francine: saudi scandal. the c.i.a. director set to travel to turkey to probe the death of jamal khashoggi. the selloff is back. asian stocks sink. europe follows. bank of america calls time on china's equity rallies. shares fall to a 2009 low. well, good morning, everyone. good afternoon in you're in asia. this is bloomberg "surveillance." i'm francine lacqua in london. these are your markets. you can see the stoxx 600 down

1.1%. a little bit of discouragement because the rally in china coming to an end. we're seeing a demand for havens. dollar-yen at 1232. let's take a look at shares. a u.s. court finds a company liable for roundup's link to cancer. down from 7.3%. the interview of the day. bloomberg television has an exclusive interview with the prime minister of itly around 2:00 p.m. this afternoon london time. we'll talk budget and the future of the country. now let's get the bloomberg news. hi. >> hey, francine. theresa may says the brexit deal is 95% complete and has to speculators.

the vast jeter of issues have been settled. she said an extension might be needed but insisted she has not committed to it. >> the second set is to create an option to extend the implement aches period -- implementation period. i do not want to extend the implementation period and i don't believe extending it will be necessary. reporter: the european commission is likely to decide today to demand that italy take back and resubmit its budget. e.u. commissioners stated italy's budget is in serious breach of e.u. rules. they are willing to reduce their budget deficit next year but needs to spend more now to help its citizens.

bloomberg television has an exclusive interview later today with the prime minister of italy. donald trump says the u.s. will cut off aid as thousands of migrants continue to march toward the u.s. border. trump has fought to escalate undocumented immigration ahead of the midterm election on november 6 blaming the caravan of migrants on democrats. aid can be held on corruption or immigration concerns. in brazil, the latest opinion poll shows a former army captain holding a 57.to 43% lead over his latest rival, ferdinando haddad. a survey showed bolsonaro dominating social media on a series of plasms, mar than

haddad. it is not clear how many were positive or negative. set to connect the former european outpost of hong kong and mack caw with the mainland. the world's longest ceiling. set to carry some 29,000 cars and trucks each kay day on the mainland and the colony of hong kong. global news 24 hours a day on airpowered by more than 2700 journalists and analysts in more than 200 countries. francine: thank you so much. president trump turns up the heat on saudi arabia saying he is not satisfied what their explanation of what happened to journalist jamal khashoggi. president trump: i spoke to the crown prince. we have people in saudi arabia

now. we have top intelligence people in turkey. we're going to see what we have. i will know a lot tomorrow. they will be coming back tonight or tomorrow. francine: his treasury secretary mnuchin is there. they discussed the death as well as the executive initiative which opens this morning. erdogan has not released details of the murder. he is said to have recordings of the murder and is scheduled to speak this hour. what is the latest on the investigation on the death of mr. jamal khashoggi? >> deliberations are on the way for the commentary from mr. trump and the treasury secretary. he spoke with the crown prince in riyadh. there are two common threads here. there is still a lack of clarity and the investigation

is still ongoing. jared kushner is waiting, a senior visor to the u.s. president. the speech from the turkish president could blow this case wide open in the next few hours. francine: this the f.i.i. happening today. who ended up going? >> well, the organizers insist 120 speakers are scheduled to take the stage in the coming three days. it is critical to the diversification story here in the kingdom. a lot of the c.e.o.s, the big once decided not to come. the business titans, the coast from hsbc, from credit suisse, from siemens. a few deals are going to be signed. this is important to how successful the conference is going to be. some of the south korean companies. let me give you a quick recap

of what's happening in the markets to see how investors are feeling about this on the table. you can pull this up in your library. this is the trade. it shows there is not as much anxiety as there was around the standoff. yes, there is a little bit of a pop that is nothing compared to the spike about a year and a half ago. francine? francine: yeah. what are we waiting to find out? >> it is interesting. the reporting from bloomberg over the past few hours suggests that the diplomats see this as a gift from god. this latest incident in the saudi consulate in istanbul. they need to get back to the power equation in this part of the world and it seems the turk irk government sees an opportunity to leverage some

information on what exactly happened that day in terms of getting some key positions back. a spokesperson for the turkish government has pushed back on this saying it would not use such information to blackmail the saudis. we'll have to wait and see whether there is one narrative that crystalizes or the story continues to go around. francine: thank you search. we should note several companies including bloomberg pulled out of the future investment event as media partners. how does this story affect the il market and investments? our guest is a chief asset strategist at morgan stanley. let me show you to price of oil. you see very clearly that saudi arabia is responsible for 1/3 of opec's output. let's see if we can put the chart up. it should come up very shortly. the impact of possible

retaliation, u.s. sanctions and saudi arabia retaliating, how worried are you about the latest developments? >> there are two intersebting forces here. the first is the oil market is tight. you already have a large increase in saudi production. that has reduced the capacity in the market to a low degree. something that our energy team at morgan stanley is focused on and eventually will push the energy price up towards 95 toward the end of next year. we're get more worried about oil demand. it is getting very, very expensive. we're worried we'll start to see some of the demand, you're entering into a seasonly weak time for energy prices between october and september. i think on balance here oil prices might soften a little bit even if the long-term trend is still higher. francine: what does this mean for investment in the region

and stability in the region and therefore markets? >> i think the market which is probably most sensitive in terms of developments in the middle east, emerging markets, corporates and dollars, this has been a part of the market that is high rated and very stable and in a year where we have had lots of pressures elsewhere. turkey itself has been a source of risk. latin murk a source of risk. south africa more recent lay source of risk. this morning we're dealing with the fact that the chinese equity market is looking very unstable and the comments that the chinese authorities are giving the market is not going down very well. i think it is just one area of refuge for people's portfolios which is beginning to disappear. that is one thing that we're dealing with, fixed information. francine: do you concur with that? >> yeah, i think it has been a little bit unusual that e.m. has held up well in this most recent selloff because it

suffed quite a bit already but look, i do think that you are you know, i think if we are really dealing with kind of broader fallout in the region then it won't be immune. also kind of the point on, on what's happening in asian equity markets and e.m. equity markets, the fact that we had a strong rally yesterday that doesn't seem to be carrying through today is worth watching. it indicates combined with a tight oil market moving into xt year, you know, another headwind of potential growth in 2019. that's what a lot of the chinese financial assets are saying and what we're going to see from an energy pressure standpoint. francine: stay with "surveillance." plenty come up. including bear necessities. what will it take to lessen investor angst.

and make sure you tune to bloomberg live on your mobile device. this is bloomberg. ♪

francine: economics, finance, politics. this is bloomberg "surveillance." let's get straight to the bloomberg business flash. hi. >> hi, francine. holdings have slumped in zurich today after the company reported assets tumbled by almost $18 billion in the latest quarter. they suspended the fund energy tim hayward.

asset manager is fighting to retain clients. i buyer shares have failed as much as 8.5% in zurich today after the firm failed to persuade a u.s. judge to set aside a jury verdict in a trial over algailingses that its roundup weed killer caused cancer. a superior court judge rejected arguments that the jury did not have any basis to conclude that it caused cancer. the judge did say damages should be slashed to $79 million from $289 million. the key ingredient in roundup has been proven safe in studies. stock by that took storm.

the biggest in the u.s. fell more than 9% on higher than usual volume yesterday. meanwhile canada tumbles, cannabis dropping 13%. that is your bloomberg business flash. francine? francine: thank you so much. after a brief respite, the selloff is back. asian stocks fell from tokyo to hong kong with china shares snapping their two-day rally. european stocks are lower. s&p futures have declined more than 1%. what is next? our guests are still with us. let me bring you to my chart. we're looking at asian stocking nearing a bear market. is this contagion? what is the fear there? >> i think you're seeing a couple of factors collide here.

