francine: asian stocks flat line as they hang on to the edge of a bigger market. oil prices are below $67 a barrel. riyadh as thet -- oil minister says they are in produce as much as you can about. deutsche bank's results of the best for any bank this order. -- barclays results are the best for any bank this quarter. >> this is the third quarter in a row that barclays generated a double-digit return on tangible equity. ♪

francine: good morning and welcome. i am francine lacqua in london. these are your markets, we are seeing a lift to these stocks. in asia, they were flatlining, but there is a little bit of nervousness out there after the route we saw. seeing at brent, you can 76.41. important to look at brent as we saw the oil minister, who told us that opec and allies are in a production mode. we are also getting data out of europe. on coming in at 52.1, a touch below estimates, and then we had quite a lot of earnings. this is down some 0.6%. we're also taking a look at tesla, shares yesterday adding to the company results.

they have moved up in earnings reports and optimism is building. we're getting them a little earlier than expected. tesla gaining at 12.7%. coming up, a lot about the banks. we talk to the chief financial officer at deutsche bank, and you can see that interview at 11:30 a.m.. let's get to bloomberg first word news. trump is passing responsibility to respond to killing of jamal khashoggi to congress. speaking to reporters, he added he wants a bipartisan recommendation on penalties. the president also criticized conflicting accounts from saudi arabia, saying that those responsible are in big trouble. >> the cover up was one of the worst in the history of coverups. very simple bad deal, should , never have been thought of. somebody really messed up. they had the worst cover up ever.

where it should have stopped is at the deal standpoint, whoever thought about it. whoever thought of that idea are in big trouble and they should , be in big trouble. >> meanwhile, expectations between president trump and seat ping.ing -- xi jin they said they would meet for a bit, but warned they might not even agree on basic principles. chinese officials are bracing for a long fight over trade. theresa may is facing another showdown with conservative party colleagues over her brexit plans. that comes after an angry meeting of her cabinet which was said to have descended into open conflict over proposals to allow the u.k. to stay inside the eu tariff regime. seven senior pro-brexit

ministers were said to have spoken out against the plan. have endedulators the issuance of game licenses through a stopgap approval process, closing the last known official path of making money through new titles. licenses are no longer being granted through a process known as the green channel used for testing titles. the mechanism have been in place since august, following the decision to restructure how it reviews video games for violence, gambling, and sensitive topics. economic confidence at u.k. employers is weakening as the nation repairs to leave the eu. , the net to a survey balance of employers with a positive outlook for the economy fell to its lowest level since february.

the rbc says getting the tax system right should be a priority. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thanks so much. aboutope, it is all earnings as we got figures from deutsche bank and barclays. deutsche bank is lower after it says the scaling back of its business will hurt revenue. barclays said their strategy was on course. we have been speaking to their chief executive. we have gained market share in our investment banking market revenue four quarters in a row. it demonstrates the return on investment we have made. barclays u.k. also had a great quarter. positive jobs, positive earnings. very good performance. the return on tangible equity

was over 18%. it is also the third quarter in a row that barclays, as a group, generated a double-digit return on tangible equity. francine: so what is the landscape like for european financials? luca, if you look at the industry, where you banks fits into all of this? it has been a benign market environment but there is outside pressure. this is an industry that is facing separate challenges in terms of property. this will go on for the next few years. the question is about interest rates. high interest rates will help banks, especially europe. the only problem that we see is that the economy is slowing down. and banks are still a very cyclical business.

i think the valuation is great, but there is still downside. francine: are we going to cm and m&a?see i think this will happen, i don't know the impact of prices. i think it will be inevitable, but it is substantive. i don't think it will change the perception of investors. francine: do the markets come back with a normalization? is it going to be a binary market up and down? or will it be easier for the banks to make money in this environment? luca: it will not be easy. we have to say that this big decline is already up. situation now is that you have to have an increase in interest margin. you have to also assume the

underlying business will be ok. there is a bit of an upside, but we do not expect a big surprise in terms of earnings. francine: looking at markets overall, he saw a selloff. it was not warranted by anything. how do you see that developing? luca: what was going on is that some of the sectors benefit from the strong growth, especially in the u.s.. we've started to see the first impacts on tariffs and on u.s. earnings. global growth is weaker, tightening is a fact. tooexpectations have been high, and now we see an adjustment. it is not the end of the market. not just technical, it is a correction that is more fundamental. francine: where do you see the most value? you say thought the end of the bull market, what is? luca: the recession.

this will not happen in the next month. the problem is that everybody seems to be expecting a recession in 2020. as long as the u.s. economy is growing, the market will continue to rise and we will see volatility and correction. but if you look at valuation, even for stocks, they are almost the same level at the end of 2009. i think there will be some upside in valuation. we may see a short and balance from here. francine: thanks so much. stay with us, plenty coming up. trump differs to congress. trump calls to show these -- jamal khashoggi's killing the worst cover up. dollar falls. we look at how the saudis pledge is playing in the market. this is bloomberg.

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francine: economics, finance, politics, this is bloomberg: surveillance. ceo has a strong case to fend off british lenders after in other positive set of results at its investment bank. saw fixed income, currencies, and commodities substantially outperform u.s. peers, growing almost 10%. in an exclusive interview, barclays told bloomberg the bank

strategy is well off course. deutsche bank says the scaling back of its business would hit revenue more than expected. this is as cost reductions may help its first annual profit in years. europe's largest investment bank has reported its lowest third-quarter revenue and a cuts to its four-year outlook. shrunk more than predicted amidst a sharp decline in trading. later this morning, we bring you our interview with the cfo of deutsche bank. you can see that at 11:30 a.m. this morning london time. strong demand from china has seen shares in luxury group jumped after the gucci brand beat estimates. shares have plunged in recent months alongside other luxury stocks on concerns that a trade war would dent chinese demand.

sales grew faster in the third quarter than in the first three months of the year. >> that's the bloomberg business flash. francine. trump's passing responsibility to congress to respond to the killing of jamal khashoggi, adding that he wants a bipartisan recommendation. congress is not back in session, however, until after november 6. but the president criticized saudi arabia's conflicting accounts. >> this cover-up is one of the worst in the history of coverups. it is simple. bad deal, should not have been shot of -- thought of. somebody messed up. they have the worst cover up ever. it should have stopped at the deal, whoever thought of that idea is in big trouble. and they should be.

that was donald trump speaking to the oval office. is yousef,us now bloomberg daybreak: americas tanker. -- anchor. what code will mohammad bin salman want to strike? yousef: it will be interesting to see what we get. there is caution from the u.s. side, but you have the u.s. president take the lead. you heard the speech, but if you had any doubts they were trying to pile on pressure, we heard e who saidkish aid that been someone has blood on his hands. it is a very fine line they will be walking. in the meantime, the investigation is ongoing.

we heard from mike pompeo, take a listen. >> we have identified some of the individuals responsible, including those in intelligence services. we suspect to have been involved in the death. we are taking appropriate actions, which include revoking visas, entering lookups, and other measures. working with the treasury department to review the applicable the of global sanctions. the countdown is in full saying. -- swing. they want details, they want this result. and the u.s. president will be meeting, telling officials that we might get more information later in the day. francine: thanks, yousef. he will be keeping us up-to-date with everything. steady.ding

its lowest level in months. the kingdom's oil minister said opec and its allies are in a produce as much as you can load -- mode. meanwhile, an industry report is adding to concerns about excesses. joining us now is the head of european -- bloomberg's european oil. first of all, there is always a political angle. through theg trouble of saying they are supplying and producing as much as they can to make sure they do not come across as, i don't know itit is blackmail,, but is related to jamal khashoggi? be, where thed saudi's could use oil as a weapon in the sovereign. their oil minister said they will pump as much as they can.

