>> shanghai composite of surges more than 4%, the highest since 2016. italy escapes junk rating. the stock market risings after moody's put the country in a stable territory. the international backlash grows against saudi arabia against the death of jamal khashoggi. ♪ francine: good morning. this is "bloomberg surveillance. "

these are your markets. lift.le bit of a bounce00 up and a nice in china as authorities say they will do everything it takes to shore up the economy. italian two-year yield. geopolitics for the moment and when it comes to the u.s. economy. italy, the fact it was not downgraded to junk and people, investors are signed a sigh of relief. fiat after the carmaker decided parts to moreto rarely. -- marelli. we will get the latest from some of the regions biggest chief executives including ryan air's

ceo. straight to bloomberg first word news. here is sebastian. outlining theresa may progress on the brexit and a saying it is 95% complete. people attended a demonstration demanding a second vote. secretary said more flexibility on one of the red line on that key issue of the irish backstop. the one big issue remains this breach between the end of the implementation period and the future relationship. if you listen to the mood out of brussels, probably good a pragmatism. we need to see it through. hasstian: angela merkel joined a group of leaders demand and saudi arabia say how jamal khashoggi was killed.

suspend she would exports of military equipment until an investigation. it was-jubeir said carried out by a rope operation and those responsible will be punished. >> it was a mistake and what compounded the mistake is it was try to be covered. we want to make sure those weponsible are punished and have features in place to make sure if does not happen again. italy will tell the european commission they are sticking to their budget plan. 59 percent of respondents support the controversial government. rate after the nation's was cut one level above jump by moody's. the u.s. is ramping up pressure on china and changed the way the

country is manipulating its currency. steve mnuchin said a 1988 definition could override a current law. china avoided the law saying it does not meet all three of the criteria. increase chances of his party holding on it to the majority, president trump propose a middle income tax cut. treasury secretary steven mnuchin and unable to offer further details when asked about it. global news 24 hours a day powered by more than 2700 journalists and analysts. this is bloomberg. francine: thank you so much. earnings season gets serious this week as third-quarter results released in europe and and caterpillar due to release

figures bring in an exclusive conversation, oaktree capital gave an offbeat -- upbeat assessment. >> look, our economy is still doing very well. the few months, it will be longest recovery in history. i do not believe there are signs of recession anytime soon. francine: what can we expect from european trading session? joining us is chief investment officer and bloomberg intelligence reporter. thank you for joining us. markets,ok at european but do we expect them to be better than the u.s. or worse? > on the surface come into looks pretty bright. the consensus is about 15% 70%ings growth based on 6%,

revenue growth -- 7% revenue growth. it is a very limited group of companies that report q3 earnings in europe and the same thing in the first quarter. with out those and oranges -- apples and oranges with comparability. very cousin charted with who really matters in european earnings. u.s.red to the u.s., the should see robust arms supported by tax reform. much is after how tax reform, tax cuts that we look into next year. could we see sustained growth? francine: when you look at some of the european earnings, do you

look at forecast in the future or the earnings seasons that was or trying to figure out what the chief executive sees as the biggest risk? guest bank i tried to put into first that if. it is best to look at the whole picture. -- gasping i tried to put it into perspective. against: -- guest: i tried to put it into perspective. probably at par with eu as policy except for the tech. european corporate leaders are just as good or bad as american ones and the main difference is the u.s. has a tech sector and cure does not and if you look at the value, european equity risk premiums look substantially higher than in the american

counterparts. francine: how do you break it sectors? we do not have a tech sector but supply chains? tim craighead: in this upcoming reporting period, energy is off the charts. energy is a bigger sector here .hen at the united states earning expectations are something north of 50% in aggregate. beyond that, the best a sectors are cyclically oriented, materials, tech, to the degree as sensitive. the staples are set to be much nmundoney gain, low -- -- mundane, low single digits.

burkhard varnholt: some countries are especially sensitive to certain sectors, financials, what have you. it is about taking it all into consideration, absolutely. francine: thank you for joining us. tim craighead and burkhard varnholt stays with us for your stay with "surveillance," plenty more coming up. escapes a junk rating for moody's. we are live in milan. do not forget to log into bloomberg radio. is strained live edit hour. right now, i were very on a guy johnson. -- "surveillance is strained -- an hour.live in

-- right now, our very own guy johnson. ♪

francine: this is "bloomberg surveillance." back to your markets surely but business flash with sebastian. ryanair said it is putting plans of buybacks on hold because of the uncertainty of brexit. strikes by air traffic controllers and disruptions from unions. michael o'leary said he expects some competitors disappearing this winter. upwards andpiraled lowest be who has of the

cost of this winter and it is ryanair. bankruptcies as some of these smaller companies are disappearing. they deserve to disappear. sebastian: shares in philips of misseded because estimates. lower than the 5.3 percent expected. called brexit "regretful." that is a bloomberg business flash. francine: thank you. jamalarabia said khashoggi was murdered by a rogue operation for killing that's part in international outcry. adel al-jubeir told fox news that the crown prince was not behind the killing. >> obviously, a tremendous

mistake was made and compounded by it was trying to be cover up. unacceptable. we want to make sure those responsible are punished and we have procedures in place to prevent it from happening again. francine: political leaders have been responding. >> i feel certain that the crown prince was involved and that is why we cannot continue to have relations with him. i think he has to be replaced, frankly. i do not think sanctions go far enough. we need to look at arms sales. it is not about this journal is being killed but the war in yemen. imagine that if orders would have been carried out without the crown prince. in altering event for the u.s. and saudi arabia and we should suspend military

sales and security assistance and polson on any directly involved. for a survey for more on this, we are joined in dubai by the bloomberg reporter. thank you for keeping up-to-date with the story. what is at the latest from saudi arabia on the case? a lot of international leaders are asking if what you are saying is true, where is the body? : exactly.tah the people who said that, the fact the body is not found is a concern. mr. one is supposed to be rdorgang tomorrow -- e is supposed to make a speech tomorrow. he was quoted as saying that in a way, he is basically saying he

will come out and discuss all of the details, presumably many will expect him to pull out more evidence of what happened. in saudi arabia, we see a lot of newspapers, pictures of mr. khashoggi and the king and his son. condolences atir a time people are trying to make sense of how this story is when at thea time government denied it for over two. -- for over two weeks. francine: with expect the u.s. administration to impose sanctions because of congress and what is turkey's role in all of this? : president are the

one is having discussions with president trump and we do not have details. we know congress is -- many in angry whattremely happened. and they are looking at it as a watershed moment in the relationship between saudi arabia and the u.s. been tested it like this since 9/11. congress may be able to force president trump to impose aretions on people who connected to this murder within the saudi government. trump has been resisting stronger measures but he may relent if congress is united. we have bipartisan support for strong measures against saudi arabia related to this murder. thankne: zainab fattah, you so much. let us keep the conversation on geopolitics and what it means.