i think the market is becoming aware that the interaction between growth and monetary policy is entering a much trickier place. at this time growth means continued tightening by the fed and banks. that is not great for markets. weaker growth is also a challenge. you have had a year that has been tough for investors and investor performance. people are not sitting on much of a cushion gain-wise. if you look outside the s&p 500, almost every other asset class is underperforming inflation this career. that makes investors less willing to step in and step against these trends. over all, you know, i think we're still in this period of consolidation. as we move closer to the end of earnings season, markets can get a respite if they see earnings are coming in reasonably well. the major earnings risk is next year's story, not this year's story. i think it remain asterisky year. francine: how do you see it

panning out? rotation into bonds? >> there is a couple of things here. there is a rotation to bonds. there is also we're -- bigger questions about whether markets are going to stay very closely correlated or whether they are breaking down. one of the challenges we face between donald trump's trade policy, pulling growth to the u.s. from the rest of the world and his fiscal policy, i'm going to rone fiscal deficit and it needs to be financed and the rest of the world has to finance it, i think these are the issues markets are grappling with too. asian stocks have been very poor this year. one of the surprises has been the credit markets haven't reacted as much as they should have. when we look at fixed income, when we have weak dwrothe growth and concerns about growth, maybe that is going to be good for the longer end of rate curves but on the other hand, i think credit spreads

need to do quite a bit of work in reflecting the weakness we have seen in equities. francine: andrew, let me bring you over to the n.y. question. a lot of you are followers on liv go. >> i think it is always -- it is always difficult. any time you see a rally that sharp as we saw yesterday, right, it is -- those types of bounces tend to happen more frequently in -- you could argue in bear markets than bull markets. that that is a sign of a temporary relief or temporary covering more than the markets sustainbly seeing this as a long run change. i think the issues that investors are concerned around the chinese economy, the slowing of growth, the tightening of credit conditions, the rebalancing of the economy, i don't think these are issues that will be addressed in a day with one

measure. i think being cautious on emerging versus equities makes sense. i think that is the right positioning. i think the time to change that would be you need more u.s. equity weakness but i think we're still a long ways away from that. i think it is going to quite a bit to make the fed sound more dovish given what fed is doing. francine: we'll get back to the markets. up next, going with the flow. as assets tumbled 21% in the third quarter, can the nvestment firm restore releasing tim hayward. this is bloomberg. ♪

francine: this is bloomberg "surveillance." i'm francine lacqua here in london. the outflows are speeding up at gam. $67 billion in the third quarter following the suspension of tim haywood. now the firm is fighting to contain the fallout. it has lost half of its market value this year. can it regain investor confidence? joining us now is bloomberg's london bureau chief. first of all, neil, the numbers were not great. are outflows going to

continue? neil: good morning. yes. the asset manager is challenging in the thinker quarter. 90% tflows at nearly lost. 20% of assets down there. ripple effect of time haywood's disciplinary action takes hold. the chairman saying they are looking at all options. they have looked at a sale. a process that will continue in the next few months. francine: is gam up for sale? is it looking to do some m&a or be bought by someone? neil: it will be bought by somebody. consolidation happening in the asset management industry at he moment. asset managers to join together to cut the costs.

that is a trend that will continue. therefore it is likely that gam will be bought. francine: thank you so much. london's bureau chief keeping us up to date with the gam story. up next, what happened to jamal khashoggi? president trump says he is not satisfied with the explanation on the disappearance of the saudi journalist. turkey's president erdogan is expected to reveal more details when he speaks to parliament in a few minutes. we'll bring you that live here on bloomberg. ♪

♪ economics, finance, and politics. this is "bloomberg surveillance ." let's check what is trending across the bloomberg universe on

tictoc. googles knows what you are wearing for halloween. it revealed its index that tracks most popular costumes. musk haderg.com, elon his account temporarily locked after tweeting about bitcoin and manga making twitter think he was hacked. here on the bloomberg terminal, president trump says he is not satisfied as secretary steven mnuchin meets with the saudi prince. is valid and 10% tax cut, news the gop. -- to the gop. around the off world. now to the first word news. turkey'surkish -- leader is vowing to reveal all about the jamal khashoggi case

later today. the country's president is expected to address parliament at 11: 45 local time. turkey claims to have west -- evidence the "washington post" journalist was killed. toald trump will cut off aid honduras and el salvador as thousands of migrants continue to march toward the u.s. border. cap has talked to escalate undocumented immigration as an issue in the midterm elections on november 6, blaming the so-called caravan of migrants on democrats. aderstanding rules come percentage of u.s. overseas aid can be withheld on corruption or immigration concerns. 's centralor of ghana bank says the country is bracing for more rate increases from the fed. speaking exclusively to bloomberg, ernest addison

explained why the west african country's interest rates were on hold. we hear there will be two more tightening of the policy rate before the end of the year. we are bracing ourselves for that. it is into it -- in anticipation of that. germany, chancellor angela merkel is warning voters not to engage in what she calls left wing experiments. polls show merkel's christian democrats and the opposition social democrats losing ground. in brazil, the latest opinion poll shows former army captain holding a 57 to 43% lead over his leftist rival. just days before the second round presidential vote. himparate survey shows dominating social media with his name being mentioned three times more frequently on a series of platforms.

it is not clear how many were positive or negative. another step in china is project to bring hong kong into its bosom is complete and is set to connect the former european outpost of hong kong with the mainland. which islion bridge, said to be the world's large -- longest ceiling will open to traffic. the link will carry some 29,000 cars and trucks each day between the mainland -- and hong kong. global news 24 hours a day, on-air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. desley humphrey. this is bloomberg. francine: thank you. the eu will probably reject the budget today, marking the first time european commissioners have demanded a member state revise its spending plan. it out in yields are lower this morning, but there could be cap -- pain to come for the country's bonds. goldman sachs has warned

investors may need to punish the government to bring about physical disk -- discipline. joining us now is bloomberg's editor in rome. what is the likelihood of the town and government backs down on their spending plan? they hinted at being more flexible yesterday. kevin: they are digging in their heels and saying the plan as submitted will stay as is. of course, that may be bluff and bluster to some extent, but the hard numbers of the italian government are the ones they say they want to have. after the european commission acts, they may not have a lot of choice. francine: so what does that mean -- what will happen today, kevin? eu speak into it or do we wait a couple of days? kevin: as a matter of fact, the european commission is expected to reject that budget and request a resubmission.

italy would then have three weeks to do that and of course, italy would have to look at those numbers and decide exactly how it wants to resubmit and what it wants to resubmit. francine: how is it playing with the italian citizens? do they feel they are being rigged? this is one of the first times i remember the e.u. saying this is not good enough. they seem not to be giving the chance to the newly elected politicians. fact, over matter of the weekend, we had a coal that said six out of 10 italians support the budget but of course, some of the experts have been warning that if the italian bond yields go up, that would hit ordinary italians in the pocketbook and that would be very popular, of course, but would be a bit down the line. francine: thank you so much, kevin costello, bloomberg's editor in rome. what does the italian situation for the markets?

still with us come our guests. i don't know what you do with some of these bond yields and whether italy will go through a mess because it seems like the e.u. is pushing for a fight. guy: i think the eu is pushing for a fight, although it is a fight that after having sent the second letter, a bit toothless or them because it doesn't seem there is a whole lot they can critically do. maybe the most important news about italy or the best this week is from the rating agencies where they decided to be reasonably generous in terms of italy. that has definitely calm to a lot of the immediate worry. more tactically, italy is fair value at current levels. we have seen it tighten a little bit today. i think things will get better in the near term in terms of the btp market. francine: do you agree with that ? andrew: i think so. it is important to separate the longer-term story that is

sustainability and the difficulties there with some of the shorter stories around positioning and the question of catalysts, especially when one potential negative event, the rating action, seems to be diminished. as we saw with emerging markets, in some of the recent selloff, it is sometimes the asset classes were negativity is high and positioning is light that can be more resilient as other things that are more popular and heavily position fall. is, andl thing i'd say i think this goes to the point of how expensive it is too short, for a u.s. investor, hedging btp's back in the dollar, these bonds yield 6.5%, 7% in dollars. very expensive thing to be underweight for an extended period of time. i think there are still serious issues here. helpful feedback mechanisms between the agencies under the market, between the market and the government, but

near-term maybe there is a window for it to be more stable relative to elsewhere. read you to mye chart, basically the spread between italy -- italian btp's and german bund's, but also spanish bonds and the german ones. is italy a really good deal, but only on the short-term? is it the two-year instead of the 10 year? guy: with italy, bonds are trading much more at a price basis than spread basis. insee more spread volatility the front-end because it has a lower duration and therefore, for the same price, that spreads move more. it doesn't matter too much with you by the front-end are long and. we would prefer the front-end a little to the long end, but the big decision is do you like it or not? in the morning or term, and we do like it. francine: is there a danger of the e.u. pushing if -- picking a fight where it comes to a tie-in

citizens and in tight e.u.. andrew: that is a risk. it is interesting the way other assets, macro acid in europe have been pricing more commonly. -- calmly. the euro has been stable. charts in spain have been stable. the market is rightfully saying this is a little more idiosyncratic rather than a real test on the sustainability of the euro itself. we have beenng focused on is italian corporate's trade extremely tight. there are reasons for that, but the magnitude of that is quite extreme. we think the value is more stretched, that is part of the market that at morgan stanley, we have more -- been more cautious on corporate spreads. francine: guy stear and andrew sheets both stay with us.