they have given a specific numbers. they could be at 11 soon. -- 11 million soon. francine: talk to me about code , which is when the spotter cash price of a commodity is lower than the forward price. this means that traders expect the price to go higher. james: to a degree, yes. it could also be that the market is weak right now. you pay a higher premium because there is an abundance. cost in a hasn't tug-of-war between fears about it economy and supplied appears that there was a selloff it equity and fears about the economy and the strength of demand are at the front of people's minds. and the issue of iranian

sanctions. there is a sign that the impact has not been as big as people fear, but the sanctions have not kicked in. so there is a potential for this to go in the other direction. francine: how do you look at this from a market perspective? if the u.s. imposes sanctions on saudi arabia, does it have a wider market repercussions? luca: i think so, and we have to keep in mind we always underestimated the impact of oil prices. what we are seeing with typical late cycle development, these prices are going higher, the fed moves, and at some point you will see an impact. all, i don't think there will be significant sanctions. i think prices will be high, but next year, global growth will be weaker. this is cyclical, very cyclical. but short-term, i see more upside risk than downside risk. is this linked to

saudi arabia at the margins? 40 markets ignore geopolitics? luca: it is more fundamental reasons. obviously, the saudi arabia story just adds to this movement. but the risk is affecting oil prices as well. francine: when does opec meeting next? we have a better sense of when production is on the table and what demand is doing? thes: there is a meeting on 11th and i would be. -- in abu dhabi. the saudis are being pretty explicit in their pledges, saying they will do whatever it takes, they will fill whatever cap emerges -- gap emerges. the meeting create the opportunity for more conflict, iran will be pushing against the notion that other members have the right to take its market is all noise,s

what matters is what the saudis and russians are doing. francine: james, thanks so much. luca stays with us. italy says there is no plan b after the eu demands unprecedented changes to bring its budget into line. in an exclusive interview, just that they contact -- the prime minister said he will not gamble with the nation's future. we feel very comfortable. we feel at home in europe. we think the euro will ease our currency, the currency of my kid, 11 years old. the currency of migrant children. francine: so how should

investors be positioned? concern with italy is that a lot of people are telling me that brussels needs to be more flexible. but no matter, spreads are whitening and it is a italian banks that could suffer. at -- italy has still cyclically readjusted, so there is some room. the problem is not the deficit. the problem is that the measures that have been announced are not particularly supportive. the government is not addressing this. that is the main problem. it would be very different if you spend more for bridges or infrastructure. but what the government is doing is wrong. that is reflected in the spread and it will have an impact on the economy. francine: will they change the budget? the concern is the government, and uneasy coalition.

arehave these parties which trying to get their campaign promises to fit into this budget. i do not think there is a lot of room for a change. there may just be cosmetic changes. luca: i do not see the italian government changing now after fighting for so long. they cannot really now go back and say we were joking. it will continue for weeks. francine: it is interesting you are saying weeks. believepoint, do you that by brussels forcing the people in charge to not keep campaign promises will turn italy and italian citizens against the euro or eu? or is it the flip side, that italians want to stay in the euro so the finances will get in line? i think the solution is with the usual fudge we have seen so many times.

they'll be some kind of commitment. i do not think the commission is ready for a fight, but the message should be clear. there is an agreement on fiscal rules, and italy cannot just go out. francine: when it comes to mario draghi, as we know about alsolization plans, he is leaving next year, what does he need to do for the euro to rally? , if the ecb sticks to its plan, and i think there will be a rate hike, if we see some kind of indication that growth as long as wee, have these italian issues, it will be very different -- difficult for foreign investors to put money into europe. we have to wait for a few weeks. our view is stronger, relative to the dollar. francine: what does that mean

for exporters? is italy the problem child, or germany? , italy is trading at 9.5, obviously, very cheap. vulnerable, more export oriented. as long as european growth's pickup, i do not think the euro will be a problem. but this is an export led economy. luca: for some companies, it will be negative, but overall, it is good if you have a strong currency. for germany, slightly different, especially for the auto sector. francine: with tariffs. luca: sure. europeanll, for stocks, it will be positive, a reflection of stronger growth. francine: luca, thanks so much. up next, this aluminum supplier

reports undermining edits that came in under forecasts. and make sure you tune in to bloomberg radio, live on your mobile device or the digital radio. we will be live. this is bloomberg. ♪

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

who is burning the most money on facebook political ads? those is slashing the most cash are president trump's committees and facebook itself try to promote the company's own efforts to keep elections affair. uber's secret restaurant empire. the incredible growth of the restaurant business. are chinaead stories is said to halt a special approval processes for gains. up top is all about the markets. markus: president donald trump says he is passing responsibility for responding to the killing of a saudi journalist to the u.s. congress. reporters, he added

that he once a bipartisan recommendation of penalties. the u.s. president also criticized conflicting accounts of from saudi arabia and said those responsible are in big trouble. cover-up is one of the worst in history of coverups. very simple. the deal should have never been thought of. somebody really messed up. they had the worst cover-up ever. idea,r thought about that i think is in big trouble. they should be in big trouble. meanwhile, expectations for a meeting between president trump and his chinese counterpart next month are already being lowered by both sides. the two leaders would meet for a bit of the g20, but warned them a not even agree on basic principles. chinese officials are bracing for a prolonged fight over trade.

u.k. prime minister theresa facing another bruising showdown with conservative party colleagues over her brexit plans. this comes after an angry meeting of her. -- her cabinet. seven senior pre-brexit ministers are such of have spoken out against the plan during yesterday's meeting. central bank says it may soon need to raise interest rates for the first time in seven years if the pace of growth continues to support inflation. it continues to guide that a hike could come between december and february. riksbanknor of the joins us for an interview this morning. china's regulators are said to have ended the issuance of game

licenses through a stop gap approval process closing the last known official path for making money through titles. licenses are no longer being granted through the green in the world's biggest market. the approval mechanism has been in place since august following the government's decision to restructure how it reviews video games for violence, gambling and sensitive topics. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i markus karlsson, this is bloomberg. investors are grappling with what is said to be the worst month for global shares in more than three years. stocks from asia to the u.s. have seen declines of nearly 6%. what's next? we were talking a little bit about the fact that this was the

most unloved bull market ever. time?s crunch what makes you worry about the u.s. economy? i keep your 2020 as the witching point. >> i think if you look at the main trends already pointing to a much weaker political environment because you see higher inflation and growth. if you look at what managers are , the equity markets are not too far away from an all-time high. there is this sense that something is going on. also political issues that are always there. there are a number of facts that will keep markets relatively within range. given what we have seen in the last few weeks, i really suspect we are going to see a year-end ready. francine: if you look at markets around the world, do you worry about china?

i'm not sure whether we are talking about the next financial crisis. luca: i don't think the next crisis would come from china. there is achina, huge problem with the debt, but it is basically domestic owned. everybody expects china to slow down.i think the real risk is the u.s. or everybody expects gross margins to move higher. i suspect that the u.s. market, we start to see the first cracks. francine: i'm looking at a headline. is as if they are speaking to us. volkswageno nikkei, has cut their china sales forecast for 2018.

we going to see more of this kind of story? luca: i think what we see is weakness in terms of car sales. thereing car sales, pretty solid. i don't see massive risk the re. impactseeing the first on u.s. earnings. don't think it is going to be a global issue. francine: thank you so much for coming on. the aluminum supplier reported a strong performance in the energy tailwinds, but mentioned continued market uncertainty around tariffs of the trade war. joining us is the north hydra chief executive. first of all, what is your price

outlook for aluminum? market, itook at the is a global deficit. somecould have implication on pricing. we have taken that demand expectation. at the same time, we have reduced expectation. it looks like the deficit will continue. as we move forward. francine: how much more can it increase by? svein: it is difficult to say. andave a full value chain we see there is strong demand. demand in the main markets. it depends on what is happening with the trade situation going forward.

it could have a negative impact. francine: how do you see it, have you see tariffs developing forum here -- from your? svein: it is a concern. we're supporting free trade globally, but we see what has happened in the u.s. market with import duties of 10% of aluminum. that has created higher prices of aluminum. it depends on what is quick to be the next steps now. francine: what is your take on china, production and consumption? svein: consumption is continuing at the good level, on the production side there is a clear reduction on growth. we expected to percent-3% growth on production, but it is now

%-3%, but it is now around 1%. francine: did you worry about china growth being significantly lower than what we have had so far? major impacthas a on the global alumina market. it is consuming and producing more than 50% of the global market. there has been caution in higher prices that has resulted in increased exports compared to the same quarter last. -- quota last year. supply and demand in china is now moving, the rate is fairly balanced in the third quarter. is the consumption continues at the same level, it will also be a deficit in china. francine: overall, what is her biggest concern?

is there anything else we should worry about? we have also been waiting for a correction in the u.s. market for quite a while. ourtill see the growth in business in the u.s. growing faster than what we saw earlier this year. we are seeing 6.9% growth in the auto market. -- a is not only disproportionate to not only the number of vehicles, the aluminum is now winning auto. francine: thank you so much.

