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. days, how many more

things will come out before the election? a lot of conversation about debt cap bounces. s&p futures are up by about eight points. it is going to be hard to take a strong position ahead of the earnings. the letter came out from italy in response to that european union. they say trust us. 10 year yields are selling on the margin. yields are up one basis point. seven years are coming out this week. 1%.e is up by 3/10 of saudi arabia saying wisdom when it comes to turkey. >> there has been a shortage of that. it is time for the morning breeze. tomorrow, davos in the desert starts without many participants including treasury secretary steve mnuchin.

deutsche bank and barclays followed by amazon. the ecb announces its most recent decision with no change in policy but many questions about what comes next. on friday, we get the first read on gdp growth. a big week. it is time for bloomberg first take. we are joined by peggy collins and marty schenker. before we get to the first take, a stock about the surprise. nobody is quite sure what he is talking about. >> we scrambled to find anyone in the gop infrastructure who knew anything about this. we were unsuccessful. no it seemed to know anything about any tax plan including the gop lobbyist for tax proposals on the hill. -- andems to be uncharted territory for donald

trump. >> congress is in recess right now. >> maybe it is part of an infrastructure plan to date a deeper hole in the deficit. >> 14 days of craziness. depending on where we are pulling -- >> i am not sure we are done yet. >> not to mention congress is not in session. >> let's get to the first take. the first story up is china. their stock is on a rocket run. i will put it on my terminal. government will not get out of the way of saying things are great. we have the president writing an open letter. >> we saw chinese equities pop today because the government is stepping in. the president has also saying he is proposing tax cuts for people in china too. it is something we often forget

and the u.s. china's middle class is still rising. china is becoming more dependent on retail investors. >> obviously this is in relation to data in china and in addition to -- how does trump gain leverage? >> he has said he does not want to force china into a depression. the game is to cause some pain to china. if china is able to offset the pain, you are right. it makes it more difficult to negotiate. >> that leads us to our second story. that italy spread. we are at 293 basis points. people were getting a little concerned. now there are promises. there are some italian officials saying we promised we were going to do it right this time. how does this resolve itself? >> i think it is going to be a

big week for italy. they still have a chart of nonperforming loans. we saw some of the italy bonds do better ahead of italy turning over its plan. plan wouldnd a the be a ceiling rather than a soft number. it does look like they solved the problem in terms of regulators. not as bad as it might've been. the chinese tend to muddle through this whole thing. it is perception becomes reality in the italian bond market. it is in nobody's interest for the italian bond market to fall apart. ultimately, they will muddle through as they have. whether this government survives through the process is another question. >> the two parties got together.

our third story is about earnings. a slew of earnings this week. turned2% of the s&p is -- is going to come out with earnings. it has been pretty encouraging. it is early going. the market does not seem to react. >> that has been encouraging. asset managers come out and say the volatility in the market has taken some of the wind out of their sales in terms of profit from trading or money they are gaining or revenue they are getting from investors who are moving more towards cash. it is not if but when we are going to have the next recession. some people are saying two years. some are saying three years. that is making investors feel like they might need to get more cautious. traders on wall street do not make as much. it isdman was out saying

not going to keep going up like it was. it is not going to keep going up like it was. we have a chart here that illustrates that. it may get rougher here. >> you can count on two hands the number of people who have said there is a recession coming and be careful. we are still waiting for that moment. it has not come yet. goldman notwithstanding, the rally may extend longer than people thought. >> peggy collins and marty schenker. we want to update you on a merger. american rail companies is going to be buying ite rail. what we really care is the icons involved. the top shareholder of american railcar owns about 62% of all the shares. we love that. icon is involved in a lot of things. >> if value has not taken off, and there is a lack of investor

interest, it creates opportunities. >> there is a lot of uncertainty in the marketplace. >> coming up, more on china's soaring stocks. we are going to break it down with marc chandler. this is bloomberg. ♪

>> this is bloomberg daybreak. it is the first major deal for chrysler since the ceo. they have agreed to sell the auto tech unit. the price, $7.1 million.

china's attempts to find new investors are picking up. capital management and -- china has been looking for strategic investors since temporarily seizing control of anbang earlier this year. the man who builds glencore into a dominant force has told investors he will retire in three to four years. training three to four front runners as the next ceo. he turned 62 in january -- he turns 62 in january. david: shanghai stocks had their best -- joining us now from hong kong is bloomberg's chief economics

correspondent. thank you for being with us. we are putting up a chart that shows how high shanghai stocks have gone. off 3 trillionll for the year in total. a broad,ave had is concerted effort by officials to shore up confidence in the market. what we have seen is president xi jinping referred to unwavering support for the private sector. we have had the central bank and the stock exchange regulator talk about taking measures to offset risk and ease the financial burden. topping it off, we have had something of a sweeping proposal for tax cuts. much broader than most people have anticipated. hand, say on the other volatility has returned with a bank. it is at the highest in 47

indexes tracked by bloomberg. my colleague has said it is either heaven or hell in china's market at the moment. david: do we know whether team china has taken the field? are they buying in the marketplace to prop this up? explicitly certainly topping up the economy. we had top economic officials and we had xi jinping's statement making it clear they are getting behind the market and the economy. they want to be ahead of the risks coming down the curve. there is suspicion that team china -- that brokers are struggling to buy the stocks. that has been a feature of previous downturns. it may become clear in the coming days. has made no secret of the fact it is trying to get ahead. it wants to set the country up as this is a can for what is a deepening trade war with the

u.s.. david: it is straight -- it is great to have you with us. alix: team china. i like that. what does this mean for the dollar? joining us is mark chandler. if you're going to have a government that is that aggressive and supporting the -- >> i think it as to the discussion -- i would -- is in china, ag lot of the companies have used their stock as collateral for loans. government central but stock. it is not that team china, which typically means the large policy banks that the government owns. we are talking about the government itself in the provincial government buying ownership stake in chinese companies.

