than you thought it was going to be when you took this job? guest: yes, it is tougher because now president ramaphosa: yes, it is tougher because in the full glare we have been able to get into the full effects of what has been happening. we can see the damage that has been done to state institutions, government departments, and corruption has become endemic. heels did nothe w come off. we are beginning now to renew and roll back best practices that had come into play. therefore, we are now in a very determined way moving forward and making sure that we do indeed get rid of corruption, we do indeed reposition our state owned enterprises, we do indeed improve the levels of governance

within our government departments. bad, we nows it was know where the problem is, and that in many ways is 50% of the task. thereafter, the rest is in the realm of the doable. we are preparing to it, transforming, and we're going to reposition south africa, including our economy, and quite a dramatic way. about when talk companies put out financial results, the talk about kitchen sinking. you put out all of this and as a result things improve from your. you say you have an understanding of the debts of the problem. you now feel you have your arms around understanding where the issues are? that was the kitchen sink budget, things get better from here? president ramaphosa: yes, this

was like the kitchen sink budget, as you correctly say. we have now done a thorough analysis. , butsis keeps rolling out we now know how serious and how deep the problem was. after this things get better, because we are now able to wrap our arms around what needs to be done. we now know what has to be corrected. we now also note the type of skills, the type of people that we need to put in place to repair the damage that has been done in the past nine years, and it is huge damage, but we are preparing it just repairing it -- repairing it. we are repositioning our economy, we are repositioning our country. doneconfident we will have a pretty good job to put south africa on a winning cap once again. corruption.k about

will -- the last government -- official to leave her government? do you have that political will right now to lead your government? are we done or is there more to come? president ramaphosa: we deal with issues as and when they happen. you can never say in politics we are done with this and that. you deal with issues as they happen, but the important thing is the ability to be willing to respond. the mud endtuck in of not respond, that's for the problem is. in our case, we are responding and doing everything we can to transform things. problems,, the one thing i can promise is we will be responding and we will be responding in the interest of moving south africa forward. guy: do you need to reshuffle your cabinet to make that

happen? president ramaphosa: every president keeps on looking at precisely the type of skills that they have in their cabinet, and how they are well-positioned to move the country forward, so that is something that one needs to keep in mind all the time. to put the best people in the positions where they can do the best. guy: you think you have the best people in the positions now? president ramaphosa: i have a number of people that are doing really good work. some of the measures that we have announced our as a result of the team of people that i have, the wonderful people that i have, who are doing really good work. guy: ok, let's move on. labor market reform, let's talk about that. you do not have a lot of fiscal wiggle room, you do not have a lot of monetary polic, wiggle room.- policy wiggle

do you go back to the policy board and say we need to rethink where we are right now. we need to rethink the way we are paying people. this is a tough conversation to have, maybe talking about having sub inflation wage rises. ,t's the only kind of area left is the labor reform, structural reform that south africa has. you have to go dutch throw everything at it that you have at this point. president ramaphosa: are compositions on labor are ongoing -- our conversations on labor are ongoing. we have developed a key partnership -- a good partnership with all of the key players we have. we are able to sit down and talk about everything under the sun. costs is onelabor of the issues that we continue to talk about.

so these are issues that are items that weenda continue to talk about. we have made tremendous progress in the past. we have been able to reach a implementation, we also have been able to go to the job summit and talk about labor, what we need to do to increase more people in employment. there are no holy cows. there are no issues that we cannot discuss and we discuss everything under the sun with labor, including labor costs. so if and when we discussed these methods, we will be able to -- able in the usual south african typical way reach an understanding of where the country is and where the country needs to go. guy: i want to ask you three quick questions. is this an investment grade economy? you have a review coming up, i

critical line in the sand. you have had conversations with the rating agencys. , after the numbers we have just seen, an investment grade economy? president ramaphosa: we are on investment grade economy, i would say, without any equivocation. looking at the interest that the investment community has in our economy, where they are prepared and willing to invest, that shows that we are an investment grade. looking at the recent past we have had where uncertainty and inconsistency were the order of the day, we are addressing that. we are taking dramatic measures to address all of those issues. again -- looking at how we have been able to keep to fiscal discipline. we should be looked at as a country that abides by what it said it would do.

even the stimulus package is a reprioritize asian within the budget -- reprioritization within the budget. taking all these measures, we should be able to be regarded as an investment grade economy. as everything we are doing now is implemented, and by the way, some of the issues we are not implementing were based by the rating companies -- raised by the rating companies. they kept raising issues about corruption, we are addressing that. -- wellhat should be for the south african economy. tom will be guest willing argue my case -- willing to argue my case with them. we are turning it around. tom: can you win next year -- guy: can you win next year's

election? president ramaphosa: without any doubt. without any doubt, with the measures we are taking. just merely taking action against corruption, our people are saying this is the type of government that we want. our ratings are continuing to increase. we will win next year's election. guy: cyril ramaphosa, the president of south africa. thank you for spending time with us here on bloomberg, a great pleasure. francine: a great interview with cyril ramaphosa. welcome to "bloomberg surveillance." guy johnson was just talking to the south african president. they talked about reform, some of the things being put in place in the constitution and they spoke about the rating agencies. joining now -- us now is bhanu head ofthat global macro strategy at ubs limited. we are pleased to have you in

the studio on such an important day for south africa. what did you make of what the president had to say? bhanu: all of the things he said are positive because they lend credibility. this was also on offer to see in the recent budget. they were much more candid about where growth is likely to be on the issues they need to face, in terms of soa restructuring -- so e restructuring. i would argue that all of this is unfortunately in the price. the market accepts this is a different regime, there will be greater governance, better clarity. can south africa actually improve their growth rates organically? i think that will be tough. it is fascinating the interview that guy conducted. the president did not touch on the international context. south africa is a commodity exporting economy and one of the main partners it gives with is

china, and that's where things are changing. francine: how much time does this president had to show that he means business? now it's about accelerating what he has promised. bhanu: i do not think he will be able to do that in a big way. i think it will take time to restructure the electricity sector. they have made all the positive noises, put the right people in place, including in the ministry of finance. those changes are done and i think the markets have re-rated as a result of that. i think the credit splits have come in. i don't think it will have enough time before the election. francine: this is a great chart looking at rand one-month volatility. you can ask any of our guests b plusons by going onto i tv. bhanu: i think china will slow because trends in trade in south

africa are already telling you -- terms of trade in south africa are already telling you the rand is weaker. i think the pressure on the rand is likely to increase. , creditn south africa spreads or credit worthiness in south africa is not been priced to badly. the honeymoon is being priced in. the implementation is what lies ahead of us. i think we are looking at depreciation from here to about 16.5- francine: let's talk about the wipeout of 8.3 billion -- eight --nt treat -- $8.3 trillion --nu: it has led to a value very over valued market in the s&p.

right now it's come under a little bit of pressure. what has not happened is that the market has not fundamentally reassessed growth. industrial metal prices, prices of high-yield credit have not settled become unstable. was alwayshe s&p being overrated and i think that is coming down. i think this is a reasonable connection. we should see a little bit more of this but i think you're just coming down from very expensive levels to expensive levels. francine: we will get back to some of the smart explanations our guest was talking to us about. we will look at the wipeout of how much we have lost in world market cap. bhanu baweja stays with us. coming up, we speak to the chief executive of electro look. war,ll talk tariffs, trade and outlook for the business as the company's stock drops the most since -- you can tune into bloomberg radio on your mobile device or

on the radio in london. this is bloomberg. ♪

♪ shares haveectrolux plunged the most in almost three years after reporting that costs are increasing. giant alsopliance warned it sees a hit to its full-year earnings from higher raw material costs and trade tariffs, and those headwinds could continue into 2019. joining us now for an interview is the electrolux ceo, jonas samuelson. how bad are the tariffs? how much do you manufacture in china and how bad will it be to export to the u.s.? jonas: there is no doubt we are facing some significant

in froms from increase materials, inflation, and increasingly tariffs are a factor. if they announce tariffs increasing early next year, there is no question we have raise prices in the market to offset these cost increases. we have started doing that in quarter three quite successfully. we are pleased with the extent to which we have been able to quickly offset these cost headwinds through pricing an ongoing cost efficiency and that's what we intend to continue to do. francine: the estimate for year-over-year impact is 2 million krona. what has changed -- 2 billion krona? what has changed? jonas: more currency headwind in latin america. francine: is there anything you can do to mitigate the change to the supply chain? jonas: we continue to work hard on ongoing cost productivity.