we will bring you that extensive interview next. china is set to end the special approval process for new video games. we will look at the impact on a tech giant. this is bloomberg. ♪

francine: this is "bloomberg surveillance. time as regulators have ended the issue of game licenses through a special approval process. bloomberg sources say the so-called green channel is no longer being used to rubberstamp domestic and foreign video games. the mechanism have been put in place since august following a

government decision to restructure how iit views games. ? what does this mean? tell us a little bit about the stopgap and what happened to it. the stopgap is also what is known as the green channel that we first learned about in august. 's ceo talked about the green channel as a way for the company to commercialize their game. we were expecting the company to use that on games like fortnite, which was supposed to bring in revenue for the company this year. or we have learned is that companies have stopped seeing so-called green channels for approval for games starting this month. story,kdrop of the obviously is that china hasn't

been approving any games for commercialization starting in march. that ban so far has not been lifted. we don't know when it will be because of this restructuring ongoing in the chinese government. francine: any indication on when the ban will lift? lulu: for right now, there has been no indication. one interesting thing where of noticed is that when we are talking to sources, apparently there has been a great market -- gray market where people have been trading so-called games. they were trading for as much as $500 yuan. were silly, the price has come down quite a bit. this might be a signal -- recently, the price has come down quite a bit. this might be a signal that the band will be lifting soon. their largest games they were counting on for bringing in revenue are not be monetized on mobile.

fortnite is another game they are counting on. the mobile version four , is not being introduced in china. a lot of things are in limbo and that is a huge drag on tencent shares. the company has lost more than $160 billion this year. we have seen share prices all come down. francine: thank you so much. let's get back to the banks. barclays and chief executive has a stronger case to fend off british lenders. we have been speaking to -- sharesave gained market for quarters anin a row now.

-- four quarters in a row now. very good performance. 18%.y was over this is also the third quarter in a row that barclays generated a double-digit return on tangible equity, which is our goal. nejra: talk to us about equities trading. there were high expectations of this in the market. >> we have done well from credit to equities, to rates,

currencies. very pleased with our market performance. manus: this naturally leads the market to a couple of questions. handshis strengthen your in pushing back at bramson in terms of his call, delivering better returns? any slap that activist investor down with these kinds of numbers? jes: we look at the profitability of the overall group. we generated an 11% return on capital in the first quarter. and 10% plus return on capital in the third-quarter. part of that has been across businesses. are consumer businesses in the u.k. has done well. our consumer business in the

u.s. has done well. corporate business has done well and investment bank has done well. the markets business and investment banking, trading equities etc., has generated a double-digit return over the last nine months. that is what you want to do. we like the diversification of our model. are enjoying the profitability we are generating. nejra: edward bramson is supposed to be updating investors this month. he also said in late august, the board is recognizing that your strategy is unsuccessful. what conversations have you had with him since the last quarter? board is veryhe happy with the results of the third quarter. i don't think anyone would say that what we are doing is not successful. inwill be meeting with ed the next couple of weeks.

and will be the second time i have met him. i look forward to his ideas and suggestions. we focused on our transatlantic consumer and wholesale bank strategy, delivering a double-digit return for nine months. it is the second-most profitable nine-month period in the modern history of the bank. we think it is generating the returns that we expect and look forward to having our conversation with him. francine: that was the barclays chief executive. up next, enthusiasm about tesla is electrifying wall street. we will break down what to expect next. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." i'm francine lacqua here in london. nmarie: it is all about strength in china as well as gucci.

chinese may change where they shop, but not what they shop for. it is still gucci. 3.5%.he bank down nearly they did lower the third-quarter revenue. worst since 2010. also, another day of carnage for chipmakers. they have seen sales growth, but no profitability boost. we seeing a lot of the tech and chipmakers down today. francine: thank you so much. after months of production hell, than a pair bank of mayhem involving elon musk, tesla may finally be entering a new era. it is approaching its earnings report today with much of wall street gushing about enthusiasm over its prospects. there has been so much negative news on tesla, is not really a turning point? alex: ultimately, the bar is

quite low. it is something they predicted they would be in the second half of this year. that is a question of, tesla delivers on its goals. finally taking the box of doing what it told investors it will do, is something of a turning point. francine: it doesn't have to beat expectations, just burn less cash? cash,stop burning essentially. if they are able to demonstrate their pre-cash positive, that reduces the requirement, but it may be gives them the room to do that if they need to. they're looking at building a factory in china. that is going to require an influx of capital. it is easier to raise that money if they can demonstrate to people that they are able to generate cash. francine: apart from that, is there anything about changes in management? alex: exactly. elon has got to appoint a new

chairman. indicationseen any as of yet who that might be. it seems to me that elon abandoning the chairmanship is something positive for the company. on othercus projects he has. the chairman has to be strong and be able to keep him in check. francine: thank you so much. "bloomberg surveillance" continues in the next hour. tom keene joins me out of new york. we have a full market roundup. this is bloomberg. ♪

francine: after the selloff, u.s. equities climbed to a lower open.

executiveeats chief jess says the results are better than any bank this quarter. a different story for deutsche bank. barrel.es below $76 a the saudi oil minister says they are in produce as much as you can mode. "bloomberg surveillance." we continue looking at geopolitics, tax cuts in the u.s., markets, also the situation in italy and brexit. tom: what a great lineup of guests today to talk about the cross asset nature. the confusion of the markets we see out there waiting in right now. francine: it certainly is. let's get straight to bloomberg first word news in new york city.

kailey: the president told reporters he wants to receive a bipartisan recommendation on penalties. he called the conflicting accounts from the saudi's one of the worst coverups in history. the u.s. is revoking or blocking the for 21 suspects in the killing. president trump has that up his attack on federal reserve chairman, jerome powell. the president told the wall street journal, he regrets appointing powell. president trump also told the journal he was intentionally sending problem a message that he wanted lower interest rates. may's u.k., theresa cabinet is said to be at war over her brexit plan. bloomberg has learned that at a meeting yesterday, seven senior members spoke out against a proposal to allow the u.k. to stay inside the eu tariff regime , indefinitely.

caseays has a stronger after posting third-quarter results. >> this is also the third quarter in a row that barclays, as a group generated a double-digit return on tangible equities. sputteredvenue had since he took over in 2016. deutsche bank admits that scaling back its business will hit revenue more than previously expected. germany's largest lender reported its lowest third-quarter revenue since 2019. it lowered its outlook. cost cuts may help deutsche bank post-its first annual profit in four years.

global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. tom: let's do a data check. chart. a deutsche bank i've been watching this quietly for the last number of days. -27.we are going to get a 113 print on euro as well. this is deutsche bank on the left. if i bring it out here, you can see the breakdown. i am sorry, we are here on banks, the cfo of deutsche bank i'm few -- interview, suggesting that it is a real moment for the eu banks. francine: it's a moment, but i think the real moment will come if they merge. it would be difficult to argue otherwise that europe is over

bank. -- overbanked. overall, the markets have a lot to do with it. tom: let's do the data check. what a strange equity market. down,k it was down, up, up. spread.to .2 spread. basically risk off. stronger dollar. francine: the owner of gucci doing really well in trade. thomas just remembering how much he has bought at gucci over the last quarter. european stocks seem to be bucking the trend. yesterday, there was a clear move to havens.

today, the story is different. am also looking at the price of oil. this is my story of the day because i am looking at code tango. in this case, my terminal is showing the price of oil is actually lower than the forward price. what this means is, maybe it is a little bit of supply demand concern. it may be that a lot of traders in markets are pricing oil in out $100. i want to bring it back to what happened in saudi arabia. the saudi oil minister is now scaling back any kind of hint at downsizing.with oil they said they are pumping as much as they can and will continue to do so as long as there is demand. tom: let's look at the dow. interesting chart here with nuances coming off of late september, early october high. twice.ed once and

yesterday, we blow through that right through the erdogan speech. here is the recovery. if i turn to the bloomberg, we are sitting right here at 25,000. thrilled with the twitter experience of "bloomberg surveillance." our the markets -- are the markets correlated? >> absolutely. because correlated stocks are hitting them, including the fed, italy and questions and concerns about china as well. all of that creates underlying themes. tom: right now, within the

markets, you have an idea of short covering as a general statement and acceleration of market moves if you get the decision wrong. are be exposed right now to the acceleration of moves that people have to cover trades? i'm not so sure about that just yet. i think from the derivative perspective, when we look at market action at the moment, what is quite clear is that even the people are quite pessimistic, there seems to be a lack of panic in the air. we don't see people rushing out short covering at this point or buying downside hedges. it is quite a strange scenario. people are optimistic but not reacting with panic yet. francine: let's go back a step. why are they pessimistic? edmund: i think there is something bigger. i think we did talk about the u.s. traits that with china. with china.at

think the real concern is the slowdown of the u.s. economy, and people pricing in more aggressively. it is going to slow down quite shortly. if we argue that u.s. equities were powered this year by strong earnings momentum, people are starting to think, next year, if we get a sharp slowdown in the u.s. economy, no tax reform boosting us, earnings and momentum are going to be much slower. where do we want to price equities at that point? francine: is that a 2019 question or 2020? themos: i think it is one of the questions. i don't think it is one of the most important ones at this stage. late 2019 more than anything else. the 2019 story is one where we need to assess the damage from trade, if and when it comes.

