francine: stocks are smashed. the roundup continues around the globe. geopolitics, and more. we will speak to the chief executive. and tesla sourcing extended trading after posting as first-ever the report -- first-ever third-quarter profit. ♪ good morning, everyone. good afternoon if you are watching us from asia, and welcome to "bloomberg surveillance." i am francine lacqua in london.

stoxx 600 down 0.2%. this follows a pretty big selloff we saw overnight. a lot of it has to do with the anxiousness we saw in the market. it is difficult to pinpoint something, but it is clear that gold and yen are actually in demand. the german business confidence coming in a touch below estimates, still at 102.8 103.2 we were expecting, so i touched below, but nothing too much of a mess. the euro-dollar -- of a miss. one,uro-dollar also at too. you can see is 7% lower, downp at the lowest since 1999. third-quarter earnings missed inbev afterr ab they raised forecasts once again. coming up, we will speak about

political risks with google, we will talk italy, brexit. a little bit later on, we talk about the u.s. ahead of mental relations with anthony scaramucci. byernoon, we will be joined the chief executive of sergio ermotti. is for firms were news, here desley. the u.s. mail to be postponed after the mail bombs tom -- that were sent hillary clinton and barack obama as well as u.s. billionaire george soros. the president and his press secretary, according to some, failed to understand their attacks on the media. media also has a responsibility

-- trump: media has a against their awful attacks. they have got to stop. bring people together. u.k. prime minister theresa may has survived amazingly conservatives lawmakers of the next rest their loyalty to her book frustration with the -- but frustration with the brexit plan. she said they must "calm their nerves" while she pursues a deal. president donald trump will be briefed by a cia chief, gina haspel, today, over the killing -- over the investigation over the killing of jamal khashoggi

continues today. this effort she allegedly heard an audiotape made a big show be theing at least 70 -- of khashoggi killing at lthe saudi consulate. he wants to prevent a diplomatic with turkey. it is a heinous crimes that cannot be justified. -- crown prince: it is a heinous crime that cannot be justified. we are working with the turkish government and to prevent the perpetrators to take their judgment. pacificcafé millionell after 9 breaches by an unknown person. the bridge includes passport and contact details, although the company says there is no

definite support. plungedrica's rand after the country's finance it was hit two years later at higher than previously forecast. also more than half the economic 2018, 0orecast since .7%, after the economy plunged into recession in the first half of the year. bloomberg television has exclusive interview with the president of south africa, ramaphosa, and you can see that after 8:30 london time. that is today's company news. that is today's company news. global news 24 hours a day on

air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. francine: factors contribute into the rout are concerns that company's profits are eating. we will hear what scott minard from guggenheim had to say. scott: the fundamentals are great. the whole scenario we talked about in august with the growth corporate earnings, the tax cuts, it is all holding up. i think it is a big psychological rate from wendy 10-year note when above the 10-year note the when above the break. francine: so what is contributing to the decline? by a chief afx strategist. first of all, what is the reason behind the rout? been talking about these risks for a month is not more.

guest: we are now talking about emerging markets developed markets. umpteen reports about the effects of labor costs, higher costs of trade, and i think it is taking a tift down. sense, in each country, in each market, you can find it idiosyncratic cause, but it started with the global tightening of monetary policy or the repeal of post easy money. we're kind of here now. francine: it happened for the last two days, but it did not happen four days ago or it is a markets level, is a technical from it is the fear of movement? kit: i think it means now that we are all going to join in selling on days when it is going down. it is still very patchy.

a lively conversation yesterday, for example, the the announcement in south africa and why it was so big and what would happen next. i think when the time is going out, like with special markets generally, a bit of bad news can have much more impact. are you expecting more volatility in the market or a downward trend? kit: i am expecting a downward trend and more market volatility. i think we are done on the bull market. we are done on the economic cycle. we're not in freefall come over the best days are behind us. it is winter. francine: what does that mean? like flatlining? kit: no. i think how deeply a global economic downturn is. the economic cycle is back, partially because of u.s. fiscal policy, partially because of u.s. trade policy, but globally, there is a cycle again, followed by a slowdown.

they slowing.g are there signs you're looking at? if it is a slowdown, that is one thing, but a recession as a whole other ball game. kit: the same degree. excess borrowings we had in the last crisis. we don't have the inflation spike that central banks are going to have to tighten into a slowdown. has overink the fed tyson already, that they have not gotten very far. i cannot think of a good reason why we ought to a significant -- what we have a u.s. recession or a global recession? i cannot think of a good reason that we should, but i can think of even fewer reasons why things would get better from here. francine: i know you are a

bloomberg terminal user, so you can interact with our viewers, kit. how much market value we have lost, that is the wide-out, more than $67 trillion have been erased from world market caps, so because of this market rout, -- how de stopck ep a stock rout would give the fed pause? ivlv loomberg customers, plus tv or tv you in touch. you stay with us. reports results in line with estimates. it will be a make or break

season. and tesla's blowout. it shares jumped after the electric carmaker turns is your profit. we will bring you that story. this is bloomberg. ♪ this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance."i am francine lacqua here in london . , youean stocks actually can see a little bit on the downside. they have been tumbling because of some of the earnings. for example, pledging the most since 1999 after outlook was cut

, concerns over trade, concern over geopolitics, and they look at monetary policy and definitely a move has hit it or it will get back to the markets, but let's get to the bloomberg business flash with desley humphrey. hi, desley. desley: hey, francine. shares in wpp has slumped the 1999 after the company signal things will get better the world's largest advertising company revealed a huge earnings hit. wpp says it now expects sales to fall is here in profit margins to decline. president sergio said investors fell over performance. costafter the lenders' ratio.

ubs had an overall revenue growth the same cost as gdp. the ms ubs had -- this came as ubs had the same revenue. you can see our interview with sergio ermotti at 12:30 afternoon, london time. cutes of ab inbev have after his six to pay down its $109 million debt mountain, much of it taken off after the purchase of rival miller. the belgian-based company, the world's largest brewer, reported profits that meet analysts' expectations. sales also slowed at the weakest pace in more than a year. that is your bloomberg business flash, francine. francine: thank you so much, desley. cathay pacific seven is entering ra of growth, but analysts

have questioned its long-term viability for some time. it is here to shore up its balance sheet and maintain its loan. out of the company make it through the make or break? joining us now on the phone for his first interview of the day nor asian airline. how concerned are you about the future? .- norwegian airline how concerned are you about the future? bjørn: thank you. there concerned about market, the market is concerned. growth, and weon know the costs that we have done -- thet quarter, and

benefit of that. francine: what is going on with him and a, sir? and a, sir? have they tried to combine with you again? a -- they could come to me in a very good management team. duty is to take care of them. francine: just to make sure we understand you correctly, are you speaking about m&a opportunities? come forward with an offer, or have you rejected any offers? but i i cannot say that,

can assure the board i am doing that, and we are taking care of all of the security and i.t. i will talk to you and little bit of the and how many more you were planning to sell. well, i can see to that, setting up the potential. it is actually in the final phase of these stocks, and we have not taken one investor wants to participate in this of course thatso

is very good for us, because it is a strong company that also takes care of things. francine: all right, mr. bjørn kjos, thank you so much, norwegian air shuttle ceo. coming up, red october stocks, the worst month in more than six years. we will bring you the latest. this is bloomberg. ♪ e latest. this is bloomberg. ♪

francine: this is "bloomberg surveillance."

