomes very clear is that it still holds true that more open economies are more competitive.

that thoseat caveat open economies have to also ensure they are putting in place some measures of social protection. yes, openness is a win-win between economies, but it can be a win lose within of the economy. that is where their day to be that kind of support provided to the folks that lose out. francine: thank you so much for joining us. we have been trying to keep you up-to-date with some of the participants at the fii saudi conference in riyadh. participants have been pulling out. bloomberg was also a media partner and we pulled out. is a chiefcoming out executive due to participate has now said he will no longer participate. we earlier had the ims as well. let's get back to jim o'neill

and news of another pharmaceutical company drastically increasing prices. been left wondering what role governments and civil societies should play when it comes to holding the big pharmas to account. is it unethical and should drug manufacturers be allowed to increase our profit margins so significantly? review an independent for the former u.k. prime minister, david cameron. how do we look at good business? that we really pleased are finishing with this because this is important for me to try and encourage chatham house to help business become much better about, i broadly summarize it as profit with purpose. so many different global industries look at profit and spend a lot of effort and a senior executive time.

they need to think that there are stakeholders that are not just shareholders. the very last thing that we touched on was the dialer must of global trade. one of the reasons we are going through these dilemmas right now, and perhaps why we have trump and brexit is because too many people inside countries have lost out. we have to do something about that. it,er than worrying about we have need to do about it, too. as it relates to pharmaceutical companies, they don't really put any skin in the game on producing the antibiotics unless they think there is a mammoth -- very largeent profit. what our review showed was that solving this of our generation would cost $42 billion globally.

pharmaceutical companies have spent more than that buying back their own shares this decade. there is something badly wrong about that. this year, the u.s. may have over $1 trillion worth of share buybacks, at a time of week wages, that does not make a lot of sense long-term for business. francine: does government need to be the incentive? they have pressure from shareholders, active investors in certain cases. do governments need to say this is that? jim: i would say two things. i have been immersed in the middle of this. i have had some implicit role in it. when i think six years from when i left the financial system, on the one hand, many executives when they are bored, simply play the game of the rules that exist.

there is this anonymous pressure from shareholders. they want to maximize whatever the most aggressive shareholders are telling them to do. i heard a case recently of a major global company that once the border to improve -- want 15%. board to improve that is not rational in the complicated world we are living in. policymakers can do more about it by thinking about shifts in incentives and rewards. we will get you back on and talk about this very important issue more. "bloomberg surveillance continues in the next hour. this is bloomberg. ♪

francine: savvy scandal.

president trump says it would be bad if leaders knew what happened to the washington journalist. user numbers crashed even the most bullish forecasts. theresa may heads to the eu summit to try and break the brexit deadlock. this is "bloomberg surveillance ." tom and francine from london and new york. we focus in on saudi politics, the grisly details emerging almost daily. ago, anotheres banker stepping aside. francine: we will have plenty more on that. let's get straight to taylor riggs. taylor: we are starting with

that story. mike pompeo says saudi arabia needs to act quickly. pompeo is in turkey after meeting with saudi authorities. turkish officials have said privately that the journalist was killed inside the saudi consulate in istanbul. the saudi's reportedly may blame the death on an interrogation that went wrong. robert mueller is on the verge key findings and his russia investigation. close tod to be rendering judgment on two of the most explosive aspects, whether there was collusion between russia and president trump's campaign and mother the president obstructed justice. presidentther the obstructed justice. theresa may will tell eu leaders in luxembourg that they need to show flexibility on the issue that has negotiators deadlocked,

the future of the irish border. may was told her latest brexit proposals would be rejected by parliament. shares of netflix are soaring in premarket trading. they added far more subscribers and analys -- than analysts estimated. all of this made up for the stumble in the second quarter. netflix has been spending billions of dollars on original programming and uses that to attacks subscribers. subscribers. 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. i'm taylor riggs, this is bloomberg. tom: thanks so much. the foreign minister of turkey stating very quickly that they had short, but productive talks with mike pompeo. he also goes on to mention the topics include the journalist,

syria as well. headlines beginning to come out. let me to a data check. what a lift yesterday. negative four on s&p futures. euro slightly weaker. vix coming in with a vengeance. forget about the rest. i am fascinated with the continuing negative yields in germany. -0.58, down from .52. that really gets my attention. francine: so it should. is an interesting story because they have less stability when it comes to politics. germany is also trying to shield a lot of their businesses from a brexit tax fallout.

what i'm looking at today is earnings overall. that is giving a nice lift to some of these european stocks. they are paring their advance on wednesday, but still higher. investors trying to figure out what these earnings mean. nothing has really changed. the underlying of this positive news from earnings is still with trade concerns, geopolitics, the italian budget and brexit. this is just the vix index off the s&p 500. the ugliness of february. this is all we did in the latest correction move. nicely.back very we are not yet back to what we would call peace as we know it. we made up a lot of room. francine: i'm looking at one of my favorite charts. it doesn't happen very often these days, but all three major stock indices closed higher by 2%.

what i am looking at is u.s. stocks shrugging off trade concerns. tom: the history of counting the beans of any economy starts with tinbergen back around the facility -- vicinity of world war ii. klein is the one that invented how we figure out what the u.s. economy is doing. he was the first doctor oil candidate of the giant pulse daniel sedin. it evolves down to the blue-chip award. four years of data was put together at morgan stanley. joining us now, she walks on water for morgan stanley. how did you do it? is, one you are in

a large organization like morgan stanley, you have the benefit of global strategist covering every region.ass of every coming together and being sure all of those beans add up is part of the process that helps what we call keeping it honest. wrong, it isif i'm a very constructively argumentative process. ellen: it is. i would describe it as constructive. it is feedback and push back. that is really important because you take it, listen to it, make sure that you are looking at it and a way that this person is presenting to you. when you go out with a forecast, you go out with extremely strong conviction. stuck to our have

one hike call in 2015 or 2016 if i didn't have that debate to be darn sure that i felt convicted about that view. people -- first of all, congratulations on the award. do people debate enough? arepeople vocal, policymakers vocal? if you talk to the former vice chair of the he is one of those that will lament over the day that the sunshine act was put in place, where they released transcripts with only a five-year lag. now, five years sound like a lot. most board of governors have 14 your terms. we said after that was put in place, what have been very open, wasst debate at the table everyone would come in with

