trick as we see markets go higher. the pound is stronger despite the selloff yesterday. a note yield rise it was getting closer and would lead to a recession. the features suggest, it looks as if we are expecting more treat for european equity markets. let's open up the market and see if we do bounce. we have had a host of earnings reports. coming through from santander, airbus, dsm, air france klm, the list goes on lots of individual corporate stories. we are looking for moves higher from the likes of l'oreal as well. profits were down for air france klm, but came in above estimates. inx up by 1.2%. the corporate story being factored in, up by 1.4%. but see what matt miller sees.

matt: let me give you the spanish gdp growth. you're talking about that. we do see spain's quarter gdp rising. the estimate was for 2.5%, so bank . helpful to should be the european numbers, although france yesterday was hurtful. here, you can see the euro-dollar trading, though not much has changed. the imap is concerned, he saw green across pretty much all of the industrial sectors. as anna said, more treat them trick today. although this month has been a hell of a trick for equity investors who are along these markets. consumer discretionary stocks are not holding up as well, health care either. but there have been individual earnings stories that could move

separate from the rest. what do you see in the mrr? anna: let's have a look at those, we see how individual stocks are performing. l'oreal up by 5.6%. another boost from china. luxury really leaving in this business to be growth since 2007. a strong story coming out of l'oreal. despite the fact they are producing capacity plans, it was not a positive story for them. -- didd not manage manage to beat in terms of estimated profits. sanofi, another strong performance. they guided the market higher after beating estimates. and bank a sense of their stronger as well -- banco santander stronger as well.

they gave us earnings lower than estimates. a weaker sales picture, so we see the stock weaker. we also see other names weaker in sympathies. that is a look at the individual stock movers them, matt. matt: individual movers pictured there, but in general, european markets moving higher and european growth missed forecasts and the third quarter, so willing to put out a little bit of a punt. dipping below the trend rate as well. what lies ahead after an unfortunate october? joining us now is andrew perry at hermes. -- hermes investment management. think about the blow that anybody is doing equities stuck in october? do you hide or come back in for more? andrew: a dose of realism has

come back to the markets. if you look at how risk appetite was behaving into this month, it was like unbridled optimism with very little seeming to knock investors off-track, particularly in the united states. i think it was a healthy and much-needed dose of realism. stocks cheaply rather than just by momentum and buy them extensively. the earnings season has been a variable, that was not a surprise there was enough decent news up there to encourage back into the market. anna: good morning. i have a chart that shows some fading sentiment. what do you see in eurozone growth? you see something to be concerned about? the sentiment indicators showing trouble lies ahead? i think we have seen the

best of growth in the united states. some of this is trade skirmishes. it is a hint of what could come there is an escalation in the trade war. about exchange rates, the dollar has been strong. talking in put prices, softening demand. this is a general trend and is specific to certain industries. it does tell you what could happen if the rhetoric gets cranked up. matt: i'm going to break in here and change the subject. the boj has just come out with changes that it is making to the plan purchased ranges in buying secret sees that sequences under its monthly bond purchase --gram for november sequences under its monthly bond purchase program.

it is fairly complicated, and to me, not very interesting. you think about the boj and the difficult position they are in? andrew: use the right word, difficult position. this is the problem central banks will have to navigate. the agendal set that, at some point, you have to move away from liquidity. i think the u.s. has done it the fed is, actually often criticized, but it has been a good role model. in europe and japan, where we have had negative interest rates, the problems become so much more entrenched. it is difficult to move them to a normalized regime without spooking the market.

part of october was in a reduction of liquidity. if we begin to see qt elsewhere, that will create more -- in the market. kuroda saying that the big picture on inflation is basically no change. the inflation picture has been picking up. andrew: the inflation we have been seeing is a more of a cyclical phenomenon. it is not a surprise we are beginning to see labor rate pick up. middle income and, i think labor costs are still contained. we are not worried about ,nflation over the medium-term this is just a bit of a normalization in the inflation rate. matt: we will keep you with us, a lot more to talk about.