that is part of our dna, what we do every year. we are implementing cost-based price increases in north america, driven right inflationary pressures and tariffs, and in latin america driven by both cost inflation and by these significant currency swings we have seen. as i mentioned, we have been successful in the third quarter of implementing those. francine: how much more can you raise prices? will it fully compensate what you are suffering because of tariffs an trade tensions? jonas: yes, i think for sure what we are seeing is something that's impacting to a significant extent all of our competitors. i think what tends to impacted the industry as a whole usually tends to get passed on to changes in consumer prices. i expect that to happen this time around as well. the scale of the headwinds are higher than usual. we have to take tougher actions than usual. we are doing that and we are

seeing several of our competitors do the same thing. francine: i was going to ask you, does it actually hurt your market share? does the price increase matches some of your rivals the you are not suffering from it? jonas: if we look at this year overall i think we are gaining market share in europe are consistently and profitably. america, if you exclude the impact of private labels, we have been gaining market share as well with our own brands. in brazil it has been a little bit up and down through the year , but overall we are relatively flat on market share there as well. francine: you have lowered your market outlook for europe and north america. what is the reason for this and what's your demand for outlook next year? jonas: we are guiding towards sort of the lower end of the range we had previously indicated. it is clear the price increases that we and competitors are implementing does have on the margin a certain impact on both

retail -- and consumer demand -- retail retention and consumer demand. francine: thank you so much for joining us, jonas samuelson, ceo of electrolux. thoughtsng to have his on trade tensions and where they go next. up next, a more mature relationship. china and japan say they have an approved relationship as shinzo abe makes his first visit to the country in years. we will talk more trade next. this is bloomberg. ♪

♪ this is "bloomberg surveillance." i'm francine lacqua here in london. has led to its weakest level in a decade. the currency has come under renewed pressure recently after the people's bank of china cut its reserve ratio requirement for a fourth time this year as a country deals with the trade war. how does the on one trade war continue to affect markets and investment? still with us is bhanu baweja from ubs investment bank. do they defend seven? seven a technical level that will mean selloffs elsewhere? bhanu: selloff -- seven is a technical level and it probably means more so lost elsewhere. seven in itself is not a deadly sin. i think what's happening in china, with happening in the currency is symptomatic of the

major changes. china has not had to make a choice between external stability and growth that every country in the world is everyday. china has not had to make that choice since 1993. now for the first time china will have to make a choice about how much they want to stimulate the economy again. you did not have to do that when your current account was 4% of gdp. what does it mean for growth? francine: what will they choose, first of all? bhanu: they will choose external stability. that's not to say that the renminbi will weaken. they have several levers that they can exert. what's happening in europe in that you we stocks recently tells you they are already putting pressure on overseas -- we think the renminbi is weakening here. we think it's going to sell at 7.30.

growth needs to stabilize and come down. growth will come down a, so 6% and perhaps further. francine: is it the rest of the emerging markets that will suffer? bhanu: yes, because china is taking market share from everyone. francine: thank you so much, bhanu baweja from ubs investment bank stays with us. pollstersposters -- may have narrowed his lead. what will that mean for the brazilian currency? we go back to renminbi. we go -- we look at the impact of renminbi weaker. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." we are just getting live hearing out of ankara,

president erdogan talk. a few days ago, he was giving us journalist.he saudi mr. erdogan today decided to talk about the economy, saying.the cash crunch is an issue is asking for patients from the turkish people. we will look at the impact on turkish lira, and have an even bigger roundup on emerging markets. now, let's check in on what is trending across the bloomberg universe on tictoc. revolution rickshaw is taking india by storm. is turkey's.com, it president making his biggest global move yet as he attempts to undercut the power of the saudi crown prince. stories, brexit talks are said to be on

hold. china is set to warn state owned oil companies to avoid buying crude. crude -- iranian amazon and alphabet reported lower than expected growth figures. let's get straight to bloomberg first word news. : talks are said to be on hold because theresa may's cabinet is not close enough to agreeing a way forward. no new plan is likely to be put forward by the british side monday.ext i'm no deal brexit would shave 1.6 percentage points off u.k. growth next year. by contrast, a trade agreement that keeps most of the agreements would increase gdp growth. has covered toward

its weakest level in a decade. scrutinyme under new after the people's bank of china has. dropped. >> we won't result to competitive valuation and we won't use the yuan to deal with trade. this point of view has been reiterated by the pboc many times. sebastian: the new fed vice chair has back to the central bank's chair for further gradual rate increases and suggests that policymakers won't change course and response to fiscal pressure. at the number two federal reserve downplayed the potential impact of recent stock market turbulence, noting the fundamentals of the economy are very solid. billionaire philip green, owner

of top shop has been named in the u.k. parliament as a businessman and has hid accusations of sexual assault and bullying. thought it was his privilege after being contacted by someone in the case. he says he categorically denies the allegations of unlawful sexual or racist behavior. joe bidene president and after robert de niro are the latest targets in a series of suspected mail bombs. new york city police remove the e from a restaurant owned by de niro. africa's president says he has been ever loans by the level of interest in an investment summit he launched today. raid $100ng to

$100 billion.se he says the company is suffered huge damage under the previous administration and is rolling backpack decisions of the past. 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. salek, this is bloomberg. brazil takes to the polls for his presidential runoff vote this coming sunday. the presidential front-runner has seen his substantial lead fall slightly. brazil's stock market and currencies has outperformed peers in the last month. , what do we know about some of the reforms that he would be putting in place and why the markets like him? >> they like him because he is

not the alternative. the alternative is what the market was worried about, that we would go hard left. i think the market is now focusing on the financial aspect. i don't the market is thinking through the math as yet. i think they do believe he is going to have privatization. he is going to privatize cubbies and push through the pension reform. brazil doesn't have the luxury -- south a setbac africa does at one point because debt in brazil is already extremely high. the market doesn't believe he is going to push through pension reform. i think in six months time, we will have questions on whether the possibility israel or whether markets will run up. i do think we have room for optimism and brazil.

bristle candy and outperform or -- brazil can be and outperform or. francine: turkey is one story, venezuela, the common thread is what dollar does. you reminded me that they are all linked because we have not seen a normalizing party ran for the last 10 years. idiosyncratic. these problems are always there. all of these are idiosyncratic issues that come to the floor when the risk-free capital moves. it has been coming up for a long time. the opportunity cost of investing, when it goes up, that is when all of these issues come to the floor. at think we think that the fed is still going to go three more times between now and the end.

that is largely being priced in the forward go in the u.s. i'm not sure it is completely being priced elsewhere in the world. francine: let me bring you over to my chart of the day. this basically looks at how many trillions we have lost in the world market cap. a lot of this is emerging markets. a lot of it is not emerging markets. how much more of a correction will we get? bhanu: i think valuations are slightly expensive and the u.s. and fair in e.m. right now. anticipating a little more correction from here, largely driven by the non-us markets because i think u.s. markets are still seeing earnings being relatively robust. the earnings are there to back it up. think e.m. is where you look -- you will continue to see downturn. francine: is still leaves you feeling higher than the last five years. bhanu: that is the u.s.

that, in the u.s. -- i don't believe we are in a situation where u.s. investors are going to feel confident that this is the right time to get back into europe or e.m.. i think those investors are going to stay home. francine: at what point does the p thein p the -- in fed from raising -- impede the fed from raising rates. bhanu: a meltdown is a very large selloff. i think even if the s&p goes down by another 5%-10%, i don't think that is going to change the fed's mind. the credit market is not in trouble. u.s. high-yield spreads are very tight. men is not really turning red right now. growth is still quite strong.