the second component is when the off.l impulse runs year.ly this time next tom: within the yen, the usual things happening. either key levels in foreign-exchange that equity investors should be observing right now? what are you watching right now that helps equity investors gauge the market? think you look at a very significant market. the reason i mention this is because the yen tends to reflect, to a larger extent two main dynamics. the first one is u.s. interest rates, the second one is the broader question about dollar against asia. both correlated and driven by the fed. i think the most important has been the increase in

real rates. you can trackback previous selloffs of this magnitude linking to increases in interest rates of the magnitude that we have seen in august. i'm talking about the 10 year rate. equally, what tends to happen in periodsbond selloffs in of stabilization in the end, is some kind of rates relief. what the market is looking for is the level and catalyst that delivers the rate relief to the equity market. francine: thank you so much. up, the deutsche bank chief financial officer. asking about the markets and also the german banking situation. this is bloomberg. ♪

kailey: this is "bloomberg surveillance." wall street is suddenly gushing with enthusiasm about tesla. electric carmaker moves its third-quarter earnings announcement ahead to today after the close. this speculation is that after --ths of turmoil, you o , tesla may be entering a new era. francine: the italian standoff escalates in an unprecedented move yesterday. the european commission rejected italy's proposal.

the italian prime minister wade in during an exclusive interview with bloomberg. >> i'm looking to explain the details of the budget war. changeeby do as me to measures will be difficult for me because i cannot affect that. francine: still with us are themos and edmund. is it just going to get wider and wider? pricingthe spread is substantial risks for default -- substantial risk

neither of those events are likely to happen because of ultimately 60 basis points increase in the budget deficit of italy. it is not an issue of fundamentals. the market is pricing fundamentals situation quite a bit. and is mostly an issue of confidence and of credibility. worriedy, the market is situation a fiscal that might be bigger. becomes risky for italian politics. we don't see much downside risk or widening spread to risks from here. francine: the concern is what the feedback loop is for italian banks.

this fight encourages a italian citizens to be more anti-euro. yes, but i- edmund: think the real risk. certain members of the italian government have pointed out that they are watching where bond yields go. they are to some degree sensitive. we are not at levels or they're going to do anything. levels will need to be much higher to really affect things. i was in the lawn yesterday -- milan yesterday, it was quite depressing. they do not see an easy way out of the current situation. tom: brilliance, you have to do even more depression with "bloomberg surveillance." themos, if i can switch it over to britain and brexit and the idea of the positioning in that i'm given beginning to read the idea that prime minister may may face some kind of vote of no-confidence.

what is the bet on sterling right now? themos: i think the market has shifted to a place where they are trying to price in the upside of the towel from an to asion of negotiations reasonably midway positive scenario. the main problem the pound has and has always had throughout the last few months is that, if things go well, there is some upside, moderate upside. maybe we go to 85 or slightly lower. if things turn sour and you have a hard brexit, our estimates show aboutalysts 10% of gdp. the main valve to offset pressures would be the currency. you nailed the idea of valve.

sameitain working on the or normal model of economics linked into markets or is it just so different because of brexit? brexit is aously, fundamental event. there are some situations that could be highly deceptive for markets in a disorderly brexit situation. they imply very little communication between the authorities. i think that if things become disorderly in an orderly fashion, worst case scenario, the market mechanics start to work and those linked to the current account deficit of the u.k., under a slow growth scenario in brexit comes under pressure, we can say currency, you know the adjustments math. francine: where do you see a lot

of the u.k. stocks? that it is still so uncertain and what kind of shape brexit takes. edmund: the result is giving the correlation between the sterling and ftse 100. if theht argue that pound falls because of a disorderly brexit, the uk's a good place to be because eu will provide the offset. pound earnings rise because they are redenominated in a much better way. actually, it's pretty good for the ftse. even in a soft brexit scenario, i don't think it is that bad. u.k.ant to buy the mid-caps in that scenario. francine: thank you so much. up, we will talk global monetary policy and about

currency dynamics. this is bloomberg. ♪

>> the cover-up was one of the worst in the history of coverups. it was a bad deal that should have never been thought of. somebody really messed up. they had the worst cover up ever. where it should have stopped is that the deal standpoint when they thought about it. whoever thought of that idea, i

think is in big trouble. they should be in big trouble. tom: 24 hours ago, president erdogan speaks. there is the president of the united states as well. we go to react and yousef -- ri yadh and yousef. what would the president say? do we have any indication on the themes the crown prince will touch upon? if you were ever unsure that the speech from a turkish president was avail threat to the crown prince of saudi arabia, they followed up just moments ago with the senior adviser to the turkish president saying that the crown prince has blood on his hands. it will be a situation of two options for the crown prince.scenario a, is that he does not address the subject.

the other option is that he finds a way to address not just what happened with the journalist, but also perhaps to send the message back to turkey and the rest of the world in terms of where the saudi position is on this. the two narratives still don't a line. francine: if we don't hear from the saudi crown prince addressing this, are we expecting briefings? the international community thinks this was very poorly handled. happen again back on track to at least explain what happened or give more details? yousef: you mentioned the international community, to seven, foreign ministers -- g7, foreign ministers, the u.s. is holding more briefings later today. side, weof the saudi heard a little bit from senior officials and the last day of the conference. in terms of later on in the day, nothing is scheduled or planned. the information that has come out has been haphazard.

willing to change the narrative a little bit because they have been a little bit on the back foot when it comes to managing the communication and managing a response with some details and answers to the rest of the world. francine: thank you so much. yousef joining us from riyadh. themos stay with us. we will look at applications on oil. oilid hear from the saudi minister that they are doing whatever they can to make sure they put enough production out there if demand warrants it. this is bloomberg. ♪

morning, everyone. a better take than yesterday. futures negative.

a little better than 24 hours ago. francine: a little better. the asian stocks are pretty much flatlining or they were flatlining and europe is a little higher. let's check what is trending across the bloomberg universe. committees,ump's beto o'rourke, and facebook try to promote the company's own efforts to keep elections there. restaurant empire. the food delivery growth has led to individual arrangements including fast-growing hot spots that only serve delivery. our most read stories in the bloomberg terminal, and third-place, china is said to hold the special approval processes for new games. second place, trump and congress. up top, the markets. those are your top stories. let's get straight to the first world news.

kailey: the head of the houses tax-writing committee supports president trump's call for a 10% tax cut to the middle class. congressman kevin brady says if republicans retain the house and senate next month's elections, they will move forward on the plan. a signal that last year's tax overhaul is not proving as popular as republicans had hoped. more than six out of 10 americans said they have that benefit from the trump economy. that is according to a new poll. low earners, women, and those of retirement age were most likely report they are no wealthier than before the election. expectations are already being lowered for next month's between president trump and china xi ping. larry kudlow says the hope is they will agree on some basic principles. both sides are pessimistic about the prospect for resolution to the trade war. china has closed the last known official after making money from

new videogame titles. chinese regulators have stopped issuing game licenses through a stopgap approval process. the government decided to restructure how it views videogames for violence another sensitive topics. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more 120 countries. i am kailey leinz. francine: thank you. the wild ride continues for asian equities. stocks turned volatile since nation's top officials launched a sweeping campaign for caused by slowing economy and campaign to curb debt. let's get back to themos fiotakis and edmund shing. we are talking china. the other story that caught our attention is a story about some

of the video games post of the first to was a fast tracking device to get them into china. that is now stopped. how much does the fortune of the company -- how much does it change on rules and regulations in china? >> i think people are overreacting a little. overall negative sentiment with the chinese economy, secondly, because of the specific measure where -- let's not forget 10 cent is the largest videogame publisher in the world. inarly, the chinese problem terms of issuing new licenses for videogames has proved a bit of a problem. but let's not forget, $.10 is global. they have to redouble the effort in publishing videogames outside of china as well as within china. what we will see as they will continue to fuel more growth outside of china going forward. francine: should we worry about the fundamentals in the chinese