in the meantime, we are here come the saudi oil minister, saying saudi arabia is going to rate crisis over the death of jamal khashoggi in turkey. he's being introduced as we speak. saying the saudi's remain committed to the partners who have returned. , one of theressing only chief executives showing up at the conference, but it is interesting to see him addressing the crisis and the death of jamal khashoggi while saying oil and gas will continue to be to third of the energy mix. we will keep an eye on anything happening in reality and bring you the latest from that conference. stay with bloomberg surveillance. plenty coming up, including the u.s. economy poised for its longest expansion since 2014. with midterms around the corner, what does this mean for president trump? bloomberg tv has an exclusive

interview with the prime minister of italy. they will ask him about the budget law and of course, the coalition. this is bloomberg. ♪

francine: this is "bloomberg surveillance." the u.s. economy is poised for its best back-to-back growth since 2014, handing president trump a $20 trillion talking point just in time for the midterm elections on november 6. the report due friday is the last piece of economic data before the vote and expected to show gdp expanding at a 3.4% annualized pace in the quarter with consumer spending and business investments driving growth. how strong is the u.s. economy

and what does it mean for markets? still with us, andrew sheets from morgan stanley and guy stear. ofyou look at the strength the u.s. economy, is evident fine now but does it come to a halt when the tax cuts come to an end and the cycle changes? andrew: this is 80 debate between level and rate of change. the level of the economy is very strong. the markets are forward-looking and the rate of change from here into next year looks very tough. the currency effects get harder for u.s. exports, the tax benefits go away on a year-over-year basis. we also think there has been some frontloading of inventory and purchases ahead of trade with a reasonable amount of certainty, you can expect more trade disruption ahead in 2019 with tariffs continuing to step up, almost potentially from the first of the year.

i think the economy will look a lot weaker next year. we see it decelerating from the 3.5% pace in 2018 to closer to 2%. that deceleration will worry markets, so you go from a market this year, which has been about valuations. earnings, the economy is good, isn't the right price? next year, the focus will be on is the more deceleration in growth that we were expecting. guy: generally, it's true. have a forecast over the next two years by 2020, the u.s. economy will -- we could have u.s. growth at 0.5%. we think the u.s. is long in the tooth and we should slow down. if donald trump really succeeds in pulling the value chain back to the u.s., that will spur a mighty increase in u.s.. that could extend growth for another couple of years. the bigger risk is we are going

to have some sort of slowdown in terms of the global economy in the next couple of years. the question is, how much of that takes place in the u.s. and the rest of the world? whetherlly depends on the trump trade policy succeeds. francine: that means you will have more expensive goods. inflation, consumer spending will go down. -- youu are dealing with probably had to increase wages too. aboutd be less concerned the consumer side and more about what corporate profit margins look like under that scenario. taxpoint andrew made about policy in the u.s. is absolutely correct, but we heard him donald trump that he wants to do with all over again. maybe we won't a fiscal dragon drag int mate -- fiscal 2019. francine: both stay with us. next, the outlook for earnings.

we will look ahead to a busy few days for european corporate. can they close the growth cap wiki west peers? that conversation is next and this is bloomberg. ♪

francine: economics, finance, and politics. this is "bloomberg surveillance ." let's check in on your markets with annmarie hordern. annemarie: we are seeing a routing europe. major indices down between 1% had 2%. the biggest decliners on the technology space, one industry group is gaining across the stoxx 600, utilities. technology shares are the lacquered after disappointing results from majors like sap and ams. it is also said to clients in a note, various geopolitical -- are weighing on confidence. we saw that with the msci asia index. let's see what the movers are doing. bayer, after a california judge

said it is liable for its weed killer causing cancer. another mover, down 11%. nearly 12%. he announced a right to offer 6 billion krone and operating profits missed estimates. down 26%. a plunge for the company. the biggest decline in a decade, but third quarter results beat. they said they had a week outlook so it is the weak guidance weighing on the shares. francine: thank you so much, annmarie hordern with the latest on the markets. let's keep the conversation on corporate's. european earnings season is in swing and we heard from the region's biggest companies. they report and made a period of hed their and have slas estimates by the most in two years.

can they close the growth data with the west peers? still with us, andrew sheets from morgan stanley and guy stear from societe generale. when you look at european corporate, do you look at earnings per share or corporate outlook? andrew: what we have coming up is, this is a critical week. the next two weeks are critical for the european story because european earnings have been depressed. they have been boosted by one-off factors helping the u.s., and that is a big reason the region has lied this year -- lagged. expectations aren't very high, you could argue earnings are not over earning any trend. the base is reasonable, but companies have to deliver. this week, we have the sector that matters most, the financials reporting in earnest. commodities are another enormous sector in europe and they are reporting.

that more so than what we are seeing in technology will determine the tone we have going forward. again, i think it's financials that are going to be critical. the market can actually get comfortable that despite these headlines, financial earnings are so depressed they can actually hold at these levels and even grow from these levels. that would do an enormous amount for confidence. if that doesn't happen, it won't. francine: going back to financials, central bank policy, the ecb and the fed. what would a policy mistake look like and are you confident we will see good volatility in the market? guy: what would a policy mistake look like? at this point, it would be tightening monetary policy too much in an environment where growth may not be as robust, certainly not as robust in europe as we had hoped it would be at the beginning of the year. the first half of this year was about a lot of european economic growth disappointmentp. that has kind of stabilize

because the expectations have come down. that would be a policy mistake, but it does seem to be unlikely to happen because monetary policy is shifting fairly slowly. if you look at financials in particular, the reason why -- and financials have been a little slow to react because since the beginning of the year, we expected higher yield, steeper curves. things haven't panned out that way, so that is some of the reason for disappointment. francine: you mentioned energy, financials. is there anything else where you see good value? andrew: we have a value bias and a defensive bias. the utility sector is one we think is reasonable. some of the telecom looks interesting, given where the dividend yield is in those sectors and how it has performed. the monetary policy tightening point, you could argue in europe tightening policy by the ecb would be a beneficial thing for

the market in so much as it would help the financials and raise their profitability case. in the u.s., a lot of what the market would determine as a policy mistake is a pretty likely outcome given where inflation is and where employment is. in europe, that initial tightening might not be as bad given how extreme policy is and how helpful that would be to stabilizing the financial sector. francine: where do you see euro-dollar? we see the euro-dollar moving higher over the next two years, but we see the euro and the european equity market moving higher together. we see it more as the 2003 to 2006 correlation where it is moving higher as the market on a relative basis gets more comfortable with europe relative to the u.s. or emerging markets, and there is good evidence that if sentiment is improving, both those can go up together. that sentiment improvement

outweighs the negative earnings affect. francine: thank you for joining us. andrew sheets at morgan stanley and guy stear at societe generale. "bloomberg surveillance" continues in the next hour. tom keene joints me out of new york. we will bring you from the turkish president, due to speak shortly on the death of journalist jamaal schuck show the -- jamal khashoggi. we also bring you our interview with giuseppe conte and ask about his fight with brussels, yields, and whether the budget law can be resized in any way. this is bloomberg. ♪

francine: saudi scandal, the cia director is scheduled to travel

to saudi arabia. the nation is going through a crisis. the selloff is back. asian stocks sink. bank of america calls time on china's equity rally. assets under management tumble, shares fall two 2009 lows. i am francine lacqua in london. tom keene in new york. we have a busy day. we are waiting for president erdogan of turkey to talk. he is to mention the death of jamal khashoggi. we are waiting for the fii conference to start. later we have an interview with the prime minister of italy. we have gdp in the u.s. later this week. tom: the markets very difficult. dow futures, we don't have a print yet. nger.off, dollar stro

francine: we will have plenty more on your markets. first let's get to first word news. president trump says he is not satisfied with saudi arabia's explanation of how jamal khashoggi died. he says he is waiting to hear from tremendously talented people that were sent to saudi arabia and turkey to investigate. terroristd about financing and economic issues. says congressp will vote on a tax cut for middle-class americans after the midterm elections. the only problem is republican lawmakers say they don't have a tax bill in the works. the president told reporters 10%,taxes will be cut seen as an acknowledgment that

republicans have found last year's tax bill not as popular as they hoped. according to the new york times company device was found in a mailbox in westchester county new york. the fbi is investigating. soros is frequently criticized by right wing groups for his support of liberal causes and candidates. british prime minister theresa may as lived to fight another day on brexit. over the weekend, members of her own conservative party were talking about ousting her. sheits were furious that might want to extend the period of brexit. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am kailey leinz. this is bloomberg. tom: thank you so much. we will do more data checks across all of surveillance

today. there is a new low on s&p futures. dow futures -277. that gives me a solid 500 points down over the last few days. the curve comes in from 28 to 29 basis points. the euro was there. unchanged over the last few days. 24 handle is where we were in the last downturn for the vix. stabilityenminbi signaling fractionally stronger. the dollar will not give way. it is an interesting fx market against the plunge in equities. francine: it is. european stocks slumping as u.s.