prepared marks any would go around the table and read your prepared marks on how you felt about the economy and monetary policy, and the next person will go on. said, something that was stuck to, was those conversations would be held off-line, ahead of time before the meeting, by phone, so that those debates did not take place where the transcripts would pick them up. much of it plays out on the global stage as they are picking -- speaking publicly now. at thee: if you look bank of england, it is very different to how the fed does it. is there a right or wrong way and if i go back to market functioning? if you have too many transparent and open debates in the public, do you have a higher chance of the market was communicating our misunderstanding? ellen: i think there is that

chance. you have many voices. i remember that, complaint from ours -- he encouraged everyone to speak publicly. if i traveled outside of the u.s., clients would say, who do i listen to? tom: let's listen to one man. roll the tape. here is the president of the central bank. threat is the fed because they are raising rates too fast. it is independent, so i don't speak to them, but i'm not happy with what he is doing. tom: the president of the united states. there is a president right now threatening fed independence. let's back up to a call that may be famous. you had the courage to go out and say no.

bring that call up to date and what a call in 2019 looks like. ellen: compared to consensus, we are still on a more cautious side. no reason for them to stop hiking right now. they are completely convicted. the but is that going in the next year, they are completely divided between do they deliver 3, 4 or five hikes? the risks have risen for next year. otherde risk of trade, , thosetional spillovers are very real downside risks. i think we should recognize that while the median dot is at three hikes for next year for the fomc, it is not a hard dot as i would call it.

i don't expect them to have any more clarity by the december meeting on how many times they should hike next year. we think they will hike twice through june. we think by the time they come into that september meeting, the shape of growth, if our forecasts hold true, will show the economy going back to 2.4%. that is where to be evidence that they must be around neutral. let's of them will say, policy or and take a look around before deciding whether or not we need to be restrictive. that is how we think it will play out. ellen stayscine: with us for the hour. coming up, we will talk cannabis. the drug is legalized in canada. this is bloomberg. ♪

taylor: "bloomberg surveillance this is -- this is "bloomberg surveillance there is new skepticism about ibm. the company missed estimates on quarterly revenue. revenue has picked up the last three quarters because of its legacy mainframe computer. denmark, the financial regulator shot down dots dow -- danske bank's attempt to name a new executive. roleormer ceo left for his in one of europe's money laundering scandals.

parent of united airlines has boosted its profit outlook for the third time this year. strong demand for travel is overcoming higher fuel prices at the world's third-largest airline in the u.s. blockbuster medicines are holding their own against a new wave of cheaper, bio stimulators. shares are hired today. hashat we see is the stock started to recover. i believe it is now about delivering quota by quota. sb continued to not only compensate, but overcompensate the entry of stimulus. i have no doubt, the confidence in the stock will come back and eventually, this will be reflected in the share price. taylor: that is your bloomberg

business flash. much.ne: thank you so donald trump expressed skepticism over the circumstances surrounding the disappearance of a saudi journalist. in an interview, he warned against rushing to blame the saudi rulers and compared the case to allegations against brett kavanaugh, saying, here we go again with you are guilty until proven innocent. mike pompeo has already met with both turkey's president and foreign minister. the turkish foreign minister that they areerg expecting lifting u.s. sanctions. they also talked about other things, including syria. turkey's straight to reporter. it is clear that turkish officials have stepped up pressure on saudi's.

there is a recording somewhere, we understand. what will turkish officials have told mike pompeo are made him listen to? it looks like turkish officials, although they have evidence that backs up claim that the journalist was killed in the saudi consulate in istanbul, it is clear that turkish officials, led by president erdogan have been uncharacteristically cautious and silent about this issue in public. pompeo was inke the region and talked this whole thing out. thetly after his meeting, turkish foreign minister has listed all of the expectations from the americans. it's clear that the turkey side is trying to leverage the situation and use some of it in

its own favor. francine: what is turkey hoping to get out of this? some issues at stake with the u.s.. first of all, the two sides have -- over the parties they support in syria's civil war. have a rule not about how to follow. turkey has been complaining that there has been no progress on the roadmap. this might allow them to get together with the americans and make some progress on issues, including the syrian policy as well as lifting of u.s. sanctions on two turkish foreign minister's.

turkey expects the u.s. into lips the sanctions. -- lift the sanctions. tom: thank you so much. coming up, we will continue our discussion with ellen of morgan stanley. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

robert mueller is expected to issue findings on core aspects of his russia probe soon after the midterm elections. this as he faces intensifying pressure to either shut down his investigation. stephanie baker joins us now on this latest. first of all, we are talking about judgments on two aspects of the inquiry. what are they? what we have learned is that he is expected to issue his findings on the two core issues of collusion, the trump campaign' electeds -- alleged collusion with russia and trump's obstruction of justice, and he would issue those findings to robert rosenstein after the midterms. ,e knew there would be a lull

that he didn't want to issue any indictments or announcements prior to the midterms that might influence the outcome of the election. we were expecting movement after the midterms, but i think the fact that he would be issuing his findings on those car parts of the investigation, does indicate that he has made progress and that he may not be wrapping up the entire investigation, but he has made significant progress. francine: will the findings be made public? stephanie: that is the key question that we don't know at this point. under the special counsel rules, he is required to issue a report, his findings to robert rosenstein. it is up to robert rosenstein whether or not those findings and his report is made public. if it is not, there will be huge pressure from congress, particularly from the democrats

to issue those findings and make them public, that this issue will not go away until everyone can have a look at what mueller has found, in particular, if democrats gain control of the house, as some polls are suggesting, that pressure will be intense. tom: what is the difference between a finding and an indictment? stephanie: he may find enough evidence to include in a report that may be stopped short of a full indictment. we don't know what he has uncovered, whether or not there are sealed indictments of that he can't release that rosenstein were not released to the public, can he get unsealed indictments? that is the real question. he may have come across evidence that stopped short of criminal activity, and that those findings would be released to rosenstein.