economy? >> long-term, there are a lot of questions, not just the underlying rate of growth that the deteriorating structure of the balance of payments for the chinese economy. short-term, i think the policymakers are sending a very clear message which should not be ignored. i was in beijing about a month ago. what they're communicating seems to be exactly what they want to achieve. the underlying rate of the economy slightly below 6% sequentially. they are expecting a shift in trade -- a hit in trade. francine: how big of a hit? >> in our estimates, you could from 40it, it ranges basis points to 50 or 60 basis points. to a large extent, they will basically try to offset. think what they are announcing

is if you put them all together, there went into a stimulus. the main problem has been you haven't seen that yet the data. the market is getting a bit impatient in that. having said all this, i would agree with the previous statement that most chinese stocks are pricing quite a bit of damage. so as soon as stimulus stars to kick in, and there being more and more verbal you heard about the stock market, you should probably see some stabilization in china-linked assets. appoint a price discovery within this. is the chinese financial system strong enough, complex enough, mature enough where equity the mood and discovery of the market, or are they simply an artificial construct? >> tom, somewhere in between

those two. tom: agreed. >> it is clearly not fully floating. there are a lot of restrictions on chinese equities. remember the chinese equities, they are not fully represented in the main global indices. but that will be more the case in 2019. remember, we're at the point were chinese does they will be included more and more in these were -- in these indices. todo expect the market become a little more efficient and a little better, particularly for foreign investors going forward. tom: themos, in your world, .here are some artificially's are they more fragile to introduction is work because she missed shock because of the artificiality of the foreign-exchange price

discovery? >> the regime? toanswer your question more endogenous rather than in zogenix. the chinese do not want to use the currency. to the best of our understanding, in any way shape or form, to -- as part of the user in the -- they want to maintain a sense these markets are not subject to fiscal interventions of any sort. the exogenous shock is less. the endogenous, two items. first, what happens if economic growth would people see more opportunity outside, capital influence kick in, so on and so forth, will it narrow, etc.? the second element, the balance of manynt surplus, for many,

years, is now declining quite rapidly. they rely more on capital inflows than before. francine: talking about luxury, tom and i share a passion for italian brands. the owner of bg is doing well despite concerns in china. is doingner of gucci well despite concerns and pregnant. >> it has spread to the sectors even within europe and the u.s. and luxury goods have been the obvious place to suffer. high know, this is wallaby, high profitability, and generated strong organic growth largely due to the explosion of interest in luxury. i was in beijing three weeks ago and it is shocking when you go around beijing how many luxury stores there are. thes a contrast between third world and the brand spanking new first world. francine: does that change? >> it is changing. francine: to less shops? >> no, to more.

is stille class growing. one of these measures they proposed now a tax cuts to the middle classes, if anything, will be relatively positive for the chinese economy for luxury goods. they can about japan. it is not just superrich japanese people who buy luxury goods. girls in theirly 30's who still live with their parents who are buying three or four or five bags. that is what of the core consumer dynamics. tom: three or four bags? four, edmund shing ? >> i try to keep my wife to fewer than that. unfortunately my wife -- tom: you are digging a hole. just shut up. i know what you are doing friday and into this weekend. francine, pick up the

conversation. i have run out of words. saying, "i hope my wife is not listening." ,e look at the differentials what does it mean? question. when it comes to the fed, i think the market and the dollar -- in the dollar, i think the market is still pressure one of the more hawkish outcomes. if you look in the futures and the forward and you incorporate some uncertainty in the market, typically like discounts for future events, you can say the main debate is the fed, where they're going to be hiking at to 350 of december 2019 or not, basically. thank you ingrid -- then keeping rates higher. the market is not pressing any down side risk. in contrast, when you look at most chinese assets, the pricing

is a grim scenario. the risk is for some convergence, some improvement, basically. maybe not manifesting in the currency as much as other china-linked assets. tom: themos fiotakis, thank you so much. greatly it appreciate -- greatly appreciate it. you have to get a bag. i am sorry, edmund. this says edmund shing. bee on, $2900 for you to styling. this is "bloomberg." ♪

francine: this is "bloomberg surveillance."

fend off an activist shareholder after more positive results of barclays, securities unit offering fixed income commodities income outperformed peers in the third-quarter. we spoke exclusively with the chief executive earlier and he said that bank strategies were on course. >> we are pleased with the results of the third-quarter. it is the second plane quarter for the bank. we have no legacy issues. profits were up some 40%. we generated the second quarter in a row, earnings over one billion pounds clean. so that is a demonstration that the bank is well on course. your question on the markets business, on a dollar basis, our market revenue in the third order was up 19% year-over-year. that is the best performance of any bank to report that spark in the third quarter. we have gained market share in a market revenues four quarters in

a row. it demonstrates the return on the investment that we have made in that business. barclays u.k. had a great quarter. it was positive earnings. so very good performance. equity was over 18%. this is the third quarter in a row barclays as a group generated a double-digit return on tangible equity, which is what our goal is. good morning. talk to us about equities trading. there was the expectation in the market. tell us how that performed. >> we have been doing well all year long on the equity strategy -- trading side. what is called flow derivatives. we are launching new electronic trading on forums across the equities business over the course of this year. that has had a strong impact. we have a new management team in

place for the business and that is doing quite well. we have done well from credit to equity to currencies. we're very pleased with our markets performance, gaining by quest some margin in the third quarter. francine: that was just daily speaking with bloomberg. we will hear from deutsche bank's chief financial officer in the next hour -- at 11:30 a.m. london, 6:30 a.m. in new york. edmund shing is still here. andalked a little about m&a whether that would be a turning point for the european sector, but there seems to be a lot of risks in your link to these banks. >> we talked about the key fear for investors and the reason why the euro stock i expect it -- specter. it does not look like it will clear up imminently. i'm still fairly positive in the medium-term. lm butk things will ca

it will take time. when i look at barclays, it is a place i used to work so i feel i know a little about it. the jewel in the ground has always been the multi-business. not just a barclays problem, and entire sector problem. we have a problem where we have a lot of extra regulation, the cost of equities is relatively high, we struggled to get to the returns of to where they were 10 or even 20 years ago. tom: i don't want to get you in trouble, but you are so good at the equity prices that i'm going to try to ask this diplomatically. the fact is, many of these bank stocks are convex lower with acceleration. what do regulators do when they see that? >> i think they find it very

difficult to cope with. tom, why thely, pendulum of regulation has swung from precrisis or perhaps far to arguably being a little too restrictive now to the point where it is very difficult for them to do anything else other than safe this mis-like lending money from mortgages. thanks are happy to lend money for mortgages, but small to medium-size businesses on a business loan basis, they are less keen to do because of the regulation and because of the -- extra risk. it is much more sick little -- it is much more cyclical. tom: edmund shing of bnp spare ball -- of bnp paribas. ford motor chief financial officer come all of the sudden come autos are export.

we will get clarity from the ford cfo in the 4:00 p.m. hour. stay with us, some important bank interviews this morning. this is "bloomberg." ♪ " ♪

francine: kailey: this is "bloomberg surveillance." apple ceo tim cook is touting the importance of privacy and legislation to protect it. he spoke at a conference in brussels. eastland tech companies that monetize their business by collecting user data. >> we should not sugarcoat the consequences. this is surveillance. and these stockpiles of personal data serve only to enrich the companies that collect them. this should make us very uncomfortable. kailey: and that is the bloomberg business flash. thank you so much. we have a question from a viewer. we welcome and encourage everyone to write in. log onto tv and then click on the -- we thank this person

for writing and regarding edmund the ftse.mments on ed, how do you view the possibility of a strong supply chain disruption in case of a no deal event? >> it will obviously be important for the u.k. economy, but if we look at ftse 100, as an index, it is very unrepresentative of the british economy. the biggest way things are in impact.ks, 0% you have to go all the way down to industrial companies such as british aerospace or rolls-royce before you get to the supply chain impact. i would argue the supply chain impact could be much greater even for german bmw that ship over tens of german parts to the u.k. to build the mini. francine: thank you so much, edmund shing. tesla shares are higher in

pretrade after speculation elon musk is in a hurry to share good news on the group's results. joining us for more comparable bloomberg opinion reporter. alex, first of all, they have advanced the financial disclosures. we are expecting that today. what would be good news from tesla, that they're stopping burning through cash? >> yes. the expectation was a positive reaction will come from the news they are pre-cash flow positive. they predicted going back to the start of the year they would be in the second half goal ultimately, a question of delivering on those goals. the bar is still quite low. tom: are they an automobile company? the earnings tried out. are they and not a mobile company or are they something else -- automobile company or are they something else? >> they are a car company. tesla will say that more

software engineers then -- tom: exactly. >> that is the case of a number of companies that we consider hardware copies. they're not selling subscriptions or software. there is a strong software component and what they do, but ultimately, you are buying a chunk of metal. tom: will there be a conference call? will mr. musk be on the call warbling daily? >> that is the understanding, yes. i think it will be a tamer musk, but some confidence. i think the questions will really be about considering capital needs. the irony is, if they are free cash flow positive, it is easier to raise capital. tentmaybe they can build a in china as well.