i am francine lacqua here in london. now let's talk banks and earnings season. has changed targets for the second time this year after investors fretted over the stock performance. the revised target talk to private banking businesses. ubs now expecting net new money growth between 2% and 4% at overall revenue growth at the same pace as gdp. still with us, kit juckes. it overall, it seems like the sector is enjoying a little bit better growth overall. kit: yeah, a little of the bad news from pmi this week, we see money supplies from european central banks. they both show stronger events of the economy, but thank lending is picking up, it is growing again, and things are looking better than they were. you can turn around and say it

took an awfully long time to fight the aftereffects of the financial crisis and the increased costs for capital, but the machine is finally beginning to come into motion. does that mean for -- what do markets to for the banks in the future? that talk about trade, can we be sure that whatever the monetary policy is, the banks can translate into the real economy? the meter nk i coming back to normal. that is what the rules happen, but it is going to do its job. in the next economic cycle, if we low rates and positive yield curve, i think the banks will lend, and that will be good, but this is why, pose financial crisis economic cycles are --

this is why post financial crisis economic cycles are relatively weeak. -- weak. francine: thank you so much. you are so polite. you can see our interview with at 12:30ergio ermotti london time. we usually have notice of when earnings drop, but this time, as elon musk strongly hinted, tesla has made money when analysts expected a rout. of all, tesla has surprise the market with a profit. are they becoming a normal carmaker? after all the scandals, have a really turned a corner? guest: in a way. fter some months, they proclaimed they became a real , and nowh the model 3 the surprise profit, some things are looking good for tesla.

however, reported a quarterly profit before, and there are questions about whether or not they can sustain those masses production rates. it is definitely looking promising. francine: elizabeth bermann, thank you so much. the dow and s&p actually wipe out 2018 gains, and we will give you the latest on that. this is what i am looking at what i am looking at euro markets. the risk-off mood. this is bloomberg. ♪ omberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance. " let's check in what is trending. from hollywood to bollywood.

on bloomberg.com, businessweek brings you into an unsolved murder case of a canadian billionaire. our most read stories, and third-place, dividends have been cut in half as it seeks to pay down its debt. quarter hastric undone much of elon musk's damage to the stock. we have extra market tax as we llance."gh "survei additional devices after some a post have been sent to barack obama and hillary clinton. president trump called the acts of horror.

quacks the media also has a responsibility to set a civil tone and to stop the endless hostility and constant negative and often times false attacks. they have to stop. bring people together. desley: lawmakers showed loyalty rather than frustration to theresa may. she told the committee that they must hold their nerve while she pursues a deal with the european union. may's cabinet is split on keeping the cabinet and the

european union. trump will beld briefed by gina haskell today as the crisis over to bachus show saudi journalist grows. it is a heinous crime that cannot be justified. today, saudi arabia is carrying out all legal things to finalize the investigations, to work with and cooperate with the turkish government, and to present the perpetrators to the court and take. their judgment -- take their judgment. sley: a breach involves

the names, birthdays and passports, the company says there is no evidence of misuse. asia's tries to steer biggest international airline back to profit after two straight annual losses. south africa's rand plunged after the company' finance minister told lawmakers the government that will peak.- debt will that is after the economy plunged into recession in the first half of the year. bloomberg television has an exclusive interview with the south africa tomorrow just after 8:30 a.m. london time. 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. humphrey, this is bloomberg.

much.ne: thank you so a year is a long time. much. a year is a long time. the ecb gives a policy decision today against a very different backdrop. policymakers are faced with an economic expansion losing its luster amid concerns including u.s. concerns, brexit and italy's standoff. joining us now from brussels is and kenctor of bruegel dukes. thank you both for joining us or sticking around. how much do you worry about the standoff between brussels and rome? i am worried by the stance of the italian government.

it is taking a directly confrontational stance against brussels, against the commonly agreed rules of the monetary union. if one ultimately, member doesn't stick to the rules, the collective is in danger. francine: do you agree with that? it has also been in the surplus for so many years that they can try to stimulate the economy. >> i think there is a middle part where clubs have rules. i'm not sure what you do when i club has a role which has no force the hind it. -- behind it. i think a tight fiscal stance from italy now would be economic suicide. i'm not sure that is at anybody wants. there is room for the italian

government to come up with a long-term plan that aims to get things back on track. some plan that is realistic in the longer run. they are reaching for a fight and i think that is the dangerous thing. am: i tend to agree, but i think the roman politicians do exactly the opposite. there is no evidence whatsoever that they have a long-term plan, that they want to put the additional money they want to use to productive use. they don't reform the economy, they don't put up the money for additional investment. i think ultimately, what is at the rules arethat being questions, but fundamentally telling everyone that we don't care about what you are saying, we just do what we want, and what we want is not even going to help our long-term goals prospects, and therefore i

think everybody is nervous. to quote david landau, he says the physical efforts of italy have gone beyond anybody else. do you not need to give politicians a chance? if brussels is always seen as, come up with a different plan, rade it will radicalize the country. kit: i think that is not correct. it exceeds the fiscal efforts of every other country. avoided a financial crisis because they did much more. thatnk you are right ultimately, there is a risk that this will escalate. the question is how do you deal with this politically?

i think politically, if you just ignore them up the romans do, the italians do what they want, a think you run into problems also because the italians will say, you just need to confront brussels and then they given. ultimately, you have to step in with monetary support and so on. rules, andist on the you also risk confrontation. i don't see any sort of easy way out here. i think the commission is trying to stick to the rules on the one hand, but then have my sling was around it. i think it is not going to be enough and ultimately we have a standoff. this is a sovereign country that has subscribed to this set of rules. is that: the concern

you radicalize the country because it can be easily spun as brussels telling it what to do. the solutions are of the kind saying, europe needs a plan for growth and long-term debt reduction across europe. the rules need changing. i agree in the sense that just standing up and saying i want to fight, can we have a quickly and out of the way and then decide we are friends again? here we are with the european central bank set to say, we are on track to stop bond buying by the end of the year. welcome to the next bond market research note from 50 investment banks. francine: thank you most. up next, we will talk a little bit about brexit. in the meantime, we did see an

equities route. it is definitely here in europe. the equities route now wiped out. asian stocks i think extended some of the declines. treasuries of falling and the dollar holding steady. plenty coming up, including a show of support. theresa may surprised the meeting with tory lawmakers over brexit. we will talk about that in our weekly brexit show, next. saudi crown prince says he will bring the saudi journalist's killers to justice. that story later on. this is bloomberg. ♪

francine: welcome to our brexit show, live from our london headquarters here in london. i'm francine lacqua. here is desley humphrey. desley: the u.k. environmental secretary unveiled a fishery bill today to take back control of u.k. waters after it leaves the eu michael gross says it will allow britain to decide who fishes and its waters after brexit and on what terms. the law would deliver one of the key planks of the leading campaign and the 2016 referendum. citigroup plans to relocate some of its roles due to brexit. the lender is moving some members of its southern european private banking chain to madrid from london. the choice reflects the fact that many of the executives are famished.

there are signs that brexit is slowing. a labor shortage in eastern europe. the group says since the 2016 referendum, there has been a steady decline in arrivals to britain from the eu's former communist block. even fewer will choose the u.k. over brexit -- after brexit. that is her brexit bulletin. back to you. theresa may survived a showdown with conservative lawmakers yesterday evening. members of her party largely decided to express loyalty, rather than venting private frustrations over her approach to brexit. the prime minister told lawmakers to hold earners as she pursues a deal. can see actually keep her party on side throughout the remaining negotiations? still with us is kit and g

untram? does this hinder her negotiation power in brussels? brussels hasink gotten used to two years of political turmoil in the u.k. the u.k. mostly talking to itself about what kind of brexit it wants, i think the dynamics have changed a little bit and that at least there is a clear and coherent u.k. position. that has so far been rejected by european negotiators. i am still hopeful that at some stage, there will be some sort of a deal. i think ultimately, the u.k. will still have to give in on some of the last remaining red lines because the eu 27

countries continue to be extremely united, than the balance of power is clearly on the side of the eu. francine: what do you see moving next? is it parliament voting on the kind of deal, what is it? kit: the big day is a vote on the deal. off on something, theresa may will accept it. i think it is clear from yesterday that there is a very l of minorities that want to change leadership, but they cannot get it done. i'm not sure there is any deal that could pass through the british parliament at this point in time. if you break down the people who would vote with the conservative party, the labour party, there may be nothing that can get through this parliament at the moment. francine: than we're looking at a constitutional crisis.