i think the actual buying of the stocks helped lift the stock market. currency -- david: when do we hit -- alix: when do we hit seven? >> i'm thinking we get there probably in december. maybe the late november summit when president xi jinping and president trump meet. a 10% tariff on $200 billion worth of chinese goods becomes 25%. economy are of the slowing down. that is exacerbating this. say that tend to everything going on in china is because of what we are doing. they would've had challenges without the trade dispute. how much of it is inherent within their economy? the would compare it to

three stooges show where they try to fix a pipe that is leaking. every time they close one gap, the waterspouts out someplace else. they have a lot of debt. it is not clear where it pops up the next place. alix: larry kudlow asked this reporter over the weekend. we gave them a detailed list. the problem with the story is that they do not respond. is that what you are hearing on the street? >> i do not know what the street knows about how china is playing its game. the u.s. makes its demands. china says it does not want to budge. the u.s. is asking for china to the desk for china to abandon its -- for china to abandon its strategy. we're talking about how china is trying to emerge back on the world's stage. the u.s. says we do not want this. that is the confrontation.

below it is china's economic system is -- economic system has some fundamental problems. david: there is no question that that is the fundamental confrontation. we have seen confrontations before from the trump administration when it comes to nafta. deale end, we come to a that changes at some but is not a fundamental confrontation. >> i hear what you are saying. there has been a lot of cosmetic changes. a lot of rhetoric without the substance behind it. i think china is different. i think that the democrats are not so different from the trump administration on dealing with china. i think we are going to see it is going to persist longer. trump does not want to negotiate and talk to china right now. he wants to cause them more pain so that they capitulate. alix: what does that mean for

the rest of emerging asia? southwestern asia is where you wanted to be if you wanted an emerging market. >> we are looking at the seven level. that is where the chinese have drawn the line in the sand. i am not sure that this is a continual selloff. china is, turkey, really a modest decline. they are easing policy while the fed is raising rates. their economy is slowing. we are going to get a -- it looks like something with a 3% handle. david: what happens to the global economy if this ends up being something where europe joins with us. that is quite possible. is this something in the new nafta treated -- new nafta

treaty where you you are not allowed to go and make deals with a country. david: is that a good development or a bad development? if we had a different configuration of political leaders, europe has very weak political leaders too. may is looking at a leadership challenge. italy has a divided government. i'm not sure that everyone can get together and resist china. the biggest thing will be that the china and the european union and possibly russia trying to fight the u.s. case coming upr for the wto before we have a united front on china. alix: marc chandler from bannockburn staying with us. staying in china here, china mobile coming out with their mobile earnings. the net income growth coming in

at over 3%. they are the biggest telecom. david: it is huge. alix: lots of tech earnings coming up this week. we will break it down. this is bloomberg. ♪

alix: a big week in earnings. florida, amazon, and ford. with us is marc chandler from bannockburn. the conversation is that everything good is going to be baked into the market. what is your read? >> we still have the fiscal stimulus working its way through the system. president trump has promised something about a large middle class tax cut. that seems like something congress is not quite sure about.

for me, the driving force is the combination of fiscal stimulus and gradual monetary tightening. generation, it seems like once a quarter, that sounds aggressive. greenspan did a quarter basis hike at every meeting. i think this is very gradual. david: we have gotten the fiscal stimulus already to a degree. there are proposals in congress. senate is going nowhere on making a permanent. what is the danger that the delta will be reduced? we had a fiscal stimulus, but it will not get better. >> i think you are right. there will be fiscal stimulus still in the pipeline. people are talking about a downturn in 2020. i think the slowdown comes at the beginning of next year. that is why the market is saying, the market is saying maybe two hikes.

alix: we are hearing from the big banks on when we will see a recession. >> look, our economy is still doing very well. in a few months, it will become the longest recovery in history. i do not believe there are signs of recession anytime soon. alix: goldman saying the opposite. this is what we were talking about over the weekend. the blue line is financial conditions in that. they are saying the stock rally is not going to be good enough for the back half of the year. you're going to see a slowing economy. >> i think you see some signs of a higher interest rate having a bite. we had a series of we had a series of week data last week on the housing market. two interest rate sensitive sectors. we will see this again next week or does the lease.

-- or two weeks. we peaked in 2015. i agree that we are not headed for a recession eminently. i think we have a slowdown beginning at the second half of next year. enough to get the federal reserve to paul. david: we have the that saying we should keep hiking. really caught between two forces here. >> what the federal reserve says is that we are going to raise rates until we see evidence that we have gone too far. the evidence is economic slowdown. so far, it has not materialized. we probably peaked in the economy. alix: did repeat in the dollar and in yield? >> there is still another push. part of it is the interest rate differential. we are looking at the ecb not hiking rates until after next summer. by which time, the federal

reserve will probably hike rates three more times. alix: you will be going against what? >> we are at the low end of the range. we got 1 -- we -- i'm looking for consolidation. maybe towards 112 before the end of the year. alix: marc chandler of marc chandler of bannockburn will be sticking with us. we will talking much more about italy and what it means for the ecb. we are going to stick to it. this is bloomberg. ♪

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"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. alix: this is bloomberg daybreak. the s&p futures market, we are seeing them climb higher by about 10 points. do you want to buy the rally? lots of conversations about dead

caps bouncing. i wanted to highlight european banks of 6/10 of 1%. part of that is optimism over italy. there are downgraded earnings for a time banks for the next three years. seeing more volatility and sovereign spread. you can see what we are looking at when it comes to the spread. you can see investors coming in. euro-dollar is a little weaker. germany was warning the third-quarter could see a slowdown. years forslowdown in the country. david: it is time to find out what is going on outside of the business world. >> good morning, david. president trump plans to pull out of a major arms control treaty with russia. he says moscow has broken the

agreement. this month, nato defense ministers discussed concerns that russia was developing a new medium range ballistic missile. saudi arabia says the death of the journalist jamal khashoggi was a mistake. the u.s. and the allies are skeptical. france wants more information. germany put arms sales on hold. president trump says the narrative is marked by deception and lies. mnuchin stopped short of calling china a currency minute later. that could change -- a currency manipulator. this could give president trump a chance to brand china a manipulator. global news, 24 hours a day, on air and on tic-toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg.