thank you so much. , thank you so much. look forward to what you acquire within the shing family blow the spanish steps this weekend at gucci. francine, we look forward to the markets. i'm looking for to the conversation with the governor of the swedish central bank. really interesting how he is buttressing up against mr. draghi as well. francine as well, a conversation with the chief financial officer of truly a beleaguered deutsche bank with the price under nine euros per share. stay with us. this is "bloomberg." ♪

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risk off. the dollar is stronger. thismorgan of j.p. morgan hour. the president goes after chairman powell. from happy valley. and mohammad bin salman will speak. will erdogan speak? this is "bloomberg surveillance." francine, extraordinary to see to see the giveaway and banks this morning. francine: you are right. we spoke exclusively to barclays. to push asidease the activist investor. we are looking at luxury after the owner of gucci and china. tom: let's get to first word

news. taylor: president trump is deferring to congress in responding to saudi arabia. he president told reporters would like to receive a bipartisan recommendation. he calls conflicting accounts from the saudis one of the worst coverups in history. , theresa may's cabinet is said to be at war over her brexit claim. 17 pre-brexit ministers spoke out against the proposal. theresa faces another showdown with her own conservative party. the ceo of barclays has a stronger case to fend off activist shareholders after results. equity was over 18% in the

u.k. it is the third quarter that barclays generated a double-digit return. >> revenue at barclays investment bank has sputtered. has beent spring, he pressured by an activist investor. deutsche bank is scaling back its business more than expected. germany's largest lender reported the lowest third-quarter revenue since 2019 and lowered their outlook. cost cuts may help deutsche bank postage first profit in four years. atwill talk with the ceo 6:30 on "bloomberg surveillanc " ." global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am -- this is bloomberg. tom: thank you. equities, bonds, currencies,

commodities. s&p futures negative. oil south. west texas $66.45. yesterday, euro near 113. francine. francine: asian stocks down. u.s. stock futures decline. -- the pound weakening on brexit worries. european bonds following treasuries higher. europe falling-- after manufacturing data. we will be looking for the crown prince of saudi arabia to speak in riyadh. we will hear from the governor of the central bank of sweden. i want to talk about the unique characteristics of the central , mario draghi,

and the ecb. they are not joined at the hip, are they? banks are unlikely to move ahead of the ecb. expectation that they will move first. tom: thank you for that briefing. we will come back and talk about his expertise and cross asset investment. right now, the reichsbank governor of sweden. he has been on the watch for 12 years at the swedish central bank. governor, thank you for joining us today. we have a president of united states lecturing the chairman of the fed. i know you were not speak about theher bank, it seems like banks are of bouncing off the politics of the moment, nation to nation, bank to bank.

how do you observe within your history of cooperation this idea of politics bouncing into the monetary policy? i think it varies over time from country to country. it basically depends on what's going on in a particular country at a particular moment. i'm talking about my own country presently trying to form a government. basically monetary policy is completely in the shadow. there are much more pressing issues. it hasn't always been like that, so every once in a while it pops up, but mostly not. just speaking with j.p. morgan about the linkages of your bank to the continent of europe and the idea that mr.

draghi with outstanding headline, saying he would signal into 2019.ance well how did you adapt to the reality of the head of the european central bank pausing well into 2019? it is up to the ecb to conduct monetary policy on the eu side. .e are not dealing with that what they do matters to us. tell us it iss time for us to raise the policy rate in december or february because the swedish economy is doing well, and we will meet our inflation target. relatively speaking if you , inare us to the eurozone

terms of growth and also the inflation rate, we have done means a certain element of -- concernedare you more about a tightening now than you were last month? in this sense we are getting closer. same thing fore a while. these things are close to what we have said for a number of months. we are getting close to the time to move in a different direction and start of a rising cycle. in that sense, we are more certain today than nine months ago. francine: because the global , do youseems shakier need to push through with a hike in december to make sure you have enough ammunition to deal

with whatever comes next? that is a strange way of thinking about monetary policy. it is pointless to raise the rate just to lower it later. best as we can trying to meet our inflation target. that is not at all the perspective we have. it is hard to promise too much when it comes to december or february, and at this juncture we are ready to say december or february, but not ready to go beyond that. francine: what data points will you look at from now until december? you have a delicate balance. you have had to revise down growth and raise the employment forecast. have can you be sure that the wage gains will take place? know when you are

looking into the future. this year, we have been reasonably right. based on that, something major would have to happen for us to change our outlook when it comes to the policy rate. tom: thank you so much. the sverigesof riksbank. how coordinated are central banks right now? we saw the president's comment yesterday about chairman powell. themselves?bank for ken chairman powell avoid the em conditions you write about every day? >> i think a good man of resilience is in the u.s. economy complement of the tax cuts. even though em stress will intensify because tariffs weigh on china, that keeps the fed on

track. tom: what i hear interview to interview is an oddness to this market. what is the oddness when you look at the coordination and linkages between equities, bonds, currencies, and commodities? of the u.s.ience economy in the context of so much stress outside the u.s. and the outperformance of u.s. assets. there will be a re-coupling of these economies lower and the assets lower. i don't think that time is now. the latest data out of europe is looking like trade policy in the u.s., the trajectory will persist. francine: how much longer? that keep pushing back point. if we had another quarter of lower pmi, higher dollar, and profit warnings in the u.s., drive a durable

convergence. i don't think that is happening now. francine: 12 months? 18 months? do you worry about a u.s. recession? thateryone has this idea the u.s. will be in a worst place -- worst place in two years, but when you think about rates in the u.s. and stimulus, i don't think there is meaningful risk of the u.s. downturn next year. francine: do you think the fed will go through the hikes as expected? or will we see a downturn in the u.s. economy? >> i think the december hike is still highly likely. the next three or four hikes are pretty likely. there is concerned short-term it isarkets lower that tightening financial conditions in an unwanted way and will ,etermine the fed from its dots but when you look at how much financial conditions have moved,

they are net unchanged and the economy has a lot of momentum. is the j.p. morgan opportunity right now? is it in foreign exchanges? if so, which pair will save my day? the cyclical opportunity is still in equities. the down move in stocks is excessive relative to profits and the run rate on the economy now and the next few quarters. i don't think there is any reason to flinch from that opportunity. if you want to be defensive, it needs to be in currencies, and specifically asian currencies. the growthre concerns will persist for the longest. tom: if i want to be an equities, do i need to hedge, the fancy stuff j.p. morgan offers to protect my backside if i want to stay in equities, or just by u.s. equities?