is nothing gets past parliament, you looking at a constitutional crisis in the cape in the next four months. -- u.k. in the next four months. guntram: i think it needs to be clear, that means brexit without any deal. there is no option then to go back to the negotiating table or whatever and find a new deal. there is just no time for that. it is basically that or nothing. if it is nothing, i think we are not just talking about constitutional crisis in the u.k., i don't know how the politics will devolve, but we are certainly talking of some very strange and disruptions. border,s at the aviation will have problems, and politically it would be a really

dramatic for the continent because one of the main members be in openill conflict with the rest of the european union. i think that is a very bad scenario. ultimately, if a deal is on the table, people will say, perhaps that is what we have to look for -- vote for. francine: do you believe in this kind of days to scenario? possible.nk it is i think so much is still up in the air. i think the main point would be that the chances of a deal getting to a vote are high. i think what happens on the vote is very unclear, even now given how polarized opinion is. also think if the vote is in january, that period between january and the end of march, all sorts of things will change. you could put higher odds than are currently priced in by a lot of people that the u.k. doesn't leave anything at the end of

march because everyone besides it is in the interest of the european economy on u.k. to push things further. in terms of where we leave with the pound, i think that event and the monstrous uncertainty around it after a deal gets to parliament or around that time, that is going to be the big market focus. francine: thank you both for joining us. up next, the saudi crown prince thomases justice as he addresses the journalist scandal for the first time. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." i'm francine lacqua here in london. dani: it is all about earnings today. i want to start us off with of the biggest loser, that is wpp tumbling more than 6%. these are it's worse and today losses.

also to the downside is ab inbev after the company cut its dividends. it is also seeing weaker cash flow thanks to currency headwinds and weaker u.s. sales. and really punishing the shares today because of that. has been one of the better gainers. it boosted its full-year outlook helped by the new athleisure trend. francine: president donald trump will be briefed by cia chief gina haskell today over the killing ofhe the saudi journalist. meanwhile, speaking of the saudi investment conference, the prince said he would bring the and.prevent art

diplomatic breach with turkey how does this developing story and response from europe and the u.s. affect markets? on the politics aside, how should europe currently deal with saudi arabia? guntram: i think it's clear that we are all agreeing that this murder is absolutely outrageous. think this feeling is very widely shared throughout europe. germany has already announced, angela merkel has announced that she wants to stop weapons exports to saudi arabia, which is easy for her to say because the numbers are not very big for germany, i think something like 400 million per year. now, the french president has cautious, and didn't really know how to respond to the move.

france is also exporting much more. france is the only country that actually has a trade deficit. it kind of depends on exports. france is taking a more cautious line, but i think in germany, it is extremely popular, what she has said because many people in germany have a very pacifist attitude and are outraged by the murder. if the u.s. imposes sanctions through congress, and that is a massive tbc, would europe follow? guntram: i don't know. i think it is a long way until the u.s. would really do this. there are masses stakes in the weapon industry behind it. i think if anything, trump has been very proud about

selling so many weapons to saudi arabia. europe might, if they were to do it, might follow. francine: what does it mean for markets? time, there longest has been a temptation to make a lot of noise, but do very little when something happens in parts of the world that we depend on for oil. thickt were to change, a markets would be scared of higher oil prices or scared we would get another leg to the global trade war. francine: thank you so much. coming up, tom keene joins me out of new york. this is bloomberg. ♪

--ncine: looking for s&p futures point to a firmer

open. ubs profits top estimates by more than 25%. we will speak to the chief executive. tesla sores and free trade after .osting "bloomberg surveillance." this is"bloomberg surveillance." -- this is "bloomberg surveillance." we will do some extra market tax. the route that started over the the last couple of days is deepening in asia. we will do cross assets for sure because we don't to the correlations that you usually see in panic. we have a great set of guests through the morning to talk about these odd correlations in the market. we take pride that we go across asset here looking at the equity markets right now. francine: we will get for the

markets and get through extra data. i'm looking forward to seeing your bloomberg. warns that more packages containing suspected bombs may still be in circulation. agents are investigating the mailing of devices to target a conservative verbal attack, including former presidents clinton and obama and cnn. the cnn president of the white house doesn't understand how serious his attacks on the media are. cia chief gina haskell is back from turkey and will debrief president trump today on the killing of the saudi journalist. haskell heard an audiotape allegedly made of his interrogation and killing at the saudi consulate in istanbul. the trump administration faces growing pressure to act against the saudi's. of parliament largely

decided to accept public loyalty instead of inventing private frustration for theresa may. themawmaker says may urged to hold their nerve as they pursue a deal. shares of tesla were surging and free market trading after the electric carmaker reported just a third quarter of positive earnings in its history. the stock is sold off when the plan to go private collapsed. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is bloomberg. tom: thanks so much. i know tesla is surging back to the high-end of its recent trading range. features of 20 right now. dow futures up 168. there is a swirled the market. next screen, please.

24.2.x up the dow closed yesterday well under 25,000. that is what is not happening. yen is not at 111. renminbi is an important story. francine: looking at treasuries. because it isyen a good way of looking at some risk sentiment as you remind us on a daily basis, it is what the pros look at. u.s. stocks took a breather in europe. treasuries falling, and the dollar holding steady. tom: we try to the hysteria free. how about a chart that says where are we for riyadh? a true correction and the

ugliness of february. where we are right now is this gap to a correction, which is about 1.7%, 1.8% down further. we are not even to an official correction yet. francine: this is what i am looking at. the mixed feature for european equities. we are trying to figure out what the underlying cause of it is. s&p futures liking positive. joining us now is daniel morris, senior investment strategist and jordan rochester. what is the underlying cause of this decline? is there something ugly we haven't pinpointed? >> think the primary trigger, which is the u.s. interest rates. it is really tech that has led us on the way down.

if you look at the contribution, it is primarily tech. i think you have fantastic gains until the start of this at the beginning of october. perhaps a bit too much. you had a couple of concerns about rates around china and week pmi's in europe. it adds to the negative sentiment. francine: will it continue? daniel: if we step back and look at fundamental growth outlook, it really hasn't changed. u.s.,tes for gdp in the we have to see about europe.is still a positive growth environment .we are not warned about inflation celebration . jordan rochester, is me wisdom on yen. if we were correlated across asset, where would it be? -- should beuls much stronger. we had our risk off moment in q2.

we had the turkey move, italy move. we are much lower now. theerms of fx to equities, correlation was not as strong as you would imagine. a lot of the macro community have already put on their late psychodynamic. china slowdown trades, aussie dollar, kiwi dollar, positioning is very short. i really believe in the china slowdown story. there is always a positioning squeeze to be aware of. that is why dollar-yen really does stand out because if you want yields, the u.s. is attractive, japan is not. it's all unhedged. tom: you and daniel morris go down to francine lacqua's fancy italian coffee joint. when you do that, you say what do i need to do to buy equities? guy, can you acquire shares this morning?

jordan: we can, we just a to be strong about it. what does well in late cycle is value stocks. what does poorly is growth stocks. tech has been a big part of that. this is a pain trade when things are good and everybody is talking about higher growth, that is a trade that does not do well. when it is late cycle, you go along value and short growth. fancyne: the italian coffee place is starbucks. let me show you our chart of the day. this is looking at how much market value has been lost and back to 2013.d when can you call the end of the bull market? daniel: weather late cycle or close to the end, the trigger that will put us in a bear market is the u.s. recession.

we are not even in correction territory yet. fundamentals are good. when we are starting to see signs of a u.s. slowdown, than the gain is completely different . at this point, we think that is premature. francine: volatility in currencies, we have kind of gotten used to. do you think is equity markets start seeing this route, currencies will stabilize? high, dollar-yen falls to pretty much nothing. fx has had its risk off move. one has these hedges in place already. for it to get worse, i think we need a u.s. recession. at least another year before that becomes a realistic story. tom: this is the dow. that is what we watch. dan, it is an elegant chart.