alix: changing the rules. going to happen? >> i do not think so. what other country is going to fall into that definition? if you want to target china, i get that. if you come up with a definition, will europe fall into it? will canada and mexico fall into it? i think it is a nice pressure to keep on china. i'm not convinced it will have much leverage. they have it within their purview to change the rules by matters of discretion. it is within the eye of the boulder. -- the eye of the boulder. >> that seems to be what the thrusters. we have to be very careful. if you want to cite china as a currency manipulator, what is the response? they have to have a negotiation with the u.s. it is more of a symbolic threshold. it is not been used since 1994.

i'm not convinced that as much pressure -- that it adds much pressure. david: stay with us. we want to turn back to rome and the back-and-forth on the italian budget. the european commission said we do not like it. the italian commission said we will make commission -- we will make changes. we want to turn now to our colleague. our western european economy editor. kevin costello over in rome. what is going on over there? >> he is saying trust us. his finance minister said pretty much the same thing. he called the budget necessary although he does what to have dialogue with the european union. the him the dialogue go?

-- the only question is where will the dialogue go? david: the question is whether the european commissioner will say we will let you go and trust you to fix it only one the fix up front -- and trust you to fix it or we want you to fix it up front. >> they can be rigorous on this. the italians will want a lot of flexibility. the business of dialogue that has come up will be an important factor because the two sides will be talking quite a bit. david: thank you so much for reporting for rome. he is our western european economy editor. alix: marc chandler still with me. you sent 112 for the downside for the euro-dollar. what happens to keep the boot spread -- to tp boon spread?

>> it is happening between germany and italy. what is happening now is that earlier today, the euro began higher. as the spread has eroded, the euro has become weaker as italy has given back on its earlier gains on its bonds. i am concerned that the market does not have it quite right. the european union is not backing off. they are saying we are not concerned with the budget deficit. we are concerned that italy has no plans to reduce its large debt. that is a bigger problem. the deficit is relatively small. it is smaller than france and spain. the problem is the legacy of the past deficit is its debt. --t e.u. once italy's plan is not yet. david: the italian government is somewhat precarious.

they have this coalition. they have been fighting with each other. there are people who say, that is ok. we will just leave the european union altogether. >> the deputy prime minister and head of the leak, was quoted over the weekend saying there is no talk about leaving the euro or the european union. the denomination risk is reduced. the problem is that with italy protecting a larger budget deficit, that means more supply. the yields have to adjust to my supply. tomorrow is a crunch day. unions when the european gives italy its budget back and says, revise it. the european union has not done this before. this is a big step. that is why the market is getting ahead of itself. the italian bond market is down 50 basis points. forgive me if it feels

like we have had versions of the story over the last two years. we had it in the netherlands, in germany, time and again. is this just a low-grade fever that keeps going? >> i agree. it is infecting the whole system. in europe, you have challenges on all fronts. you have the high court ruling that poland has to stop changing it supreme court. you have the slowing down of the economy. prepares tohe ecb stop buying their assets at the end of the year. alix: it is almost like he knows where we are going into this segment. get into how they are going to take into account the growing metrics. growth is the white bars.

how does mario draghi make his case for stopping bond buying? what he is going to do is put two spins on it. he is going to talk about the labor market. tightness of the labor market is going to boost demand. he is going to say yes the economy is slowing down, but we are going back to trend. we overshot on the second half of last year. it gave us balls expectations -- it gave us false expectations. will it be sustained or will it slowdown further? i'm betting on a further slowdown. david: what is it saying about low rate hikes? what does it say about when we may see hikes and what they will say about that? >> the ecb has to stick to the

current game plan. no rate hikes until next summer. a lot of things can happen before the. -- before then. i think we will have to see what the economy happens -- with economy does. -- what the economy does. alix: what do you see the reinvestment policy being? what duration today by yes -- what duration do they buy? >> a bond expires and you buy the long end. i think that seems reasonable. alix: we are they going to focus that? >> i think they are governed by the t. -- by the capital key. the idea is that if you buy german bund, the other countries trade us spread. s. david: i want to come full

circle tactic currency manipulation. eurome point, with the being lower, that does help the german exporters. something the white house has been concerned about is they are not altogether wrong about that. germany is getting a free rate on exports. >> it is partly cyclical. sometimes the euro has been overvalued and sometimes it has been undervalued. the federal reserve is tightening policy. the eurozone is having this extraordinary policy and slower growth. that justifies the dollar to be a little bit stronger. what fair value means is not mean any one point. it means over the course of a cycle. it is hard to make the case that the european union is manipulating the currency. this is not manipulation. that is the way we have understood it and the markets. alix: i want to get your take on what is happening with brings it

-- with brexit. brexitink the risk of without a deal has increased. maymore that prime minister moves to the european union position, the more likely she faces a leadership challenge at home. that is the problem that the u.k. is in. i see sterling having a test the downside. i'm looking at 128 in the coming weeks. i think the volatility is in the markets and not the currency. alix: what is the next they crisis? what are you most worried about in 2018 -- in 2019? >> there's so much to worry about in 2019. i would say it is still the trade policy and the ramifications of trade.

i think china is big enough to take care of itself. i think the trade issue is bigger than all of us. david: it is the reciprocal of all that that is the biggest upside. if we came to terms with china, how would the markets react? >> if there were some kind of says, we and the u.s. are no longer going to -- china is going to be a strategic ally, markets would like it. alix: what do we have in 2020? a presidential election. marc chandler, always a pleasure. three-day it is a saudi investment summit taking off. this year will look very different from last year. this is bloomberg. ♪