andrew perry, head of sustainable investing at hermes investment management. up next, we will bring you the stocks. we are eight minutes into the trading day. has risen after third-quarter results impressed investors. the shares are up in madrid. we tell you more about that next. this is bloomberg. ♪

anna: welcome back, this is the european open. 10 minutes into your trading day. let's get to the top stock stories need to watch. >> we are looking at a lot of earnings stories, all green. what it comes to telefonica, trading at a two-month high. they have doubled their full-year outlook when comes to revenue. they had a big investment in football that is paying off. sanofi another one with solid earnings. that is after reporting the first quarterly growth. again, bidding us out nearly 5% santander also with gains. that's after another solid

earnings, an increase in their quarterly growth. investors are liking that, they were able to post gains even with volatility in the currency. much.thanks very let's get some more on that last stock. earlier, we spoke to santander's ceo. >> our target is to continue building capital. above.get is at 11% or we are already there. time, we believe that current conditions recommend having higher capital than just 11%. matt: let's bring in the madrid bureau chief for bloomberg news. it seems like the bank earnings did impress investors.

what is the most positive aspect of the report? >> good morning. , oneost positive aspect we've seen analysts pick up on, is this issue of capital. they have reported an increase in their main capital measure. their capital measure -- levels have been under scrutiny because they have seem to be somewhat short of capital. that is because of their retail-based model, but today's, they have reported numbers that show capital measure has improved quite significantly. in fact, they have reached their year and target on capital. the market is taking that well. anna: what about exposure to various markets? this is something santander knows a lot about. they are a bank which relies on emerging markets.

brazil is a huge part of its business, we have seen a lot of political volatility. it has always been that the underlying business in brazil is a solid. evidence ineen any ofs set of results disturbing issues and resume. -- in brazil. anna: thank you very much with the latest on his banking sector. andrew perry, head of sustainable investing at hermes investment management is still with us. give us your big picture on the earnings story. hasn't served a purpose to reassure you or make you more ?ervous andrew: the earnings season has

reflect the underlying strength of the sector. however, there are those straws in the wind that suggest tightening liquidity is beginning to hamper a few sectors. just talking about autos and houses. but it has been a lead indicator for tightening rate environment. it is beginning to crimp demand. anna: this is the chart we were just discussing. at the bottom, we have got autos and house builders. during this month of october, it has been so scary. i read a note that says i can't find anybody who enjoyed october. but look at the rebounds we have seen. you say this is just a function of lower interest rates in it in -- in the markets? andrew: it is illustrative of a to fear points.

one is the fed tightening. they said they might need to go further than the market, that spooked markets when rates were up. it is like a natural stabilization mechanism. the other one was the china-u.s. trade more. the auto industry is generally being targeted by the trump administration. so has the language used? cars cutting tariffs on was the reason why, but it shows you where the markets real fears are of that general direction and the risks going forward. are you concerned about the auto industry? aside from volkswagen, we had so much negative news, and of course, they had others.

how bad does it look going forward? they have got a trade fears, being an emblem for that. they have got a transition going on. diesel begins to lose its dominance. we have got sufficient volumes of attractively priced companies and cars with sufficient range. and then we have general economic conditions. they will probably be in the spotlight for a while. this is an example of a company that drives the transition. is that the main auto companies electrifying. we have this going on and have that uncertainty over the trump administration which is going to tackle tariffs going forward.

will we have a full-blown trade war? i think they will be in an uncertain place. matt: if i take a look at the ea function, here we can see, by surprise or growth, in terms of grow, if we have 11% earnings growth for the stoxx 600, 4% topline growth. tag,click on the surprise we can see that we are beating and losing on sales. what you think about the earnings picture in europe? certainly not as rosy as the u.s.. andrew: the u.s. has seen a deceleration in sales. they are less good on the earnings number. the u.s. story has been very good. i think they are doing what they always do, chugging along in a

2% growth range. there is a wide despair and see disparity at the level. currencies are beginning to help a little bit, because the dollar has been strong. there have been in demand issues coming out of china as we see these tariffs rise. matt: thank you very much. andrew perry, head of sustainable investing at hermes investment management, stays with us. as wecheck in on markets are 90 minutes into the trading day. this is what markets look like right now. green across the screen, a sugar high this halloween for equity markets. u.s. features point tire. this is bloomberg. ♪