i think it will remain strong for the next 12-24 months. companies should give you decent earnings. in that case, the u.s. market declined. earnings and amazon are not coming through. a meltdown, i don't think that is likely.i think the fed is going to continue at pace. francine: my question is, isn't only a meltdown that would make the fed stop? bhanu: the strike is very far. it will take a significant tightening of particularly the credit market. because it is coming off a very high level, the s&p would be fine. if you begin to see consumer 100 printsrelax, sub and unemployment rate rising above 4%, that is when the fed is in place. 5% on the s&p, not so much. francine: thank you so much.

as opec big oil reports flip-flops on its plan to pump oil out. the latest on what is driving the markets. this is bloomberg. ♪

francine: you are watching "bloomberg surveillance." i'm francine lacqua here in london. the president of turkey is giving a speech. a couple of days ago, he was focusing on the saudi's and the killing in the saudi consulate in istanbul. now, we hear from him talking about the economy and going back to statements on saudi saying they have been childish and comical.

statements, he says who gave the order. his rhetoric is ratcheting up. it seemed last time, he didn't talk about the crown prince by his full name. i don't know whether he will do it today or not. the rhetoric seems to be heating up on what mr. erdogan is trying to push saudi. let's get back to the markets. it has been a huge week for markets here in europe. arie: there have been a slew of earnings. lafarge, battling higher fuel prices. on the earnings call, the ceo saying there a steep cost on inflation.revenue was a beat, but they did see the dact that they lowere their outlook for profit growth this year. the ceo talking about disposal, they said to early to be talking

about that. those it shares are up 2.5 this morning. iag, the parent company of british airways, their stock is up 2% this morning. they are also battling higher fuel and oil prices, but are able to show themselves somewhat. earnings came in with expectations. their key measure, operating profit, was slightly higher than estimates. the ceo talking on the call saying they had to adjust their growth. route networks plan to respond to fuel. francine: thank you so much. let's focus on oil. shares have dipped slightly after this morning's third-quarter earnings. the french oil giant also raised andproduction prices pledged to keep its spending under control. brent crude flattening out

rtelnd $76 of the ca sites earnings. i want to bring everyone up-to-date with the very latest headlines from president erdogan of turkey, saying the saudi consulate will come to turkey on saturday. we had a veiled threat from the u.s., maybe imposing sanctions on saudi, the biggest oil producer in the world, they pushed back saying, we may retaliate. they're looking at the economy. >> they seem contradictory, but the kind of fit together in the sense that the saudi oil minister was there on tuesday to reassure markets he was going to produce as much as the market needed. a couple of days later, the enlarged opec a group came under as well. we are not sure what is going to happen next year.

they're not necessarily contradictory, and i would challenge anyone to tell me what is going to happen to the global economy in six months. francine: what does it mean on your forecast for the price of oil? stuart: i think it will remain at $70 because the global growth is slowing down. if you look at how oil prices have evolved over the last six months, a large chunk has been because of supply reduction. if demand comes off, that would mean it would begin to pick up, and oil prices pick up aggressively from your. from the u.s. and turkey has been very measured. and restaurants, i think the saudi's will pump quite hard. we still think this is going to be the $70-70 five dollars range. $70-70 five dollars range -- range.

tuart: we have seen quite a lot of trading activity at those levels. that has tailed off a little bit in the last couple of weeks. there are still people out there that believe it. francine: the think the cartel, opec and its allies -- is it more than previous times? the markets around and dangerous to the world economy. bhanu: you also have to remember that iranian sanctions kickback in a less than two weeks from now. there is great uncertainty about that. this morning, we reported that china is not going to take any cargoes, but that could change. probably,a and japan in that same category. it is really going to come down to what are those countries going to be allowed to buy, what are they going to buy without permission, and how do they pay for it? francine: i want to have a victory lap. i found this chart.

remember, you can also use gtb if you are a bloomberg user. the fate of emerging markets, does it rely on dollar? bhanu: it is much more about the fed. it is chinese growth slows down more than expected, both reporters and exporters are going to be in harm's way. , the exporters not necessarily of oil because china is a large supply of oil, but their dominance in copper is much larger. markets are driven by chinese consumption. commodities, that has led to the run-up in growth. tech is under pressure, china is

under pressure, fed is under pressure. francine: thank you both for joining us. still to come, we'll be speaking exclusively to the dallas said president. robert kaplan. that is at 1:00 p.m. london time just before we get u.s. gdp. we will talk said, dollar dollar fed, strength. amazon getting hit in flame market trade. google parent, also but also following pre-trade. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance ." let's talk about the u.s. we get gdp this afternoon. economic expansion probably moderates and third-quarter, but the annual rate is still healthy at the 2.5% prince last quarter. meanwhile, the fed vice chair

has backed the central bank's plan for some further gradual interest rate increases and suggested policymakers won't change course in response to political pressure. the new number to downplay the potential impact of recent notingand turbulence, the fundamentals of the economy are very solid. how strong are the fundamentals and what should the fed' next move bes? still with us is bhanu. when you look at richard, this was his first speech. based remember him sitting at your desk as a guest host. we won't bow to pressure from the president, and we are steadier she goes. bhanu: indeed. that is not unexpected, but not also unexpected that he is saying the u.s. economy fundamentals are very solid. when you look at final sales demand and gdp, the gdp print is

going to be very solid. final sales are actually below 2%. the classic centers are beginning to rebel, but the labor market remains very solid. that is why the fed still has ways to go before it ends. i think it has three hikes to go. this is what i think he is talking about. even today, we're sitting in the bottom. the credit markets have really not tightened up.the dollar has done a little bit , but it is not appreciated that much. in terms of what the stock market has done, you have come down to 15,times which is modest. i don't think this is a case for the fed begins to really worry about financial conditions tightening through the entire economy. the labor market remains quite healthy. i think that is why the fed has to go three times more. in q4, there might be -- they

may be obama-era watchful in reaction to tariffs. francine: i think spreads in italy are going to struggle to rise to aggressively from here because i think a lot of that bad news is for the near-term and a price. this idea of divergence from the euro to the u.s. is kind of in the price. it is a little difficult for to break 112 or 130.i think the euro is stabilizing but i think against china and against the other emerging-market currencies, i think it continues to appreciate, the dollar does. francine: we were talking about italy, do you think italian bonds play on the euro? bhanu: the eurodollar could have been at one or two. the fact that it is trading 113

tells us there is already a large dollar discount because of dollars position being compromised. there is already a lot of premium on the euro as a result. if it is whittle down because of the european project coming into question, it can come under pressure, clearly, spanish financials are not in trouble. i think there is a lot of premium in the euro because people have slowly moved away from the dollar. if the european project comes under question again, i think the euro has some ways to fall. that is not the case today. francine: thank you so much. ."loomberg surveillance continues in the next hour. tom keene joins me out of new york. this is bloomberg. ♪

francine: a week outlook for amazon and alphabet. shares plunge in trading.

european and asian stocks take another like lower. feature stocks look at another day of pain. look at how much support the tight labor market is offering the economy amidst the ongoing trade war. this is "bloomberg surveillance." londonncine lacqua in tom keene is a new york. we're looking at technology stocks, brexit and china. tom: renminbi moving as well. thrilled with the twitter streaming we have been doing. i'm thunderstruck by the erdogan headlines we have seen. it sort of slipped below the friday radar. other tech knows that are out there. mr. erdogan, a lost warning regarding syria and the idea of calling saudi statements childish and comical.

i find that extraordinary. e: what is extraordinary is that after the long speech we covered a link on wednesday, we finally talked about the crown i know how you will make your witnesses talk. he also mentioned the economy, saying it concerns on the turkish economy have been put under control. we will have extra market checks on turkish lira. let's get straight to kailey leinz. kailey: brexit talks are said to be on hold because theresa may's cabinet is not close enough to agreeing on a way forward. source, no new plan is likely to become put forward by the british side before next monday's annual u.k. budget statement. a report by the national institute of economic research it says a no deal brexit would shave percentage points off u.k. growth next year.