>> this is bloomberg daybreak. hour, ap in the next harbor -- a harvard kennedy school professor. this is bloomberg daybreak. more upheaval at cbs. of 60 board members appointed at the network after the departure of les nunez -- les moonves. he says he is leaving because of complications from like cancer. elon -- publications of blood cancer. his musk announced that

company will open in less than does the month. unclear what transport must will use -- transport musk will use. the -- health -- that is your bloomberg business flash. david: we turn now to wall street. aboutup, they are all saudi arabia. the first one up, the saudi blackstone discount. blackstone cut the deal with the saudi's as they placed $20 billion to the infrastructure fund. the consulting firm says it is horrified that is report on social media may have been misused by the saudi government. the saudi summit loses its

swagger. after sponsors and big names drop, the conference will look very different. alix: joining us is jason kelly. blackstone landed at $20 billion from sally's. -- from the saudi's. what did they give up? >> they gave up a lot of the fees they would normally get to get this massive commitment. equity fund private is roughly give or take $20 billion. this was one commitment from one investor. wow.it back and think, then you realize that a $40 billion fund would be the biggest of its kind. it is not actually surprising. david: it is a fascinating report. it is kind of like a volume discount. they said we want to cut the fees.

>> it is not that surprising. the scope of everything about it is a little bit surprising. we do not usually get a look behind the curtain. also, it is a reminder that the saudi's given everything else going on, are a massive economic force. we talk about them in the oil business. just in the money business, they are a massive player. blackstone, i saw last week about elon musk taking a private with the saudi's. musk andntioned elon softbank. softbank got $45 billion committed from the saudi's. this has been the most important player from the last year. a year ago, you look like a genius if he could get tens of billions of dollars from the saudi government.

i find this a sad story. it is kinsey. they have done business around saudi arabia. the basic thrust of this internal report is, what are people paying attention to when it comes to the saudi budget? they concluded it is social media. they named some people and a lot of the people got arrested in the saudi government. they say they are horrified. they are really upset about it. mckinsey iscussed, a well-known brown -- a well-known brand name. this was not a report that was commissioned by the saudi government. it was used in part because of mckinsey's unbelievably strong brand name. you see how that was twisted for bad purposes. last if it did not, in the

two weeks, i do not think we would have glanced twice at the headline. the senators were hammering this home. there are a million other things we can be tough you about in terms of countries during -- we can talk about in terms of countries doing the wrong thing. david: it is because of one person. this is not consistent with other things with the saudi government has been doing. nobody is paying attention. >> part of it is because of our third story. that is the conference that is starting today. this was drawing the biggest names in finance. everyone was descending and still will, but many are not for the second version of the future investment foroum. -- investment forum. it shed a spotlight on all the things we had been talking about.

story.hat is our third those and the u.s. who are not going to the conference. aboutr ship was talking what should be done. >> i think this ought to be a relationship altering event for the u.s. and saudi arabia. we ought to suspend military sales. we ought to suspend certain us it since -- certain assistance. alix: you know who is going? china and russia. you can talk all you want. the u.s. is going to leave a lot of money on the table. >> it will be interesting to see going forward. talking over the weekend to people and last week, the financiers, corporate executives, they are struggling

with where it goes from here. this is the moment and saudi arabia is not going away. david: is unrealistic to think that the united states is going to terminate relations with saudi arabia. alix: you have china with a trade battle. david: your priority has been iran and you go after saudi arabia, you are actually helping iran. >> there are all kinds of political ramifications that come if for some reason the crown prince is deposed by his father. if there is something else more dramatic that happens, and arab spring type situation. the important politically and economically cannot be overstated. david: instability in the region would be something. you want to tune in to jason every single day on business week on bloomberg radio. that is every day from 2:00 to 5:00 p.m. eastern time.

coming up, a move that could boost access to credit cards and loans. this is bloomberg. ♪

david: this is what i am watching. the front page of the wall street journal has a report that fair isaac, they are going to change the rating system. they will increase the ratings of people so consumers can borrow more. thus far, it has been, you pay your bills? let's look at what is your cash? what is your balance? how do you manage your cash? we just put up a chart. we are already really up on consumer debt. at historicre is

highs. this is in response to banks going to them and saying, we want to lend more money. alix: there is less demand. there is some shadow banking demand too. david: it makes me nervous. alix: i forgot to pay my conrad bill the last three months -- my coned bill the last three months. berman will ben goldman's call that perhaps the stock market will not be boosting growth like we thought. this is bloomberg. ♪

alix: earnings explosions.

32% of the s&p will report with tech names leading the way and big banks warn of growth and recession risk. we speak with the former council of economic advisers. they says it will ensure 2018 budget deficit doesn't break the deficit. is not -- it is not 1973. they say oil policy is responsible economic tool as some lawmakers call for sanctions. david: welcome to "bloomberg daybreak." i'm david westin with alix steel. president trump said we will have another tax cut directed at the middle class. it turns out as we learned it's not just the united states thinking about it, china. alix: living with china's they knew about it. when president trump said it, the white house was like what? david: and they don't have a thing called congress. alix: to your point, it shows

what length the countries have to go to while they are fighting that trade war. china you could argue is having problems before but now they are all in. personal tax cuts, helping smaller firms. david: maybe in part because they are fighting. ,lso back in the united states some will be feeling the bite of those tariffs. the market it feels like we are around the highs of the sessions in the futures market. will we hold onto those gains or see another friday scenario? part of that definitely coming from germany saying third-quarter gdp -- gdp could come in slower than expected. the first miss in about three years. oil goes nowhere. trying to digest the saudi headlines. coming up this week,

tomorrow saudi arabia's investment son meant -- summit starts about many of the prominent participants who were otherwise going to attend. a big week for earnings of deutsche bank and barclays reporting wednesday followed by twitter, alphabet and amazon on thursday. the ecb announces decision come -- its decision. first reade get the on u.s. gdp growth in the first -- third quarter. emma chandra is here with first word news. says the death of jamal khashoggi was a mistake perpetuated by a -- was a mistake. germany arms sales on hold and even president trump said the saudi narrative was marred by deception and lies but so