here.us kiss right it is well ordered and contained. what is establishing this trend? is this a trend based off fed policy? daniel: i think only indirectly. what seems to trigger the market of the comments. that is relevant for parts of the market any see that reflected in the dow. if we look overall and guidance we have had this quarter, at least until yesterday, it was running above average, above the rate of last quarter and above this quarter lastif we look ovee we have had this year. guidance is positive. we have seen good earnings numbers, and i think at some point the market is going to realize that we are going to get a rebound. tom: there we go.we going to quote him on that in three months. us.an and daniel with we will do more data checks

through the morning. tomorrow, an important and , the presidentw of south africa. this is bloomberg. ♪

kailey: this kailey: this is "bloomberg surveillance." the world's largest beer maker, anheuser-busch is falling the most since 2008. it is cutting its dividend and in have to pay down debt. sales have slowed to the weakest in more than a year. shares of the world's largest advertising company are falling.

it is a signal that things will get worse before improving under a turnaround promised revenue ceo. he says wpp has been too slow to adapt to structural changes in the ad business. keyceo has reset the bank's financial targets for the second time this year. it's moved is aimed at investors fretting over the performance. ubs is promising medium-term gains while conceding it will miss more immediate goals. profits beat estimates, and a share buyback is ahead of schedule. that is the bloomberg business flash. tom: thank you so much. more than anything, what i see is a continued, managed erosion of the renminbi. what is the signal the government is trying to send? yet.'re not quite there

by all accounts, the government seems to be keeping things relatively stable. we had numbers before i came on the banks areat at a high since 2016. it does indicate there is some kind of pressure there. so far, all of the focus has been in the equity market. the government will be happy they are managing that kind of relatively modest, gradual slow decline there doesn't you to spook markets yet. as we did get closer to the level, and if we do go over seven level, that will be a key psychological barrier and a test of sentiment toward both the yuan and china. of theat is the action chinese government in beijing and the communist party to support the chinese economy? enda: it looks like it is about stability rather than stimulus right now. we have had a string of measures

and rhetoric in recent days. we have had promises of personal tax cuts. some of the highest economic officials come out and make statements such as unwavering support for the private sector. they are trying to make financing for the private sector companies cheaper and easier to get. they are taking these steps to shore up confidence to stabilize the wider markets, rather than -- resorting to the bigger stimulus we have seen in previous down terms. the key to remember is that the trade war is only starting in earnest in china. the impact of the tariffs is expected to be felt over the coming months. everybody is watching to see if china will unleash more stimulus are minutes with the measures they are taken so far. francine: the linkage between markets and real economy in china is different to the u.s. and other parts of the world.

is it more likely that if the market falls significantly, it has an impact on the real economy? right.hat is entirely there is a disconnect with what happened in the real economy. share ownership is only a fraction. it does have an impact on sentiment. it does impact the corporate confidence. the bigger picture is that the economy is slowing because of deleveraging. we have the trade were happening. there is downward pressure on the one. that -- yuan. that is expected to continue over the coming months. there is no doubt that all of these factors together point to something of a starker mood towards china's economy. tom: thank you so much. greatly appreciated. renminbi up to 6.95. oh weaker chinese yuan. --ugely emotional

daniel and jordan with us. i want to go back to your work with the teachers insurance and annuity shop in america. are we framing ourselves up for a single digit world? is what is really going on with all of this tumult is that we are getting ourselves finally to where everybody said we would be? daniel: if you think about your expectations for equity returns at the beginning of the year, i don't think they were necessarily all that high. u.s.was surprised that the economy did as well as it did. you expect that we would end up with modest gains for the year, with perhaps more volatility than we thought before. for next year, i don't think it is necessarily much different. earnings growth isn't likely to accelerate at all from levels we are seeing now. you're going to have a earnings growth, market should

appreciate, that it is not going to be blockbuster. francine: thank you both. coming up next, we will discuss earnings with -- andill also talk about 5g some of the cost saving programs put in place. . this is bloomberg. ♪

francine: this is "bloomberg surveillance."

let's talk about nokia. the finish telecoms equipment maker says it will cut an unspecified number of jobs to save 700 million euros. is rajeev surei. rajeev: thanks for having me. 5g is moving very fast. started -- it started already in the u.s. some middle eastern countries and also nordic, scandinavia, it is starting to happen in 2019. francine: you also report

pricing pressure in regions such china, howerica and can you reverse the pricing pressure? rajeev: our strategy is that we have an and to end portfolio. we did talk about rising pressure with regard to some customer situations in q2. that is already expected in our q3 numbers. i would say that pricing of competitive intensity has not worsened or changed in the last few quarters. it is somewhat stable. tom: i would suggest more than anyone in a train wreck known as scandinavian technology, you have the most experience of where we need to go. yet been with nokia through nine lives in 23 years. what is the strategic plan to get shareholders? suri's this is mr.

fault. this is a train back of l illsion back to 2000 -- decision back to 2000. what is the strategy? goeev: the strategy is to -to-end portfolio we have. it is a change of the architecture. it is time for us to benefit from our portfolio. growth we have a strong rival in enterprise and we have established a new enterprise business group. we have been growing 18% year to date in that business. also software, where we have had good growth. for us, it is all about driving the sentiment, and a fitting from 5g. tom: what is the engineering distinction from a scandinavian set? what is the engineering the

station you can bring versus your american competitors? rajeev: are distinction is the install base, second, the thing i keep mentioning, which is this portfolio. five g has massive benefits and will have a lower cost per bit and huge capacity for consumers. for us, we have been setting a lot of first in terms of technical first and setting the pace of that. francine: what is the magnitude of job cuts you will need to do to reach that target of saving 700 million euros? we believe the ones that went into this industry, cost management is a key advantage.we will not slow

the pace of change . we haven't talked about the magnitude of the actual headcount numbers. start to work on headcount numbers country by country. some of it is headcount and some is digitalization. francine: thank you so much for joining us. he is the nokia president and chief executive officer. daniel and jordan both staying with us. the ubs chief executive at 7:30 in new york. we will be talking to him about better than expected results and the banking sector overall. this is bloomberg. ♪

♪ good morning everyone. a little bit of a risk. an abrupt decline in the u.s. yesterday, with knock-down effects worldwide. francine telling us that the yen

does not correlate with these markets. a bit of lift. francine: a little bit of a lift, but you are right. it is less than it was an hour ago. let us check in across the bloomberg universe from hollywood to bollywood. bloomberg.com, an unsolved murder case of a canadian billionaire. tesla's electric quarter has done much of elon musk's damage to the stock. to bloomberg.ight we will get back to the markets. but first, kailey leinz. ey: the hunt for a serial

mail bomber in the u.s. is on. bombs were mailed to the homes of former presidents clinton and obama. cnn also receive him. so did debbie wasserman schultz. another bomb was sent to george soros. been theem have targets of conservative anger. the fbi warned that more bonds could be in circulation. reports that chinese spies are often listening to president trump's calls to his friends. according to "the new york times," reports indicate that those spies are getting valuable insight into administration policy. china called the report fake news. a group of trade ministers is meeting to set up a reform agenda for the wto, but it is not clear how far the talks will go. the u.s. and china were excluded. trump'st was president criticism of the wto that led to the wto that led to

the meeting. and, the federal reserve bank warns about leverage. it is looking at whether or not wall street banks are adequately protecting themselves. morgan stanley and goldman sachs are among firms that have taken part in deals. day onnews 24 hours a air and tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: the european central bank meets today. the euro fell yesterday to a two-month low. we are joined now. is italy the main problem child right now? >> it is definitely a problem, but not the may 1.

one. european pmi's have collapsed. the correlation to gdp is very strong. seven next has also fallen. jordan: we're trying to end qe. then the chinese say they will raise rates, but the data is turning against them. the market is thinking, well, isn't going to raise rates now or next year? it going to raise rates now or next year? >> it will be worse before it gets better. perhapsing to have prompted the italian government to change things. they do have the tools are means to do it the market likely does. that means we need higher spreads before the government rethinks its policies. tom: is mr. draghi watching the euro?