still with us is burkhard varnholt. is it the wrong time to tell people to sell assets? burkhard varnholt: today has been a good day for risk assets. it was telling that in china where the old prime for where night is darkest -- proper where night is darkest, we see the which has spurred around the world like a bushfire. talking about geopolitics, one of the reasons but not the main reason. it has not been our main reason. we cannot expect global economic growth to continue despite all the naysayers who keep predicting a recession. we do not see it. with good growth, one of the expectations that some markets are going off the supply chain like iran and venezuela, it is only natural to see energy

companies are beneficiary. francine: we could see possible sanctions and a huge repercussion. and oil has an impact. : sentiment,nholt what can i say? ,hen you look at the markets markets are very skeptical. is one of nine, this the most hated bull markets in history and cookies to be deeply unpopular bull markets. end and euphoria and we are far from it. recently lastent week and i asked an audience of 200, i said, who sold stocks last week? people were afraid of raising their hands in public,

it is showing few something interesting. you see panic in markets but when you speed to clients, says imomes forward and a seller. maybe this is driven by some of fundsderlying, automated using the quantitative investment a models and do not move forward. francine: thank you. from creditnholt suisse stays with us. asian stocks rally. the shanghai closes up more than 4%. we will have the details from. this is bloomberg. ♪

francine: this is "bloomberg surveillance" and i am francine lacqua. shares rally. the shanghai composite has surged the most in two years. with of the trade war still ongoing, how long can the rally last? still with us is burkhard varnholt from credit suisse. you are quite bullish on china. up an have to shore economy protecting the private sector, economically, domestically, things are worse than we think? thehard varnholt: much of bad news is well priced into markets. i am not disputing them, i am saying, what is in the market? would you look at the china, you have to differentiate between

short-term, medium-term and long-term. short-term china was on the wrong foot with the trade war started and was overly reliant on the u.s. exports and trade connections which are falling apart. that was one of the reasons things went to bed and the can overshotted it its. the irony off the story is if anything, one of the unexpected outcomes is it only strengthens china's resolve. i think that is what it does to make sure it does not suffer from it again. the open your war was a trade war like today's and caused ofna a history -- a century disappointment. t because of taugh that collective experience, they

will want to make sure it does not happen again. francine: it takes times so mistakes happen. burkhard varnholt: it is about rebalancing an economy from being export-less to domestic to chinan china to enter in market free and a time, it will happen. francine: burkhard varnholt, thank you. from credit suisse, he will stay with us. are live in we milan to talk autos. this is bloomberg. ♪

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internet are to be auctioned off in geneva. i most read stories right here on the terminal, and third-place, it is all about the latest in the brexit negotiations. in second place, u.s. allies grow skeptical and what happened to the saudi journalist. up top, all about the rally in global equity markets. sebastian: theresa may will outline progress on brexit in the u.k. parliament today. that comes after organizers estimated 700,000 people attended the demonstration demanding a second vote on any final deal with the eu. the brexit secretary says more negotiation on the key issue of the irish backstop. >> the one big issue remains this bridge between the implementation period and future relationship.

if you listen to the mood music, there is pragmatism on all sides. we need to see that through. sebastian: angela merkel has joined european leaders pressing saudi arabia to come clear about how a saudi journalist was killed. arabia's foreign minister says the killing was carried out by rogue operations and those responsible will be punished. >> it was a tremendous mistake made. what compounded the mistake was an attempt to cover up. these things, unfortunately happen. we want to make sure that those responsible are punished and procedures are in place to prevent it from happening again. president donald trump has promised a new middle income tax-cut plan to land days before the midterm election.

other republican parties were caught offguard by these comments. 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 sebastian salek. this is bloomberg. hascine: fiat chrysler agreed to sell a car parts for 6.2 billion euros. shares are up this morning for fiat, the first major deal for the carmaker under the new chief executive. this deal hashed originally? dan: yes. it was his idea and came at a time when he was really developing his is been on strategy. we saw it with ferrari. there was an internal debate

probably on whether they wanted to go ahead and spin it off to investors. he said at the time before his passing that he also was getting offers. this deal, essentially wrapped up that process, and fiat managed to get a slightly higher price than some of the bids. francine: if you look at the share price, it is a quite significantly.what will they do with this cash ? dan: we have seen some analyst notes this morning. there is speculation they could perhaps pay a dividend, which will be the first since the fiat chrysler merger was put together. that is a possibility. see, fiatve to results will be presented later this month. that could give us an indication when he speaks to analysts and investors on the earnings call. if we pivot to

politics, the italian government has been given until lunchtime to present their budget. : comments over the weekend suggested they are not going to modify those targets. the rhetoric was a little bit softer. they kept repeating the idea that they are interested in a dialogue with the eu commission. i would be very surprised if in the letter they submit today, that they lower that 2.4% target for next year. francine: thank you so much. day is the the widening spread between german bunds and italian btp's. how do you see the spread going and what does it mean for your investments in italy? --khard: italy is a problem

italy's problem is more structural than chronic. longhave been there for a time and italians have been remarkably flexible and innovative in dealing with them. italy is suffering from a state that is not well administered, that is having trouble raising taxes from a deep north-south divide, which you see it in all walks of life. latest movie report made it abundantly clear, it is a large and strong economy. is not as financially vulnerable as the media makes it look like. italy tend to be -- tens to be funded. even a lot of that will matured in the coming years, there will still be a saving over the historic cost of those

seven-year bonds. italy runs a current account surplus. that iscountry vulnerable to an immediate run. play call with brussels acknowledging that not a single time since the there ever as i treaty cap. -- kept. had is the market price that in? burkhard: that is what we see in the spread, that euro skepticism. our view is that it is not as sustainable -- a sustainable driver for political capital. that is usually migration. the political capital for the far left is on the economic situation.

unfortunately, those drivers will stay, but not the euro skepticism. italians acknowledge that life was better for them prior to the introduction of the euro. the fact that italian gdp per declinings been steadily as a result of neglect for more than a decade. francine: i don't know whether you price in the elections and what that would do to euro skepticism. could euro be a part of the next campaign promises? burkhard: no. exiting the euro will not happen. i would bet everything i own on a promise that tenure today, the eurozone will have at least as many members as it has today. francine: with the banking union? burkhard: the eurozone, just the currency union. that cannot be run with a plan b. you cannot exit.

it is economically and socially suicidal. francine: will we have a banking union? burkhard: that is a question. i wish we had, but that would be wishful thinking. i don't know the answer. i don't see it in the next 12 months. francine: thank you so much. coming up, the road's largest producer of uranium confirms it is going ahead with an ipo. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

i'm francine lacqua here in london. kazakhstan has confirmed plans it to sell as much as 25% of uranium. it may start the ipo roadshow as early as october 31. joining us now is the chief executive. much for joining us. why now, ipo? is now really the right time to be ipoing a uranium company? >> we actually think this is a good time. 50% sinceices are up of below over a year and a half ago. we are very confident in the long-term perspective of the uranium. taste on strong demand and supply fundamentals. this is a government decision coming from two dozen 14

strategy set by our president to .ollow standards the government set out a privatization program, so we are following for the program. this is not about timing. do you expect the trend of four uranium prices to remain up? fukushima, they have been going down and it seems to be an oversupply for most of the 20 20's. >> yes. was significant production cuts by primary producers. marketed and balance. we continue -- imbalance.

we expect the trend to continue based on demand and supply picture. francine: how worried are you that the top administration extends tariffs that so far have been on steel and aluminum to uranium? what affects of that have on a possible ipo? >> we can't speculate on what the top administration may or may not be doing, but i can tell that cause extend is a strategic kazakhstan is a strategic ally of the u.s. only lessr company, than 10% of our production is sold to the united states. are coming, we don't expect any significant effects to our company. depending on what steps the government might take in the u.s., it will affect the market, but it is hard to speculate right now. francine: would that be a good

idea to keep an eye on supply? >> no. we haven't been discussing that with other producers and we don't think that is the way to go. we produce 40% of the world uranium. we are already a significant part of the market. our share, is 20% of the world primary production. we are not planning to have any of that kind of discussion. francine: what kind of stockpiles will you have for this year and how much stockpiles are expecting for next year? to take a sixy is month inventory level. mainly driving from the time it takes to go through the whole process of delivering to our customers. we are not planning to stockpile. that is kind of a mistake in the market that we are building up a huge stockpile. francine: so markets do think

your stockpiling. >> we have a new strategy. as part of our new strategy, beginning of 2017, we stopped selling our product to traders. there was a time we had a little bit of buildup in inventory until he found a place for the material. that is not going to be the case. we are the largest uranium producer in the world with 20% market share. largest uranium reserves that can be mined, which is different from underground mining. structural advantage in terms of unit cost and environmental impact. largest uranium producer, lowest unit cost and lowest environmental impact. we are pretty confident. we. have a unique case -- we have a unique case.