stressed the importance of u.s. relations with the saudi's. president trump plans to pull out of a major arms control treaty with russia because he says moscow has broken the agreement. in 1987.was signed the defense minister discussed developing aia was new ballistic missile. thousands of central american migrants are openly defying the u.s. and mexican governments. they are heading to the u.s.. message -- mexico is under pressure from trump to stop the caravan but thousands of migrants ignored orders to submit to processing at a checkpoint. 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 emma chandra, this is bloomberg. david: this week is an earnings bonanza. more than 160 stocks, 32% of the s&p companies will report

including caterpillar, ford, google and charter. ,oining us is thomas digenan head of u.s. intrinsic value. good to have you with us. we are only a little ways into the earnings and we have a lot coming up. thus far they have been quite strong, but the market has in was rewarded the country -- companies. what's your take so far? thomas: there are a lot of factors you need to look at. is it topline growth, margins. right now its guidance. people are focused on the sustainability of earnings and are worried the earnings growth we've had is not going to be sustainable. david: what causes that question about whether it sustainable? is it because there won't be tax cuts down the pike? thomas: we will say or test we will see if they are -- if there are more. i think if you look it corporate confidence, while it is high relative to the store at levels,

you have seen it pullback a little bit and we are at a point where i don't think we have a recession on the horizon, but we have certain sectors that give people pause. alix: part of that has to do with margaret -- margins. -- andlson had a strong we spoke to him about how margins will start to roll over. stimulating the economy to its already overheated which leads to higher wage cost, the capacity is in there. those costs are feeding into businesses. it should be very difficult for most companies to pass that on. some well, but the problem we see is the street is modeling and other increase in margins. we are very skeptical about that. alix: what do you think of that? it's also the dollar and oil prices. thomas: it is and i think it's different by industry. if you see industrials, you start to see it. you have pressure that is

trimmed margins. it comes down to who can pass this through and who cannot. we will start to season inflation. we have been waiting for wage cost pressure for a while and we will start to see it. the key there is can you grow the top line. david: one of the questions i have is productivity. we are coming down growth in earnings and in topline revenue, but we were told with particularly the capital investment incentives was that we would see productivity picked up. did that change things? thomas: productivity pickup can definitely change things. the one area where investors is ono be overly cautious productivity gains. for theay this opportunity buys because over the long run we do see productivity gains. whether it's automation or

reacting to tariffs, we can react to that in terms of how you change are manufactured footprint. alix: industrials are looking at their worst month in six years. we've only got financials and industrials reporting. how you position yourself? thomas: this is where you have to be opportunistic. financials actually look really attractive, earnings are strong. the consumer is the probably the strongest we've seen. we mentioned fight goes scores all-time highs. some of the opportunities are in credit cards were you look at loan loss provisions are very low and they should be low. things have not been making desk banks have not been making bad loans. david: another thing coming down the pike this week is tech. thomas: i think it's a bifurcated market. you can go to the big secular growers and then in the deep value chain of this.

tech was heard about worries with trade with china and how there could be a repositioning in that space, but some companies trading at such discounts and low multiples that these are companies trading at four and five times earnings. they get their earnings cut in half and get traded half and's would still be -- and would still be double the price they are. there is still -- in tech if you are selective. david: stay with us. furman andjason former -- former white house adviser. ♪

>> this is "bloomberg daybreak: europe go daybreak."rg the price, $7.1 billion. the deal creates and auto-parts maker with about 65,000 -- china's attempt to find new investors for anbang insurance. they've held talks about taking a stake. china has met with strategic investors since temporarily seize control of anbang and pushing its desperate its former chairman in jail. bloomberg has learned ivan glazing berg has started training three to four

frontrunners of the next ceo. . that's your bloomberg business flash. alix: also is the doj .nvestigating the drc there have been a lot of questions and analysts. will you want to stay with the current management if you have this investigation? david: but he is saying three to five years. he has been saying there is no succession plan. this would be a huge. -- this would be huge. david: the fed and economists tell us the u.s. economy is growing robustly, but concerns over what comes next raise questions. increasinghs saying interest rates will produce tightening financial conditions. we welcome the man whose job it was to interpret data like these

for president obama. jason furman, former chairman of the council of economic advisers. thank you for joining us. give us your take on where we are. we have these competing forces. geopolitics are weighing on investors minds. we hear the fundamentals of the u.s. economy are strong. how do you reconcile these? jason: we have had a great couple of quarters. the unemployment rate and inflation rate are pretty much just where we want them to be. but we are still not seeing productivity growth. once we are done with bringing people back into the workforce, where the growth above that 2% will come from is really hard to see. that's without the geopolitical uncertainty. when you add the certain -- uncertainty into it, it gives you an additional reason in the medium term.

old job wasn't to try and set monetary policy, below may look at the federal reserve, how should they be interpreting the data and what should they be doing? are we talking another interest rate hike in december? where are they? jason: chair powell rightly stated in the last press conference that they will be much more data dependent. he basically said do not look at the dots as much people have in the past. they also said they will be raising in december, that's the markets expect. i would not do it though. i think financial conditions have tightened with markets down , with interest rates up, so i think while a rate hike in december was appropriate before, we basically have gotten that on the market and there is a good chance for the fed to show as they are being data dependent and taking that into account. the question becomes

if the sugar high from tax cuts can be extended, does that change the game? we got surprise announcement from president trump at a rally that there are middle-class tax cuts. inwe are going to be putting and are studying deeply now a major tax cut for middle income people. not for business at all, for middle income people. alix: whether or not that will happen, could that really extend the cycle? jason: the sugar high is going if you lookto 2019 at the combination of tax cuts and spending increases, they are even bigger and 2019 than they were in 2018. they only start wearing off in 2020. i think we have a little more to play out in the fiscal stimulus. another log could be put on that fire to continue to mix this metaphor. to extended out even further.