i think we moved for big figures from 118. >> it impacts inflation, of course. it is temporary and lasts a year or two. that could be the pressure valve that releases to get the ecb through this. we think there is a normalization trade, but in recent days and weeks i am starting to doubt that given what is going on with risk in u.s. markets and asia as well as the china slowdown. one thing we also are watching is inflation. ine inflation, tom, is 1.9% europe. it has not moved for years. it has gone higher, it has gone lower. we need core inflation to go up. if that does not happen, normalization gets trickier. tom: agreed.

that, are you just touming it is totally wired consumer inflation? niel: if you had consensus , you wouldor growth be a bit above trend. pressure should build. that is what everyone has assumed. with these, you are not sure you will have 1.8% next year. you're not that much above trend at all, and so does inflation actually pick up? me bring you to one of our questions we have been asking. with ibs, it goes to top producers.

you can join the conversation if you are a bloomberg customer. does the market at some point stop the fed from hiring? daniel: it certainly could. it is within our scenario. december, stopped in but we are still relatively bullish for the outlook on fed policy. we think they will stick more or less to their layout. when do they hit the bottom? jordan: i agree, it is definitely a possibility. i think a december hike is still on the table. francine: and what happens after that? the pace of hiking is

the same. let's get to june, say, or even september, what is happening is it is coming year earlier. it makes us nervous because we have had this narrative of a slowdown in the u.s.. the tech cuts will roll off, for example. 2020, therewhy in could be a recession or slowdown. we think it is a little bit too early to say. where it a point where the tax cuts may come to an end by that point. a point where the tax cuts may come to an end by that point. daniel: yeah. i think everyone uses that as a not-before, but not necessarily you see enough stimulus still coming through because of the tax cuts and because of the debt ceiling deal.

this will affect and support the u.s. economy, but certainly after 2020. gdp numbers are coming out. are we talking 4, 3, what? we have a few questions about market activity. 2.5 next year, and by 2020 where back to the trend growth rate of 1.9 for the u.s. economy. what it is important to realize is that with all of the tax cuts, with fiscal stimulus, we have not really changed the long-term potential growth rate for the u.s. economy. however, if we see a continuation of business investment that we are seeing now, that should actually raise potential growth. it is something that will be relatively small. francine: thank you both for joining us. the meantime, we need to also look at brexit.

the irish prime minister says he will need to get the same solidarity on other issues. i think he is basically talking about what they can and cannot agree on. relations with the u.k. have been strained. story we will keep an eye on. this is bloomberg. ♪

♪ therehere was a moment were i was almost optimistic.

the red sox saw a gain up on the dodgers, francine. the problem is that we are playing in a refrigerator in boston. ridiculous. francine: i know nothing about baseball, tom. i cannot deal with an optimistic tom. sure. let us go negative. we can do that with markets. marcus, the rate of descent of the banks is jaw-dropping. toit a problem of regulators where the national system steps in to assist beleaguered banks? : i do not think so. you have to look at banks like a prettyh are doing good job but not getting any credit for it. deutsche bank has their own worries, and they are trying their best to the upside.

but, you know, barclays and ubs are doing fine. tom: let's bring up the chart here. bank index.under francine knows this way better than i do. you see the rate of descent. and of course, deutsche bank now down on a normalized basis through the weaknesses of 2016. incus, what do regulators do europe differently than america? well, essentially they never got a hold of the problem in the first place. there was a shift off of balance sheets. we have not gotten to that in europe. there are no signs of them doing so. also, french banks are very long. talian bcp's. issues in on a few

terms of italian problems in 2016, that regulators may have to look at. it. marcus, are the banks lending again? if you look at it, credit seems like they are starting to lend. this is also a time when the economy is going downward. marcus: yes. it is the best of the bad bunch in italy, but there are signs of turnaround. as i said, you look at the theres with barclays and european economy is not doing great this year. it is down quite substantially over 2018. that is not good for house builders or, indeed, banks. overall, dan, how do

you see the sectors? i know you cannot speak to the banks, but when you look at the blocks -- daniel: we know that the europeans have moved much more slowly than the americans. but we still have those issues to resolve, particularly not only in italy. but not only in italy. valuations are certainly more attractive, and it is a question of whether or not they have fallen enough. we're not sure we are there yet. tom: we need a victory lap. from the spiral staircase marcus, youstreet, need to do a victory lap. how contagious are we this morning? s: i think when i look at how the ecb reacts today, italy

spreads -- we are seeing movement in the past week or two. foreign selling through japan, apparently, and some sentiment of worry on how the rest of the budgets get treated by the commission. containment is not quite there yet. we have seen real scares in , bad budgets and such. for the moment, we called ourselves down on emerging markets but it is about domestic stocks in the u.s.. worries. some risk-off is getting worse. personally i think one area of value. jordan and sergio armani

coming up. excuse me, daniel morris, i am so sorry. marcus mentioned the japanese stock market. what causes contagion? is it just fear? is it as simple as that? daniel: if there really is a link between asset classes, that is the contagion you want to worry about as opposed to andstors turning negative investors redeeming. if that were to happen around , i think so far there are linkages but not like what you had during the global financial crisis. for now we are focusing on areas where, you know, markets have not all in enough as opposed to taking broader sentiment risks. if you look at

emerging markets from china, again, maybe i am being idiosyncratic, but we had argentina, venezuela, could something be triggered by china? think it certainly could. people have anticipated it for decades. of theseind all problems in china. we know all about bad bank loans and so forth. you did see a big -- if you did see a big meltdown in china, yeah, that could have a big impact. very good. daniel morris, thank you very much. always,us ashworth, as thank you. coming up, david rubenstein doing some terrific interviews for bloomberg this year. conversation with mr. rubenstein. look to that -- look for that at 3:00.

david rubenstein of the carlyle group. it is not frigid off the food court of good italian coffee on good victoria street. ♪

kailey: and now, the bloomberg business flash. daimler struck a confident tone for the fourth quarter. the ceo says she is continuing to see high demand in a challenging environment. they have been hurt by trade in missions follow. cfo george: will step down in the third quarter from britain's largest mortgage lender. cut to the lowest in the european banking industry. they reported third-quarter profits above estimates. that is the bloomberg business flash. francine: thank you so much. tesla shares are soaring in late trading. the company reports third quarter earnings. it usually gets two weeks notice

on when earnings will drop, but it actually gave 32 days. -- as elon musk noted, $312 million. elizabeth, how much of this is a big deal? it seems like all of the negative press, they have delivered. they are turning page. certainly looks that way after a couple of months where operations became a with all ofeshow these elon musk tweets that were erratic. they managed to eke out a profit result ahead of expectations. most of them seem to be saying the company is not quite out of the woods yet. cbs saying, for example, they expect that these results will not be sustainable for 2019.

the model s is getting quite old, for example. so that would be weighing down on results going forward. tom: bring up the bond chart if you would. i want to convey to folks that with a surge in equity it is just a trading zone surge. is going to reprice today, i assume. at this is the price of a tesla bond, way below par, yielding up to 7.7% with a big spike up two days in a row. i totally agree, elizabeth, that it is not all clear for tesla. what is their next round of financing they need to do. the fact is, they need money, do they not? elizabeth: for the kinds of targets they have in mind, they will certainly need money. thing we also saw is that they manage a positive cash flow. that is a big step in the right direction. francine: thank you.

back with more is dan morris. whether it is a tech story or new energy story, is this what we are seeing? daniel: with all of the volatility in tech shares, you look at the medium-term outlook. demand for corporate technology products. for us, it is quite robust. auto andests with other parts of new developments within technology, that will recover. even with the volatility we are seeing, there may be a recovery because there is opportunity. francine: technology stocks look frothy. daniel: i think what is interesting is, if you compare pes for technology through other growth estimates, on a certain basis it did seem expensive. on a pe to growth basis, not necessarily.

so it all comes down to those estimations for growth, but those transformations that we are expecting means it could be robust. tom: thank you so much for the briefing this morning. ias's daniel morris. coming up, gary shilling. we will have thoughts on the you on and such, but far more importantly, as we approach the election, the nation's fiscal integrity. from new york and a beautiful picturesque london, this is bloomberg. stay with us. futures up. ♪