francine: thank you so much, seniorie baker, our writer who has been covering the trump administration. us.n will be back with trumpl talk about the suite a possible sanctions, and what happens in south africa and the amc, next. this is bloomberg. ♪

tom: bloomberg "surveillance." good morning, everyone. francine lacqua, i'm tom keene in new york. of lebrate the anointment

alexander of morgan stanley. 48 months of forecast. she that is lowest standard error. that is an extraordinary accomplishment. i thought i would show you the why here. retail sales, going to focus on retail salings when you didn't know who she was, that's what .ade her famous ellen what is the state of retail sales? >> came in softer than expected but over all an ok report. it didn't show broad declines. there was one large decline that i think needs to be watched. i'm watchful but not worried. it is food services. . in the retail sales report, it captures a good chunk of overall spending that we do each month. it has the dining out category.

when that declines, it can be sometimes households don't field well. tom: seamless. come on. you go thai food. we got that. tell me about the tax cut. i thought we had more money in our pocket. is it working? what you see the it mean? >> it has given households more disposable income but also raised the savings a lot as well. households did prudent things, paid down debt or tucked it away. we have spent some of it. gas prices started rising and that ate up 1/3 of the tax cut. tom: gas prices have already eaten up 1/3 of the advantage. >> we started getting higher paychecks in february and gas price started rising in

february. some of that tax money has gone to pay for higher gas. if you take the glass half full approach you would say at least it helps us weather gas prices better. tom: in your presentation last night you stopped traffic on fifth avenue when you put up a slide about the growing deficit, the growing debt. how tangible is it in 2019? >> we're going to be continuing to look at eye-popping numbers and continue to get criticism of the administration for putting in policies late cycle that are not paying for themselves at a time when we are supposed to be raking in the tax revenue, when economic times are good and reducing our debt as much as possible in the good times. instead we are raising the debt levels when the economy is at its best. that is naturally probably one of the biggest focuses next career will be as growth is

slowing on the other side of the tax stimulus, we're going to be talking about what does the next downturn look like when it comes, whether l we have the fiscal muscle that we need to help boot straff us out of that? tom: here is taylor riggs. taylor: president trump is saying the leeversd saudi arabia are being called guilty instead of innocent. the president said he wants to find out what happened first. still he said it would be bad if the saudi king and crown crins knew what happened to jamal khashoggi. british prime minister theresa may's problems at home and abroad when it comes to brexit. she has been told her latest proposals would be rejected by apartment. european leaders made plans to

keep open after brexit doesn't have enough support. the federal reserve may give a hint today about how hay interest rates may be raised before taking a breather. in the last few weeks fed officials made it clear they are rate table with garagal in-- grad wall rate increases. resident trump said guatemala, el salvador would lose american aid if they allowed pem to enter their countries illegally. global news 24 hours a day on tictoc, in more than 120 countries. i'm taylor riggs. this is bloomberg. tom, francine? francine: thank you so much,

taylor. the african national congress to appropriation of land. donald trutch said he asked the secretary of state mike pompeo to study the south african land and farm seizures. e have joined by the spokesman of land affairs. the president of the a.m.c. youth league who sathe sits on two to have most powerful bodies of national executive committee. they had agreed on some of these measures as long as it didn't hurt the economy. you can argue that debate in the south is hurting confidence. hy go ahead with the plan? >> obviously they need any policy debate in have unintended

consequences but if we wanted to -- confidence or -- we could have immediately -- we are nationalizing the land from parliament but we have -- we do not want to nationalize the land. we want to use the -- the easure of exappropriation. guided by the constitution and also the legislation. it will be done properly to the rufle law. the debate is necessary. we need to have land reform which will enable all south africans to participate in the mainstream of the economy either through other culture or for economic -- in environment part of the country.

francine: ok. a lot of from what i'm reading is that the majority of citizens do not want the constitution amended, something that you will have to do. are you absolutely certain at this moment this is the right recourse? >> it is not proved that the majority of the citizens do not want it to happen. from the public hearings which are happening, you will remember -- because of the -- and because of that, most of them chose to make input into the public hearings which are in the town hall and in the -- some of the - but they did make input. most of them say they do not want it to happen but that is also on the basis of the realities we have just talked

but in terms of the -- there is consistency. can

sharing of the land so everyone is able to participate in the economy because of the francine: of course. let me ask you also about some of the residential land. this is some of the other concerns we have been hearing. it comes under question in the constitutional change then that could have a huge impact. a systemic impact on your banking sector. how do you avoid that from happening and how simply do you choose what land goes to whom? >> yes. we are considering that. it is going to happen. obviously that will include a --

land that is not used. vacant land. land that is -- and various lands that will be identified for these people. and for that, the reason we are considerate of the -- some of the residential -- also commercial properties. it will be difficult to expropeuate them without composition but there might be a need to with the composition and so forth. the model that we're following is a model that is defined which to lso going to give guides every property order. diminish orgoing to wipe out the property rights. the only thing that will is if we imblanket blanket -- -- implement blanket -- of the

land. we're going to follow the rule of law. francine: thank you so much. he is the a.m.c.'s national executive committee member. we'll get back to our guest with morgan stanley. you can also listen to radio. tom: yes, you can. bloomberg day break from coast to coast. do that. this is bloomberg. ♪

francine: this is bloomberg "surveillance." tom, theresa may's brexit headache is far from over.