equities, it needs to be less aggressive than six months ago. you want to be overweight equities versus bonds, but not to the extent you were at the beginning of the year. you want to focus on the ones not exposed to china. -18, down, futures 142. i'm going to call a calm her morning. the crown prince is scheduled to speak in roughly four hours. is our chiefdh washington correspondent kevin cirilli. the language was remarkable in the oval office yesterday. how would the united states listen to the crown prince? >> president trump says there has to be more action taken. going intohin meetings with the kingdom of

saudi arabia. republicans are increasing the rhetoric, suggesting there might -- sanctions imposed on key individuals and saudi arabia. the question from the international community's becomes what the kingdom is doing to prevent this from happening again. francine, why don't you come in on saudi arabia? francine: kevin, what could congress do? there are arms deals. the president seems to have backed from initial claims that we can't touch that, but how do you see this developing? act, this issky something the russians can't stand. does iss magnitsky act

allow the u.s. government to go after specific individuals and not just the country as a whole, so a much more tailored saying short -- tailored sanction response to get folks responsible for this killing. when i interviewed senator paul a couple of days ago, he said that will do nothing. ,n a country like saudi arabia you get one person to do the job and get them out of the way. that is the concerns from lindsey graham and bob corker and other conservatives on the hill. how did they correct course after their charm offensive? now you have this major international incident. francine: if you look at the comments of president trump in the oval office, is this a u-turn or he is just going off , and if he is cooling off, who briefed him, intelligence, or is he thinking about the midterms? is the intelligence

community and republican leadership in the sentence. in terms of the 110 billion dollar arms deal, that can still stand, but if congress takes a tailored approach and targets specific individuals for their response with the magnitsky act, then the money comes he'll trickle into saudi arabia and they can still have a response. this is the president forecasting they might be able to do both. stays and the sanctions also happen. tom: let's go to the elections right now. i thought the washington post was brilliant on the senator from missouri. this morning must read i thought captured the moment, the tension of blue and red. the centerpiece of senator

mccaskill's strategy has been a string of more than 50 town hall meetings that have taken her to cities, birds, and hamlets, all hoping missouri will win this week. which strategy will win? ghost jefferson county, so goes missouri. a battleground state. these are socially conservative rural, unionre folks. senator mccaskill is making the heard thethey have soybean market and these tariffs have heard. the attorney general gone after the republican governor. race.s a fascinating senator mccaskill is running as a centrist. attorney general is saying not so fast. you voted against tax cuts, repealing obamacare, just as

kavanaugh. this is one of the key red states, a state president trump carried by 19 percentage points in the last cycle. this is a much different dynamic. soybeans, soybeans, soybeans. tom: thank you so much on missouri. with us is j.p. morgan. we continue on the political with john lever -- lieber. a former policy adviser to senator mcconnell. john, i want to rip up this script. senator mcconnell has been maligned over the last couple of months. guy thathe kind of will rebound and do better after the election, or is this as far as it goes for mitch mcconnell?

>> in terms of his policymaking this guy has had the biggest impact of any senate majority leader on reshaping the judiciary. be one of hisll most important legacies when people look back at his career, how he used the trump residency to install a significant conservative presence on circuit courts and the supreme court. this is going to be his biggest legacy and probably a thing he has said he is proudest of. ford ont does he drive the wednesday after the election? he has a huge opportunity to get business done in a lame-duck congress. >> there is a lot you can get done in a lame-duck congress. you can get a lot done. you can ratify trade deals. you are confirming secretaries.

the most important theme for all three of those is that there has been a big tax deal that has gotten done. ofally there is an extension some kind of existing law, but that is the most important thing in december and november, the tax provisions that expire, and i think congress will want to do something on that. francine: if they don't implement and the republicans put this 10% like the president to, but it never comes frisch and whether republicans pay for it when it comes to election time? >> i doubt it. you have the most significant tax reform in a generation passed last year, which will be paying dividends through next year and into 2020. this tax idea, a 10% tax cut for the middle class

made up by president trump, it is unclear if there is substance to it. pass it, to try and but they will need the cooperation of the democrats in the house, or certainly in the senate. it doesn't seem likely democrats will go along with that. they have no reason to cut taxes further. the position is the original tax they want mistake and to roll back back. i doubt they are in the mood to do more legislation here. francine: do you have figures showing the tax cuts benefited base?space -- trump's >> you're seeing an increase in capital expenditures by corporate america. you're seeing a lot of money come back to the united states. fromriation is six times 2017. you're seeing a lot of m&a

activities. those are attributable in part to the tax cuts and the strong economy. you are seeing incomes rising. inflation is eating away at some of that. you have headwinds from tariffs in terms of consumer prices, but the fx are small relative to the magnitude of the tax cuts moving through the economy. politically it is not playing as and as republicans president trump thought they would. it seems they are barely an issue in the campaign. the economy couldn't be much stronger, and part of the reason are these tax cuts. tom: don't go anywhere. bring up the chart, if you would? this is good bundled math on u.s. dollar against the new dollar strength. withine an opportunity

the dollar when you hear some of the challenges we have going forward? >> under one particular outcome. if republicans retain the house and senate, rates would go up in the u.s. because there would be the expectation tax cuts may be extended and made permanent. i don't believe the numbers of there to pass any kind of extension. tom: help me here. president watches fox and friends. speak to the president about the best news for republicans, which is higher rates, stronger dollar. that is not what the president wants, is it? >> it isn't, but he can't have it all. the priority is more growth, then he should want an election outcome that retains the republican majorities in the house and senate and raises the

prospect of an infrastructure bill or further deregulatory moves. that will come with higher rates and a higher dollar. one has to choose what one wants. do tariffs and the spat between the u.s. and china change depending on what happens in the midterms? >> i don't think so. i think this is a misperception that there could be a different outcome. there isn't pushback from the democrats republicans on trade policy. you have states affected by certain measures, and this is the case and certain farm states , but there is not a broad enough coalition of voices against the administration's policies that you can expect these to be pulled back. i feel like a trade policy is a must on autopilot because there is a high degree of ideological

commitment to this by republicans and democrats. francine: john, do you agree with that? >> i think the reality is the tariffs aren't politically playing at all. they are not a factor in this midterm election campaign. you hear democrats talking about health care as opposed to bashing the president on tariffs. it is in concentrated pockets. as a national issue, the tariffs are not there. you are not even hearing people talk about the renegotiated nafta. you named one of your dogs or cats gridlock. i remember that. what does gridlock look like to you? >> gridlock would be the best case scenario. there are things that have to get done next year, increasing the debt limit and funding appropriations bills.

thingscan't get those done, there are serious consequences for the economy. dormant legislative bodies for some time, some activity for the last 18 months, but for the most part you don't expect congress to do that much anymore. i think that is what will continue next year. you have to worry about keeping the lights on for the federal government. bills have to get paid. francine: thank you so much. hear from the chief financial officer of deutsche bank. this is bloomberg. ♪ . this is bloomberg. ♪

francine: this is "bloomberg surveillance." deutsche bank shares have slumped until the investment bank reported the lowest quarter revenue until 2010.

thechief executive said focus is growing the top line without controls. net miller spoke with the cfo. matt: let me start with a positive. in are on track for a profit 2018. how much money do you think you will make? >> we don't want to give precise guidance. we have been profitable the first nine months and working towards a profitable year. think the third-quarter results demonstrate our progress towards those goals. matt: you have met your cost-cutting goals. is he getting more difficult in the fourth quarter? legal costs are expected to be higher and you want to reduce headcount by 1400. james: for adjusted costs we take litigation out given the fact it is harder to estimate.

matters can be positive and negative major drivers. managing the corporation to bring it down steadily over time, that is how we translate our annual objectives to near-term targets. we are making great progress on that. we are very aware as well we have at a track record of surprises in the fourth quarter. we are working to avoid such a surprise this year. matt: what about paying your investment bankers? you want to pay them competitively. james: we want to pay our people for performance and with a mind to the market environment we are in. we think we have built a crew to

give us some flexibility to do so, pay-for-performance. the compensation decisions that 10 of the >> we are focused on driving performance in the balance of the year. one thing we do not want to repeat is a large a cool -- a crew -- it is reflecting that decision as well or as amortization of deferred compensation. >> it would make sense revenue is falling given that you're pulling back from a lot of businesses. it seems they are falling more than the market anticipated. why is that? >> that year on year comparisons is what the market looks at. the sequential comparisons are much better.

be more and line with market performance broadly. the strategic decisions we have made have played out in our revenues, but have not been significantly adverse to what we expected. environmentest rate is still much better and expected to get better in the u.s. and europe. it your strategy to not be fully present in the u.s.? >> we have dollar capabilities and can support our global clients. fx is a global business for us. we made some strategic decisions about where we wanted to invest. we are seeing that play out.