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

"all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. ♪ tom: this morning, the stock market1.7% away from a

correlation, correction. inflation matters. gary shilling on your near and present depth. the election beckons, a nation divided, a caravan of pipe bombs, a care caravan of fears. elon musk kills it. can tesla deliver back to back-to-back quarters of profit. good morning. this is "bloomberg surveillance." i am tom keene. a better tape off the carnage of yesterday. francine: a little better. european stocks were still on the way down. we are still looking at trade tensions and geopolitics. people are saying it is because of monetary policy, but we knew

this or a while. tom: there we go. some date of this morning. to give youed just perspective on the equity market. right now, first word news. >> the fbi warns that more packages containing suspected bombs may be in circulation. agents are investigating the mailing of devices two former presidents clinton, obama, and cnn. the cnn president said the white house does not understand how serious its attacks on the media art. the cia chief is back from turkey and will brief president trump today. according to the washington post , she heard an audiotape allegedly made of the interrogation and killing at the saudi consulate in istanbul. the trump administration faces growing pressure to act.

survivedister may has a deal with conservative party lawmakers over her brexit plan. members of parliament decided to express public loyalty instead of venting private frustration. maylawmaker said theresa urge the rank-and-file to hold the nerves. tesla's profit blowout has undone most of the damage done to the stock, shares are surging after the third quarter of positive earnings in its history. stock sold off when the plan to select collapsed. 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. tom: thank you so much. equities, bonds, currencies, commodities, a list after what we saw yesterday afternoon. futures advance, up 26.

dow futures up 200 points. next screen, the vix. there is the close on the dow. it shows how yen has not moved. renminbi on the seven watch with gary shilling. francine: we need to keep tonight on that. what else? i decided to put some of the things we look at not on a daily pe.is, for example, euro the stoxx 600 down, now. the pound 129.03. there are questions on whether alsosa may survives, it whether we get a last-minute deal pass through parliament. i changed my terminal because of the equities route.

this is the bloomberg world stockmarket capitalization has a brace some seven trillion dollars. tom: we are all going to die. how about this chart? the correction in february, down 10%. we have a little bit more to go to get there. what a joy. i get tears in my eyes over our team's ability to get to people from different planets on the same hour. gary shilling is with us, legendary on dis-inflation, the greatest call, and a few thing since then. cameron christ is a wonderful strategist knee-deep in the bloomberg world looking at the cross asset correlations.

talk to the immediacy of what you see on your bloomberg right now. our markets correlated or is it uniquely and equity event? think it is an equity event. it is an interesting dynamic. most of the last couple of years have featured fixed income markets pricing in a way they are skeptical of growth outlook. , we have seen a complete reversal where equities , growth is about to hit a brick , youmode, and fixed income could argue it is more optimistic than equities. omg.oh my god is you use it on your cell phone. tell me about the correlations of gary shilling, which is the debt tilde in emerging markets, and the trump emerging-market

debt buildup in america, right? particularly emerging markets. they feasted on debt after the great recession. investors were throwing money at banks. the only problem is a lot of that debt was denominated in dollars, and now with the dollar strengthening, it makes it more difficult to service their debt. argentina,rkey, maybe south africa, but will we see contagion and anything like we saw in the late 1990's? that is the question now. francine: is it going to spread? francine: is it going to spread? are we going to see contagion? >> i think the jury is out. there is a risk of that. knowere is, and i am not

to blowout anything, except bonds, treasuries. , when it started in thailand in 1998 and spread allussia, it didn't take the economies of the world down. we had a mild recession in 2001. comhad a collapse in dot stocks. today, there is a lot of vulnerability. there always is, but i don't think you can say this is a global economy killer. francine: right. cameron, we know the risks out there. what is looking good out there? >> i have to say i am increasingly of the mind you are supposed to be fading this equity market weakness. my work suggests we are pricing in over the next six months a

decline of eight points in the composite isn figure -- ism figure. we only see declines of that magnitude in a recession. are we going to get a recession in the next six to 12 months? i think that is unlikely. tom: gary? >> i think the odds are increasing. i think the stock market is a great indicator. you don't fight the fed on the way up or the way down. housing is very interest rate sensitive. it is turning down. you have indicators out there. a lot of speculation. tom: i want to jump to what everybody wants to know, larry kudlow is there all alone. what is your advice to the president as he looks at dollar strength and a fed that is wrong? what would you say to president

trump and his supporters about the free lunch of low interest rates? >> i would say that is over. you can expect the fed to accommodate everything forever. when you get to the long end of the market as opposed to the fed , you have anend interesting balance. you have inflationary pressures and the fed on the other end, and you have not seen that much of an increase rate on the long end. the 10-30about spread. the backend is driven by guidance we have not had before. since greenspan first an issued a statement in 1994, they are now explicit in terms of what they think the long-term rate is, which is still below 3%. that provides an anchored to the

backend of the curve we have never had. , hehere is one great thing is backing away from 40 guidance. 40 guidance is ridiculous. for surveillance correction. >> thank you, sir. you've heard me say that for guidance is ridiculous because based on information and data they dealt yet have. done a poor job forecasting since the great recession. they expected too much inflation and faster growth. powell is backing away from that, which is a big improvement. tom: did you smoke a pipe back in the day, going let's raise three points?

>> we are not there. the evidence we found is before forward guidance, there was less volatility in the bond market the now. tom: francine. francine: the size of the bond market has also increased. cameron cris and stay with us. coming up, the president of south africa. about some him reforms. that is a: 30 a.m. in london.

>> this is "bloomberg surveillance." let's get the bloomberg business flash.

est fallingsch inv the most since 2008. third-quarter profit missed estimates, sales rose to the weakest pace in a year. shares of the world's largest advertising company are plunging as it revealed a big earnings miss. it is a signal that things will get worse before improvement under a turnaround by the new ceo. ubs's ceo has reset the financial targets for the second time this year, aimed at investors fretting over the performance of the stock. gains.mised medium-term profits beat estimates and the share buyback is ahead of schedule. that is the bloomberg business flash. tom: thank you so much.

we discussed the election with first, first, but responders in bedford, chappaqua, and central park south of the time warner center yesterday. those are the first responders yesterday. what will be the second response today to the news of pipe bombs? do they affect and adjust the election? kevin: president trump striking as he saidne there is no place for this and politics. attacks and potentially he will have to move beyond that. , thenight at his rally president did not speak as aggressively as previously. this is the hunt for the serial bomber continues. tom: i thought kathleen parker in the washington post with the

conservative tone was quite good. bring up the morning must read from this parker on women and the stridency of democratic women. women are at the center of elections. democratic women make noise and likelier to head fundraising thanks in large part to emily's list. paint the effect of this woman election right now. of the females vote, democrats have mobilized progress of women on the issues of reproductive health and other issues. while organizations do exist on the left, the equivalent of such does not exist on the right necessarily. republicans have targeted women voters in different ways in the moms, so tor soccer speak.

there have been conservative efforts to reach women, and looking no further than the senate race in arizona. that really has emerged as a key flashpoint in arizona. this is my bottom line. the way the two parties try to attract female voters is very different, but the mechanisms are still very apparent. tom: a headline coming out right on cnn,doubt covered where they report the new york police department is investigating a suspicious package down by the financial district. francine. francine: i want to ask kevin about saudi arabia. the president will be briefed by the head of the cia today. she alleges she listened to the audio tape in the consulate. alsos, and steven mnuchin meeting with saudi officials.

there is no question the president has taken a more aggressive tone against the , saying the explanation is not good enough and this should not have happened, the killing of jamal khashoggi. the president striking a different tone. meanwhile, he is facing pressure from the republican senate to do that. age of thes magnitsky act, it allows the u.s. to continue with the asiness deals it has as well sanctions for individuals found responsible for the surrenders incident. tom: thank you so much. the nypd is investigating a suspicious package in lower manhattan, according to cnn. they had to leave their offices yesterday. these images from franklin street downtown. this is a developing story.