an agreement that would keep most of the arrangements which he gdp grow. south africa's president says he has been overwhelmed at the interest in his summit. the leaders of the country suffered huge damage under the administration of jacob zuma and that his government is rolling back the bad decisions of the past. >> we are ahead of the track. we are way ahead and i am overwhelmed by the level of to be inthat continues the south african economy. the new fed vice chair has backed the central banks plan for further gradual rate increases. at the peterson institute of international economics, the new number two at

the federal reserve downplay the potential impact of recent stock market turbulence on fed policy, noting the fundamentals of the economy are very solid. amazon has reported a second consecutive quarter with a sales that fell short of estimates. sharesine retailer slumped in extended trading after the third-quarter result, was also saw a disappointing revenue and profit forecast for the busy hollywood. -- holiday period. twitter and microsoft shares both gained following their earnings. former vice president joe biden and after robert de niro are the latest targets of a series of suspected mail bombs sent to opponents of president trump. the package was moved -- removed from a restaurant owned by de niro. similar packages found in delaware were addressed to biden. 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. leinz.ley this is bloomberg. tom: thanks so much. let's get through this quickly. we have five hours of wonderful guess lined up for conversation today. futures revert off the balance yesterday. a lot of that is the tech earnings. dow futures, -220 or so. dollar strength with euro is well under 114. vix way after that 24 level. the dow closing their. futures on that 24,652, dow futures are solid underneath where we close yesterday. finally, yen strength. sterling islique the one thing we are keeping -- a weak sterling is the one thing we are keeping an eye on.my

concern with brexit is that there is a bit of brexit fatigue. our reporters have been calling everyone in the cabinet and around the cabinet. however, it also seems that every two days there's talk about either being held up by one party or another. keep an eye on sterling. am also looking at a lot of talk on a monday. markets overall look strong. let me bring you over to the selloff we saw in tech stocks. the s&p 500, information-technology sector versus the s&p 500, you can see the steep decline in the tech sector. tom: i want to bring in my guest. rae lignos and sebastian -- are we going to

test of the lows that we saw of 2016? immediately, but i think eventually, we are definitely on a path where you're going to see sterling underperform at least in the short-term. i think part of the problem is that in order to get a deal through parliament, theresa may is going to have to convince her cabinet and back benches that we are on the brink of no deal at all. francine: i think it is so critical to really begin to see a parting of the gdp. is attached -- is it that sharp a distinction of the two outcomes? elsa: i think the really critical thing now is, can we get some kind of deal that will enable the transition. bank so all of this will go relatively's move way? -- relatively smoothly? if you don't have this transition period, where out at the end of march and no one knows where we are going.

setting aside all the uncertainty around brexit and future relations and so on, the current picture is not even that strong. you're not really seeing the benefit to exports you would see given weaker sterling. that, in itself is a concern for the u.k. economy. -- i'me: sebastian, focused on the tech route, does this go back to dollar dynamics and what the fed does? sebastian: i think the overwhelming theme of the market are growth concerns. when we speak to investors and look at the market pricing, the market is very worried that we see an additional sharp slowdown in growth momentum. it is already at a two-year low. the market is priced for this to become worse. francine: how much worse? currently ise pmi at 52.5.

the market is priced for this to fall below 50. we don't think this is going to happen. we think the growth cycle has trust in europe and china. right now, the market clearly is worried. tom: the market is clearly worried. there are all sorts of little tea leaves we see out there, including a small german bank i don't want you to comment on. the basic idea of little stories adding up into a market decline, a market correction, a bear market, are you seeing a summing of stories or can a big picture hold that? could either think about a lot of these little macro flashpoints to me together, or we think there is a big theme that is dominating. in our conversations with clients strongly suggest there is one big worry. most investors we speak to say china has to slow further because of the overall overhang

from trade. there is a worry that china growth will slow. frankly, we think that the china growth cycle has already fallen. tom: when you look at remember the as a proxy for china growth, what do you see? what is the nuance there you see in renminbi? >> it's interesting because this week, we have seen record volumes going through in the onshore market for renminbi. that is consistent with the central bank doing the best it can to try and prevent further renminbi weakness. insaw something similar august 2015 when we saw the one off the evaluation. they are barely managing to keep still. francine: one of the things we have been trying to figure out is theek is what exactly

catalyst? we have seen a weakening and growth momentum. there's a lot of concern the -- if we see signs of stabilization in the macro picture, investors will have to conclude that the market is bearish. edward and stan to be with us. the interview of the day, michael mckee in discussion with robert kaplan of the dallas fed, timely to say the least, the 8:00 hour. this is bloomberg, that is london. ♪

francine: this is "bloomberg surveillance." south africa is helping investors will look plastic leak midterm budget as it seeks to attract $100 billion in investments over the next five years. the target is part of the boost an's drive to economy that has expanded more than 2% annually since 2013. earlier, guy johnson spoke to the south african president. >> we are ahead of the track. we are way ahead and i am overwhelmed by the level of interest that continues to be in the south african economy. many corporate, money potential investors are here.

we have well over 1000 people here. many of them are real investors. they are not just people who just want to come and have a freebie at a conference. they are here because they want to put money on the ground and make money themselves. a little bitalk about where the economy is right now. clearly, you need the numbers look better if you are going to attract more investors. it is a virtuous circle. the midterm budget the finance minister delivered some tough news on the south african economy. the outlook for this year is half of what was anticipated. is less rosyook than originally anticipated as well. era,e legacy from the zuma even tougher than you thought it

was going to be? job of tracking the south african economy even tougher than you thought it was going to be? >> it is tougher because now in the full glare of the commissions of inquiry, we are now beginning to really get into the depths of what has been happening. we can see the damage that was done to state institutions, government departments and corruption has become endemic. fortunately, the wheels do not come off. we are beginning now to renew and rollback the bad practices that have come into play. therefore, we are now in a very determined way, moving forward and making sure that we do, indeed get rid of corruption. ouro, indeed reposition

enterprises. we do, indeed improve levels of governance within our government department. francine: that was the president of south africa speaking exclusively to guy johnson. still with us is sebastian and elsa. i have a great chart looking at rand. does it weaken from here as we expect rating agencies to come in? elsa: that is going to be critical. alongside of that are doubts over how much, in terms of fiscal consolidation, the government will be able to implement. all of the measures that would be needed are politically very unpopular. it is going to be a difficult balancing act. francine: what exactly is the concern? he talks the right talk. he is inheriting an economy that was more corrupt a difficult than expected, or is he not pushing quickly enough with the reforms? elsa: it is a very difficult

time to try and undertake these conditions. if it had been three or four years ago, south africa would have been in a much better place. that would have been more appetite for e.m. assets. it is a particularly difficult time to try and attract investment into an economy that is not really growing. tom: within south africa is a constant and continuing turmoil. is it an emerging market? a frontier economy or something else? elsa: there is turmoil in so many emerging markets. there isarge economy, a very solid mining sector. i the same time, you have there a fiscally challenging situations the government needs to come to terms with. i think a lot of the euphoria we saw earlier in the year has waned. i think it has further to go for the rant in terms of an pricing

that kind of optimism and facing the reality of a very difficult fiscal situation. francine: thank you. both stay with us. coming up, the intel chief financial officer. we will talk to him about tech and some of the innovations they are talking about. this is bloomberg. ♪

francine: "bloomberg

surveillance." tom and francine from london and new york. hen the u.k. chancellor delivers his budget he hopes it will show the u.k. after brexit. mario draghi this week said weaker economic momentum isn't the same as a downturn. there is no reason to doubt the central banks prediction that the blank is on the mend. -- -- is on the mend. do you believe my when he says inflation is on the mend. i do think that inflation is on the mend and it is one of the most famous macro topics at the moment. i think the bigger risk is that we have a very strong inflation pipeline, both in europe and the u.s..