sources told bloomberg that avoiding a hard board we are ireland doesn't have enough votes from u.k. lawmakers. she heads into a key summit in brussels today to try to break the deadlock. first of all are the e.u. on side in trying to help theresa may get a deal that will get through the parliament? there is like a million angles to the story. >> we certainly do want to achieve an agreement over the withdrawal treaty and i think europe would like to do that prior to the end of the year. what everybody has minded to do today is avoid a rerun of the summit where i think the discussion very quickly got out of control and left a bad taste in everyone's mouth both on the u.k. and european side. i think the interventions have been more constructive going

into today's meeting. fundamentally europe is not ready to remove its red line on the move for ireland's solution to the border problem. that is the problem for the u.k. francine: is the president of france actually having a softer tone and does that make the difference? >> i think there is a misperception about how tough the french are or the other members of the european council. there is a lot of consistency between french and german position and the two-member states and the institutes in brussels and the e.u.'s approach to brexit. no cherry picking. the fact that they ultimately want a new agreement but are not willing to secure one that would undermine the single market over the long-term because trade for those countries are far more important than their lateral trade with the u.k. having said all of those things,

i think the french are seeking to facilitate an agreement as are officials in germany and then brussels. ultimately they want an agreement but are not willing to bend and compromise the core functioning of the single market. tom: for those distracted by it all, what is your timeline on this? the spring or next year or further into 2019? >> i think the timetable is probably being pushed out. i think originally folks were hoping for an agreement today on the treaty and mid november on the future relationship that could get right turn are thified in the house of commons in december. now it is likely in december which would probably push ratification on the u.k. side into early new year. it would be very tough to railroad an grem through parliament if you get an agreement in mid december. we're probably looking at ratification early next year.

i think it will take more nerkting to get over this big structural issue they have on the irish border and i think that is going to take sometime to resolve. francine: what are the chance s of the u.k. having a hard brexit or crash ought? >> i think crash out is unlikely because on january 21, if there is no agreement, parliament will become more important to the process and parliament, you think 650 m.p.'s at least 450 of those simply don't support the crash out. parliament would become more important and most don't want that. i think it would be hard for that to happen because the government has proven incompetent and incapable of a resolution to the irish border. a hard brexit is still the groth's ultimate landing zone. they want to exit the single market and the customs union but

that is beyond 2021 when it expires. francine: thank you so much. we'll be back with ellen of morgan stanley. bloomberg users have interact with the charts. click on loomberg gtv. this is bloomberg. ♪

tom: bloomberg "surveillance." francine lacqua in london. tom keene in new york. joining us is the chief economist for morgan stanley. an incredible four years of forecasting including winning the blue chip advisory and their forecasting award last evening in new york. part of that is gaming the fed. they take g.d.p., inflation dynamics and unemployment dynamics and is it easy now to gain the fed?

>> i think it is getting more difficult. i love the diversity of views that he has brought to the board. tom: do you get clarity out of the press conferences? >> he is a very clear communicators. clients love his communication style but it also means since he is so much more -- even more data dependent than his predecessor, it means more volatility under his leadership as well. tom: in his last press conference, the whole dynamic of data dependency was front and center. can we just say they have to wait and see the data? >> yeah. it also means the fed is going to be much more reactionry as the dats pour in. if you take a more simple approach and you're not going to do rules based policy making as chair powell is taking, it is going to be more difficult for

economists to sit in their comfy chairs in their office and apply models. tom: how do you respond to people saying the fed needs to get it going and get to a positive real rate so they have ammunition available if we get an economic slowdown? how do you respond to people who want four, five, six rate rises? >> if that is the appropriate pace then that is the pace that the fed will take. but to say that you should increase rates at a more rapid place to get as much space between zero and the target rate as possible, you run a risk. chair powell could not be more clear he does not feel pressure to hike more quickly. inflation is still within the zone. he said it is too early to declare victory on having inflation around there 2%, goal. unemployment rate is coming down but he would like wage growth to

be faster. while you know, he is certainly of the view that we don't sit here and do nothing. we continue to hike rates. it is a message of we hike rates but cautiously. there are still precautionry rate hikes in their view in order to stay on top of their economy. not getting behind. we're just not there yet. francine: do you think actually jay powell is feeling the pressure from president trump who every day says out of everything the bigs risk is the fed. that is quite something. that is quite a statement. does he feel the pressure to move less quickly? >> no, i think he feels the pressure to do the right thing. this is one reason why it is so important to make decisions by committee. so that if one person is biased in a particular way, if they don't like the president's comments or if they are in ca hoots with the president, that

that person doesn't sway an entire committee. i think chair powell is there to do a job. i don't think it matters to him what the president says in his free time about policy making and independence is key and is a deeply held belief by the chair. tom: thank you so much. morgan stanley blue chip award winner for 2018. up next, steven stanley a conversation on the american economy. we do this 20 days before the midterm set of elections. please stay with us worldwide. this is bloomberg. ♪ ♪

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a market bottom of 500-plus points? is there an underestimation of the resiliency of earnings and cash flow? is there an underestimation of the strength of the american economy? memoji -- netflix -- they kill it. if it is wednesday, it must be ankara. the secretary of state -- with the election 20 days away in america, there is an underestimation of the importance of getting out the vote. good morning, everyone. this is "bloomberg surveillance," live from our headquarters in new york. tom keene. with me, francine lacqua. tom, we know that the investigation is ongoing. we do not know if it will find anything. we do not know whether it is a thorough investigation, which is

what a lot of where leaders are putting into question. we follow the situation, we monitor the situation, and we will bring you up-to-date with any developments. generale'se leadership will not attend the meetings. bloomberg has pulled out of that as well as a media partner. right now our media partner with our first word news is taylor riggs. taylor: we are starting with that story. mike pompeo says saudi arabia knows it needs to add quickly. he is in turkey after meeting with the saudi authorities. turkish officials have said privately that kosher gate was gi was killed in istanbul. they blame it on an interrogation that went wrong. robert mueller says he is on the verge of key findings in the russia investigation and that he will issue them soon after next month's election. he says he is close to rent

during judgment on two of the most explosive assets, -- aspects, where there was collusion regarding the trump campaign, and whether the president obstructed justice. the summit battle over exit. you leaders will be told they need to be shown -- they need to show flexibility. that is the future of the irish border. exitas told the latest proposal would be rejected by parliament. and shares of netflix are soaring in premarket trading. the world's largest paid online tv network at it far more subscribers than analysts estimated in the third quarter. all of this made up for the stumble in the second quarter. netflix has been spending billions of dollars on original programming and uses that to attract subscribers.