you wonder how many more of these we may see today. we will come back with gary shilling, a bloomberg opinion columnist, and cameron as we look at market dynamics. this is bloomberg. ♪

francine: this is "bloomberg surveillance." we're just getting some breaking , the asset dws

management arm of bill to bank. they listed earlier this year. they are now changing the ceo. executive has been named. was the germany retail head of deutsche bank. it is interesting they picked this person to run the wealth management unit. tom: very good. futures up 21. terrific knowledge within .orrelations of the market gary shilling is legendary for price change and his multi-decade call on lower interest rates is the call of a generation. you and i remember the tipping point of deficit to gdp. where is that tipping point today, 5% deficit to gdp? , it is globalized world

higher than that. tom: a bigger number, a worse or number? >> probably right now. the u.s. is a safe haven. it is true recently that foreigners have not been buying treasuries the way they were earlier, but when you look at global troubles, there is a great willingness to hold treasuries. u.s. banks, the only asset classes increasing our treasuries. at 85% level, gary shilling would suggest we have to get to a larger deficit to gdp before the angst clicks in. defined what dollarization is. all those dollars in debt abroad , what does he mean? >> in countries like turkey and , it seems muchs

more economic for them to borrow private dollars to fund sector activities or public-sector activities, rather than issuing in local currency with double-digit yields, because what seems cost-efficient in the near-term can have a staying in the tail if dollar borrowing costs rise in which they are, and the dollar rises, which it is, and you go from a virtuous cycle to a vicious cycle. tom: thank you. there is no free lunch. chrise -- cri we willse. continue. lots to talk about in terms of market dynamics. gary shilling on fed

independence. scaramucci is out with a new book. we told him we will not speak about the new york mets during this interview. that was in our agreement with scaramucci. an important new book on the president of the united states. much more happening today. a lift to the markets, futures up 20, higher yields, a risk-off field with selective dollar weakness. please stay with us. coming up, anthony scaramucci. this is bloomberg. ♪

i'm all about my bed. this mattress is dangerously comfortable. when i get in i literally say, ahh. meet the leesa mattress. a better place to sleep. this bed hugs my body. i'm now a morning person. the leesa mattress is designed to

provide strong support, relieve pressure and optimize airflow to keep you cool. hello bed of my dreams. order online. we'll build it, box it and ship it to your door for you to enjoy. sleep on it to up to 100 nights and love it or you get a full refund. returns are free and easy. i love my leesa. today is gonna be great. read our reviews, then try the leesa mattress in your own home. order during our fall mattress sale and save. for a limited time get 150 dollars off and free shipping too. sale prices are available right now. go to buyleesa.com today. you need francine: this is "bloomberg surveillance." let's get straight to first word news. >> there are multiple reports police in new york are

investigating another suspicious package. the package was sent to the home of robert de niro, a prominent critic of president trump. this comes a day after bombs were sent to the former presidents obama, clinton, and to cnn. there is a report chinese spies are listening when trump calls his friends on his iphone. u.s. intelligence reports that spies are getting vital insight on how to affect administration policy. china calls the report fake news. wto.eform agenda for the it is not clear how far the talks will go. the u.s. and china were excluded. it was president trump's economic data with beijing and his criticism of the wto that led to the meeting. the federal reserve is warning banks about the risk from the leveraged loan market.

a closer looking at whether wall street banks are chasing deals without adequately protecting themselves. morgan stanley and goldman sachs have taken part in deals that have exceeded what the fed considers appropriate. 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. thank you so much. an extraordinary headline right now. why don't you pick it up, on saudi arabia and turkey. francine: it is extraordinary. the jamaland that khashoggi killing was premeditated. , at the time of when we interviewed the crown prince of saudi arabia, he said he had left the consulate and that he did not know his whereabouts. it is amazing how the last two weeks you have seen a complete

reversal and that with this committee saying the jamal khashoggi killing has been prepped meditated -- been premeditated. bloomberg, the saudi prosecutor continues interrogation of suspects. let us move back to the markets and the single best chart with gary shilling, an important chart about where we are and the sum of all our fiscal fears. thank you michael mckee for this chart. low interest rates in the rising interest rate burden we are beginning to see. many people watching remember 9% cds, double-digit annuities. the fear is higher interest rates. should we fear higher interest rates because of our debt irresponsibility? >> we should if they get near

double digits, but i would suggest that is highly unlikely, unless you are talking about the economy virtually collapsing. if you are talking about confidence fading to the point with today's deflationary pressures in the world, globalization, when you are talking about treasury average cost getting back to double digits, you're talking about a complete loss of faith in the treasury and you better get your ak-47s and gold bars and get into a cave. the thatave a cave for we have fully stocked. --hink this superior type the stereotype is gary shilling does not own stocks. you have owned equities throughout your newsletter. what equities do you own today? >> health care and defense are

two areas that we do own. they are small positions with what has been going on fortunately. i don't think you always want to have your eggs in one basket, but it has been a defensive approach. sum as i said earlier, the of all the fears of people out there, you have pushed against that for years. why should we celebrate where the american economy is right now? >> you should celebrate, but always worth if this is a peak. the celebration is always the greatest and confidence is always greatest at the peak. it does not mean we are at the peak. it can get more extended. the bank of england has already made comments on the fed. is a lot ofre speculation out there and things going on when you are close to yield curve inversion.

consumer confidence is at a high, but that is normally at a peak. higher, butlower or if this turned out to be a peak within the next year, it would not surprise me at all. francine: gary, do you think it is a peak? what are the chances of a worldwide slow down that could lead to a recession in one region? probablyd say they are in the 50-50 range. you look at the signs, the selloff in the stock market, the fed tightening, housing is highly leveraged, inverted yield curve, problems with the emerging markets, all these things say we are at a point where you no longer have the back and the fed

and other central banks flooding the market with money. the ecb is finally ending their quantitative easing, moving towards tightening. all these things suggest you are close to a peak. nobody rings a bell and says you are at it now and it is time to move away. as i say, i think there are enough things there that there is a good chance within the next year we will see a recession. a lot of these things are never clear except in retrospect. it is only after the fact you find out you were at the peak. francine: gary, this is the most important question. if there is a recession, 10 central banks deal with it? >> they can certainly try. one of the reasons the fed is trying to get interest rates up his so they will have something to cut if we do get a recession. they don't want to go with negative rates. do? did negative rates

they encourage people to save more because they figure i'm not getting any return so i should save for retirement and so on. if it does leave the central banks without a lot of ammunition, it doesn't mean they can't go back to quantitative easing, but i think they certainly aren't limited, much more limited than they were earlier. tom: very good. francine, further stories on these bombings and the discovery of pipe bombs, not bombings. from the new york police department in the area of tribeca to the south and west of manhattan, above wall street, and over towards the hudson river as well. is a more serious morning for the new york police department. francine: it is. people say we could see more packages.

coming up, we will be following this developing story. we will speak to the ubs chief executive. about his talking pivot to wealth management at 7:30 a.m. in new york. this is bloomberg. ♪

tom: good morning. we are looking at markets, a bounce up 19 points on s&p futures. continual reports of the new york police department in downtown manhattan and further pipe bomb's discovered as well. byht now, and important book