>> what is happening in the short term with price is mostly a result of the uncertainty around trading disputes. fundamentally, we think the outlook for copper is very favorable. >> i think china has a number of levers they can use to simulate the economy. we have seen that improvement. , wehe inverse correlations

-- these trade wars could impact the dollar. caution, to a certain degree, has to be blown to the wind. reserves are declining. if we are not replacing the assets, we're going to stop existing. just a taste of our exclusive interviews from the international mining and resources conference. welcome back to the european open. we are 20 minutes into the trading day. ofthe most frightening day the year, halloween, after a horrifying month for stocks, today our mliv question of the day is what scares you most about these markets? ,ndrew parity is still with us

-- andrew perry, head of sustainable investing at hermes investment management is still with us. what is your answer? andrew: there is only one truly systemic geopolitical risk and that is the relationship between china and the u.s.. mentioned, it is skirmishes. if this does deteriorate, there are no winners. these are two great superpowers clashing, almost a battle for supremacy. either of themee wishing to step down and lose face. china-u.s.nk the tensions will go away. it is possible to see them escalate. anna: interesting, because some suggests it is the fed to be afraid of. but are they just reacting to stimulus in the trump administration?

or is the fed the source of the fear? andrew: the fed can derail the economy. but is that a really structural reason? it is self-correcting. if they go too far on rates, they will cut and then go back down to an accommodating stance. when we look at china, that is a more systemic issue. the fed seems to be less concerned about asset prices than previous lords have been dashboards have been -- boards have been. andrew: i don't think it is the central bank's position to stimulate asset prices. it is to manage and balance the growth in the economy.

i welcome that, it leads to a better quality of earnings, rather than a fed that is focusing too much on financial assets. the fed is doing a good job, normalizing. anna: i wonder if we should talk about trump, with regard to policy. if. the selloff gets to that, does that make him change? andrew: i think it goes much deeper. it is not just trade. trade is an emblem for what the administration is looking at. they do not want china to get to advanced. there is a fragility in the political system, now is the time to act. this is much more of a political viewpoint, rather than trade. trade is one mechanism and we don't want it to go beyond trade. matt: we will continue talked about china. andrew, thank you for that. andrew will say with us.

you can join the debate as well and answer the mliv question of the day. iv tv go to message us and we will include your answers. this is bloomberg. ♪

matt: good morning, 30 minutes into the trading day. red october, stocks rally in europe and asia. but globally, there are still headed for the worst month in more than six years. profits surge at santander. they beat estimates for the third quarter as the chair says she sees many years of growth ahead. soothing words from standard charter. the banks measures of profitability lag, but they senate shares higher. it is the biggest gainer on the ftse 100 this morning.

welcome to bloomberg markets. i'm alongside anna edwards at bloomberg's european headquarters in london. look att's have a returns, this is the picture of the individual stocks. london listed up by 7.3%. , and onceorting again, china and luxury seem to be the watchword's, managing to drive the company to the best growth since 2007. positive story from france. sanofi up, underlying the strength of the earnings and france. better than estimate numbers. standard charter also guiding numbers after a rally in hong kong. downside, we've got the u.k. retailer in negative territory. their numbers for sales were worse than estimates.

we have a host of other stocks moving to the downside as well. these were also down. managing to deliver numbers in line with estimates, getting an upgrade, but that stock is down by 14% let's get an update on bloomberg first word news. businesses are getting increasingly nervous about the u.k. governments ability to pull off a brexit deal. optimism slumped to the lowest levels this year. the drop in confidence was felt in almost all parts of the country. a separate report also showed that consumer confidence falling in october. corona says that rice estimates are not rising in japan as they

leave policy rates and targets on hold welcome for they will not meet inflation targets for years to come. the central bank trimmed inflation forecasts for the current and next few fiscal years, saying it will remain below target until early 2021. local media said seven people as a disasteread sweeps across philippines. the country was already devastated by last month's typhoon. according to the disaster monitoring agency, at least 30 people are trapped in building felt by landsides. global news, 24 hours a day on air and on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. this is bloomberg -- matt and anna. anna: thank you very much. i want to talk about a function we use to track what has been moving markets.