futures are down. it has definitely started in asia and is filtering through to europe. investors taking haven in safe haven assets. there is a little bit of things to do when it comes to italian bonds. as the european union is set to reject the countries budget. tom: i want to take a look at this chart because it is shockingly elegant. thank you to doug cast for joining us yesterday with a cautious view on the market. these are kisses against this moving average. trend3, 4, 5 on this downward. right now down futures are right there. we are sitting on important support. when you get down there, you get to 24,000. we are not their area. that is an elegant chart that

suggests sell. francine: mine is a much more simple chart. thank you to hillary clark for bringing it to my attention. you can see this is entering a bear market, significant because of the losses today and the move to havens. i have brought it back to 1994. tom: very good. we want to go two saudi arabia now. -- we want to go to saudi arabia now. mr. erdogan speaking about the full nakedness of the moment. riyadh,at respect for what is the present nakedness of mohammad bin salman as they begin this future investment initiative? how exposed are they to the criticism worldwide? >> the pressure is on. that much is clear. the dust in the background serves as a potent symbol for

the lack of clarity in the killing of journalists jamal khashoggi. we are not hearing much more. we only know the investigations are ongoing and more details have yet to come out. here is another important saudi official who has weighed into confrontation just minutes ago. take a listen to the saudi energy minister. >> we are going through a crisis of sorts, resulting from the very regrettable and the boring abhorent incident that took place in turkey. nobody in the kingdom can justify or explain it. >> as you pointed out, in the coming hours or minutes we might from the turkish president. that might blow this case wide open. tom: will they listen? how will they listen?

what will they listen for? >> you have to bear in mind that the saudi narrative of what happened and the turkish narrative of what happened at the saudi consulate istanbul is not matched all the way. it seems like the turkish government and media has always been a step ahead in the information they have had our understanding is that they are trying to use it as a form of leverage to get some concessions from the saudi's to muscle back into the regional balance of power, which they felt left out of. whether erdogan is coming to reveal as much to expose the saudi's were a deal has been reached -- saudi's, or a deal has been reached with the help of the americans is yet to be seen. francine: we heard from mr. all follow, the energy minister of saudi arabia saying that the

saudi's are committed to the partners that stay the course. not many chief executives showed up. is this a veiled threat? fii isou point out, the underway. this is an attempt to show it is business as usual when in reality it is not. a lot of the business titans have said no as far as turning up. lower-level delegations have been sent. we understand that hotel and and somehe -- totale of the asian companies are going to be signing deals. that will be the measure of success or failure of this conference. francine: what do we know about foreign direct investment in saudi arabia? can what happened in the turkish consulate definitely delay vision 2030? >> they are hoping that will not

be the case. it has been a long process for the saudi's accelerated over the last few years. the conference serves as a platform for foreign investors to get on board, get foreign capital allocated into the kingdom. this needs to be resolved in a transparent matter if vision 2030 is to be achieved in the kind of way they drew it on the initial board when they all came together with the transitional power a couple years ago. tom: we say good morning to all of you worldwide. this is "bloomberg surveillance." francine lacqua and tom keene. erdoganaiting for mr. to speak. toyears old, this party back 2002. this is a statement of the conservative islamic voice and turkey. state been a fractious

for mr. again. can we say this is possibly his most important international speech? francine: it probably is. when you look at turkish president erdogan has done so far, he has placed himself and turkey almost as a catalyst for change between the balance of power between saudi arabia and the rest of the world. from where mr. erdogan was a couple of months ago, you could say this is a masterstroke in diplomacy. tom: mr. erdogan will be speaking. we will have translation in english. >> i would like to greet you with much affection and longing. our party group meeting will, to the best effect for our party and our nation, god willing.

veryweek we have seen beautiful things that are moldova. mulled over. we have seen and met with the general chairman of the party, the prime minister. we have held very fruitful meetings with them. see that those area, and inseparable peace of this country and have met with the citizens people and have attended certain activities. in fact we have attended a meeting at a square where about our people attended with , and we have

built byny structures ourselves, and these were gifts to our fellow turks from our nation. in recent past as you are aware, we have visited hungary, and we have uniform memories to bring back with us -- beautiful memories to bring back with us. we have started restoration of -- to escalate our relationship to much different level. wherever we go in the eastern samee, we are met with the .ffection and enthusiasm

as we always mentioned, our nothing boundaries are to compare with our boundaries -- emotion. escalate the level of relationships, the emotional level of relationships with our kin to a level where it should centuries ago. we visit these countries and make contact and the best of kin in theser lands, and we will continue our friendly relations with these countries. citizense embraced our , had a warm chat with them in is mere.

important investment refinery plants, and i hope it will contribute to our economy. azerbaijan has invested and country with this refinery and this is an important .ontribution to our country this is an $11 billion investment, and we have opened this together with our brother from azerbaijan, and i hope it will contribute best to our country and azerbaijan. ,n middle east and north africa this is compared in middle east and north africa, this is one of

the biggest refineries. currenteducing our deficit at the level of $1.5 billion. 10 million tons of crude oil ,ill be refined in this plant and more than one million square -- more than one million cubic meters of storage capacity is there. hank my dear friend, the president of azerbaijan on behalf of of my for making this investment possible. is obviously at the beginning.

once this becomes privatized, and once azerbaijan has a port also has been built and wind has been made a career have also -- made, and we have also made a huge football stadium capacity of 33,000 givee, and i am able to the starting at this enjoyable event. we have also meant with nongovernmental organization representatives. sunday in istanbul, the youth trust of turkey opened its general headquarters, and on this occasion we were able to

lead our youth, and also on the byasion of the first visit -- we have hosted the prime minister of kampuchea. to contribute to the easing up of transportation problems in istanbul and the opening ceremony, thankfully about 20,000 people attended this spectacular, very enthusiastic ceremony took place. we are not going to stop. we're going to continue opening such important structures through the end of march 2019 continually. every single investment in these

different cities and beautiful theme on these opening howmonies indicate determined we are and how determined our nation to .aintain the unity toevery city, i would like share the enthusiasm and express my gratitude to citizens in these three large cities. at this section of our group , in the consulate general -- francine: that is the turkish speaking indogan parliament. he is expected to address the killing of jamal khashoggi. turkey has evidence that the -- claims to have evidence that the journalist was killed and

dismembered. we are waiting to hear mr. erdogan address that. he is not going through a list of other things. we will keep an eye on his press conference, speech actually. we will get back to. actually, the president is addressing it now. of september, friday, has entered at the saudi arabian consulate general in asked stumble -- istanbul. the teamerstood that has been informed about his arrival, planning and making a roadmap about his death has started. staff of the consulate have gone to the country in haste,

and it indicates preparation work has been done in their country. the day before the operation, 6:30, as monday at 1 group of three people arrive at a flight scheduled in istanbul and then go to the consulate general. in the meantime, another team from the consulate general goes somelgrade forest for surveying work. 1:45, the second team of three people comes to the hotel. there are some generals among the third group of nine people, arrive in a private jet at the airport and go to a different hotel. in total a group of 15 people, team of 15 people between 9:15

come toorning and 11:00 the consulate general separately and meet there. through the camera system, first the hard disk is removed from the cctv of the consulate general. isha be -- khashoggi contacted by consulate phone. from london, khashoggi returns 13:08 entersnd at by walking into the building of the consulate. fiancee is with him. on, no news ist available from him. at 7:15 in the evening, authorities have been informed by his fiancee that khashoggi

force inr been held by the consulate building, or something that happened to him. upon this, security forces in our country begins an investigation straightaway, and they analyze the security cameras, cctv cameras in the area. it becomes definite that khashoggi did not leave the consulate general building because they have diplomatic immunity, this was a matter of theute recently, and this convention should be analyzed details about the regulation, initially nothing can be done against the authorities of the

consulate general. our security forces started analyzing the matter in depth prosecutor investigation, official investigation started. the deeper they go, the more interesting information they receive. they find. murder, 15ore the information officers, various people have arrived in our , and into different groups that have left our in two different flights.

gentleman with them, selectica riyadh with go to .he excuse of some inspection room,ut some stuff in one and some other stuff has been allowed to take the day off. claims about to show these murder have first been -- about khashoggi's murder have first been denied. journalist a reuters inside the hotel room and show him certain structures in the building and in a laid-back manner try to defend

themselves that khashoggi is not there. staff continued investigating and trying to find out more documents and evidence into relations,in foreign we exchanged information. specialer, some representatives arrived and worked on the matter. when the matter has been checked on the agenda of our country and the world, upon this the saudi authorities eventually explain, express that they will allow the consulate to be searched. my dear colleagues, first of all we have to question certain things and look for answers because this incident has taken place in istanbul. we are in the responsible

position of our country as those who are responsible of matters in this country, we have the .ight to question the matter fog covering this situation is removed, the more comes to life. going to take the necessary first steps. our consciousness forces us to take. -- conscience forces us to take. before investigations, we will not accuse anyone without firsts and with telephone conversation, i have talked about matter with the existing findings in hand, and i have

also met with the delegation he has sent previously, explained about that meeting we held, and our decision to start mutual working group, and we came to an agreement with this working group, the king about this working group. , staffkings instruction of the security into the consulate and started making investigation, which was not previously allowed by the consulate general. thee this is to do with incompetence of this consulate general. king, explained to the and as a result one day after our talk with the king, the

console general has been removed from office. generalult, the consul removed to his country. an investigation took place in the consulate general building. 17 days after the murder, saudi arabia and authorities -- saudi authorities have officially accepted that jamal khashoggi has been killed in the building of their consulate general. died aso claim that he the result of some skirmish some commotion that happened in the consul building. following the acceptance by them of the murder, some 18 people me. been arrested, he told

realizedof people we that are the same people, our security forces have listed as peopleprits, so these 15 , eight people in the other group of three people are those who are in charge in the consulate. it is important that they accepted this and on the 21st of october, we have held an extensive telephone conference with mr. trump, and we came to an agreement on the fact that this incident should be investigated to bring the facts into life. we have held this investigation in line with the domestic and

international rules. is thosell that, there toia circles who have tried smear our country about this investigation. we know very well who is behind these media companies and what their purpose are. murder willts of not distract us from our sincere activities to bring the facts to light. first of all, yes this murder may have taken place in the consulate building, which is considered the land of saudi arabia, however it should not be forgotten that this is within the boundaries of the republic of turkey.