core inflation tends to lack the economic cycle. growth was very strong last year, that points to an upside inflation in the u.s. and europe. the first implication is going to be higher yield rates. just as the market is worrying about growth and all the bond proxies outperforming, we think the big theme is going to be an increase in real bond yields and the interest rate. that is a problem for the bond proxies. francine: what does this mean for euro? moment, it is a very long time before it is going to get positive yields. the u.s., you already have rates as high as they are and only set to rise further.it is very difficult to see why someone would buy euro-dollar now on a promise that cyclically, the ecb will be hiking sometime late next year. outlier call on yen moving weaker. what is your outlier dollar

call? if dollar has developed country dynamics, em dynamics, what is andrbc m call on dollar, particularly the euro? elsa: we have a year-end target of 112 for euro-dollar, we have actually had this since the start of the year. that was a very lonely position to be in at the start of the year. there was this strong concern that we regretted go above 120 and stay there -- we were going to go above 120 and stay there. i think we will see further weakness in the first half of next year because i still think the fed is underpriced and there is more for them to deliver. eventually, you will get that cyclical recovery in euro-dollar, i just think it will take longer to happen. tom: what are we doing in the market right now?

deterioration in futures we are seeing right now. powerpoint on industries to step into, like banking. can you reaffirm that over the last couple of days of a volatility? sebastian: yes, we can. the main drive of the banks is the growth cycle and outlook for rates. we think trust growth momentum is set to stabilize. a combination of factors, stabilizing growth momentum, higher yields is the perfect environment for banks. there is one big overhang from italy.if you are convinced there was a sharp escalation in tensions and italy, that would be a problem. if you say we have to be agnostic on whether that escalates or not, all you are left off are very supportive fundamentals of a growth cycle that is -- renminbi, 6.95

on yuan. let me talk about futures right now. the idea of markets moving on a global basis. bring it up as you can. some of the data we are seeing right now. -285.tures at it is important within volatility to see where dow feature is set right now, 24,000 597 is really getting distance -- 24,597. also looking at serious downdraft in alphabet and amazon. ian bremmer of eurasia group. this is bloomberg. ♪

tom: looking at the bloomberg, it is simple. risk off. with theaught up downdraft in the last couple of days, getting near a 111 handle.

s&p futures -40. look at the end. withis a stronger yen thanks to. what is trending? the firstthis is thing we read when we come in on the morning on tictoc. electric rick sharga revolution is taking india by storm. 11,000 vehicles are being added onto the roads every month. making hisrdogan is biggest move yet as he attempts to undercut the power of the saudi crown prince. our most read stories, in third is brexit. those talks are said to be on hold while the u.k. cabinet cannot find agreement on the plan. the second place is about china countryfact that the

one state owned oil companies to avoid buying iranian oil. stocks having fallen after amazon and alphabet reported lower-than-expected revenues. that gives you a snapshot. let us get straight to first word news. china's you want has slid toward its weakest level in has slid toward its weakest level in a decade. people think china cut its reverse -- reserve ratio requirements for fourth time this year. the central bank will continue to keep it at a reasonable level. china is a responsible nation. yuan to dealhe with trade tensions. this point of view has been reiterated many times and i am reiterating this again today. green, owner of

the top shop clothing chain has been named as the businessman alleged to have use legal agreements to hide accusations of sexual harassment, and bullying. he told the house of lords he felt it was his duty to reveal parliamentary privilege after being contacted by someone in the case. philip green says he denies the allegations of unlawful sexual and racist behavior. battled thes northern mariana islands with 178 miles per hour winds, the strongest storm to hit the territory since 1950. seven typhoons have reached having this year. it may head toward taiwan. the forecast is unclear. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." thank you.

kailey leinz mentions the heart of the matter which is the yuan. enda curran is in hong kong. ,nterview after interview everyone has hinged on china's gdp. give us some new wants to what pros are watching within the china macro economic experiment. : the biggest story today is the china currency. it was heading for a near decade low. there was talk we might break the big seven handle. kened, we sawa a sharp turnaround. chinese banks began to buy the yuan in an attempt to support it. sending ament is signal to the world that they wanted to stay stable.

-- want it to stay stable. we had the second in command of the central bank come out today with a clear message for short-sellers. want you to get in trouble but let us look at the remnimbi. the broad weakening of the chinese yuan. then, down. why did it strengthen and is it a market function? 1-800-stopng dialing devaluation? enda: chinese banks began to sell dollars. we have had rhetoric from saying that china will not devalue the yuan.

they are not about pushing it lower. they want to keep it stable. that has been their message and that appears to be playing out in the market. thinkst think anybody downward pressure has gone away given the trade war, given the complexities and it is so much more than just a dispute. the slowing in china's own economy and the fed heading the opposite direction. plenty of reasons why the downward pressure is going to stay with us for some time. a matter of when and not if it touches seven and what happens psychologically to china? enda: that is the big question. the views are split. some people will tell you it is a psychologically important level. it will trigger companies to get their money out of the country.

others say we are close to that level. have much further to go. as long as it passes through a stable decline, the panic will subside and there will not be any rush to get money out. most people will tell you it is headed towards that direction but it is the pace of that move which is critical. tom: thank you. more bannersto do to show you the immediacy of market moves. elsa lignos with us and sebastian raedler. i want to bring up the yen chart. this is the short move. dollars a lot like the equity charts. significance if we see the yen breakdown through 111, if we see a touch eight 110?

10?a 10 what does that mean for japan? elsa: we have had a lot of lifers plans. japanese lifers happen releasing their plans and a lot are looking for an increase in their unhedged fund holding. if you do see those dips and dollar-yen, there will be interest to buy. consistent with the increased cost of hedging and it is more expensive than it used to be. there is going to be a bid there for dollar-yen. the fact that it seems when it comes to matters of trade, china and japan are on the same page. does that have an impact on either currency? contributoris a into chinese exports in terms of absolute value. trades as a safe

haven and it is critical risk sentiment to dollar-yen. even more critical is what happens to bond markets. if you see bonds rallying, that is classic. see equities selling off and bond selling at the same time, that is a different environment. francine: what does it mean for some of the equities you follow, some of the markets? we need know whether a strong china or a stable china? sebastian: the first one would be a china less focused on currency and more on growth momentum. we've seen a weakening in the credit cycle. the credit cycle has troughed. the credit impulse was -10% of gdp. the driver ofs,

the credit impulse is monetary policy. the reserve has been cut at the fastest pace in a decade and points to a positive credit impulse. the credit cycle has turned at a time in which the market is worried about growth even though a stronger credit cycle means stabilizing growth. tom: i know we're not near levels that are near standard deviation. you are an equity guy. i would like to know from you, are you seeing elements of liquidity issues when you talk to the short-term bond people at deutsche bank? are we starting to move towards liquidity discussions? sebastian: one topic a number of clients are worried about is dollar liquidity tightening globally. i have never seen good statistics that link that to growth performance.

what matters is what happens to the discount rate which is rising but not at the level which justifies the current selloff. elsa lignos, jump in here. what do you see? i have got to agree with sebastian. what we are seeing is exaggerated in terms of sentiment. we have not seen a material tightening in financial conditions and as long as that is the case, it does feel like you should see a stabilization. tom: this is critical. has there been a shift in the last 12-24 hours from a statement we heard through the week? , we are seeing at the moment, good interest to buy dollar and the classic risk off proxies outperforming. news, we will

probably see a little bit more of that. tom: very good. elsa lignos, thank you and sebastian raedler. this is a fascinating discussion as we see market movement again. futures at -35. mick mulvaney, fiscal conservative, he is director of the office of management and budget. fiscal conservative. the 9:00 hour. let us look at data across equities, bonds. yields on the screen, a lower 10 year yield. through 112. this is "bloomberg." ♪

francine: mrs. bloomberg surveillance. tom and france -- this is bloomberg surveillance. relief in the tech sector was short-lived. alphabet down after reporting a second quarter of sales below estimates. amazon also missed revenue targets. out for bed is down about 5% ahead of the u.s. market open. -- of the we will be back is down about 5% ahead of the u.s. market open. et is down about 5% ahead of the u.s. market open. >> the link is the revenue growth seems to be slowing a little. they are compensating with

impressive bottom lines. amazon and google beat expectations on a net level but missed on the revenue. google's miss on the revenue was small, $100 million in the context of 127 billion in overall revenues. francine: both companies are spending more. will this translate into more market share? was something that investors are asking about on the call yesterday. google spend on youtube content and cloud infrastructure and hardware. that could take time to translate into profit. it is new revenue streams. same as amazon, spending on content, that will translate but the subscriptions but forfrastructure

now, it is building infrastructure. amazon, it is a bear market from the peak of august, september. late may. back to how is the sell side spinning this end away from the headline news, what do they see in terms of margin integrity? >> that is the point they are askng, that the ability to for folks to allow big profits to be generated is what they are doing. it is a different story. it is about a becoming a profit driver. tom: you just brought up the question protect and for amazon -- for tech and for amazon. was yesterday afternoon the day

amazon began to shift to becoming a more growth, cash flow driven company? >> it is possible. seen two corridors where they've missed expectations on revenue. india is a huge market for amazon. it is making baby steps. there is an opportunity there. as the contact him, that offers another growth late for the company -- as the conductivity increases, that offers another growth opportunity for the company. there's room for growth. francine: thank you. alex webb, a tech columnist. we are back with sebastian raedler and elsa lignos.