this is very attractive to investors. kazakhstan listed other natural resource companies and share price has not been doing so well? is that why you think your company is so different? >> yes. this is a government privatization. we are uniquely placed in a very strong market. we have the largest producer, lowest unit cost, least environmental impact and largest reserve base. francine: thank you so much for joining us. be talking brexit next. will the prime minister deliver a speech today that satisfies them? that conversation is next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." let's check back on the markets. sebastian salek has been watching on the action.

sebastian: picking up where we left off on friday afternoon. stoxx 600 heading higher. gains pretty much across the board. what is interesting is italy. italian assets rising today. we have the credit rating from moody's,ot as -- not as bad as some expected. you will see one of the big gainers today over equities is in italian stocks. we are talking about fiat chrysler selling its units. m&a movehe first big from the new ceo. also a strong day for ryanair. they are saying they are from more share buybacks because of brexit concerns. phillips out with earnings,

missing is growth in the personal health unit. stocks falling by the most in two years. francine: thank you so much. theresa may will outline progress on brexit in parliament later. she says 95% of the deal is now complete. an estimated 700,000 people protested in london demanding a deal. >> the one big issue remains of this bridge between the end of the of the implementation period and a feature relationship. i do think that if you listen to the mood music that came out of brussels -- francine: what do you do with u.k. assets right now? what does pound do from here? burkhard: based on the view that

there will be some kind of soft say,eal, what i would being swiss, we have a lot of experience dealing with brussels. our experience is that dealing with them can be tough and subject to political cycles. almost always, there is a significant difference between the last 10 months in the last 10 hours of the negotiation. usually, things really start moving in the final 10 hours because there is goodwill and pragmatism, but nobody wants to offer it to early. switzerlanddn't have to reverse referendum is brussels offered something? not and: we know it is easy negotiating partner. fair, those negotiations are always factual and done in good spirits and good

partnership. while the situation between england and switzerland is fundamentally and entirely different, all i am saying is there is a commonality in negotiating tactics and the fact that the timeline starts very slowly and then things really get moving in the last hour. francine: do you think brussels will back down or will it be up to the u.k. solution for ireland? if it is impossible to square, how will you deal? burkhard: nobody will lose faith. one thing i have confidence in, whatever will be negotiated will be keeping good faith for both sides. there is no beating around the bush. continental europe has a strong interest in maintaining a working, free partnership with

the u.k. and vice versa. now, diplomacy will work its way. francine: what does it mean for your u.k. assets? do you buy them because pound is cheap at the moment and very internationally driven? burkhard: there are some attractive investments we see. despite the fact that we think pound will benefit from the outcome of this, it would not be a headwind strong enough to derail u.k. equities. the u.k. has some very attractively priced assets in financial services, health care and others, which we find very attractive and we think will gain tailwinds in the next six months. francine: do you just invest in a broad u.k. index? burkhard: sector wise. we have been in the energy sector throughout the year. we believe there is value in financial services.

we also like the health-care sector where the u.k. also has a lot to contribute. francine: if we don't get a soft brexit, who has the most to lose? german exports? burkhard: you can say it is german exporters, british consumers who would suffer from the weakening of the pound and pay dearly. francine: thank you so much. "bloomberg surveillance continues in the next hour. tom keene joins me out of new york. we will be talking about a host topics. markets are moving sideways, but we are getting a nice list of

because of what we saw in china. looking at euro-dollar and italian bonds. that is coming up next. this is bloomberg. ♪

francine: chinese us stocks soar. president xi thousand wavering

support for the sector. the international backlash rose against saudi arabia over the death of a saudi journalist. "bloomberg surveillance.". happy monday. it has been quite a busy weekend. we look at what is happening with brexit. italy hinting at backing down when it comes to budget deficit. overall, we look at earnings. tom: an american set of political events. the wall street journal today out with a very important shift showing across all sorts of demographic classes, the intensity towards the midterms. go, wee: two weeks to will have plenty more on that. the u.s. and its allies are

skeptical. the saudi's assay the journalist was accidentally killed in a scandal. france, the u.k. and germany aren't buying it. he stressed the importance of u.s.-saudi relations. meanwhile, president trump plans to pull out of a major arms control treaty with russia because he says moscow has broken the agreement. the deal was signed in 1987. this month, nato defense ministers shall concerns that they are developing a missile. president trump promising voters that will be a new middle-class tax cut before the elections. republican tax policy makers don't know anything about it. the policy has turned out to be less popular than a thought. -- they thought.

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 kailey leinz. this is bloomberg. tom: thanks so much. one screen for me is a little quiet. west texas child to get back to $70 a barrel with brent crude over $80. -- euro can't find francine: what i am looking at overall is a little bit of market sentiment getting a boost from the chinese rally. treasuries dipping while it italian bonds rallying. tom: euro, 114 overnight as well. to the bloomberg, i want to show the effect of high interest rates leading in housing. the trump election, move down in interest rates.

here is the trump election right here with a move up in interest rates. 2007.s the crisis of the long-term drop over 10 years in interest rates and the abrupt turnaround. this level here puts it in perspective with pre-2007. the answers we are getting back there on the 30 year mortgage rate quickly. francine: i like that. it is a great chart. italy's populist coalition is what i am looking at. they have hinted it might be prepared -- i'm looking at the widening spread giving scope for a rally between the italian yields and the german spread, the highest since 2013. that is part of the politics in europe. let's go to the geopolitics worldwide and that is saudi arabia. the country's foreign minister told fox news that the crown prince was not behind the

-- at the saudi consulate in istanbul. >> what compounded the mistake was the attempted to cover up. these things unfortunately happen.we want to make sure that those responsible are punished and that we have procedures in place of that prevented from happening again. francine: that was the saudi foreign minister. is our gulf politics reporter. a lot of leaders don't accept the expedition given a saudi arabia. or saudi arabia to give more details? explanation given by saudi arabia. are we expecting turkey to come out with details or saudi arabia to give more details? thate turks are saying

president erdogan will come out tomorrow, and he will highlight the naked truth, completely. people will expect him to be providing evidence. erdogan so far has not come out and detailed the case against saudi arabia in this murder that happened in istanbul. the varying discussion on the saudi side, they say they wanted -- to come to saudi and that a chokehold ended in his death is certainly not accepted. as germany's chancellor made it clear she also would like to see more of the full truth come out and germans have halted military sales to saudi arabia as well as

the french have talked about the need for the truth to come out. tom: within the the american press, there is the idea that mr. erdogan wants something with saudi arabia is he -- if he is not to, with the perfect details of this murder. what does he leverage? what does he want from saudi arabia? ainab: so far, we don't have any proper reporting to know for sure if there are such negotiations. people expect that he would be trying to get as much as possible from the saudi's, either in terms of money to help his struggling economy, or an dorsum of the decisions made in the past two years that he considers to be dangerous for the region, like qatar.cott of --

they have a big divide. while turkey believes that islamist parties should have a way to go through the ballot box to get to power, the saudi's theider those, mostly muslim brotherhood to be a terrorist organization, and in many ways have dealt with their members as terrorists. so far, we know that erdogan and the ruling party in turkey are mostly muslim brotherhood. a big divideere is that has to do with the political perspective on the region and how they see things in the region. this can be something of a because getting closer on that divide may not be very easy. francine: thank you so much. --.joining us

thank you both for joining us. where does this end? the international community is not really believing the saudi story. what will make them either take action or convince them that they are saying the right thing? the story is hard to believe from the very beginning until now. whoever has been advising him should be the one executed because it has been appalling. i think it will depend on what the u.s. is going to do. i don't think they are going to do much. francine: you don't they congress will push for sanctions? ango: i think it will be difficult to get there for all sorts of reasons. we have seen the germans suspending the sales of weapons, other countries raising complains.