conventionienna suchd not, does not allow horrible murders to be hidden behind the dramatic immunity excuses. will investigate issues. such jamal khashoggi was a saudi citizen, but he was a world journalist, and this asked to our responsibility in turkey. representative of the general public consciousness of the whole world we will maintain investigating this matter. we will not give up.

information that came to light so far and evidence shows that jamal khashoggi has been the subject of a terrible murder and cover up. covering up such a murder will hurt the consciousness -- conscience of all humanity. the same sensitive approach from the others who are party to this matter. taken anbia has important step toward resolving this matter, and from now on we are expecting them to reveal those responsible of this incident and punish them in the way the law requires.

we have strong indications that it was a plan to murder, that it was not the result of a commotion that took place in the consulate. this question keeps bothering everybody. those 15 people who had qualities attributed to the incident, why did they get together istanbul on the day of the murder. we are looking for an answer to this question. those people, who were they ordered by to come to that location? we are looking for an answer to that. who ordered them to go there? why the consulate general building has been opened for investigation days after, not murder ory when the in the open.

why did they give many conflicting announcements? why the body of the person who was murdered is still not around? where is the body? if the statement that the body has been given to a local collaborator, who is that local collaborator? if that statement is true, who is that local collaborator because it cannot just be an ordinary person. this local collaborator is subject to saudi arabia authority. if you talk about such a local collaborator, you will explain who this is. without the answer to these

questions, no one should think of covering this matter up. our security and information informationtain that are still subject to investigation and analyzing. they already indicate certain facts. the more we complete analyzing this information, they will take file.n the investigation internationalthe bylic will be convinced blaming certain untoward attempts by certain people. we are expecting a full investigation and full facts to come to life.

i don't doubt the sincerity of excellency, his salman.cy bin it is important that this investigation should be held by an independent person. ,f this is a political murder if exists other culprits in other countries, they should also be subject to investigation . islamicnational law and law, i believe saudi arabian requires this. turkeys authorities will follow this matter until the end until it is resolved. we will do whatever our law, international law requires.

we will ensure these requirements are met. call saudie to , starting with his the king and the higher authorities of saudi arabia. i call upon them that this incident took place in istanbul, therefore these 15 people, eight people already under arrest, i suggest that their trial should take place is istanbul -- istanbul. this is what i am suggesting. request, and this is by suggestion because the incident took place in istanbul.

item on our agenda is the discussions in our country , as is known in the matter of july 15 issues, we have entered a new era. the cooperation of national movement party has contributed a lot. we have called this -- francine: that is the president

of turkey, mr. erdogan, talking about the murder of journalist jamal khashoggi. he is reiterating a lot of things we are doing it. the 18 saudi officials he has named and said they entered. he said it was preplanned. at the end he said the 18 saudi officials should be tried in istanbul. what is missing is the evidence. turkey has claimed to have evidence that the washington post reporter was tortured and assassinated. there was talk of an audio recording. in his speech to parliament where he went step-by-step through what happened, he did not mention the audio tape. tom: i agree with you. missing was the idea of evidence. i would go to the audio recording, which certainly we have not seen yet in his comments as the president moves on to other topics for his

justice and development party. i really cannot explain the historic moment of this. the president and his party is founded on ottoman empire pride and islamic faith speaking to the world about rihanna and mecca inriyadh and saudi arabia. inncine: let's bring bloomberg daybreak middle east anchor, who is listening in. what did you take away from this speech? arabias about saudi being sincere, but he wants the perpetrators brought to justice. >> a lot of information at the beginning was quite familiar. there were new elements to this, including the detail that the saudi team explored the forest.

the president wanted to underscore that a lot of planning had gone into this. he did not want just a few officials to be punished for this when the chain of command goes much deeper. that is what he was alluding to. he also asked where is the body? we understand there was a disagreement in the consulate that resulted in the death of mr. khashoggi. where is the body? the turkish government doesn't have an answer, and we have not heard from the saudi's. we are left with more questions than answers. what is clear is that the saudis and the turkish government and the americans are talking to each other, coordinating an investigation. tom: one of your great tribes is an understanding of the persian gulf, of the distance from moran to morocco across the air world.

-- arab world. how was this speech taken by the nations adjacent and distant from saudi arabia? >> this has been covered on all the main media channels in this part of the world. no speech makes it onto eric tv wider -- arab tv in the world unless it affects national policy. on this point they are seeing eye to eye. the turkish government and saudi's have not been on the same page for quite some time. politically it has been quite a difficult relationship. maybe they have found common ground now that the saudi's feel cornered as to what happened on that day in the consulate. francine: thank you, joining us from riyadh. joined now by sin on

tobacco -- sanam vakil. does this raise questions about prince mohammad bin salman? >> seriously or not surprisingly , president erdogan did not mention mohammad bin salman. he was very reverential to the king. what was missing was a mention to mbs as he is commonly known. this remains the all caps in the room. -- the elephant in the room. how is president erdogan going to leverage this killing of jamal khashoggi to his advantage to get concessions from saudi arabia in other arenas in the east?le francine: saudi arabia obviously

has deep pockets, but what kind of concessions with the turks want? -- would the turks want? >> what comes to mind is saudi arabia and many other countries in the region are looking at this as an opportunity to humble the saudi's. there is regional competition between turkey and saudi arabia and iran and turkey. this is an opportunity for who has been through a number of domestic and international challenges to reassert turkey as a powerbroker. syria is an area of strategic concern for turkey, and turkey has had an important role in the process, but has been very frustrated by saudi arabia's efforts that have worked against

turkey's interest. this could be an opportunity for in theto assert itself syrian conclusion when it comes about. tom: during the speech, the president of turkey wandered back to the the and a convention vienna -- the anna -- convention of 1961 on diplomatic immunity. iranaudi arabia and convention ofenna 1961? >> i don't know down to the letter. i think they would like to say they respect these conventions. it sends certain messages to the domestic audience and the international community. saudi arabia wants to demonstrate its commitment to international norms and laws

although we often see very acutely that it does not respect those laws. has an audioturkey recording of what happened in the consulate, will anyone ever hear it? >> i think the saudi's will do whatever they can to prevent that audio recording from coming out. it might be in the wider interest of the international community to prevent that audio recording from coming out. it may be humbling mohammad bin hisan and spreading accumulation of power in the kingdom might be a good thing, but diminishing the kingdom might not be good. it is unclear what knock on scandal will have

for saudi arabia. the international community and the u.s. are concerned about the larger project against iran. the saudi's are instrumental in the coming months in pumping more oil and pressuring iran. president trump does not want to lose momentum on this project at the same time. francine: thank you very much. sanam vakil. let's bring in david riley, peter dixon. we are listening to president erdogan's speech. the fact that president erdogan did not mention mohammad bin salman by name, and that he accepts the sincerity of the saudi king, that means he is scaling back the attack. >> this is clearly not a full frontal assault on the saudi diplomatic community. it does raise questions in saudi

arabia and turkey. mbs is the crown prince. this might be a bit of overreach. it will be interesting to see how the internal politics of saudi arabia play out, especially if president trump needs to keep the saudi's onside as a regional bulwark against iran. tom: i look at will we just witnessed and see the market moves as well. from an economic standpoint, is this separate indiscreet from studies of turkish economics, or can you link them together? >> funny enough, i was just thinking as i was listening to this speech, what we have heard through this year is a turkish president who has effectively tried to influence the operations of the turkish central bank, and markets have taken flight. what we have heard today is a

presidential speech. argue about the because, but the tone gave leadership. we could see a little credibility that he is lost over the course of this year. tom: i am tom keene in new york. francine lacqua in london. the president of turkey speaks to his justice and development party in ankara. the headlines are out. you can see this across bloomberg. you can see the market move. futures deteriorating. during the speech, we sought dow break under 25,000. a little dollar weakness. i saw the 10-year yield move five basis points lower. that is an abrupt move. it is a joy to have david riley with us. what do you do with your portfolio today? i am not going to sell because of mr. erdogan or mohammad bin