can the repricing going on there take the rest of the market down with it? sebastian: not in europe. it is the most expensive sector in europe. market cap, it is so small, it might be a big driver in the u.s. francine: will that change? it might if europe becomes more proactive in terms of technological development. you're talking about a decade story. it is not going to be a driver of the market in the near term. tom: if it is expensive, where is the most intelligent value now? sebastian: by far the cheapest sector in europe is autos. telecom looks cheap. you have got some of the financials, banks, which were overvalued, they start to be looking cheap now. tom: sebastian raedler and elsa

lignos. upoil, a wonderful our set -- hour set up. edward morse will join us. we will catch up with the news out of saudi arabia. futures -282. stay with us. from london and new york, this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. let us get the business flash. the royal bank of scotland has posted stronger than expected capital earnings. wasating profit before tax 10%. it is majority owned by the u.k. government. -- it givesecutive the chief executive ammunition for buyback. valeo shares have plunged the most on record after trading.

that is after cut its profit forecast because of a slowdown in china and new rules on emission testing in your. it's operating margin will be between 6.2% and 6.5%, the second time this year it has lowered if target. -- it's target. due to risingp oil and gas prices and production. it pumped a record 2.8 million barrels. net income came at $3.96 billion. it raised its 2018 production growth target. that is the business flash. tom: thank you. a first look at gdp, we will see that later today, down to 3% handle. you wonder where it goes after that. with us, sebastian raedler and elsa lignos.

want to talk about the barometers of confidence. in sebastian's world, confidence is tested on the moment. i would suggest euro-swissie is a good barometer. what does a strong swiss spring tell you about the underpinnings of confidence? franc tell you about the underpinnings of confidence? specifically, italy and the swiss franc has always been a safe haven. the move have not been that large and not large enough that b would be worried. it is not out of control. i bring over the folks, this is one of the bloomberg screens pros are going to go to today. date changeover.

you can do 12 months trailing and all that. all of a sudden, into early november, i am going as quantitative tightening and jonathan ferro is going as richard clarida. if i looked at a single-digit return, that begins to erode on confidence. does that feed on itself when we get to 12 month single-digit returns? if you look at it over a longer time, let us say the last 10 or 20 years, the main drivers of the european and equity markets are the growth momentum, the currency, and the discount rate. in the u.s., you were around 10% or higher because growth momentum has slowed. the dollar has strengthened by you would not know it if you look at equity markets.

in europe, you are below fair value. the only questions are, what are these variables doing. in europe, you are low. good, sebastian raedler, thank you and elsa lignos. mckee inrget, michael a conversation with the dallas fed president. in oure, john ryding next hour. john ryding on that gdp statistics are it -- statistic, on where chairman powell is. stay with us. ♪

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"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 yen strengthens. the dollar views a correction.

amazon will enjoy its own bear market. john ryding on the markets and chairman powell's reality. the election looms and an american debt. in this hour, stanley collender. american oil independence. edward morse of citigroup. good morning, everyone. this is bloomberg surveillance live in new york, i'm tom keene. francine lacqua in london. what are you watching? isncine: what i'm watching what you are watching, u.s. data, oil dynamics. what i'm watching is brexit, china and the remnimbi. when it comes to brexit, it seems that the pound shorts are more aggressive than yesterday because they're looking at this fraction within the cabinet and the fact that we will hear -- that we will not hear from the

cabinet position until monday. tom: we will get to the stronger japanese yen in a moment. here is kailey leinz. kailey: brexit talks are said to be on hold because theresa may' risk cabinet is not close enough to agree. no new plan is likely to be put forward by the british side before next monday. a report by the national institute of economic and social research says a no deal brexit would shave percentage points off u.k. growth next year. the trade accord that keeps most of the current arrangements with -- will keep gdp grow by 1.9%. south africa's president is overwhelmed by the level of interest in the investment summit he launched. ramaphosa has launched a drive to raise $100 billion to stimulate the economy. speaking to bloomberg television, the leader said the country suffered damage under the administration of zuma and his government is rolling back the bad decisions of the past.

>> we are ahead. we are ahead and i'm overwhelmed by the level of interest that continues to be in the south african economy. joe biden and factor robert de niro are the latest targets of a series of suspected mail bombs. new york city police removed a package from a restaurant owned by de niro. the fbi says two similar packages found in delaware were addressed to biden. investigators believe some were mailed from southern florida. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." tom: thanks. equities, bonds, currencies, commodities, we will show data through the morning. futures -245.ow

currencies are new wants with stronger dollar. nuanced with stronger dollar. the vix up. it begins to show the banks out there. anything toward -- show the angst out there. through 112. look at sterling. francine: i like sterling. we thought a lot of it was priced in. maybe we were wrong. sterling on the move, stocks in europe are renewing their decline. the dollar gaining. we are going to get gdp in a moment. there is no one better than to talk to than john ryding.

he writes a optimistic letter. he is a great fed watcher and synthesizes a lot of the political economics of our systems. he has had two hours of duty at the bank of england, at the federal reserve. to -- you assume we go forward three? john: 2%. 2.0%.k around is going to growth come in around 3.5% this morning. accompanying that is an unemployment rate that is continuing to decline. we had a record low reading on continuing jobless claims. , a low number. the labor market is getting tighter.

you have to remember the demand side and supply side. the supply side you vols slowly. -- evolves slowly. it is important to look at capital spending because over time, that is going to raise capital stock, that is going to raise productivity. koreawas optimism in yesterday. someone was talking about this stronger productivity growth. oft takes quarters investment. next towere sitting each other when we learned about the madoff scandal. you mentioned productivity. is theme of our listeners the technology overlay we do not understand. is that the mystery for chairman powell? john: it is not only the technological overlay. cut in the a

corporate tax rate which has put the u.s. on a par with the rest of the world. capitall encourage spending over time and we are seeing that. we have to see more. if you look over time, coming which wasmy hometown, the home of the industrial revolution back in the late 1700s. longer the center of the technological world. it is on the west coast. the world ye evolves and --evolves and we cannot get too hung up on the latest data point. francine: this is what the fed look set. if we do not get hung up, how do

you look at the fast pace of change? john: data is important. yesterday, the vice chair talked about a productivity growth measure. that is too low. if you're looking at the demand side, a quarterly number may be an important number to look at. you think the u.s. economy seems better than expected? john: this year, it is doing better than expected. many people said there would not be a big impact from tax cuts. we've got the economy growing at can continuehat but with that comes a lower unemployment rate. all that isr is necessary to keep the unemployment steady. , you've know the game got morgan stanley with a few

rate cuts next year. goldman sachs suggesting more. you've got many more hikes from goldman sachs and a few from morgan stanley. where are you and why are you there? , we had four been hikes for this year, poor hikes for next year. -- four hikes for next year. the fed is adjusting rates gradually and they are going to continue. out,e vice chair pointed there is a difference in policymaking when you're at your objectives. they are at their inflation target of around 2%. there at full employment. k is to adjust to a neutral rate over time without upsetting the markets too much. i do think it is different that

we're no longer in this pandering mode. tom: we have a terrific forward motion. michael in conversation with robert kaplan. coming up, stan collender, edward morse. this is "bloomberg." ♪

kailey: this is bloomberg surveillance. i'm kailey leinz. polio shares have plunged the most on record. that is after it cut its profit forecast because of a slowdown

in china and new rules on emission testing in europe. it's operating margin will be between 6.2% and 6.5%, the second time this year it has lowered it's target. amazon has reported a second thing consecutive quarter -- second consecutive quarter of sales that fell short of estimates. shares slumped after the third-quarter results which also saw a disappointing revenue and profit forecast for the busy holiday. that is the business flash. tom: more data checks, futures at -34. kevin cirilli in washington, counting the days until the midterm elections. immigration front and center. it is always the issue that fires up the base for the republican party. how does immigration fire up republicans and democrats? kevin: it is about the base.