the thing that is inevitable is it will come to an end at some point. you can't just keep doing more and more fiscal stimulus. at some point we will crash out of it. david: there is always a cycle. my question is is there sort of a law of physics were economics that the higher you go, the farther you fall. would we make it worse by extending or will it come sooner or later? jason: it's depends on why you ride high. if it's something on productivity growth, that's a good reason for the economy to do well and you can sustain that for a long time. right now, that is novel we are seeing. the is a lot of demand to bringing people back in. it might pay off in terms of productivity. it is hard to know in real time what will be around the corner. so it might, but right now i am not seeing evidence of it. i think there is a limited amount of time we can have these very high growth rates. david: investors pay attention

to the yield on the 10 year and a lot of discussion about that. release this weekend saying they will -- it will remain subdued. this is what they said. they think the 10 year will probably be down 2.5% and that is robert tip saying that. in large point because there's such a demand for long-term money around the world and with aging population. jason: i think everything he says is right. that's why it used to be. with 3.5. gone even that is way below what it used to be. whichthe debt we have goes the other direction and plus it -- pushes those yields up. , i demographics and debt would've that around 3.5% and called that low. david: let me ask about what might happen. a lot of pundits are saying

right now on november the sixth. particularly are there ways in which president trump could join forces with the democrats on things like infrastructure spending and even drug price control. i take those two and i would add the minimum wage because they are all things democrats have been in favor of that in various points in time, president trump has been in favor of. beingn imagine the logjam broken that way. i think that's a real scenario. i don't think it's the most likely, but so far he has been very beholden to his base and only wants to do what they want to do and a lot of democrats aren't particularly eager to do deals with them. , your best bet is not a whole lot happens except when it comes to the sequester for discretionary spending in 2020. i would expect that to be lifted enough to get more defense and

nondefense spending like last year. david: thank you so much for being with us. we have some breaking news right now. said he of lehman's will not attend the saudi arabia investment conference. situationsimes devolve where every option is wrong and that's what he is facing. siemens is another one that will not attend. alix: bloomberg's among media partners that have pulled out of the event. still with us from chicago is tom dignan. iegnan. dea thomas: the 10 years at 3.2 which is a historically

low level and we had multiples pulled back in this environment. if you look at where the ceiling is, i think it's driven by the global environment. the 10-year gets in the 3.5 range, you get a flood of money thrown around the world that pushes it back down. i don't think rates will be the problem the drive multiples lower. david: tom is going to stay with us longer. fiat chrysler agrees to sell its carport unit valued at $7.1 billion. more on that next. this is bloomberg. ♪

david: time for the bottom line where we look at the three companies you should be watching. fiat chrysler sold their auto-parts business to a japanese company and its is $7.1

billion deal which is $1 billion more than predicted. they will have a long-term supply for those car parts. now you will have the new combined auto-parts company based in tokyo. they will maintain summing big in italy. alix: clearly it is getting out from under that. i'm looking at halliburton. they do see a better 2019 when it comes from all the issues they have been having this year. a key area to watch. , talking about execution of shale in the u.s. is actually getting worse in some capacity. so we are overestimating how much shale oil can produce in the u.s.. david: is this drilling new wells? alix: a bunch of things. one is a parent-child well.

that is actually causing execution issues. david: i have seen that on your graphics. hasbro, fornow, that will bring in brooke sutherland. >> they are our their earnings reporting and missed big. the stock down and the culprit is the fallout from toys "r" us. this is a bit of a surprise because analysts expected the impact from this to be waning and that we would stop hearing so much about toys "r" us being a negative for hasbro and mattel sales. but this quarter they saw a big drop in u.s. and canada. they say they are making a lot of process that progress. they admit they are behind the ball when it comes to international sales. a 24% drop. europe they are having a difficulty adapting to changing consumer behavior. you have the influx of online sales of toys and a shift in

preference. kids want more games and electronics. they don't want the physical toys like that. outd: separate those whether the change in taste as opposed to toys "r" us. if it's toys "r" us, what is that favor santa claus? >> what i think is interesting as they called out a difficulty in meeting shifting -- shipping demand late in the quarter. lossthat means is with the of toys "r" us, which was their biggest dow let primarily for toys, they have had to find these avenues. that requires a significant change up to their logistics footprint. to be able to not meet those demands is a big negative and something analysts will want to find out about on a call. david: and it may not be the last negative because over the weekend, there were reports sears may have to liquidate. you might have another toys "r" us coming. >> which is another rush of

inventory you don't need to deal with in the peak holiday season when you are trying to capitalize. hasbro issue or will this be all the toy makers having this. when we hear from mattel, are they seeing the same issues or perhaps navigating better. ofx: brooke sutherland bloomberg opinion. up, saudi arabia says it has no intention of using its oil wells as a political tool. this is bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?"

"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. alix: this is "bloomberg daybreak." i'm alix steel. s&p futures up, can they hold onto those gains. european bank stocks moving up.

downgradinge outlook for italian banks. classes, stronger dollar but getting caught up in what's happening in italy. you're luck coming into the italian 10 year, but now it is down less. the euro continues to weaken slightly against the dollar. in the u.s., yields are steady. david: time for an update on what's making headlines outside the business world. emma: prime minister theresa may --l help parliament today meet with parliament today. this comes at a time of maximum political peril. seven hundred thousand marched in london demanding a second brexit referendum. anti-brexit members could topple her from power in a

disagreement over strategy. president trump is promising voters there will be a new middle-class tax-cut before the midterm elections. republican tax policy makers don't know anything about it. the taxans it helped overhaul would help carry them to victory in the midterms but the policy has turned out to be less popular than they thought. the u.s. and its allies are skeptical of the official a saudi explanation for the death of journalist jamal khashoggi. they say he was accidentally killed in the you -- in the saudi consulate in istanbul. president trump said the saudi account was marked by deception and lies but also stressed the importance of u.s. saudi relations. the top democrats on the house intelligence committee are calling for shank shins. -- first sanctions. sanctions. --we ought to send military suspend military sales and

impose sanctions on those directly involved. emma: 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 emma chandra, this is bloomberg. around $80.trading a part of that story is saudi arabia trying to walk back any conflict with the u.s., dismissing the idea it would use oil as a political tool. saidaudi energy minister for decades we used the oil policy as a responsible economic tool and isolated from politics, so let's hope the world will deal with the political crisis including the moment a saudi citizen in turkey, with wisdom. joining us is alex, bloomberg's oil reporter. how long can the saudi's keep making that kind of claim? >> for the time being they will certainly keep doing it. the other side was trying to