salman, but am i going to sell because david riley says things are ugly? >> things are pretty ugly at the moment. i think we have moved into a higher volatility regime. ist of the reason for that because we are entering the end of that quantitative easing era. u.s. rates have been moving higher. for globaldelta growth. growth isbout china what is spilling over into european growth, assets and equities at the moment. invested,o is stay but look for quality, look for where you are getting paid for the risks you are taking. do your stock selection and pick

up that yield and that carry. now is not the time to try to hit the ball out of the park. stay close to home. francine: talk to me about oil. we were just hearing from president erdogan of turkey. he said that it was saudi operatives that murdered the journalist, but was not linking it to the actual leadership of saudi arabia. what does it mean for the price of oil? >> good question. we are not seeing a lot of movement in the market. what is going to matter hugely is the extent to which the saudi's decide to ramp up production when iranian oil disappears from the market. over the long-term, that is one of the reasons why americans don't want to rattle too many saudi cages. tom: that is good but short conversation. stay with us. stewart wallace joins us on hydrocarbons and commodities

across all the bloomberg. the fragility of the royal family in saudi arabia and the price of oil. it is remarkable how oil has not moved on these events. does that change on mr. erdogan's speech? >> i think the link, and you are thet of the fragility of ruling family in saudi arabia is dependent on oil. without it, they cannot find any of their programs. the effectue this to the price today, but it does build into the risk premium of people making that calculation. iran looms large, as does venezuela, iraq, and libya. sense ofd to get a where it will end. there is much more to come out here, not least of which the

audio recording. and derails the oil market leads to a much higher price. francine: what does a derailment of the house of saud look like? is this turkey putting pressure on president trump to put pressure on the saudi king to pick a new heir? >> yes, and ultimately it is a precarious position for them all to be in. i suspect none of them wish it to be true, with the exception possibly of turkey. it will be a critical moment where the u.s. administration is dependent on the rest of the world to comply to cut their 20 or as close to zero. saudi arabia is a key ally in that fight. the peter dixon, away from

discussions in ankara this morning, we see in the u.s. press the beginning of articles on the fuel affect on airlines. we are beginning to see a lift in oil prices. describe that in europe. oil isangible where now? >> my sense is we are not there yet. it is still coming through. we are starting to see price inflation on the cpi side. tom: david, within the equity markets and hydrocarbons, is there a huge opportunity? are they behind the surge? >> i do think it is the case that oil related assets have not performed as strongly as you would expect given the outlook for oil. oil prices have held up well during the course of the year.

not least because of the geopolitical premium we have been discussing. i think there are opportunities, certainly we think there are opportunities in investment exploration, production space in terms of credit. i think that is reflected within equity as well. francine: i don't know who is fighting with you, but italy and brussels are not getting along. you are a buyer of btp. do you still buy them? >> i think you still do. i think spreads will be tight on year by the end of this compared to where they are today. one of the concerns is that italy would fall to junk grade status as a result of the rating agencies. that has not happened. we got a stable outlook. we saw s&p at the end of this week. i would be surprised if they were not more aggressive than

movies. i think the worst scenario has been taken off the table. i think we are going to have a reasonable him out of volatility and noise around italy. i think italy is still mispriced credit. francine: are you short duration? you can see the difference andeen btp's and bunds, between spanish and bunds. is it the two-year or 10-year? >> we have been looking from the midpoint up to the 10-year. i can see the attraction of the short end, but i think this opportunity is at the longer and as well. one of the issues is going to be if we saw a break higher, and that is one of the reasons why we were not push this to heart. if we see a push higher, we will get contagion.

fors no longer a problem the italian government, it becomes a problem for the european commission as a whole. tom: peter dixon, is there a slowdown in europe? >> yes, there is. it is a modest slowdown at the moment. it is certainly affecting germany. to be fair, it is coming off of a very high base on european standards. it is not something we overly worried about at the moment. it does not change the ecb's view of the world, that they will likely have to stop buying assets. it is a slowdown, but it is not a problem at the moment. tom: david riley, i just want to know what the market reactions today, have you changed your allocation? do you plan on changing that mixture of stocks, bonds, and

cash? >> now. we have been looking -- no. we have been looking at picking some spots, some value in oil, high rated, sovereign credit within the emerging-market space. i think in this environment where we are in, if you like the second derivative of growth, growth is strong, but it is not getting stronger, in that sense, i think credit and fixed income generally has got potential on a risk-adjusted basis to outperform equity. david: calculus with -- tom: calculus with david riley. peter dixon with commerzbank as well. stewart wallace mining the commodities watch with bloomberg. thank you for your visit today. francine, the washington post publishes, turkish president says jamal khashoggi's killing

was a planned operation. i am sure we will see much more from the washington post through the day. francine: that was after the speech from president erdogan involving saudi operatives, but stopping short of putting the blame at saudi leadership, also saying he believes the king of saudi arabia. european stocks are slumping. u.s. futures are down. the global equity selloff is resuming. investors seem to be taking shelter in some of the haven assets. i am looking at gold. i am looking again. i am looking at treasuries. we have a full market round up next. we look at geopolitics and saudi arabia. this is bloomberg. ♪ as tom: this morning, the market find.les to

yields lower. junk falls below 25,000 during the president erdogan speech. findthe president of turkey ane former mayor said this incident that has taken place in istanbul , yes where is the body? he states trial and justice should be in istanbul. on the election, the senator from vermont since a blistering -- sends a blistering message , turnout orctions lose. this is "bloomberg surveillance." francine lacqua is in london. thaesthetic start very moment in turkey. francine: in the history of the middle east and saudi arabia. erdogan president speaking to his parliament saying he believed the saudi team planned the killing of a journalist jamal khashoggi.

he did not talk about the audiotape, the evidence we have been talking about. tom: a lot of things unmentioned, but certainly an attempt by the president for a statureation of the within the middle east and world community. in new york, first word news, kailey leinz. isley: turkey's president rejecting saudi arabia's explanation of how journalists jamal khashoggi was killed. he says the killing was not accidental. he called on the saudi team to call all the perpetrators to account. >> we have strong indications that it was planned and not a result of motion that took lace in the consulate -- place in the consulate. those 15 people who had d, why didattribute

?hey get together on that day we are looking for an answer to this question. kailey: president trump says congress will boat on a tax cut for middle-class -- vote on a tax cut for middle-class americans after the midterm elections. it is reported taxes would be cut 10%. that was an acknowledgment that last year's tax cut was not as popular as republicans had hoped . an explosive device has been found at the home of billionaire george soros. it was discovered at a mailbox in westchester new york. he was not there. the fbi is now investigated. george soros has been criticized .y right wing s own party was

talking about ousting her. they may want to extend the period in which the u.k. would a by -- would abide by a eu rules. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg. tom: challenges within the market. equities, bonds, commodities. after the president erdogan speech, features negative 37. the yield market moves with curve flattening. yields command, tenure isspeechd year is aoints -- 10 that yea solid 10 basis points.

a weaker renminbi. francine: investors deductibilit investors definitey --ing in riyadh, we are joined and watching the middle east. kevin cirilli is also watching for the elections two weeks away. to the speech, how will the saudi's respond and who would you guess will respond within the royal family? say. this point, hard to turkey took the position and the last 24 to 48 hours and it is unlikely we will see him this soon given some of the comments the turkish resident made --

president made. it wasn't completely peaceful or conciliatory. he left the door open for further collaboration. from the saudi side, we have heard from senior saudi officials this morning to take a listen to the energy minister. >> we are going through a crisis veryrts resulting from the incident that tookorei place in turkey. no one can justify it or explain it. going into president erdogan's speech, the thinking was the turkish government was looking at the situation as a gift from god according to one of the medic -- diplomatic source. francine: what do we know about investment in saudi?

abandoned by the west. is that right? yousef? this for the conference for the three days. asian representation and regional representation is strong. a lot of big business types from europe and the u.s. might have event, this particular and as a result, we understand from our colleagues that it is much quieter in the halls of this conference center, a lot less activity. what will be the real benchmark for investors for the success or failure in the shadow of the killing will be how many deals can be signed. tom: thank you so much. kevin cirilli is in washington. formu expect to see some of response from secretary mnuchin and sergei pompeo and

the president? kevin: i would. the speech is demanding some type of white house response. it comes at a time in which there are questions in which we will takeaction against saudi individuals. he president has said that has been at odds with the senators with regards to whether that would be specific targeting with sanctions against those in saudi arabia. i was on a conference call with senator rand paul, who essentially said and really speaking out against the saudi crown prince. i would anticipate that type of rhetoric from republicans will continue. francine: what will president trump do? will he continued to support the crown prince or be more mutant? kevin: if you look at the

comments from the white house and senate, there will be some type of action. how severe remains to be seen. reportingt to show for the new york times and not necessarily an op-ed, but it is an op-ed from the senator from vermont. sanders -- i happen to not believe there is not as great democratic blue wave. on election night, which party controls the house will come down to a very few seats. i am doing everything i can to make it happen. it will not happen if people are cocky and how sure they are of winning. overconfidence will result in disaster. the sweat of the president and republicans. where is the sweat of democrats? kevin: i am so glad you pointed this out. from crunching the numbers the 2016 cycle in a state like michigan.