president trump calculating the issue of immigration, the issue that this caravan is going to motivate republicans to get to the polls particularly in states like texas. he needs of those voters because democrats are targeting the suburban areas to rally bases to pick up the seats they need to take back control of the house. has eluded reform both republicans and democrats, predating president trump. you are starting to see this with the u.s. administration trying to use immigration to and to bolster the economy along the southern border. tom: our audience knows the cultural wars of america.

let us bring up the language of for reads a courier. zacaharia. has notcratic party found a way to go on the offensive. i thought this was brilliant. whether the democrats can move right on culture. is there evidence of that? kevin: i would disagree. i think the issue of separating children from families was a win for democrats. how the is right is on president has been able to mobilize the base following the cultural wars of justice kavanaugh. you could make a case that the republicans have seized on that. the democratic base is fired up. i will leave it there. sorry. francine: i do not disagree.

has anything changed? we talk about saudi, about geopolitics, about domestic concerns. what has changed that would make people change their vote? kevin: nothing. i sound like a broken record but that is a bottom line. ever since the confirmation of justice kavanaugh, there has not been a turning point. ,ook at senator ted cruz congressman o'rourke has not been able to have a turning point shifting of the narrative , youhat is why you've seen see intended or ted cruz doubled down on the culture wars, such as the kneeling in the nfl to try to portray a centrist as more of a progressive. tom: thank you. our chief washington correspondent.

john ryding with us. edward morse will join a little bit. right now, on the debt and deficit, stanley collender joins us. to get this discussion started and we will drive it further, how ugly is the debt -- deficit vector now? the treasury said the deficit is going to reach about $1.1 trillion and keep going up from there. is assuming nothing bad happens that requires additional money, like a war or another hurricane. we are talking about a deficit that is at least $1 trillion for the next four or five years. it could reach $2 trillion. am: john ryding talks about

run rate getting down to 2% gdp. plug-in thatgdp works for deficit dynamics? stanley: if it gets below 3%, we are talking about deficits that rise every year for the next couple of years. the administration is praying and promising that the growth rate will be 4% or higher and i do not know anybody who thinks that is going to happen. you see rates below three and you start to see deficits rising. francine: when it does not happen, will be administration recognize it is not happening or will they blame it on the fed? stanley: they will blame it on the fed to a certain extent. the question is whether it will precipitate the administration into shifting gears. the answer is no. this is a president that things

printing money is ok and if there is a split congress like there is likely to be, there is not going to be any place for compromise with spending cuts and tax increases. francine: what about the 10% tax cuts after the midterms? is this something they are looking at? , i do not see anything yet. there is a path to get there. pass a budgetuld resolution, they would not be worried about a filibuster in the senate. they could get another tax cut. i do not think it is likely but there is a path to get there. i do not think the 10% tax cut is likely. i do not think a 5% spending cuts is likely. you see the president throwing everything up on the wall trying to get turnout. and stan john ryding

collender, both stay with us. coming up, a thing or two about trade. this is "bloomberg." ♪

tom: good morning. bloomberg surveillance, lots going on. i'm tom keene in new york. stan collender with us, john ryding with us and linking in monetary theory. go to the screen, this is sterling, breaking through a 128. this is weaker pound sterling, breaking down through 128. one of the moves this morning. john ryding with us with his work at bank of england and the fed. what is austerity? mick mulvaney is coming on, he wants to balance the budget and we are going the other way in america. does america know what austerity is? no.:

you did ask, what is the number that makes the budget work? that number is the same number that was your number which is three. england, thefrom number three, 3% growth. that is from the boys at preston football club. tom: i think it will fit my dog's vet bill. francine -- that is the real deal. thank you. stan collender, where is the austerity? stanley: a good question. i think john is right. we are not going to balance the budget anytime soon. to have aas tried

budget resolution. that is impossible. the deficit is high. there is not enough spending. no one is willing to increase taxes. even the cut that francine mentioned, even that is only a small part of the budget. much, evenot get you if they do it, and that is not going to happen. we are going in the opposite direction. tom: i know they do not care for the midterms. are we going to care for the presidential election? everybody else's looking at deficits. is it done? stanley: i think the answer is yes. they've been preaching balanced budget and deficit reductions and they are powerless. there is no demand for it. until you see an impact on individuals, until they feel higher interest rates, until they feel higher inflation, no

one is going to be pushing for deficit reduction. just the opposite. you are more likely to see increases than reductions. tom: thank you. i am not focused. i have got to cheer up. , preston northit end? i think we have a new team. it is not chelsea, all the other ones. look at that. what is number three? john: that is your number. tom: this is bloomberg. north end.ston ♪

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: markets on the move this morning. francine lacqua in london. i'm tom keene in new york. futures -33equity

now. there is character to it. i see more correlation with other assets. francine: there is correlation. i am trying to figure out what is leading the most. a lot of european indices are under pressure. individual stocks falling by as much as 7%. companies.ewable oil tom: let me bring up this chart. this is important for our global audience. this is deutsche bank. we do this on fridays on bloomberg surveillance. , there,deutsche bank that is the drop. that is something. it is something and it is affecting other banks as well. we will get back to that.

south africa is hoping investors will look past his bleak midterm budget as it seeks to attract investment over the next five years. the target is part of the president's drive to restore confidence and boost an economy that has not expanded more than 2% annually since 2013. guy johnson to the south african president. pres. ramaphosa: we are ahead and i'm overwhelmed by the level of interest that continues to be in the south african economy. many corporate and many potential investors are here, well over 1000 people here and many are real investors. they are not just people who just want to come and have a freebie at a conference. they're here because they want to put money on the ground and make money.

guy: let's talk about where the economy is now. clearly, you need the numbers if you're going to attract more investment. it is a circle. you need to improve things. the midterm budget your new finance minister delivered on wednesday delivered tough news on the south african economy. the outlook is half of what was anticipated and the trajectory that the debt is on is less rosy than was anticipated. the legacy from the zuma era tougher than you thought it was going to be? is the job of fixing the south african economy tougher than you thought? >> yes, because now in the full glare of the commission of inquiry, we're beginning to get into the depth of what has been

happening. we can see the damage that was done to state institutions, to government departments, and corruption has become endemic. the fortunate thing is that the wheels did not come off. we are beginning now to renew and roll back the bad purchases that had come into play. we are now in a determined way, moving forward and making sure that we do indeed get rid of corruption, we do reposition our state owned enterprises, we improve levels of governance within our government department. tom: the president of south africa with guy johnson. engineering and

technology gone bad. rolls-royce is not getting it done. this is not the automobile company. 50,000 employees in aerospace and the engines. go to the headlines. rolls-royce to fall short of engines. they tell staff delays will hamper airbus deliveries and airbus is down 6.6%, the most in two years. this is not a surprise. there it is, failed into nearing technology. let us get to first word news. a new fed vice chair has backed the bank's plans are central rank increases and suggested policymakers will not change course in response to political pressure.