andred by 2700 journalists analysts in more them 120 countries, i am taylor riggs. this is bloomberg. francine? tom? tom: moments ago, brian wieser -- down to his cell target of 1.31. it's go to facebook on the data check. , currencies,s commodities. futures off that negative eight right now. oil was a lift in the last 24 hours. a couple of days in a row oil is migrating up, a bit weaker. francine, as i mentioned in the previous hour, the german two-year, that should be red on the screen. a greater negative yield, down -0.58 on the german two-year. francine: i think it is very important. if you look at u.s. futures, they are slipping, dollar rising.

some of the good moves we had earlier on is fading. in fact, the european stocks making gains, dollar treasury is pretty much steady. tom: on the vix, let's look at the chart here in february and the ugliness here, the blowout. down to complacency, back again in 2012. nothing like what we saw in february. we come over nicely here in the last couple of days. a little bittoward of complacency. francine? bloombergi changed my in the last seconds because i wanted to focus on the u.k. economy after we had figures just about half an hour ago. amazing we are getting positive figures out of the u.k., when it comes to wage growth and inflation, and that is helping some of the sectors." u.k. inflation slowed more than expected, dragged lower by the

cost of food and transport fares. marconi of the boe is looking at inflation, which growth, -- wage growth. tom: joining us now, kevin cirilli. i want to get to our bloomberg story this morning, and i have to go to the elections. we did not touch on that with the saudi outpour. i ame 20 days away, and focused on cedar rapids, iowa, the northeast corner of iowa, where a republican is fighting for his life. that is replicated across the nation, isn't that? kevin: it is. you have what is going on in iowa going on in wisconsin and the suburbs of pennsylvania. polling would suggest the basis of both parties are fired up to get to the polls, but it is the centrist-middle vote that will determine this. it is going to have the map of the house impacted because there

are 30 seats in the house of representatives that could swing either way. pollsters, most political pundits suggest the republicans are going to have a hard time with the house of representatives, but it is a much different forecast in the senate. democrats are up for tough reelections. heidi had the worst yes -- the worst day yesterday in terms of her lyrical career, with the release of this ad naming victims of sexual assault that she is now apologizing for. in a state where she voted against justice kavanagh. the senate map looks good for republicans. he is optimistic about that. the house, a very different picture. tom: you could hear the reticence of the senate majority leader as he spoke to you yesterday. "politico" this morning, there is a fabulous article walking through the millions of

dollars that will move forward in the next 20 days. would you explain to our global audience why america has all this money thrown out there? what is your take this time the millions of dollars? kevin: it is why the supreme court matters. citizens united has upended the political process in terms of the political process. there are progressives that i interview, like the sec commissioner, who told me essentially they want to see corporations disclose how much money they are donating toward elections. then you have republicans who say it is a freedom of speech argument. there are billions of dollars that are going to be flooded into this. look at the last cycle where it set a record in terms of how much money has been going in. --ould note

francine: kevin, how do you expect the trump administration to do with saudi? we have heard a mixed reaction, but if we do see an investigation, how can they deal with it? kevin: three things, secretary of state mike pompeo is over there meeting with the saudi's, fresh off a report that it was a botched interrogation in the killing of jamal khashoggi. billions of dollars worth of funds have been allocated to saudi arabia, a fraction of which has been -- has made its way there. is, the magnis ki act. remember that? is pertaining to the president having authority to target specific individuals who are found guilty of misconduct in the international community.

the senate has done that. if the president uses this, if congress pushes for this, it is the first time it has been used the on russia. tom: david brooks wrote an essay on an incredible poll. it is fiction -- it is feature this morning. in the poll, here is the morning must-read. "86% of conservatives think it is more important for children to be well behaved. only 13% of progressive activists agree. 2/3 of americans are the exhausted majority." is the exhausted majority going to show up to vote? kevin: that is the biggest question mark. i grew up in this world. brooks hits this on the head in terms of the divide between the working class

. you have liberal elites and working class, and that is going to be the giant unknown as we head into this. i am biased toward pennsylvania, but this is the microcosm of where this country is at. tom: take the next 20 days off. kevin: no, i live for this, really! as welling through this is the president of the united states. here is president trump. threatrump: the biggest is the fed because the fed is raising rates too fast. it is independent, so i do not speak to them, but i am not happy with what he is doing. tom: president trump. trish regan. it is also good to see stephen stanley as well, of amherst pierpont. does kevin cirilli's world matter to economic growth in

confidence, or is it discrete? tephen: elections always matter. but in this case you look at the rhythm of an administration. typically you come in and get your big stuff done in the first year or two. i do not think it will entail a lot of big legislation that will affect the economy. the senate is important because he wants to get people nominated and confirmed, but i do not know how much action is going to go on in the next two years either way. and tell us about the debt the deficit. we talked a little bit to ellen zentner about it. are we going to pay for all this? are ok: i think we near-term, but we have a real problem. we have two problems. at a point is rising in the business cycle when it should be falling. we have the long-term issue of entitlements with the baby boomers retiring, which we have

been talking about for 20 years, and no one seems to have an interest in fixing that. i do not see it being a problem in the next six months, but 10, 20, 30 years out, we have a real problem. francine: i hear more calls about a possible recession by 2020. is that a possibility, and is authorities and policymakers can do to mitigate it? stephen: it seems people in the markets are in a big hurry to talk about the next recession. premature, but any kind of shock that hits the system, never say never. that is maybe a little bit early. the fed is trying to get back to neutral. fiscal policy is giving the economy a tailwind. sure there is a lot that needs to be done on the fiscal side. i am not sure we need more there. is reloading the gun by

getting rates back up to a normal level, but i do necessarily think we have to deploy that near-term. francine: do you think the fed needs to step up? that when the downturn comes they have enough tools? stephen: a lot of people take that approach. that is exactly the wrong way to think about monetary policy. if you are worried the economy monthsg to be weak six or a year from now, you want to be easy. the fed needs to do what they need to do at the current moment. right now with the employment of -- the employment rate slow -- the employment rate as good as it is, the best thing is to go back to neutral, to take the easiness out of the policy. they are in the process of doing that. once we get there, next year, we will see where we are. francine: thank you so much, stephen stanley of amherst pierpont.