it is a question of time, at the end of the day. i don't think it is going to be back to business as before, but give it the crisis, about six months and we will be back to where we are now. tom: wonderful to have you here. stephen cook will join us later today on bloomberg surveillance and bloomberg radio with a council on foreign relations. he talks about the false dawn of the arab spring. let me talk about the false dawn of regime change and saudi arabia. wolfango: at the end of the day, it is not just about the affair. this is a guy that has launched a major war in yemen with no end in sight.

he is a guy who has upset lots of people domestically by detaining them and extracting money. now, we are surprised with what has happened with the journalist. he is at risk. he is not particularly well advised. and theking huge bets stability of the regime is something investors should consider. francine: what is he at risk of? can his father turnaround and choose someone else as his heir? question is how much longer the king will be around. as long as he is around, he has protection. the moment the king is out, let's see what happens there. that is a key signpost for us. really looking forward to

talking about alberto about his italy and debt in europe. here is an important conversation. it will be on the debt and your deficit. also maybe on budgets and gridlock in the 8:00 hour. stay with us. this is bloomberg. ♪

>> this is "bloomberg surveillance." the italian carmaker has a graded to sell its high-tech

auto. the price is $7.1 billion. the deal creates an auto parts maker with more than $7.2 billion in revenue and 64,000 workers. shares of royal for are probably the most in seven years.it posted third-quarter profits at missed estimates. first of all, we will redesign some of our supply chains. we are in a good position to have factories in the united states, europe and asia. we can rebalance load it going forward in order to avoid some of the impact. besides that, i think we will have to look at raising prices selectively, as well as taking productivity measures to offset the currency. kailey: that is the bloomberg business flash. francine: thank you so much.

steve mnuchin is open to changing how the u.s. determines which nations are getting their currencies. meanwhile, asian stocks have a rallied after four straight weeks of losses. thank you both for sticking around. one you look at what we are hearing from china, is it manipulating its currency? even if the u.s. were to change the way it looks at it, is a be a very hard case. alberto: i think they have reacted very mildly impaired it to the amount of sanctions that has been imposed from the united states. china could evaluate its currency further. we think investors have been particularly fixated with the 7.0 level of dollar yuan. we think it could go slightly

higher than that, but we don't expect a very strong, move especially before midterm elections. i think china is playing the long game. they don't want to boost trump support by making it very hard -- a very hard retaliation against the sanctions. we don't think the game is over. francine: what is your take on china? can see them speed rolling some of the policies to make sure the market is kept abreast, but do you worry about the chinese economy in fundamentals? wolfango: not particularly. it will depend on this top soil with the united states. china isith alberto, for the long-term. trump has got an electoral calendar in congress to manage.

chinese leaders play for the long game there. tom: dumb question of the this chinaberto, have a fixed income market? do they have tradable debt? there is a domestic market and are maybe -- renminbi, but we have seen local growth in the corporate debt develop in wants to order to be able to outsource from its banks. you see the chinese economy today, there is probably between $1 trillion and 1.5 trillion dollars in nonperforming loans across the banks. that banks have been established. they want to be prepared for the next crisis by having the bond market take part in those losses, which is a smart idea. that is what the u.s. has been doing, and the reason the u.s. recovered faster from a crisis.

there is also the hard currency market, which has been losing a lot of points in the last few weeks. we think it has become attractive. the yields are over 10% and some of the high chinese names now. tom: equity strategists will tell us that china is not a normal equity market. i would assume you need to have price discovery. how do you discover prices than a communist regime? wolfango: what we have seen is that because of the chinese economy, there is a large amount of savings. there tends to be a lot of demand for domestic assets, whether from the national team or from private investors that invest.ot of savings to normally, the chinese market is very expensive compared to the risks and leverage in the economy and private sector.

despite some of the backstops from the government. the last few months, we have seen a big repricing with many of the high-yield bonds losing 10% or more. now, we have a situation where some of the private sector companies in china are priced for a recession, which never happened in the last three years. we think it is time to consider a position there. tom: interesting. it is 15 days tomorrow, two weeks until the midterm elections.it is more than percolating across america . really looking forward to kevin and john together. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." francine lacqua and tom keene. let's turn to one of the distractions over the weekend, this one on the international campus. reagan and gorbachev. mark, extraordinary for any of us of a certain vantage to remember the somewhat triumph for all of that meeting in iceland. president trump wants to do away with the 1987 treaty in nuclear

missiles. where are we on this right now? can he do that? mark: yes. nuclearthe intermediate missile treaty. as you said, it was a huge deal when it happened. out and john bolton is on his way to moscow to talk about it. this at treaty has been in discussion for a while because the u.s. has accused russia of breaking it, by developing a cruise missile that can carry nuclear war has. the russians deny it and accused the americans of breaching the treaty by building anti-ballistic missile systems that could also be converted to be used for offensive missile launch. tom: what does it mean for germany of president trump

pulled away from the 1987 treaty? : for europe, this is really concerning. , if one remembers back then, there were huge protests over the pershing missiles being located in europe. there were stacks of them on and the soviet union had to get rid of twice as many as the americans. pulling those missiles out of europe resulted in a big problem in the alliance. that will now be of concern again if the u.s. decides to pull out. russia would be free to deploy as many intermediate missiles as it would like on the other side of europe. it is unlikely that the europeans would be very keen to see american missiles the floyd, ployed,-- de

making them targets in their mind. it may be justifiable for the u.s. to pull out with its accusations made against russia, but is it smart? tom: thank you so much for the briefing. we are going to come back and continue the discussion. thank you so much for watching .twitter, g tv steal a chart, steal francine's chart on italy. this is bloomberg. ♪

morning, everyone. francine lacqua in london, i'm tom keene in new york. we have got breaking news out of russia. russia expecting explanations from the u.s. on missiles.

the story continues to migrate forward and will not go away. the president talking about walking away from an agreement. after donalds is trump said he plans to pull out of a major treaty with russia, claiming they cam when -- claiming the kremlin breach the accord. let us get back to our guests. what does this mean for security? , there are a couple of points. with au.s. goes ahead decision, it will get blamed for withdrawing. it is true russia was not complying. the administration raised the issue. you letnt you withdraw, the russians go ahead with further development of missiles. an issue between the u.s. and european partners and the timing is off because the u.s. does not have a missile that can match the russians to deploy in europe or anywhere

else as an intermediate range missile. have a missile, where are you going to put it? there are not going to be many countries willing to host these missiles. in terms of timing, it does not look particularly like a great decision. the timeline is extraordinary. 1989 collapse of the soviet system to the 1991 which he is mentioning here, he hopes the united states will act responsibly. then you go to the new start treaty of 2010. is the sequence at risk if the president goes after the 1987 agreement? wolfgang: not necessarily.