, darkeningramucci the door of 1600 pennsylvania. what is important is the president group up on third base, rounding to home, and scaramucci groep somewhere rocketing out of first base. scaramucci on the blue-collar president. you have to be kidding me? this guy is so far from a blue-collar president. why is he a blue-collar president? >> it is more about the people i grew up with an less about the president of the united states. you are thinking of the golden toilet seat and his apartment on fifth avenue looks like louis the 14th smoked crystal meth. what i'm thinking about are the kids i grew up with and my

cousins out on or survey that love the president. i did a lot of research on him and his father and try to explain the neighborhood i grew the people who didn't go to college who are working hourly jobs love the president. you in the white house right now because his tax bill has failed. the fed is the public, including your blue-collar audience figuring out the plutocracy. what does he need to do as an encore? >> there are three things that did not happen. he didn't get the repatriation of capital from outside the united states. , the numbers for those families i am discussing, you're talking to $1000 to $3000. enougheaningful, but not

to get started at those levels. is u.s. thing corporations are still in a defensive position because they are worried about a recession. francine: go ahead, gary. >> i think the numbers are pretty clear. lower 50% of taxpayers only pay 5% of income taxes. if you're going to cut income taxes and you have to cut them on the top. want to go to a negative income tax, you can't do much for these people on the lower end. >> you have the earned income tax credit. >> you are basically writing a check. >> here is the bottom line. that group of people for what ever reason has rejected the establishment. the president saw that. he did something unique in political history. he hijacked the republican

party. he got the nomination, then stole the base of the democratic party and moved it over to his ledger. i described why he was capable of doing that, given his personality and what i saw on the campaign trail. i want to do a little fact checking. scaramucci,thony you know what our managing director want to know is was right? could he shoot someone on fifth avenue and still get away with it? >> pretty close. i think that is clear now. if you go from june 2015 to today, he has ardent support. vacuum whereyour politicians were focused on the very wealthy and the very poor. what they were not focused on is that lower middle income area or

the middle class, so what i am writing about in the book, and if you're a democrat you should read the book because you should understand how donald trump hijacked your base, but yes, he has a group of ardent supporters and they don't care. i was there for the access hollywood moment. many of us thought that was going to be a bad moment in terms of not being able to win. that happened 30 days before the election. lo and behold, he is the 45th president. ,e has a lot of teflon in him and a lot of likability for this people, and i described why in the book. forcine: what would it take the president to lose support from the gop or his base? >> three things would have to happen. number one, something cataclysmic related to the model report. some kind of steep

recession going into 2020. 1880 two today, it is hard to dislodge a sitting president with the rising economy. tom: you were newsday paper boy. i did the same thing in rochester. my mother ran it like a fortune 500 company. the democrats in the neighborhoods where you delivered are screaming for a different democratic party. will the president be a two-term president if the democrats don't move away from the clinton progressivism to form some kind of new democratic party? >> the democrats need a right of center economic person and the socially liberal person to run, but unfortunately, they have a little trump derangement. if you think about what happened to senator warren, he shoots at her and gets inside her melon and she runs out and gets a dna test.

that will not help the democrats. gary is laughing because trump has twitter and he vaporizes everybody. tom: the charm of anthony scaramucci is everybody knows you grow up in a blue-collar environment on long island, and as you say, the president hijacked that ethos. how do democrats get it back? >> they need a different candidate. they don't have the right candidates. you name the candidates. they have 10 bowling pins of candidates, and the president is an orange bowling ball and will bullish strike. tom: will he be too old to run for a second term? >> he looks pretty tireless to me. i've never seen anybody with that level of energy. you saw him the last four nights. he's the only human being i know that can eat anything he wants

and it has no effect on itself -- on his health. francine: if there is any doubt about the fed's independence, what does that mean for treasuries and the dollar? >> the fed is clearly independent. there when we were having the discussion about jerome powell. it was on a wednesday. i was only there for one wednesday, so i do remember it. i like the direction the fed is taking. if the economy starts weakening, in' when areas of the economy will start slowing down, the fed will say we moved to data dependency and you will see them slow down the rates. it is not clear they will get five rate moves in the next 15 months, because things are starting to slow down and people are starting to get defensive. it is being reflected in the market right now. tom: every administration, it is exhausting.

i know you are exhausted by the third or fourth day. >> it was great. i was doing great. tom: every one else was exhausted. it will be a changing of the guard. what do you imagine the president's new people will be within the administration? >> the personnel? tom: yes. >> the president made the decision to go with washington swap monsters. swamp if youin the have a guy pouring sewage into the swamp. the president will switch dynamics and hire some people that may like him and one to help him and create the effective guardrails for the president. the best relationship with president trump is when you are polite and respectful, but telling him what you really thing. is not loyalty.

it is selfishness and a form of self survival. he needs more people to tell him the truth. tom: which caravan did the scaramuccis come in on? >> a boat out of naples, ellis island. my father went to a coal mining town in northeastern pennsylvania. tom: how do you respond to the caravan debate? it is middle easterners and terrorists according to the washington post. did they say that about the caravan? >> if there are women and children in the caravan, which they're obviously are, i want everybody to stop and think about that for a second. there is a mom out there traveling thousands or hundreds of miles to get to the u.s. border, and if you think that is funded by george soros, that mom is making that decision with her children, i think that is a far-fetched thing. we have to dialback some of the rhetoric and get people to

relax. you are not having moms with traveling hundreds of miles to get the u.s. border because george soros is paying them. that is a bunch of malarkey. we know that. francine: you call the president a liar yesterday. >> can i correct the record? francine: do you think he knows what he is doing? correct the record. >> do i think he knows what he is doing? he absolutely knows what he is doing. don't underestimate the president. what i said to the reporter, he , yes, the to push me president is speaking this truth. but doing it intentionally to incite certain people, which would include left-leaning journalists and most left-leaning politicians. they come out like a hall monitor in high school and say

the president is lying, and his base is basically laughing at them. if someone is taking your lunch money in the cafeteria, if you call the whole monitor, it will not help you. you have to defeat the person at the table with your peer group. that was the point i was making yesterday. cnn, butose guys at they were trying to pin me, saying scaramucci calls trump a liar. so what should, the strategy be from democrats in the midterms if you were to advise them? it is a simple strategy. it is a simple strategy. you have to switch what you are doing and stop talking about gender bathrooms and saving dolphins, go back in the neighborhoods and tell those people you will redesign a product to save them, increase their income, and give their

children and aspirational opportunity in america. i lived in and aspirational working family. later, the democrats have to stop the political correctness and micro aggressions and go back and tell those people that were in their base for 60 or 70 years that we are with you, but they are not capable of doing that. that is why he will continue to steamroll. francine: thank you so much for coming on. now we need to change gears and talk tesla after some negative breast in the past couple of months. prophet blowout means they are back on track. joining us for the latest is our guest. has tesla really turned a corner? a great quarter, no doubt about that.

key question is do they need to raise capital? the answer is potentially not. there still remains a lot of questions with respect to demand. one of the key things we are monitoring is demand. in norway, the jack were has outsold tesla and its first full month of being available by over once those cars get to the united states in 2019, what happens to tesla's ability? >> vertical research is known for a acute numbercrunching. tom: does tesla have a cash conversion cycle? do you have transparency as to what they do with their cash? >> we don't. there are some key questions and oddities we need to get answered. their depreciation and amortization was up 5%, despite

they advertise their costs on a per unit basis. storesve opened a ton of , supercharger stations, service centers, so their answers we need that we did not get yesterday. tom: what answers were you get as you wait for the second quarter? >> at the beginning of november and we will get production and sales for october. that is important. it is important also how much backlog they burn through. data suggest they burn through ,heir rearwheel drive backlog and 70% through their long rage drive backlog. we think they pulled some key levers to put a lot of things in q3. we think for numbers are what matters. tom: thank you very much. the vertical group, some great research on industrial america, cautious on tesla.

we need to tell you where the markets are. really better. up 22, dow futures up 180 points. we see some risk on. i don't want to oversell it, but some risk on field across bonds and the foreign exchange complex as well. much more to talk about. ubs saying trview, humbs up on a well-run bank. do stay with us. worldwide, this is bloomberg. ♪

alix: a pause in the equity breakdown, stock values

decreased by $3 trillion in two weeks. equities try to find their footing with 71 companies reporting today. ceo says volatility is good for trading, but wealth management clients are sitting on their hands. ario draghi must confront global equity selloff and slowing momentum in europe as the ecb is normalizing. david: welcome to "bloomberg daybreak" on this october 25. twitter is out, a beat, revenue $758 million, as opposed to $701 million expected. that is a nice beat for twitter. alix: looking at monthly active users, a little light, 326 million. the stock not reacting well.