, sayinge focus of opec it would raise production and kind of deal with the supply gap issues. toarly there is an attempt return the oil market to what it's used to be thinking about. clearly in the u.s. as well and some of its allied nations, there are big demands that the relationship with saudi arabia needs to be changed and as long as that keeps going, there will be an impasse between those voices and the saudis trying to put cold water on it. alix: there was a school of thought that leadership wanted 80 and now they are questioning if they 190. with a great shot -- great chart that shows internal oil price keeps climbing. is that going to wind of change and how they react to that as well. alex: we potential is he the saudi's shifting the goal post again. we sort of heard it 50 to 60

price target. that would up to 70 and 80. now we are the 80 to 85 range. you see that in wall street banks as well with the likes of jpmorgan revising their forecast. goldman sachs seeing a 70 to 80 range. i think there is a sense among the wall street banks that the next path is higher rather than lower. backdrop of this, the real issue is iran and how much we will lose. grow up to 12 million barrels of oil a day but if we have 3 million barrels of oil a day, we can't do anything about that. which brings up the relation between u.s. and saudi and help bital they are when it comes to iran. alex: that again is why you're seeing this impact -- impasse of

the dialogue. it doesn't help anyone to have saudi's cutting production or flow because you look at indian demand, that they worry at the moment. that therow on top of world's most stable oil producers starting to cut supply, then you have all sorts of economic problems and that doesn't just affect the domestic policy of saudi arabia, it's a much bigger economic issue and we saw those headwinds come to the floor last week ending global markets. clearly that is one reason -- and in global markets. alix: alex longley, thank you very much. the question for the administration's will they grant waivers and how much? they will have to when it comes to iran. david: what happened to that aramco idea? tom, how do you play

energy? ♪ you have -- thomas: you have to be careful. you have risk on the upside and downside. i put a 10% chance worth $50 within a year but i put a 20% chance where hundred dollars within a year. andink those around numbers you can see real demand destruction or real excess supply, in. -- come in. i think it is an interesting dynamic and a global dynamic. the risk is on the upside. alix: how would you be playing it? thomas: one of the ways is with the oil services companies. within the u.s., you have this backlog where they need to build out pipelines, so they need to get more oil out. you want to play it where you do have direct beta to the price of

oil as opposed to the asegrateds where it isn't a direct that as you think it would be. david: why are oil services a potential good bet? think -- there are difficulties in the output, but there is also difficulty in the pipeline and getting stuff through. i think it could be a six to 12 months scenario, but i think longer-term, there is real opportunity. alix: to challenge on the higher , if we get prices to hide some of deputy secretary has talked about potential responses. >> i don't think it's fair to say we are concerned, there is ample capacity in the marketplace. we are working with the saudi's and other producers around the world. secretary perry has met with his colleagues around the world.

we feel really confident about the markets ability to provide -- market's ability to provide. you go bullish on oil when you have a president who doesn't want oil -- higher prices? thomas: just the fact the you are talking about spr's is an extreme measure. the president does not control global supply and demand. the spr is thek thing that will drive oil prices in the near term. -- d: to go back to what what you anticipate will happen in november when further iranian sanctions kick in? thomas: anytime you take supply off the market, people -- will as the the saudis

swing producer and they also look to the u.s. with shale growing fast in those are two areas of production that now there are more question marks around them. alix: drilling down into what we samberge have, cemented in comments about the growth expected for u.s. shale might not -- the fact that the really good wells have been drilled. how do you see that in your investment? thomas: that goes back to the issue of the supply demand. the unlimited supply people found was there may not be there . what is that due to the oil price? there is more upside risk and downside risk. thomas: tom -- alix: tom, thank you for your insight. up, babies boz all --

baby spas -- we will look at critical points. this is bloomberg. ♪

>> this is "bloomberg daybreak." power"up on "balance of the governor of delaware. this is bloomberg. now to your bloomberg business flash. the founder of lululemon may be taking the seat he gave up after

repeated fights at the company's leadership. he is, with a book that complains about five years of missed opportunities. wilson argued the company has lost ground to rivals. elon musk has taken a step forward in his vision for the future of public transportation. his test tunnel will open in less than two months. it is unclear what sort of use tort musk will achieve top speeds. more upheaval at cbs. one of six new board members at what it to the network after the departure of chairman les moonves was accused of sexual harassment. parson said he's leaving from complications from blood cancer. david: a sad story. a lot of us know him well. and itaol time warner

appears he has had this problem, but it has gotten worse. same time as another friend of ours has stepped into the sea. they are trying to figure out where to sell the company. alix: are you able to replace that. david: a lot of have to. dick parsons, very well known. he has been at fox -- zelnick has been at fox and video games, he knows his way around a board room. -- david: time for the future of money where we take a look at different aspects of how the digital world will make money. pnm and is so-called how those consumer cause that companies are trying to build

loyalty through a wide range of , and whoprograms better to give us that story than brian kelly. great to have you. ?hat is new in this space brian: credit card companies have been battling it out to win consumers, offering sign-on bonuses. with so many points in the marketplace, the airlines at a breaking point where there are not enough reward seats so the companies and airlines, everybody has been figuring out ways to use your murch desk points for merchandise -- points for merchandise. they are not all the same value. ,t is a currency unlike crypto the more knowledge you mine about your frequent flyer miles, the more value you can get.