in the marketplace reflects an environment where people have different perspectives of where the market is going. that is healthy for markets and the business we are in. we would like to see more uncertainty about the direction of rates as we get to a point where ecb policy gets closer to that change. that is the business we are in. we tend to benefit from a changed environment. >> if you back out of your job here and think as a student of finance, when you look at what mario draghi has to deal with, can you expect him to get more hawkish ahead of time? isn't it difficult not to turn more dovish? >> rates will be a function of inflation expectations. are starting to

move up in europe and globally. as this expansion continues, you would expect to see the beginnings of an interest rate cycle. i think that is what you see in the policy discussions taking place and what we hope to see in terms of our business going forward. >> in terms of transaction it hasn't huge unit, seen the turnaround you had expected. i know you made some changes there. how do you want to kickstart that business? >> the third quarter was disappointing relative to earlier expectations. there are a couple of drivers of that, including episodic asenues that did not come in we expected into and less organic growth, but the underlying trends are significant. we look forward to that focus under stefan's leadership going forward. >> in wealth management, you had

been hoping to court more saudi money. in light of current events, i know peter wanted to hire relationship managers for the middle east, does that change things? we have strong> relationships in the kingdom. we are watching events carefully. as others didion around the conference, but long-term, we will wait to see how things develop. it does not change our overall perception of the region or kingdom. >> i wonder about the regulatory environment. it has been difficult especially for your nordic competitors lately. one wants to make sure everything is on the up and up everywhere. is there money laundering concerns? are you more vigilant to make sure you don't have those kinds of issues? >> we remain vigilant.

it is part of our business every day to ensure that tracks are not-- transactions missed used. we have invested significantly for anti-money laundering. theexpectations and expectations of regulators have increased over the past several years, and with that we have continued to invest. are working closely with regulators on expectations to make sure we meet and exceed those expectations. did would be remiss if i not ask about cooperation or mergers. cross-border mergers have been difficult in the eu, but the german government indicates they prefer to see deutsche bank merge with another german bank. does that take up your day-to-day time? basically, no. we are focused on building our

business and executing on the plans we have articulated to the marketplace. the german government wants to make sure there is a german bank , a domestically-based bank able to support german economy and industry globally over time. we believe we are that bank today and intend to remain positioned in that way. that is our strategic objective. tom: messaging from the chief financial officer of deutsche bank. the market not buying it with the bid slipping away under nine per share. we will come back with john normand and j.p. morgan. cfo of ford motor company. stay with us. this is bloomberg. ♪

tom: good morning. francine lacqua in london. we are streaming on twitter. it is a younger demo, francine. francine: millennials. tom: a different group. let's go to first word news. house of thef the tax-writing committee supports president trump's call for a 10% tax cut for the middle class. congressman brady says if the republicans retain the house and senate, they will move forward on the plan. it is a signal that last year's tax overhaul is not as popular as republicans hoped. say theyf 10 americans have not benefited from the trump economy.

expectations are being lowered for next month's meeting between president trump and xi jinping. the two will meet in berlin salaries.- when a both sides are pessimistic about the prospect for a resolution to the trade war. bloomberg has learned chinese regulators have stopped issuing game licenses. that stopgap has been in place since summer since the government decided to change how it reviews video games. the new restrictions threaten the fortune of companies such as tencent. wall street is gushing with enthusiasm about tesla. the carmaker moved its third-quarter announcement

ahead. it happens after months of turmoil. tesla may be entering a new era in which it finally shows a profit. shares rose 13% yesterday. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. the italian standoff escalates in an unprecedented move yesterday. the eu rejected its budget proposal, adding to tension over spending targets. the attack prime minister weight in during an interview with bloomberg. to have aailable dialogue with the commissioners. to sit around the table to talk with them and explain details of the budget. me toy are going to ask

, it will beeasures difficult for me because i cannot accept that. francine: that was the prime minister of italy. we are back with j.p. morgan. john, italy has a budget surplus for quite some time, but it is not about that, is it? it is the sustainability of finances that brussels is concerned about. >> exactly. it is not the deficit projection. it is the longer-term deficit projections and how they fail to reduce it over time. this is something investors want to see from the standpoint of debt sustainability. francine: john, what do you see in terms of spreads? i don't know whether the government gains support because brussels seems to be off the mark. they need to at least help try

to deliver in the year they got elected. unfortunately what they will gradually realize is that this is a counterproductive strategy. the commission doesn't have the power to cause the budget process to be reordered. it doesn't have tangible lovers to pull. what matters is whether the investor base thinks this debt to gdp projection is sustainable. is from current spreads is that it is not sustainable. that, to me, will dominate over time versus what the domestic politics might suggest. it's going to be impossible to deliver on the fiscal promises. the outlays will be towards debt service or higher interest as opposed to fiscal spending. by thewas thunder struck

brexit report summarizing the chaos within the tory party. totally bored by this whole discussion. when does it end? it now seems to be incredibly important for this government to fall. >> the underlying issue is with the successor government have better luck negotiating a stable outcome for this process. part of the reason why the market has been complacent is a feeling that eventually there will be a realization that a soft brexit is better for the economy. >> how do you frame sterling within what you just said? did you just step aside? rate marketterest were pricing in a lot of hikes from the boe, you would be short risks of thinking the a disruptive event are high.

sterling is a cheap currency. investor clients are short. the bond market prices in less than one hike over the next year. i think you meander while this whole drama plays out. francine: do you worry about prospects in europe or the u.s.? >> in europe. a slowdown is harder to explain. there are fewer sources of policy support in europe. i think the political risks in are once that can push growth down over the next year. afeel like europe is still difficult place to interest, even though the assets are cheaper than the u.s. john, thank you so much. in the meantime, we will get some charts. coming up, our single best chart. is a chart looking at dell at 25,000. you log onto your bloomberg terminal and run gtv and

browse the shorts shown on bloomberg tv, and you can say them and use them at your own meetings. this is bloomberg. ♪ this is bloomberg. ♪

>> this is "bloomberg

surveillance." let's get the bloomberg business flash. tim cook is telling the importance of privacy legislation to protect it. he spoke at a conference in techels and slammed companies that monetized by collecting user data. >> we should not sugarcoat the consequences. this is surveillance. personalckpiles of data serve only to enrich the companies that collect them. should make us very uncomfortable. >> shares of volkswagen are lower. the ceo of the china unit says sales are likely to end the year flat or lower than last year's totals. btw's largest single market. the mainland and hong kong make up 40% of global sales. ford is underscoring the

importance it puts on china, elevating its china unit to a standalone position. it has brought back a company veteran to lead the turnaround effort. ceo of arved as chinese automobile company. gucci's parent are surging. it beat estimates and the third quarter. it had been down 30% from june and a tax one war undeclared luxury goods that her chinese demand. that is the bloomberg business flash. tom: thank you so much. and out with a sharp note. out with a sharp note. buyer going on the forward. one guest was saying

the chinese will buy more luxury. ,hen it comes to video games they are changing regulation. the market is so big it can make or break a company. tom: let's go to single best chart. john normand visiting in new york. brent crude back to 2003, meandering along, some percentage change moves. giving anent crude emerging market the violation in turkey. india stepped in with support today. when does this become a domestic crisis for these em countries? >> their oil prices under downward pressure, but if you believe the u.s. will be tightening sanctions on iran, there is a good chance of the oil price reversing. right now there is relief in india and turkey. if the oil price goes down, i

don't think that will be a permanent feature and the oil price can go higher. oil is the opportunity in -based or commodity-based nations? emthe opportunity in currencies is in latin america. tom: you want to own brazil? >> you want to own brazil. you might want to own mexico. you want to be in currencies where the interest rate is high and there is not much u.s. geopolitical focus. that is why latin america is unique now. francine: what do you do with brazil? there are risks to the economy. >> there are risks that if the next government does not pass this go reform, you are on the downward path for sovereign ratings. that will be about half for the currency. the polls are looking like it will deliver a right of center government. they are hopeful for social

-- reform,rm was so so i think it is a positive story. francine: are they muted he cuts of and the countries they sell to? >> it is in direct. if the u.s. is putting more sanctions on china, this will reduce commodity demand and prices, some of which are brazil's exports. is aould not frame it as is 100% immune. tom: this chart on gtv . ats is what we can do "bloomberg surveillance." strong brazilian real, a very cool two weeks through the moving average, isn't back down to 3.10, 3.20? >> i think it is 2% of 3%.

em currencies versus other regions like asia, at least on a relative basis, it is interesting. it is still interesting on an absolute basis. tom: thank you so much. a set of topics, including that important conversation with the .overnor of sveriges riksbank we will move the conversation forward on bloomberg radio. ,his morning, wall street time looking for comments from the crown prince of saudi arabia, alman.ed bin som please stay with us. this is bloomberg. ♪ ♪

is 2015.l like it

asian stocks flirt with a bear market. trump's blame game. he says maybe he regrets jay powell as his pick. war, openrnal conflict as members protest. it all brings her leadership into question, again. david: welcome to "bloomberg daybreak." at&t out with earnings, a slight miss on gps, a slight beat on the revenue. because it istell the first quarter since they bought time warner. at&t-verizonke the story. two stories, two bets. david: we will be curious