is the at risk here wider sensee, they of international corporation on key issues like missiles. we have seen the u.s. walking out of the iran deal. that is the message in the short term. whether deals will eventually be phased out, the question here is about whether the leadership of the u.s. and making sure these treaties remain in place and they are abided to. tom: how will do just -- francine: how would you describe the u.s.-russia relationship? wolfgang: it has been rocky for some time. it has been a rocky relationship. it will continue to be rocky and from the russian perspective, the u.s. withdrawing is a risk.

further inhem to go the development of missiles and they do not get blamed. usually, we blame them. this time, they are not going to get blamed. francine: if you look at geopolitical tensions across the world, there is china, korea, what makes you the most worried? wolfgang: the korean peninsula in terms of the global potential impact, the kinds of weapons involved and the numbers involved. key players are china, the koreans. is becoming more confrontational, more difficult. it will not have the impact that a conflict of the korean peninsula would have. francine: thank you so much. let us get straight to first word news. here is kailey leinz. says theaudi arabia

death of jamal khashoggi was a mistake perpetrated by a rogue operation. the u.s. and its allies are skeptical. france wants more information. germany put arms sales on hold. president trump stress the importance of u.s. relations with the saudis. trump chief economic adviser blames china for refusing to engage on trade issues. larry kudlow told the financial thes the u.s. has given government a detailed list of demands and has no response. president trump believes it will take more time for those tariffs to have an impact on the chinese economy. of central american migrants are openly defying the u.s. and mexico governments. they are heading to the u.s.. mexico is under pressure from the u.s. to stop the caravan.

the cofounder of one of the largest alternative investment firm says be cautious. they spoke with bloomberg in sydney. >> our economy is doing well. months, it will become the longest recovery in history. i do not believe there are signs of recession anytime soon. kailey: global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you. bonds and stocks rallied after moody's remove the threat of downgrading the credit rating to junk. the european commission demanded italy explain its deviation from its budget rules. alberto gallo and wolfgang piccolo are with us.

the trials andt tribulations of the italian economy, we hear from the coalition in charge that they possibilityat the to stay more in line for 2019. will that be enough to appease concerns brussels has? alberto: it is not about the number itself. it is how the money is spent. there is lack of details on how much growth will be generated from the spending. if you're giving money to people and they save it, the multiplier is low. they estimate something over one dollar spent, i generate more -- the growth estimate is too high. the fiscal multiplier estimate is too high.

europe is notat, nearly, is not approaching a recession. italy has a current account surplus. not stable in is its communication but you have underweight positions. macroir value given the indicator. wider and you need more drama against europe. the bad news is, they get more votes if they are aggressive. francine: the coalition is an easy. cut loose of five-star and go to fresh elections? a loss ofthere is people to put in key positions. yes, it is not easy. they are competing against each other.

young leaders, young for italian standards. i think the earliest window will be in the summer of next year, depending where the economy is, how much they get done in the first six months. seen, theyat we have do not seem to be capable in terms of policymaking. this is a government that will go through and we should be prepared for that lasting longer than people initially expected. tom: we just showed howard marks within our business flash. himou go so far as to quote within your latest research report over the human condition you have to do something. you have to do something that the italian government parties feel? recession has taken a strong toll in italy.

the middle class and lower income families are's ill -- are still at low level of wages and that has provided fertile ground for people to believe in the promises of higher spending. europe has an inequality problem. governments are trying to solve this. what we are lacking is that european wide plan for investment growth. is -- tying government the italian government is selling the same story as france's president. i think this is an issue. italians want to stay in the says that only half europe has benefited them. we have shown that germany has gained in the last 10 years compared to italy and spain. opportunitye an

within market moves, is there an opportunity? it is not what you trade for one month and between now and the next two years, we see european markets price for recession across corporate debt, across bank debt in the 125 years maturity. you get paid very well, around bet the largest companies will survive. value and thatis includes spain, where there are less populists and the u.k., which is usually expensive with but which has become more attractive. do think there is a secret plan to take it out of the euro? wolfgang: i do not think so. they would be

able to execute such a plan. these are the guys who struggled to put together a budget. if you look at the budget, it is appalling. even their ability to mount a plan like that, which would be savers, i dothe not think there is a plan. it is connected to the question tomas before, this government asked before.m this government has keep the popularity high. before it was about the migrants. the next one is about the russian sanctions. keeping a fight with brussels is what this government wants. understand having a fight with brussels is popular. i have been told that the italians do not want a widening because that hurts them.

wolfgang: it hurts. it is something the government will have to consider. we are not there. people are talking about a spread of 400 which is a number mentioned by tria which shows you how incompetent he is. mentioned numbers like that, you're causing problems for yourself. the moment in which my view will pullback in -- is when we are at the edge. francine: thank you. both stay with us. will be speaking to executive sberbank earnings. berkeley -- two executives on bank earnings. we will also talk about the anxiousness on european stocks. this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. let us get the business flash. cbs. upheaval at parsons is leaving because of complications from cancer. something chief operating officer will not attend in the wake of the death of jamal khashoggi. is concern over u.s. regulatory approval over the pending sale of sopping to

sprint-t-mobile. lands for putting future share buybacks on hold because of uncertainty over brexit. the largest airline just completed an 863 billion dollar buyback this month. the ceo said starting a similar program makes no sense. the airline is predicting more european airlines will go bust. oil has spiraled upwards and they will be a flight to who has got the coitus -- who has got the lowest cost this winter. we are seeing bankruptcies. these smaller guys are disappearing and i hope more than disappear because they deserve to disappear. that is the bloomberg business flash. francine: theresa may is due to up progress on brexit later. she says 95% of the deal is complete. estimated 700,000 people

demonstrated in london demanding a bolt on the final deal. -- a vote on the final deal. still with us alberto gallo and wolfgang piccolo. tough to 5% that are crack down and that is the irish border. how will they do it? they will do it in any way brussels tells them to do. we've seen is lots of grandstanding from the u.k. from the british side. the solution will be the one that brussels puts forward. will stay in the customs union for an amount of time. no date will be specified. the question is for theresa may to sell it or it -- it. the europeans may give some nice wording to give it more leeway. have a special summit in november so she can claim victory but that is the solution. francine: how do you see this going? alberto: we think it is an

extension, one or two years. not much will change during this period. will continue to question the long-term viability buying factor on a 10 to 20 year horizon. we think the passporting is the main bargaining chip the u.k. can give. allow banks to europe in exchange for access to the common market. will be continued moves of headquarters from london to other parts of europe. generally speaking, this period of kick the can does not look great for growth. some parts of u.k. are price for recession. risk is something we like because we do not think there is an immediate tail event. we think it is a slow scenario. brexiteers?w would

wolfgang: if there is an area disability, ito is the moment in which we have a deal, whether we will get a positive vote. we have no precedence. it is going to be difficult to crunch a number around that. there are pieces of legislation that have to go through parliament. the risk is significant, even the moment and which a deal has been a great. will have to help themselves. this is a country that has not seen a meaningful debate about europe for the last 40 years. it is time to have it. all of that is out of the way. there is no time, no will to do that.

they're going to have to realize whether they won a deal that brussels has framed for them or face the cost of a no brexit. francine: thank you both. alberto gallo, wolfgang piccolo, both stay with us. up, the exchange commissioner at 2:00 p.m.. this is "bloomberg." ♪

good monday morning. francine lacqua in london, i'm tom keene in new york and buried in the news flow is a modest debate. morgan stanley versus goldman sachs. it gets the attention of alberto and wolfgang piccolo as well. it is simple. number sachs looks for x

of rate rises and morgan stanley says a couple of more in 2019, 3 more in total. that is it. who is right? with the u.s. economy in isolation, we could have four rate hikes next year and one next year. of the world, we have other issues. i tend to think four hikes is high arid our view -- hi. our view is of three. because we have a slow down in the rest of the world. these things can weigh on the u.s. economy as well. up, does that mean price yield down for fixed income instruments? is some it means there rising yield pressure on treasuries. a big rise has just happened.