of then is a key part midterm elections, particularly in the house. senator sanders beat secretary clinton in the primary by one percentage point. flashforward to tway 16, president trump gets a victory by less than a percentage point .n michigan sen. sanders is correct in asserting this will be all about turnout. it sounds like a cliche, but it is true. the fate of the democratic party is at play and also the margin of victory in the house of representatives. i note that nancy pelosi, congresswoman nancy pelosi, said that shouldeviewing democrats take control of the house of representatives, they will use subpoena power as a negotiating chip in terms of getting policy crafted. tom: is nancy pelosi helping

democrats coast to coast? kevin: that is a great question. when i talked to consultants, they say she is not been the divisive issue president trump has been. she has not been as polarizing as republicans would have liked to see. mr. surly, stay healthy as we get to the elections. -- kevin cirilli, stay healthy as we get to the elections. what was your observation listening to mr kevin cirilli? >> that it applies to stock markets and midterm elections. tom: is the election linked to the market? >> the expectation is democrats when the house. the midterm elections is a small part of the nervousness we experience right now.

let's look at a chart that kantor would never look at. it is about market cells in moving averages. here is 25,000. charles, here is a correction for a guy like you is an opportunity, isn't it? .harles: no doubt if you are long-term investor and you do not think the view has changed, it is a very attractive proposition. market trades today is a arranges simply cannot ignore. volatility creates opportunity and forces you to double down on fundamentals and test your faith in business models and management teams. over the long-term, you hope it

meets with higher returns. francine: why it is the market down today? is there a risk of contagion? charles: calling day-to-day moves in the market is difficult. about are nervous variety of things given where the futures market is trading for us it is about the fundamentals. by the end of the week we will have more companies reported and will give us a sense of profits for both this quarter and next year. as go earnings, go to the market. as go cash flows, go to the market. we are at 20% of companies in the s&p reporting. as you get a better sense of profitability margin and cash flow, the market will calm down and focus back on fundamentals. francine: i don't know whether to push back that one day of

losses is ok. the vacuum of news of foreign policy may be the markets waking up and policy changes when foreign policy seems more uncertain. there is no doubt that in the u.s. there is a certain markets andt marketin what rates will have on valuations. that is a key debate and that thinkmplified as people through corporate profits will then lastr issue year. this year they will grow at 20% and next are they expect 10%. than 20%, but corporate growth in a 10% range given where valuations are and the treasury yields are is really attractive. when you think about the earnings on the s&p today, it is over 6%.

treasury yields around 3.25%. that is the key here the equity -- that is the key. the bond market better understands the influence that productivity gains in general have on inflation. parency.mp's parents elites were productivity and less inflation. francine: thank you. charles stays with us. later today, an exclusive interview with the prime minister of italy. we'll ask him about the budget law. this is bloomberg. ♪

apple plunge the most in a decade after its margin outlook disappointed it produces optical sensors for mobile phones. 's pushing the augmented reality has made them a critical supplier. investors pull out $18 billion a the third quarter from troubled swiss manager, 1/5 of the firms asset. the start manager had allegations of -- the setback in a california court. judge refers to set aside a jury that roundup weedkiller causes cancer. the judge cut damages to $79 million.

facewill appeal and they thousands of losses. that is your "bloomberg business flash." is with us and he looks for value and opportunity. whole foods is acquired by a company. give us an update. i walked into whole foods. amazon struggled for a while, and then the amazon thing clicked in the what is the next whole foods for you? charles: this has been a year where we have double down on 46 of our holdings on topics around corporate governance board experience, capital elevation

and structure. in talking with francine, no one knows is watching. when you look at this list of talk,, so much of it is what is your method difference between some of my carl icahn? charles: we want stocks for the long term. when we approach companies, it is from the perspective that we have owned you for three to five years and have watched the evolution of the business. we don't pretend to know how to run the business but we have strong views on dividend policy and how to communicate with the financial markets. the shell you get is a function of the strategy around corporate communication and the metrics used to communicate the message. we are looking for companies

that can articulate clearly and create long-term shell. when the mosaic becomes bad andgh that we get agitated start to think if there are remedies behind the scenes we can bring in that will enhance capital allocation. where you environment want the best assets. it puts the focus on environment . we are at the part in the cycle where the winners and losers will be defined by cash flows and how to grow shell devalue. do you company pick or look at industries you believe will outperform? charles: the winners and losers right now -- they will be defined by key strategic actions they take. folks like us could rely on the

multiple going up because interest rates will stay low forever. in this environment, it is about knowing the details and about think of is the chief allocators of the firm have the fortitude to be growth investors again. it is not about management for productivity, it is about taking cash flows and making strategic bets for the next three to five years and building bigger companies. where they double down in assets , that gives them were scale and market share and high returns on capital. we think those transactions will be well received. diversifyingaround the cash flows and business mix of less cashtense flow volatility will drive higher share prices. those companies will likely be poorly positioned and poorly received by the marketplace. francine: overall, are you

china? or bearish on do have to get the china call right? charles: can't do it without thinking through china. it is the key overhang in the u.s. market. it relates to the influence of the china-u.s. relationship and that influence on uncertainty and powered in forms of global growth. administrationhe is playing a longer ball with china than some of the other trade agreements. that is the key market as it relates to fundamentals. , you have clarity on that would see a move higher in risk assets. i would not say that is a medium expectation, but china is a key driver and its contribution to

the global economy is really important. uncertainty around that is much more meaningful than uncertainty around nafta trade policies. tom: there is a kantor opportunity on banks. there is something about the banks doing well and the stoxx not heard where do you buy in financials to make profit? charles: we love to own financials that are not dependent on net margin expansion and loan growth to make money. we prefer to own the businesses that facilitate transactions, like a visa. it is working for you while you were sleeping. tom: is it working? apple and visa is leading the way, right? charles: its value as you think about the global migration from cash to payments happening at an accelerated pace across the world.

banks are ofoubt tremendous value today, given and theey trade dividend yields are and utility characteristics they present. there is concern that some of the loan growth is being mediated away by some of the competitors. that is a bit of a conundrum for us. the value idea is the epicenter on why cyclical securities by nature haven't worked this year. there is a believe at the end of that is a believe i don't share. show moreneed to meaningful loan growth for the security to outperform. francine: where do you see us in cycle?

if it is not the end of the cycle, because this is told was over and over that 2020 is crunch time at the end of the tax cuts and the end of the cycle -- where do you see us? theyes: based on gains don't always and after nine innings and facts and circumstances change. the tax policy changes that meaningfully drove corporate tax , given where corporate competence is today and given where investment confidence is an given where incomes are for individuals and low unemployment rates, it is hard to call an end of the business cycle anytime soon. this year, folks were certain the business cycle would end at the end of the year. now i think the view has been pushed out.

the fundamental backdrop of the u.s. economy today is incredibly strong. recessions always happen and will happen and what causes them is the same, a pullback in consumer confidence and causes companies to pull back on investment spending and hiring plans which causes banks to pull back on lending. that drives a recession. we are a long way from that at this moment in time. francine: thank you, charles. coming up this week, we will speak to executives on bank earnings. this is bloomberg. ♪

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erdogan is not buying the saudi version of the death of journalists jamal khashoggi. he says his killing was a result of a thoroughly planned plot. he wants the saudi king to hold the perpetrators to account. placing the blame for a matter like this on security and not forence members is us or the community. president trump says after the midterm elections next month, commerce will vote on a bill that would give middle-class americans a tax cuts of 10%. republicans say there is no such legislation in the works. the announcement is a sign that last year's tax cut was not as popular as they had hoped. white house national security john bolton has said the russian in the election was

ineffective and he said it has damaged relations between the two countries. in an interview with russian media, it was said the u.s. is in the in withdrawing treaty with missiles. in germany, shaping up to be the biggest test for angela merkel. she is warning voters not to engage in what she called left wing experiments in an election this weekend. global news 24 hours a day, online and at tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm kailey leinz. this is bloomberg. metalsteresting moves in , gold up nicely. gold up $13 and now. palladium climbs out to a record amount. palladium to a record.