coming up, the u.k. energy minister will be asking about fracking.rts and also this is bloomberg. ♪

taylor: this is "bloomberg surveillance." let's get the bloomberg business flash. imf managing director stan lagarde says brexit will not have a negative impact on all countries in the european union. she is the guest on the new episode of the david rubenstein show. >> i think it could be net negative in all cases. the variability of net will depend on the brutality of -- i think it will be in any

circumstances more severe for the u.k. than it will be for the rest of the european union. within the european union, you have the two companies that will be more exposed than others. ireland, probably belgium, probably the netherlands. taylor: you can watch that interview tonight on "the david rubenstein show, go at nine a clock p.m. new york time. let's turn to the u.k., where the first -- it is a government initiative to promote so-called clean -- green growth as strategy to promote gdp and cut greenhouse gases. a lawmaker since 2010, she was previously undersecretary of transport. now she is planning to reduce emissions to net zero. claire perry joins us now.

what a great pleasure to have you. talk to me a little bit about investments in the u.k. if you look at some of the positioning of the u.k. and wind energy, they are doing very well. in terms of sustainable investments, we could do a lot better. claire: the greenest office building in the world is here in london. what we realized is we are doing very well in the u.k.. we are leading the world in and growingsions our economy. no country has done more income -- in terms of reducing its carbon intensity. there are two big things we need to do. one is go further. how we might have a net zero emission economy. second, we have to recognize the opportunity that is going to come from this. about 400,000e people working in this low-carbon economy in the u.k. that is bigger than the

aerospace sector. we think financial investment is absolutely key, the key to unlocking the offshore winds -- francine: why is it lagging? claire: i am not sure it is lagging. many of these technologies are moving to -- we are buying more select as we get to a market position and we leveraging private sector investment. one of the things we're seeing today is government money going into the early stage of investment. one of the challenges we have is getting from idea through to commercial. we are putting more into funding. i am not sure it is lagging. we are seeing ebsbs and flows. the u.k. last year generated 32% of its energy from renewable sources. we are seeing energy bills coming down. we are not going those ahead of the results of that. the u.k. and london is a world

leader in financial services and solutions, as you know, so we are tapping into that expertise and innovation to finance the next generation of innovation globally. bencine: how will that affected by brexit? theresa may is saying we are doing so well in the u.k. with renewable energy, exporting it to the rest of the world. but the manufacturing in green technology comes from abroad. is, willne question your standard strop? they will not. we are not worried about standards when it comes to food and -- we have led europe. we are doing twice as well as the e.u. average in decar bonization. i was in europe just this week talking about reducing emissions of vehicles. we were pushing for the maximum. even post-brexit, which is a real alignment of the technical

structures in europe, our partnership with the other european countries will be unprecedented. that you and mr. johnson are not on the same page. you worked at mckinsey. what would mckinsey do in this debate over brexit? claire: we focus on the facts, which is a good thing for politicians to do. we also focus on the need, whether it is company or financial institutions, to pull together. message that has been delivered to him is pretty good. it is always nice to write newspaper headlines. this is the biggest set of negotiations is country has ever done in peacetime. it is tremendously difficult and important that we get it right. it is interesting what you have got to say, but let the grown-ups get around the table. as a member of the cabinet that is absolutely possible. tom: i am going to say there is

not much energy in the irish see versus what is left in the north sea. but you have an immediacy about the water between you and ireland are discuss energy and the border in the sea. claire: it is a bit like -- the proposal is a bit like putting a reporter between texas and the rest of the united states. tom: we have done that. claire: the united states, not south of the border, north of the border. tom: we have done that, trust me. claire: you have not done it for goods and checks. when i go through the states i do not have to go through border checks across state boundaries. northern ireland is constitutionally part of the united kingdom, home to 1.7 million u.k. citizens. it would be inconceivable that we would leave them in a different arrangement than the rest of the united kingdom. redlinea constitutional for us. what is on the table does not respect that.

you prime minister will be -- the prime minister will be going to another summit today. she is working to basically come up with a deal that respects the brexit results -- we are leaving the e.u. and we take back of the borders -- we take back the borders, money, law -- but keep the united kingdom together. that is a point of negotiation, and i am confident he will get a result. francine: you are also in charge of oil and gas and shale gas. we have been talking about saudi arabia. priceu worried that the of oil will go to $100? how will the u.k. government deal with saudi arabian rulers? that havee messages been sent by the foreign office is right, that there is a serious allegation to be investigated here in the challenge of oil sovereignty is important for us because we have all along been an energy producer. --have a pretty significant

the investment in the north sea when oil prices dropped, the indices restructured. now with oil at whatever it is -- $82 -- there is a huge question about energy supplies per one of the reasons we backed nuclear, we want to be seeing very safe on shore shale extraction happening. statesot want to have who do not have the global best interests at heart determining energy prices. of course, renewables coming into that mix, it is entirely homegrown. we do think gas is the long-term part of our decarbonization. we do want to promote a very safe environment, a secure form

of shale extraction, which we just started this week. francine: how do you deal with saudi arabia? claire: comments have been made by the foreign office. if there is a case to be answered, we want to answer it. we will let the foreign secretary decide what he wants to do with that. tom: thank you, minister. we greatly appreciate that. for thegy minister united kingdom. francine, for so much of us, the geography is a little shaky. the idea of the borders of ireland and onto the irish see, i would to just -- and onto the suggest a i would little bit of study moving forward. francine: it is all about technology. if you do not have hard borders, you could think of a solution in 3, 4, five, maybe longer, years. but we are not there yet. do not underestimate the technology part of this

discussion. tom: i would not underrate the -- underestimate the history of five, 6, 7, 8, maybe 900 years. thank you for keeping us up-to-date on this titanic debate in europe. coming up, on saudi arabia, on turkey, and on the united states, the ambassador to the council of foreign relations, martin indyk, joins us. and the secretary of state is in ankara. stephen stanley with us as well, from amherst pierpont. we will touch upon the american economy. course, is 20 days from an election. this is bloomberg. ♪

francine:francine: this is "blog surveillance." tom and francine

from london and new york. let's get to bloomberg first word news with taylor riggs. taylor: president trump is concerned the leader of the -- in a series of media interviews, the president said he wants to find out what happened first. he said it would be bad if the saudi king and the crown prince knew what happened to jamal khashoggi. there are reports that the saudi's will say the journalist's death was the result of a botched interrogation. theresa may has problems at home and abroad when it comes to brexit. bloomberg has learned that may has been told her latest proposals would be rejected in parliament. she will address skeptical european users today that european leaders in luxembourg. reserve may give a hint today about how high policy makers will raise interest rates before taking a breather. the fed releases minutes from last month passed meeting at 2:00 p.m. new york time.