the 10 year moved 40 higher. in the rest of the world, if you gilds, we are far from getting the bigger signs of inflation. even in the u.k., the last data was week. the divergence in growth persists for the coming quarters. francine: what does a policy mistake look like from the fed or anyone else? the ecb made a policy mistake. they should have normalized the deposit rate. we wrote about it widely. instead, they decided to go the same way as the fed, waiting to and the deposit rate normalizing quantitative easing before that. it had just started and it is

going to end by the end of the year. the deposit rate hurts banks and profitability of lending across europe. the end of qe creates volatility. will have to remain dovish. francine: alberto gallo and wolfgang piccolo, thank you. when it comes to negative yields, coming up, kate moore a blackrock. we will talk italy, saudi, markets. this is "bloomberg." ♪

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comcast business. beyond fast. tom: quiet markets. bring crude $80 a barrel. beijingyuan signals a

that must act. trade war.fic all eyes on mr. erdogan. what does he know about what happened on the saudi consulate? where is the body of the deceased? 15 days to a midterm election. president trump says we need a middle class tax cut. good morning. this is bloomberg surveillance, live from new york, i'm tom keene with francine look while in london. , from the bank in germany, growth may have stalled in the third quarter. what we heard from alberto gallo of a slowing europe. how does that affect chairman powell' us path forward. -- powell's path forward. francine: they are saying that the slowdown is due to the test problems. this is the scandals when it

comes to the carmakers. it should not last long and optimism has improved. there are two stories, one is the politics stalemate in europe, angela merkel losing speed and the other is tariffs on carmakers. this seems to be more about emission test problems. german growth may have stalled. tom: many stories. we will get to kevin cirilli in a moment. your first word news, here is kailey leinz. allies are u.s. and skeptical of the official saudi explanation for the death of jamal khashoggi. he was accidentally killed inside the consulate in istanbul. france, the u.k., and germany are not buying it. president trump said the account was marked by deception and lies but he stressed the importance of saudi-u.s. relations. president trump plans to pull out of an arms control treaty with russia because moscow has broken the agreement.

the deal on intermediate range nuclear missiles was signed in 1987. nato defense ministers discussed concerns russia was developing a new missile. president trump is promising voters there will be a new middle class tax cut before the election but there is one problem. republican tax policy makers do not know anything about it. republicans had hoped last year's tax overhaul would help carry them to victory in the midterms but the policy has turned out to be less popular than they thought. theresa may will tell parliament today that 95% of the brexit withdrawal deal is complete. this comes at a time of political peril. 700,000 people marched in london. both pro-and anti-brexit lawmakers could topple her from power.

global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." tom: thanks. now, a lot coming out here. the mining company, their chief has aive officer says he three to five-year retirement path and he wants to train front runners as next ceo. let me do a data check. not much going on in the markets. futures up 2. oil with a little lift. francine: this is what i'm looking at. italian bond yields are on the move. may have a softer stance when it comes to deficit goals. i am looking at pound. dollar and treasuries steady. tom: i want to get to the midterm elections.

and the u.s. overwhelms all. moments on fox news, the saudi arabian foreign minister. a mistake made and what compounded the mistake was the attempt to cover up. that is unacceptable. these things happen. sure thosemake responsible are punished and we have procedures in place the prevented from happening again. tom: joining us is kevin cirilli in washington. sunday morning talk shows seem old news. mr. erdogan is going to speak tuesday. does the united states want the president of turkey to speak? kevin: they do. the question is what is president erdogan going to say? are they going to make the case that if the u.s. does not talk to them are they going to keep trending toward russia? the saudi's are speaking.

aey have fired more than dozen folks involved in the killing of jamal khashoggi. they're getting attacked politically on both sides of the aisle with the exception of one person and that is president trump. case, since this happened, that the removal of of 110 million dollars commitment, only a fraction of which has begun to trickle in, that that would put u.s. jobs at risk. said specifically the calculations he is using. how this unknowns in is going to impact the long-term relationship. in the short term, when lindsey graham chris blumenthal are attacking you, not a good sign. -- graham and chris blumenthal are attacking you, not a good sign. lead to: does this

sanctions against saudi arabia and does this play into midterms? in terms of sanctions, absolutely. u.s. -- i asked mitch mcconnell -- he said it is appropriate. the senatens is that foreign relations has asked the administration to put back a days and that would force the president's hand to target sanctions and saudi sanctions inget saudi arabia. in terms of the midterms, i'm not sure it will have as much of an impact as the justice kavanagh confirmation. to the midterms and i want to get to the wall street journal poll over the weekend. ie op-ed in the journal thought was extraordinary, about the democrats.

the democrats have no issues. the issue is, we hate trump. the president is a typical american. i'm sorry about the courses of the average american that mr. trump conveys. that coarseness is unpresidential. yearskipped davos every and watch fox news. how upset are those people and will they turn out? kevin: yes, they will. point, is what impact will that have? the turnout, the congressional house landscape is different than the senate landscape. there has not been a development since the confirmation of justice kavanagh. the senate will likely flip toward republican. tom: i want to dovetail this into mr. hudak.

what is the democrat view? was the the discussion idea the democrats do not have a plan. democratic candidates have to have a plan or is it about the president? kevin: they have to. of the house races, you've got different democrats running. you have got folks like alexander castilla cortez who are more centrist. when the republicans would say obama care bad. they take control of the house of representatives and the senate and the question is, what is the plan? this is a dangerous political tightrope for democrats to be walking down, something republicans struggled with. it is different to govern. tom: thank you.

it is gridlock in the philadelphia eagles coaching office after a loss. john hudak is with us. are we going to get gridlock? john: the republicans controlled the house, senate, and presidency and there is gridlock now. imagine in a few months if the democrats take the house back, gridlock will increase. very little will pass congress and very little will be entertained in the senate. how does the u.s. deal with saudi arabia in a convincing way without upsetting president trump? john: it is difficult for the u.s. to deal with saudi arabia. congress has play an independent role. it is a separate branch and it

needs to speak with the type of unified voice that the administration cannot muster the ability to do. congress has a role to play, even in the space around sanctions and they need to do that whether the president likes it or not. francine: are we looking at sanctions and are they going to be real or just sanctions to give an idea they are putting sanctions? quite a feware republicans and democrats in the senate and house who are furious at what is happening with saudi arabia's response to this killing and the fact it violates and whatvalues americans reputation looks like worldwide. congress is almost certainly going to levy sanctions. they are not going to be economically disastrous for saudi arabia or that violates the bond between the u.s. and

saudi arabia. the u.s. hasess -- to make a statement in congress is going to be the place where that happens. senatorweet from the from nebraska. ben sasse has been direct about evidence within the saudi arabian story. is, senator sasse is saying the saudi's need to produce the body. this is getting brutal. at the white house ready for the domestic discussion on this international event? john: i'm sure there are people who are prepared. an issue that touches on national security, economic policy. there are people at the white house who understand both the short and long-term implications of this situation. the problem is trying to convey that to the president.