is with us.or david page has his own more of roses. the wars of the roses is 32 years long, which strives republicans and democrats in the united states. who is going to win as you look at it? david: the outcome is likely this time around to be democrats taking the house. the polls suggest it is going to be mixed and difficult for democrats. that is the situation we are familiar with. the specifics around the major market is. we were here with george bush and obama, and there will be a lot of jim -- logjam of politics. tom: does gridlock diminish or growth?economic

david: we have a different style of presidency. what we fear from president trump is that you would get a gridlock situation and fall back on executive order and trade. this pushes us to double down on trade policy. why do we have this on the desk? it is america's global. this is extraordinary, this election. what will it due to growth? >> investors hate uncertainty. we rather have results today than wait for them. ultimately it gets down to the influence politics can have on local growth. to the degree that investors

like checks and balance between the house and senate, we will see if we get it. donald likes a clear mandate, and he will take result of the midterm election especially personally. the actions that drive will no doubt influence markets over time. issensus is that the market prepared for the democrats to take the house. 60% to 65%d of the probability based on some of the tracking we use. francine: charles, what does a 10% tax cut promised by president trump due to the us economy? is it in dangerous overheating territory? hard to argue the end of a business cycle at the same time we worry we are overheating the economy. they cannot stand next to each other. ultimately, it would be my view that more cash in the hands of

individuals is good for overall economic growth. there is no doubt the consumer has been the winner in the u.s. as it relates to this economy. by that time i mean they received more income and income is going further and they are not finding price inflation when they go to the supermarkets and restaurants. that shows up in the sales growth that we have seen to the second quarter, or aggregate sales is up in the u.s. that would suggest an extremely strong u.s. consumer. tom: francine, i want you to charlest because of minced garlic when up 12% because of kantor. francine: you have lived in the u.s. too long paired i will bring you here and make you cut

your own garlic. does the us feel the pinch from trade tensions? >> not yet. it will come through slowly. the fiscaling about stimulus on the back end of last year. that is what is driving consumer confidence. that momentum is likely to continue. trade policy is something businesses worried about and could act as a long-term headwind. it is not likely to impact the consumer in the short term. likely is inflation pressures as they move through the next couple of years. that is the major headwind that comes through. tom: charles? charles: on the tray, companies chains.sting supply it, companies are adjusting supply chains.

laxe is a logjam in the .orts and air freight companies are adjusting and thinking through sourcing goods from other places. we speak to many of them, indonesia, vietnam, south korea, because in their minds, they are trying to protect their margins and do not want to push higher prices on to the consumer. tom: we have an economist and a guy running real money itself. dow.is a chart of for the the idea is the malaise. is the malaise incorrectly associated with president carter appeared his a 1910, 1920 malaise. what is the outcome -- forget about the drama of up or down, how close are we to slipping into a stock market that shows a

malaise of growth? they are coming off the back of a strong year. they are coming off the back of a strong year. this is likely to pose the strongest gdp. next year will be modestly slower we think, but nothing to worry about. what worries us is not malaise, but we are bit close that as we going to 2020, the yield curve inversion. you would see a peaking of the market. tom: nice distinctions. charles wants to weigh in here on some of the malaise. coming up, an important interview, the secretary of the housing and urban development, dr. ben carson, on bloomberg markets. this is bloomberg. ♪

kailey: this is "bloomberg surveillance." buyout global management reportedly has offered $11 billion for iconic. the maker of aerospace and construction products is considering an offer. the news agency says there is another buyout offer. stepping up its push win online shoppers. they are offering two-day shipping next month to third-party products sold over its website. consumersso will let use stores to drop off returns of consumer goods. third quarter missed revenue for

the automaker. its exports to china. that is your "bloomberg business flash." the european commission will decide today on whether to formally demand a member state to take that and resubmit its budget. it has never taken that step before. .e are talking about italy in the u k, the prime minister says a brexit deal is 95% complete. she has appealed to lawmakers to support her after a weekend of it speculation about a leadership change. joining us is david page, senior r.onomist and charles kanto aroundou for sticking here what is more complicated to unravel, brexit or the italian budget? david: it is definitely brexit. it has no obvious solution.

the problem is not the 95% done, it is the remaining 5% of the irish border. what we have seen is very's attempts to bridge the gap which have failed. it is very difficult to see it come through in a political punch. it will take a lot longer and a lot more pain in the next few weeks. let me just come back to this. fudge,e is a political what are the odds of a constitutional crisis that would put into motion? david: it depends on what it is. longerpes to push this and address it when they think about free trade and details of negotiation which will come over s.e next five to six month

the eu and the commission does not want to see that. they want hard and fast stops for the risk further down the suddenly realizing that situation for ireland. is not an has to be dealt with, that could be a crisis in the u.k. francine: charles, what is your take on brexit? our view is we go back to the companies and the companies we speak to our already planning businesses in the financial se sector around a hard brexit. the great challenge as david knows is finding labor willing to stay in ireland and do the

job necessary. just flyd you cannot in on a monday and leave on a friday, you have to stay there over the weekend. there is a shortage of labor to do the jobs necessary. hard brexit as it relates to companies is how they are planning businesses. tom: david, i was making a joke in the war of roses. but now it is the future of the city of london. i have been a london optimist. you have a great english heritage working for a great french insurance company. will they move every warm body back to paris? brexit willdowns of see clearing operations in london. the european commission has been keen to get its hands on clearing operations. there will be significant changes to london. london will reinvent itself.

there will be a significant headwind if brexit comes through in the way we fear. from paris to london, which side of the train decent on? this is a big debate in my house. >> we sit on the right side. tom: the views are stunning on the right side. with the fears of brexit, how do you translate that? >> through this political uncertainty, the economics are straightforward. tom: everybody does their job and worries about the next paycheck. transition, into the upside may be meaningful. we expect pickup coming through. we have been promised about a book spending. the problem will be if we don't get the transition, if we get brexit which comes at the end of mark which the u.k. has not prepare for, then you see

headwind and logistical issues. the issues could lead to short-term recession in the u.k.. economy.hows up in the it is not a free lunch. given the uncertainty around brexit, you have less future investment decisions and productive activity around hiring and growing and investing. that is an unfortunate overhang that is happening today you cannot make up the last years. are you invested in italy? charles: i'm not invested in italy. my mandate is u.s. focused, recognizing the world is increasingly interconnected and many businesses i like to own our growing businesses on a global basis.

that has been the story of the u.s. markets over the last 10 to 20 years, which is how they have taken ingenuity and entrepreneurship and technology to the global markets. therefore, while focused on individual companies in the u.s. , you have to be aware as it relates to the conversations we have had this morning. francine: thank you both. later today, exclusive interview with the prime minister of italy . we will talk to him about the budget and a brewing fight between rome and brussels. this is bloomberg. ♪

citythe beauty of new york in october. it has been cold. francine in london as well. and interior view -- an interior view. is this a wing of your house?

francine: it has been voted the most sustainable building, but we won an award. tom: nobody cares. the coffee is better in london than the new york office. harley davidson out with earnings. about a single chart. loves this chart. i put it on for him. this is at yale who did it with spx. this is the dow back to 1904. charles, why do you like a chart with a guadalcanal of the ?ptimism of america periods ofer long time, it has paid to be an

optimist. you can question optimism given where futures are trading today, but if you believe in capitalism and creative destruction and ingenuity of american business and global economy, it has paid to be invested in that asset class over long periods of time. you go to pits of volatility, but being -- periods of volatility, but you have been nicely rewarded for the risk. yesterday, there was an agreement with you that when you go out long-term you cannot fight the upward trend. sees doomes kantor and gloom articles on a friday, that is the definition of short-term is them. charles: they have continued to press and the markets have changed traders programming trading out there. our view would be businesses get

net present value of cash flow and the strength of business models and the managements ability to allocate the cash flow for the benefit of shareholders. that would be bidding against that not being productive over the long term. on the short-term, you can get waves of volatility as market changes and there are derivatives. conviction in global trade and markets and business has paid off handsomely over very long periods of time. there is no overconfidence in today's market. what causes travel is are you invested at the wrong point? valuations today are fine and reasonable and reasonable is reasonable and generally attractive. over the next three to five

years, those who have the conviction to allocate capital and risk assets in the u.s., we will get paid for that volatility. it will take strong fortitude. francine: let me get a question -- what is in a bubble? is there anything that looks expensive or frothy? , itles: from where we sit feels like assets will get sold in the markets and carry valuations that look different than the same companies carry in the public markets. againstn many days valuation. like increasingly don't the day-to-day mark that comes with public equities and judgments of how smart and dumb you are on any one day can be tough to live with. from where i sit, i aspire to

get the private market valuations that many are getting today. tom: thank you so much. francine, an extraordinary morning. your thoughts. francine: the news flow we have heard, we look back to a president erdogan was saying. he said this was coordinated from saudi and did not directly implicate saudi leadership. he did not update on the audiotape. that is why you saw a going up of the saudi stock exchange while the president of turkey was speaking. much more today including a conversation with the prime minister of italy. this is bloomberg. ♪

alix: judgment day for italy, they wait for the commission to

revise or resubmit the budget. it's an unprecedented step. we have an exclusive interview with the italian prime minister. rebounds are short-lived as the market awaits u.s. earnings. to call the equity roller coaster. they are trying to stop modifying it in an asset management programs. david: welcome to bloomberg daybreak. before we came on the air, president erdogan on had some strong things to say, a saudi general led the team in. he says this goes up to the top of the government and he wants the perpetrators to be tried in turkey. have he said he may not ordered the killing of the journalists. you saw equities bottom with that. there was some