in the last two weeks, fed officials have made it clear that they are comfortable with gradual rate increases. president trump is warning central american countries to turn back migrants headed for the u.s., tweeting less night at honduras, guatemala, and el salvador would lose american aid if they allow migrants to travel through their borders to enter the u.s. illegally. a caravan as many -- of as many as 2000 honduras entered guatemala this week. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in over i am taylor riggs. this is bloomberg. francine? tom? it joke about it at the top of the hour. if this is tuesday, it must be riyadh are it is ankara, -- if it is wednesday, it must be ankara. but there is no joke about it. it bears a careful conversation. my conversation of the day on these affairs, he is the former

u.s. ambassador to israel. martin indyk joins us, his esteemed career at brookings, now at the council of foreign relations. wonderful to have you with us, with stephen stanley of amherst pierpont as well. you were the innocent abroad right now. , mr.ecretary of state pompeo, is he an innocent abroad gekko martin: -- is he an innocent abroad? be comparedend to to the cynicism on display during this case. we seem to be quite innocent. i think the president is behaving in that way as well, the secretary is in ankara. he is about to enter the turkish bazaar, where president erdogan has something to sell. that is, he has the goods on the

murder and dismemberment of jamal khashoggi. he is looking for payment, from and the united states, and he is bringing out evidence to show. it comes down to this interesting dynamic between arabia.nd saudi not saudi arabia and turkey, but the other way. i do nothing that is in the press right now. describe how turkey perceives this emergent event. martin: president erdogan sees himself as the kind of air to the ottoman legacy in the east, tore the -- the kind of heir the ottoman legacy in the east where the turks ruled the region. saudis have that title. the king of saudi arabia is the custodian.

an intense competition, which is now on display, where the turkish president sees an opportunity to promote his only to ship at the expense of the saudis. book coming out next year on dr. kissinger as well. let me give you the easy question. what would dr. kissinger do? would be would be -- what would be the best practices of another time and place? martin: he would understand the gravity of the situation, but it cannot be simply brushed under the rug. it is important, given the porton's -- the importance of saudi arabia to the united states, particularly because we have made it one of the pillars of our anti-iran strategy in the region. we have to find a way to get the particularlyhip, the crown prince, to take an

active role, not only in terms of saying there will be a thorough, transparent investigation, but also in switching the channel, in making the focus something positive. is announcing he will release the women that he has arrested. do something to double down on his positive reform agenda, to make it clear that there is a reason to be supporting him. francine: does the u.s., and does the west that has ties to saudi arabia, really want to know the truth? i would say the vast majority of the senate and congress, all of the journalists and editorial staff at "the ," "the newpost cong york times."

morewill be dribbling out and more information. you can see it on the front page of "the post" and "the times" today. they are identifying those who were left when jamal khashoggi was in there, as being not just saudi security officials but part of the royal guard, which is under the direction of the crown prince. so whether or not government a nationalee interest, a security interest in trying to get past this, there are two bank many stakeholders in the -- there are too many stakeholders in the united states fuel by turkish evidence that will need to get to the bottom of this. it is not only the u.s., it is others also, refraining from selling to saudi arabia. should we be looking at sanctions?

what is the next step? think first of all we need to recognize that this is trump's first real international crisis. andeeds to understand that basically get off the television and get off tweet. i know that is not a likely scenario, but he is not helping the situation by making it look like he is intent on covering up what happened. i think that is number one. to get on -- we have saudise script with the and the turks and, in effect, put this in a box that a real investigation is going to take place. but in the meantime, to start -- -- to focus on the

positive things we have in common with saudi arabia, and make it clear to the crown prince that he will continue on the positive agenda that he has launched to saudi arabia. that is something they united states -- the united states can support. but it is in jeopardy with his horrible murder. university of sydney, australia, another time and place. continuing -- modest debate has ensued. follow the australia united states to jerusalem? martin: well, i am an american now. tom: the accent gives you away. martin: but i still have australia in my heart. local politics trumps everything. there is a liberal from the same party as the prime minister, a candidate running for election

in a place where jewish votes do count. it is probably the only electorate in australia where the jewish votes count in sydney, my hometown. baitis is put out there, for the jewish community. i do not know if the prime minister will consider it. he is an evangelical like vice president pence, so he probably pushes this idea. francine: speaking of political ploy, there is copy written by the media that this could have been a subplot to try and curb the reform agenda. will we ever know the truth? think there is not a lot of doubt about the already. the question is, what is to be done about it? in circumstances in which there are huge consequences -- i cannot underscore this more --

this is a crisis. the crown prince of saudi arabia ambitioused on an effort to drag his country into the 21st century from the seventh century social structure they have had for so long. that is an inherently destabilizing process. there is a gathering in the princely palaces of riyadh to do him in. if this effort comes apart and destabilizes the kingdom, there could be fairly profound consequences for the oil markets and for the efforts of the united states to provide and protect our interests in the region. as i have said before, we have to recognize the crisis, take it very seriously, take a lead in trying to get him to conduct the full inquiry, to at the same time promote his positive agenda

in a way that we can get behind. francine: martin, thank you so much. martin indyk from the council of foreign relations. stephen stanley will continue the conversation with us. we can look at these saudi oil production compared to its gdp. log on to bloomberg. we have some great graphs looking at oil production and consumption worldwide. this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance." with us, stephen stanley of amherst pierpont. before i get to the single best