in a speech, the new number two at the federal reserve downplayed the potential impact of recent stock market turbulence on fed policy, noting the fundamentals of the economy are solid. has slid to its weakest level in a decade. come undery has pressure recently after the people bank of china that its reserve ratio requirements a fourth time this year. the deputy governor says the central bank will continue to keep it at a reasonable level. china is a large nation. will result towe competitive devaluations and we will use it as a tool to deal with trade tensions. this has been reiterated many times. i am reiterating this again today. kailey: philip green, owner of the top shop clothing chain has been named as the businessman alleged to have use legal agreements to hide accusations of sexual harassment, and

bullying. peter hain told the house of lords he felt it was his duty to reveal the name under parliamentary privilege after being contacted by someone in the case. philip green says he denies the allegations of unlawful sexual and racist behavior. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm kailey leinz. this is "bloomberg." francine: thank you. relief in the tech sector has been short-lived. amazon down in premarket trading after reporting a second consecutive quarters of sales below estimates. they also missed revenue targets. they tell a senior research analyst -- it a senior research analyst joins us. when you look at amazon and both spending are

more but it is not translating into the bottom line. >> it is not translating into the top line. and there at 30% fourth-quarter guidance is to be up 10%. still, pretty strong considering how big the company is and how fast they happen growing. the profitability was strong this quarter and is expected to be good next quarter as well. mencine: you are telling your earnings report has to be perfect or your stock will be punished? that seems to be the case. it seems like people are taking profits. there are jitters. this company has a long-term view. amazon is doing well. i do not think they are worried at the corporate office this morning. tom: is there any indication that mr. bezos and his team want

-- to some different form of different strategic model? form of cash flow driven strategy or is it billed revenue? -- build revenue? joe: they are focused on building but they realize they can generate profitability. business and advertising are continuing to get more profitable and fund the retail business. that continues to work for them. tom: are they going to institute a dividend? bezos let us do and dividends? -- a dividend? joe: i'm not sure they are there get. i think they are focused on winning market share across all aspects of their business, whether it is retail, advertising revenue, media.

they are focused on gobbling up more market share. does the capital expenditure help with market share or what does it help with? joe: it helps fund innovation. they have a culture that focuses on growth and being able to try and test rings and fail. -- test things and fail. that is ok. that has been helping to drive this company. they are focused on doing what is right for the customer and bit,if sales have slowed a i think with the profitability they're going to get and the sales growth is better than most of the others out there, i still think this is a winning company. francine: do you worry about the cloud computing business? i am not so worried about that.

45% growth on top of 50% or 60% last year, it does not seem there is an end insight. they were reminding us about how small they are in cloud computing relative to the potential market size. we think there is room for growth at a high level. i take 30%, 40% growth any quarter. tom: that is ok. feldman, a senior research analyst. i do not think hammered is the right word. we have got lots to talk about. john ryding with us. withd morse, coming up citi research, their global head of commodities. thrilled to bring you dr. morse. this is "bloomberg." ♪

tom: a magical morning here at bloomberg. francine lacqua and tom keene. stan collender on the fiscal budget. john ryding with us and we are thrilled to bring you edward morse of citigroup. i must start with your thoughts in what we have observed from saudi arabia in the last days. edward: we have seen an impact on the oil market. after a temper tantrum that came from on high, indicating they might pull oil of the market. tom: do they have that market -- that power?

do the have the ability to move oil by political reaction? they have shown, the long-term consequences are dire. it not only brings about lower recession but a it spurs on growth in and growth inels competition from the united states and non-opec countries. francine: have you ever seen opec and the sally's -- our allies go from one thing to another so quickly. saying theyinister are going to pump as much as they need to. now, because of inventories, because of concerns, there talking curtailing it. edward: they are confused about the market. the impactt look at of market prices. when oil went to $86 for brent

, that waswti went up a function of financial markets. one record level to another. it went right through the old record. the price went up with it. reasons,ber of associated with the fundamentals not change it, that was a selloff. that has continued. swings that have nothing to do with fundamentals and a lot to do with financial waited, they they would say markets are going to get tighter, prices will go up. is a volatile world and that is the lesson they should learn, not to speak on the basis of financials close -- financial flows. francine: how tight will they get. i think we're going to

betweenfinitive split the major benchmarks, brent and wti. the global market is going to remain tight through the fourth quarter because of what opec has been thing, a lack of spare capacity. if there were to be a disruption thany, there is no more 700,000 barrels a day they could be brought into stem a price increase. there is disruption in nigeria, in libya, in venezuela. we have a market that is tight not just because the oil market has low inventories but because the natural gas market has low inventories not just in the u.s. there could be a cold spell anywhere. we have either the winter weather or disruption. tom: i have got eight ways to go.

politics of europe always comes back to russia is the hydrocarbon provider, a provider of heating oil. where is that discussion now? he control the thermostat in european homes? edward: to some degree, he does. europe is moving to put in liquefaction, liquefied natural gas. remains tied to russia on the oil and gas side. europe isosition for that russian entities want to export material and they do not like high prices. tom: what level of gallon of gas makes the media issue a political issue in america? is it for dollars? edward: right now, four dollars. tom: an important update.

very -- thankou you. i want to come back with john ryding with important comments from chair yellen, publishing today. please, stay with us. francine: go on to gtv . you can still charts. -- steel charts. this is "bloomberg." ♪

tom: bloomberg surveillance. francine lacqua and tom keene. michael mckee encumber say should robert kaplan of the dallas fed. in conversation with robert kaplan of the dallas fed. it is an interview. it is with chair yellen who does not mince words. for armer chair watched presidential tweets as she raised rates. she goes on to say, i have some reason to believe it might be a mistake to replace me.

think about the history of this. we should not feel the financial stability glass is half-full. it is an extraordinary interview over lunch. the idea she is framing the ahistorical nature of our politics. they have no sense of the politics, of the history of the fed, do they? john: we have a president who may be goes out side the lane of monetarythorities into authorities in a way we have not seen. the fed is a resilient and independent institution. i think they will it ignore this noise. they will focus on fundamentals and keep raising rates and whether that brings along tweets

, hikes untily rate we get a rate of adjusted -- rate of justin inflation isrease where janet yellen taking shots at the bar? the inflation rate is around 2% and it is creeping higher and the risk is a goes higher. -- is it goes higher. long-term rates are around 2%. 3%,ave got to get back to in terms of interest rates and that is where the fed is headed. a number of people at the fed mediumhat 3% is the long-term estimate of where the rate should be. now, we are several hikes away from that. to thee: what happens

markets if treasuries touch 4%? john: 4% is our forecast for 10 year yields at the end of next year. what is it that drives interest rates to 4%? to 4% becausees the economy is strong and real rates are rising, that will be met with higher equity prices because the profitability story will be strong. fede goes to 4% because the does not do what it needs to do and inflation expectations rise, that becomes negative. thee see rates rise with real rate in the rise of 1.5%, maybe towards 2%, there will be bumps along the way but that will be supported. francine: and that is your base case, right? john: that is correct.

economic growth is running above trend. i think the fed is going to continue to raise rates and the 10 year is going to rise. bring up the chart, brent crude. down we go to 29 and up we go. what is the linkage of strong dollar with oil? edward: i think there is an indirect linkage. the main linkage is having an impact on emerging markets. this impacting the market more quickly than we thought. will chairman powell have to a depth and adjust to a leader of petrol in istanbul? edward: i doubt it. the fed worries about things when it impacts the u.s.

economy. were in anrkets issue and we worried about global contamination. i think we are in that environment. tom: we are out of time. john ryding, thank you for joining us. arerd morse, futures negative. we will be doing more data checks. michael mckee with robert kaplan, look for that. this is bloomberg. ♪

>> the whipsaw continues.

as a globaloff equities lose $8.3 trillion is late september. and resigned apple come up short. they are still growing but not as much. and it's the economy, or is it? strong growth expected, but will that be enough? welcome to bloomberg daybreak. i'm david westin right here with carol massar. and here we have the anchor of bloomberg businessweek. andoll: right to be here what another interesting day. david: another interesting day. carroll: let's get to the board because david mentioned we're seeing the impact already today in terms of the setup. yesterday, we had quite a rally with good tech news. saw the markets with a very different tone. terms of today's se