the president sees the relationship in a linear way. to be able to stop the president from playing checkers and start playing chess is something people struggle with. the 1987question about nuclear agreement, i'm getting conflicting opinions about whether the president can act unilaterally or whether congress can intercede. have you read up on this? how narrow are the president's powers? john: i have not read up specifically on this. general, the president has discretion when it comes to removal from agreements like this, not necessarily entering them. same time, the president has significant power in congress in terms of changing minds. regardless of whether the president has unilateral power to do this, he is going to need

to build a conversation within the public and congress to withdraw from an important nuclear treaty and one that reagan was a big part of, is something that is in america's best interest. francine: thank you so much for joining us. john hudak. speaking of governance, we are talking about italy. be hinting at a softer stance when it comes to deficit goals. the deadline was about 10 minutes ago. the finance minister saying the government is aware the plan is not in line with the packed and close by the european union. bonds carrying the rally after the budget response. we will talk budget next. this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. let us get the business flash. built glenn ford into a dominant forcing commodities has told investors he will retire in three to five years. --has started trading training three to four from runners. he turned 62 in january. it is the first major deal for free a chrysler since manley became ceo. -- for fiat chrysler since manley became ceo. the carmaker has agreed to sell its auto parts unit to kkr. the price is $7.1 billion. the deal creates an auto parts maker with more than $17 billion in revenue and 65,000 workers. shares of royal philipps are falling the most in more than seven years. the technology company posted third-quarter profit that missed estimates. phillips wants to redesign its manufacturing output because of trade tensions.

>> we will redesign some of our supply chains. we are in the good position to have factories in the united states and asia and we can rebalance load going forward to avoid some of the duty impact. besides that, i think we will have to look at raising prices selectively as well as taking further productivity measures to offset these currency events. kailey: that is the business flash. tom: thank you. it is a joy to speak to kate moore of blackrock about politics, your determination of what to do in the equity markets. i see a jumble. i thought the memo you sent had clarity. sectors have been left behind by tech. back?rowth in tech come

kate: this is where definitions are going to get creative. as you know, there are ways to think about value. when we talk about value here or debating, there are sector neutralize. it depends what you're getting. value is the style. there are structurally impaired industries and companies. when we're looking at whether people are willing to rotate into cheaper parts of the same industry, there is potential. growth, there are high quality companies that have fallen into -- in growth indices. the rotational profit taking is overdone. -- the rotation in profit-taking is overdone. do you acquire shares of highfliers this morning?

can you buy those things that the margin? kate: you can but it depends on your time horizon. we could see more rotation and profit taking. there is anxiety now. step awaycy is to from the leadership and neutralize positions, take down your beta. to think about how to position yourself at the year-end. i would be buying, understanding you may not get outperformance. francine: kate moore is staying with us. it is earnings season. we will speak with several chief executive spirit -- executives. stocks willbig bank be in the mix. this is bloomberg. ♪

tom: bloomberg surveillance, good morning. politics anday in in international relations. quickly, what is prime minister may's biggest headache this morning? francine: prime minister theresa may when on tv saying -- went on tv say 95%. it is great having 95% but you need that 5% to be locked down. tom: we will get to that.

with us.e we continue on growth versus value. , like the united kingdom, is there an opportunity? kate: in value? tom: should i buy the ftse? not thatare constructive on u.k. equities and we prefer to stay in the u.s. and it seems contrary and and a lot is about sentiment, about trade around future growth. we are not seeing that come through in terms of earnings or demand or any signals we look at. em -- is itavor of a commodity engle or more general? kate: on the commodity side, we're not calling for a big upside. a few weeks ago, i spent time in china talking to tech and media

are making the biggest part of the market cap. what we saw is that demand trends are long-lasting. this is not just a few quarters. these companies are getting punished when it comes to prices because of changes in the regulatory environment or concerns around policy. i think this is a great opportunity for a long-term by which makes up close to 40% of the market cap of that market. francine: is this the base case scenario that the chinese are going to do everything they can to stabilize the economy and stabilize the markets or is this because it you are bullish that we have oversold the chinese market? extra us it and implicit support by the chinese government in key sectors -- and impliciticit

support by the chinese government in key sectors. whether they step in to buy the shares, that is to be seen. is a lot going on in terms of development that makes companies competitive on a global basis. it seems underrecognized in share prices. if you have a stomach for volatility, this is a time to step in. francine: thank you so much. kate moore is staying with us. bloomberg users can interact with charts using gtv . show up at your meeting. -- show off at your meeting. this is "bloomberg." ♪

tom: a lift to the markets. francine lacqua in london, i'm tom keene in new york. here is kailey leinz. kailey: saudi arabia says the death of jamal khashoggi was a by a roguerpetrated

operation. both the u.s. and allies are skeptical. france wants more information, germany put arms sales on hold. president trump stressed the importance of u.s. relations with the saudis. and germany, the central bank warns growth may have stalled in the third quarter. largestdown in europe's economy is due to problems in the auto industry. the breaking growth should not last long. thousands of central american migrants are openly defying the u.s. and mexican governments. they are heading to the u.s. mexico is under pressure from president trump to stop the caravan. orders tots ignored submit to processing at a checkpoint. the cofounder of one of the largest alternative investment firms says be cautious but stay invested in the u.s. they spoke with bloomberg in sydney. >> our economy is doing well.

in a few months, it will become the longest recovery in history. i do not believe there are signs of recession anytime soon. kailey: global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you. pared theirs have rally after the government responded to criticism about the budget. the financein from minister saying the bond yields just hearingsed -- from the finance minister saying the bond yields will be reversed. the government is ready to intervene. they are aware the plan is not in line with the e.u. pact. we're joined from milan. is this a softening of the coalition government in italy? at first glance, yes, i agree

with you. comments struck me as conciliatory. their outsidege the parameters of what the e.u. has established. considerilling to action if these objectives are not met. the e.u. midterm objectives. know, they have not changed in the target so far. initialems to be in the reading, perhaps a willingness to bend a bit on what they proposed previously. francine: where does this go? are we going to see more softening from the italian side and will be e.u. become softer? the ball bounces back to brussels.

tomorrow tospond by italy's response. to see if interesting they adopt a hard line and say this plan is not going to work or they try and leave the door open to mark negotiation. -- to more negotiation. tom: i am fascinated whether italy is in a vacuum or whether there is a back-and-forth with germany and brussels. is this a debate alone or are the other players involved? it is an interesting question. it depends on what country you are talking about. responseermany's interesting last week. she was not adopting a strident stance as opposed to austria. think you i do not could determine a unified

response. the commission will be responding in unison. individual countries, i think they are not completely on board on attacking italy in a hard-line fashion now. that theydo you think want dialogue with the e.u. now? dan: that is clear. the finance minister repeated that this weekend. theprime minister repeated concept of keeping dialogue open. for now, that is the party line. tom: thank you so much. we're going to come back. kate moore of blackrock with us. equity markets, your morning briefing on radio. karen moskow and nathan hager. look for that on bloomberg radio. stay with us worldwide. this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. let us get the business flash. more upheaval at cbs. parsons has resigned less than one month after being named interim chairman. he was appointed after the department -- departure of les moonves. he is leaving because of complications from cancer. it is another setback for this week's saudi investment conference. softbank's chief operating officer will not attend in the wake of the death of jamal khashoggi.

one possible reason may be concern over u.s. regulatory approval over the pending sale backed sprint to t-mobile. ryanair is putting lands for future share buybacks on hold because of uncertainty over brexit. the largest airline just completed an $863 billion buyback this month. the ceo said starting a similar program makes no sense. the airline also was predicting more european airlines will go bust. >> oil has spiraled upwards and it will be a flight to who has got the lowest cost this winter. that is ryanair. we are seeing bankruptcies. these smaller guys are disappearing and i hope more than disappear because they deserve to disappear. kailey: that is the business flash. tom: thank you.