it takes a bit of time to understand the ins and outs, but you don't want to use your credit card points for merchandise. you will be getting less than one cent per piece in value. that's i you have to think about your points, as a currency. it takes a little bit on which -- which makes sense. if i wind up looking at all of the options, i won't push might credit card debt credit card based on the rewards is -- choose my credit card based on the reward system. brian: the people who do get a couple of cards a year, the average consumer can take three trips as long as you maintain a good credit score and pay your bills. with amex points, a lot of them will say let me use points to take off my statement credit and that's one of the worst uses of points. the closer you get to cash in

is the worst value debt. david: so does this all work? for the credit card companies do they steal people. brian: they are totally making money. they just launched sapphire banking and they offered bonus points on mortgages. chase's play is let's get customers in and give them rich rewards and make money through balances, investments and these others. alix: you have some of the top cards for points and miles. walk us through. david: the amex platinum is great for perks in general because amex is one of the few charge card products. if you need that spend power. the chase sapphire reserve at three points per dollar on travel and dining, that's a favorite among points collectors. when younts are value

redeem directly for hotels or airfare. there are a bunch of different cards. if you are not getting a lot of value from points or you are a quarter, getting cash back -- if you are a hoarder, get a cash back card. you've got some fairly unusual possible rewards you can get for these. for example, a flight simulator. for a lot of business travelers, the last thing you want to do is get on another plane. they aret's smart offering experiences you cannot buy. i redeemed my points for concert experiences, they have a box at msg so you can go to knicks games. spend zero dollars cash for a ringside box seat. it's a pretty good deal. some of these are really cool.

always do the math. when you valley -- value these points. alix: what is the next iteration of this? , pleasemore competition use the card instead of cash and they are competing for points. what is the next part? brian: the next step would be allowing points to be transferred and a lot of loyalty programs are doing this. jetblue and british airways. giving more fluidity to these frequent flyer miles and points. you go to dinner with a friend, let me put you in my american airlines miles. there are a whole lot more partnerships david:. david: this all sounds great. -- partnerships. david: this all sounds great. is there an easier way to crunch the numbers? sguy.comeading thepoint

is the easiest. if you google is it worth it to redeem amex points -- what's the most valuable way to redeem amex points, our posts,. we are working on an app that will track your points. you should use if you want to go to bora bora. right now it's all these disparate systems. david: what's the biggest new thing, what you see that innovative coming down the pike? brian: in travel in general, there's a lot of new amazing resorts opening up. using technology, i'm really excited about the travel space. david: it's basically a way of competing on price without competing on price. brian: these companies also own travel booking agencies you are redeeming, so they are double

dipping in a lot of ways. at the end of the day, it is a rebate. the great thing is you're not taxed on them so you can get thousands of dollars in value but do not technically own these points. whod: we had a young fellow founded a startup now saying spending points and miles would give you fractional shares in the company. and every time you use your credit card. are there other people creating things like that that might go around points and miles? brian: there are a bunch of blockchain travel booking sites where you of potentially -- where you potentially get a piece of the company. but have really taken off there is such a margin in hotel booking that companies are figuring out ways in addition to giving you miles for booking the hotel stay, they will give you a piece of the company. david: brian kelly, i'm going to give you my email so you can get

me that cap. thanks for being with us. alix: in the markets, you are seeing a rally in the futures market, but will it sustain itself as the dollar climbs higher? a stronger dollar putting pressure on the euro. buying on the 10 year at the margin. crude taking a leg lower. the u.s. and saudi relations continue to be front and center. we are joined by michael cohen. we were talking about your report earlier and why the saudi government will not weaponize oil. we have moved beyond this time where they have anbang -- an incentive to do this. they are too much to gain is a , soesentation -- reputation

i think from here what we have to focus on is the potential for there to be a breakeven price that is arguably higher than $80 per barrel that mohammed bin sa officials have targeting. reported officials there was a comfort ability with a higher price. now we have to wonder if they will be comfortable with $90. that is the key question we have to be wondering about because it's clear with foreign investment pulling out, with higher cost of operations at higher costs of supplying, that is the problem. alix: this is when the u.s. versus saudi relationship comes into play because of their do by month -- purchase weapons from another country. they will need that oil money and that's a different circumstance from six month ago -- six months ago. michael: that's the key issue. the other thing we have to because ms. of -- kind of --

cognizant about. see them raise output next summer? increase inays an the amount of oil used domestically. will they raise output up to 10.5 million barrels a day or keep it at 10 flat? if they keep it in that lower range than we will and up with stocks drive the same time iranian supply is lower. will the u.s. be forced to grant waivers when it comes to iran? michael: what we have seen is evolution then administration's policy. it's clear the outset we were going to go with no exceptions. secretary mnuchin was in europe over the weekend and in the middle east over the weekend saying we are going to go to zero again, so i think it

remains an open question, but they need to at least issue some significant reduction exemptions for india and china as they test this higher range. 2019 you have an average brent forecast of 72. we also heard talking about execution issues. do you think you will have to revise that? michael: we take a fundamental view to how we look at the market and we see as we look into next year, the supply and demand balance will be back in a surplus. given that outlook, we cannot be of a more bullish view than we are now and we expect we will see stocks starting to build again and arguably we could see it in the next quarter. given that outlook, we continue to view the prices need to stay in the range between 70 and 75. if we see a disruption that is

more aggressive than what we are currently doing. what we are assuming is quite aggressive already. three -- 300,000 to 400,000 they lower for iran. all of this we are trying to take into account and we have arguably 1.4 million barrels a day of demand growth and therefore, even despite those assumptions, we are seeing builds. alix: thank you so much. , this isming up bloomberg. ♪

comcast business built the nation's largest gig-speed network. then went beyond. beyond chasing down network problems. to knowing when and where there's an issue. beyond network complexity. to a zero-touch, one-box world. optimizing performance and budget. beyond having questions. to getting answers. "activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. jonathan: the countdown for the open starts right now. i'm jonathan ferro. ♪

jonathan: coming up, the promise of extra stimulus in china, helping investors shake off trade concerns. looking back at a week full of volatility and ahead to a week full of tech earnings. assets going nowhere fast. populists: for dialogue with the eu. a brand-new trading week. the cash open around the corner with future positives up on the s&p 500. 115 on euro-dollar and 11487 and in the treasury market, 318 on a u.s. 10 year. overlooking after days of volatility. >> there is tremendous amount of anxiety in the market. >> far to a complacent. this quarter will really start to show up.