chart, i went to set it up, which is yield at the head of the litmus paper system. is it broken now? are we still on that trend, or is there a way to go? stephen: we have talked about this in prior times, but hopefully we are getting an uptick in productivity growth and an uptick in economic growth, and that would entail presumably higher interest rates, which would be a good thing. if you get interest rates rising as inflation is rising, that is not necessarily great for the economy. i think rates are headed higher, because the economy is strong -- and if they do because the economy is strong, that should not be a particular problem. tom: here is 10, 12, 13% 1980's, rate of the back here the eisenhower disinflation, true inflation. here is a great path that so

many of us lived as well. it is a long chart that shows the change of percent. do you suggest we break out of that, or even in on an inflation-adjusted aces we stay with moderate rates -- inflation-adjusted basis, we stay with moderate rates? inflationn an adjusted basis, rates have been extraordinarily low since the crisis. if the economy is doing better going forward, hopefully we would get something -- get back to something more normal in terms of real rates. tom: ellen zentner is more cautious than consensus. what would be the catalyst for the fed to do more than a few rate rises? stephen: inflation. tom: not so much gdp but price change? i think the fed is probably content to be in the general neighborhood of neutral, which is where the dot suggests they are headed in 2020, 2021, as long as inflation stays

around 22%. but if inflation moves they wouldabove 2%, need to be more aggressive. francine: do they need to keep an eye on emerging markets, or keep an eye on dollar strength, mitigating emerging-market turmoil? stephen: they are certainly watching that. i and not sure how important emerging markets are going to be in the decision-making process, in the sense that the feedback effects following emerging markets to the u.s. are not large enough in terms of our economy to make a huge difference in terms of monetary policy. they would like to make everybody else happy, but at the end of the day they have to do what is necessary for the u.s. situation. the dollar plays into that, and it is a very noisy -- our trade situation is very noisy, so movement on the dollar ads to that.

they will certainly keep an eye on that. francine: the u.s. economy is not insular yet. positived constitute a effect right now? stephen: a number of them have indicated there are really two they are watching out for. one is being too easy for too long, and the other is clamping down too hard and too fast. the former is the more worrisome one. tremendous has a amount of momentum right now, or at least seems to, and the fed is still in easing, which is unusual at this stage of the business cycle. that is the one i am more concerned about right now. tom: how is the consumer? stephen: the consumer is in good shape. with a strong labor market, incomes are growing at a good rate. balance sheets are clean, having

come through the crisis. as long as the labor market is strong -- tom: spending it now or saving it for later -- what is that dynamic right now? stephen: we had a game changing data revision with the gdp numbers. we thought the savings rate was running in the threes, and it talked -- and it turns out that for the last several years it has been between 6% and 8%, which is historically high. the consumer is doing a good job of spending and saving right now. stanley, we greatly appreciate it. it has been a wonderful day to look at the american economics, 20 days into the election -- 20 days until the election as well. would people, sky chefs, they are thinking about coming into some kind of group relationship. we will have much more on that today.

will have much more on that today. he is the chief executive officer of cisco, jeff robbins. look for that in the 1:00 hour today. stay with us. netflix. we will try that next. this is bloomberg. ♪

francine: this is "bloomberg

surveillance tom:, and francine from london and new york. let's talk about netflix, shares soaring in late trading and this morning in pre-trading. to watch wase subscriber growth, which surpassed wall street estimates. for more on this, we are joined by paul sweeney, senior intelligence analyst. three months ago we were talking about netflix having trouble. strong subscriber growth numbers for the third quarter, and equally important to get good guidance for the fourth quarter, and in excess of what the stream was looking for. this is more typical of what we have seen from this company. they are in the growth curve of their story here. it is really international growth. the international market is

where the subscriber growth is coming from. the u.s. market is a bit more but sure here. they are in every market around the world, with the notable exception of china. they are starting to see some good subscriber growth coming out of the international market. hopefully with that, revenue and profit will follow. francine: netflix does not identify which shows are more successful. is it because they have great shows out there that people go with netflix? paul: i think that is the case. particularly with original programming. they like program from other studios in hollywood, but what drives the growth story here is some of their original programming. when they have a quarter with more programming being launched or some new programs coming on, that is where they tend to see some strong subscriber growth numbers, and that was the case. in the third quarter they had some successful shows coming back for a renewed season. in the next season they will

have the last season of -- in the next quarter they will have the last season of "house of cards." cash flow at the able tv -- and cable tv went to shareholders. why is netflix like amazon, where free cash flow does not matter? paul: they are probably going to have a negative $3 billion of free cash flow this year, a similar number yesterday -- a similar number next year. what is happening here is they are going to the debt markets and funding program expenses by floating long-term debt. what investors are saying, particularly creditors, cash flows are there two to three years out. i can wait for them, particularly given subscriber growth. netflix, up we go. disney going nowhere.

.his is going back to 2009 the huge outperformance by netflix as well. paul: disney are pulling back conflicts.ir disney is basically saying we have to compete against netflix, so they in 2019, bob iger is going to launch his direct to consumer netflix type service. he is putting on his own direct to consumer product. that is why netflix is saying we need to bring more with our own original programming. our traditional holiday -- our traditional hollywood suppliers recognize they need to -- we are setting up for a competitive battle over the next five to 10 years. the question is for disney, are they too late to the game? has netflix already cornered the market for streaming video? tom: thank you to your team or

your team was brilliant yesterday, with short notice on yesterday. we will continue with all sorts of news, including ben harvey with our turkish team, working with ankara, with the secretary of state. jon ferro tuning things up for me in radio. we will do that in a bit. within all this of course, 20 days from the election. stay with david westin at 12 noon for our political coverage of america. this is bloomberg. ♪

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risk. the president attacks the fed, janet yellen defends it. keep the faith. the company crushes subscriber estimates. analysts upgrade their price targets. sanction the hell out of saudi arabia. senator lindsey graham attacking. first, a trip to the kingdom. david: welcome to "bloomberg daybreak." i am david westin, with alix steel. all eyes are on the white house right now. president trump believes the fed is the biggest risk, but there is also mr. mueller out there. apparently he will wait until after the midterms and then wrap up at least a big parts of the collision and the of section of justice of this investigation. democrats,ear the the collective know, please, do it before the election. you want to do it before th