without question, the book of the year in investment is by h. marks. i will have more on that in the coming weeks. bloomberg caught up with howard marks. >> look, our economy is doing well. in a few months, it will become the longest recovery in history. i do believe there are signs of recession soon. tom: howard marks of their in singapore. kate moore is on the buy side. -- andstanley and gordon goldman sachs are on the sell side where they pitch opinion. morgan stanley says a few rate cuts. goldman sachs says more rate cuts. which will it be and what does it mean for my portfolio? taking are conservative view of what the fed will do. the market is priced in. call it three over the next 12

months. andening to howard marks going back to our conversation, what if we are all being too conservative? we keep asking what can go wrong. our earnings going to disappoint and revenues not be in line. do we have to worry about brexit? what if things look good? what would we do if growth continue to be in a sustained global expansion? we had companies continue to produce solid earnings and everyone has gotten conservative. tom: do you own a same -- the same stocks? does it matter in terms of portfolio selection? kate: i think the number of rate hikes matters for the more rate sensitive sectors.

is aboutour question how worried should we be about the number of rate hikes for companies and the work we have done suggests companies are not that sensitive to higher rates. what we're watching is what happens on the consumer side because the consumer does not seem to be as prepared, shoring up their debt profile. if that in the pushing back on consumer demand, -- if that ends up pushing back on consumer dan demand, thatsumer could have a forecast we have not predicted. the policy mistake would be to abandon their framework of being data dependent. i'm laughing because it is unlikely that is going to happen. if we were to have acceleration in the pace of rate hikes, that would scare the equity market. long as we are communicating,

as long as the fed is clear about the data that is important to them, i do not think the markets should be shaken. the sentiment pullback we have seen over recent weeks has so much to do with geopolitics and u.s.-chinathe relationship and less to do with what is going on on the ground. what if things go right? our portfolios position for that outcome? i would suggest they are not. francine: go ahead. tom: that is too much optimism for monday morning. francine: i was going to push back against that. there are risks. it could go right. you have these risks which could be emerging markets, geopolitics , more politics being put in place that are not good for the economy.

what is the market pricing in now? we think theral, range of growth outcomes and policy outcomes have rod and from where we were -- have broadened from where we were. focus on how it has broadened to the left and not to the right. tax cuts lead to sustained growth and we see the top line look good. i was reading papers and there was the obsession about how companies have not met revenue expectations. it is early in earnings season. analysts are not expecting an acceleration in the second half of the year. we are talking about a percent, 9% -- 8%, 9% revenue growth. tom: this is where you have expertise. what does it do to margins if we

get some form of slower economy? we always underestimate what corporations can do to protect margins. kate: companies are going to protect margins at all costs. they have done a phenomenal job of maintaining a low cost base and continue to streamline their business. tom: do they have room for further cost cuts? do they have further room to protect margins through synergies? kate: think about inflation. whereis this bifurcation you have goods inflation continuing to trend down, services trending up. companies invest in technology, they are securing a higher sustained level of margin. we're not going to have a collapse. tom: it is the optimist hour. it is too much for monday.

some optimism. it is better to be optimistic. if you look at your optimism, what is the one thing you need to get right? kate: china is the biggest concern. i'm coming out more optimistic. i'm getting tired of having pessimistic conversations with smart investors who are taking risk off the table, rotating to lower beta portfolios. i'm talking about the street and our clients. loominga question is large and how we proceed in terms of engagement will do a lot, could do a lot of damage or could do a lot to encourage companies if we come to some sort of arrangement into 2019. what if we have this

trade war for the next 20 years? given theu know erratic nyssa policy being made, ofgiven the erraticness policy being made? going to have to think about development in the tech sector and the industrial sector. what happens in china, what happens in the u.s.? you want exposure to both. a diversified approach to the equity market. near-term term, more conflict and posturing and less agreement and fewer moments spent together is going to cause volatility in the market. a lot of that news is getting priced into chinese equities. if things get bad, we are not seeing any of that news priced

in. tom: it is understood the u.n. and jeff rosenberg are on speaking terms. you and the -- that jeff rosenberg are on speaking terms are the allocation of our money is under debate. , where is that frontier? optimism is that equities are going to outperform bonds. jeff would agree with me. most of our allocators at black rock. you have to be smart about what you own. within stocks, we want you to own quality which does include tech. the u.s. is our preferred equity region. on the fixed-income side, we are in the camp -- tom: i do not want you to get in trouble.

invesco buying oppenheimer funds. it is wrapped around the active-passive debate. is there value to signal stock election over the etf? kate: i would not be sitting in my seat if i did not think that was true. this is one of the most interesting moments for people choosing securities. we were talking about margins. this is a perfect place analyzing margins and how companies are able to control costs and how stock pickers can differentiate themselves. blackrock is in a great place of having a huge suite of products. we can share information. it has been the best information hub of any firm. tom: too much optimism. go away. kate moore of blackrock with us. u.s.s stein, the

securities and exchange n,mmission are -- kara steio the u.s. securities and exchange commission are with us. this is "bloomberg." ♪

[italian] francine: that is the prime minister of italy. you can hear him speaking in italian at the foreign press association, saying they need to be prepared. he talked about brexit. more important is the italian budget. italy has been softening its stance, saying the target is the upper limit. it might be lower, repricing the italian btps. tom: who is he speaking to? francine: to the markets.

it is a message he wants to give the markets and all foreign investors. let us stick with things in italy. it is a busy week for central bank decisions. tuesday, indonesia is expected to leave rates on hold. say, -- wednesday, canada is expecting a rate hike. ecb, they will confirm it will end this year. turkey, the rates will stay on hold at 24%. that is on thursday. there is central-bank action. we talk more with kate moore. was the ecbdline and draghi keeping rates on hold until 2019. the central banks have to react to financial banks. kate moore with us. in looks at the laggards

banking. if yourt of the day is are a passive manager, you have average out jpmorgan, wells with citigroup. on stock selection, how do you treat the banks as a sector and which do want to own? kate: let me put something out there. i continue to say stay overweight equities. one call i have not gotten right this year, thanks. .- banks felt like everything was lined up from the regulatory side to the growth and policy side. there seem to be everything in place for these stocks to outperform and they have not. a little bit better in the past month. as long as central banks commit to normalizing and the fed is on

track and we get the yield curve steepening, banks should do well. they have all been unpunished -- they've all been punished. tom: which banks? the regionals? or is it the smaller banks? there is good opportunity in some of the large banks, the money centers. the deposit betas for the smaller banks are higher so they cannot maintain that margin as much. think that is hitting those companies that do not have the same technology to continue to attract consumers even if they are not offering a progressive rate. this is going to be an opportunity for choosing different financial institutions. it feels the underperformance of the sector is overdone and we need to take a look at the quality of these companies and the fact that central-bank

policy around the world is becoming less accommodative. tom: that is our dose of optimism for october. we look for kate moore to return in march of next year. anything else will be doomed. . daysth the news flow, 15 until an election for the united states of america. we drive for the conversation on bloomberg radio. we do that next with jonathan ferro. this is "bloomberg." ♪

>> italy promises promises. the country says they will ensure the budget deficit does

not exceed -- big banks on growth. investors prepare for 32% of the s&p report earnings for this week. president supports the private sector and plans to cut personal income taxes. >> welcome to bloomberg daybreak. i am david westin. we are going to take a look at the white house. it appears president trump gave us a sneaky over the weekend saying tax cuts are coming. >> the white house says, what now? >> all the gop is saying, we do not know what he is talking about. they have a plan. the republican party says people across the country think it is for which people. >>