which of these investing styles have been moving things around? i wanted to get your thoughts on contrasting october with what we have seen her to date. we have pulled out the downside. , downhas been the laggard by 12%. i canlose that animation, show you, the contrast of what has been going on over the motor period.- more recent if we pull out away from that and changes to last month, we can see that value has now moved. value is a big negative for markets, and now it isn't set tell us anything about where we had from here? andrew: one of the factors i was interested in was momentum.

momentum has been up 16 or 17% at the beginning of october. by the middle of yesterday, it what we have seen is a rise in passive, , with 90%ve investing of the turnover on the new york stock exchange coming from this passive trading. there is a tendency for momentum to the get momentum. and it works as a factor, until it doesn't work. and what we have seen is this incredible collapse in momentum, and when it suddenly turns negative, people revert. or fourhad about three of these big reversions. the problem for the value stocks over that. always been worth than growth stocks.

i think we will be in the same position. they will continue to have bad revisions. there was a fundamental justification of growth being a driver that just got taken it too far. i wonder, because of what you do, you are head of sustainable investing, does that make you naturally inclined to one factor or another? when we think of sustainable investing, i think of value. is that wrong? every company, to be at attractive or long-term sustainable investment, has to have an attractive mix of growth and evaluation. -- valuation. some of the poster children got caught up in momentum trading in the first nine months of the year. they got great emerging growth

opportunities, so they are actually cackling. but the rise in interest and sustainability, etc., did mean that from a factor point of view , some of those did become crowded trades for people looking at factors rather than long-term investments. anna: thank you very much. andrew perry, head of sustainable investing at hermes investment management, really great to get your thoughts on the markets. let's have a look at our stock of the hour. this is what we have got, this is sanofi. with a crowded field for stock the hour this morning. there were a number of companies that could have been in their, but they are listing their forecasters. they say earnings will provide faster than expected.

that is one of the focus points for this business. is on the rise, up 4.7%. . next, we bring you some stock movers. includes the u.k.-based computer center getting crushed. we tell you why. this is bloomberg. ♪

matt: welcome back to the european open. we are 41 minutes into the trading day with stocks across the board. despite the fact that angela merkel seems to be in her twilight, she has served as the german chancellor since 2005. including the financial and migrant crises. on the global stage, her voice has been one defending liberal values which have increasingly come under attack. for 13 years, she has worked with three u.s. president across the political spectrum. and as the era comes to a close, questions swirled around succession, international relations, and the future of europe. we are joined by the united states ambassador to

germany during the clinton administration. ambassador, thank you for coming in. let me first ask what you make of this move by angela merkel. of always says the leader the party and the chancellorship, those things go hand-in-hand. and now she steps back from one and not the other. >> i think she is acting out of necessity. she had to very, very devastating election result. she is now trying to improvise to keep herself in power as long as she can. other german chancellor's have also stopped being part, that was basically the beginning of his and. she understands that giving up the chairmanship is also ultimately giving up chancellorship. something i have been thinking is that she opens herself up to increased competition within her own party.

can someone like the young health minister, who is far more , whatvative than she is if they become the head of the party, is that not a problem for her? >> it definitely is, and she knows this. she has proposed that heard secretary general be made the new chairman. has a hard road to hoe, she is very new on the scene. and he is a well-known quantity. herink it will be hard for to get akaka into its. anna: i wanted to ask about the transatlantic relationship in the post merkel era, or in a weakened merkel era.

how do you think the u.s. administration reacts to a weakened merkel? >> it has been a no secret that president trump does not have the warmest affection for miss merkel. he also has not had the most positive relationship with germany. i would say that the europeans, , do not understand how to live with and to do with the new tones coming from the united states. right now, there is so much upheaval going on that i think they are more concerned about what is happening here. when summary says transatlantic, i think of this german-american association that i believe you are a member of.

what do you think of his chances? something that the german media has gotten pretty excited about. john: the media is excited and polls show people want him to be the new chairman. germans get schizophrenic about their leaders. they don't like to change -- chancellor's. i always surprised people when i asked them how they chancellor's they have had. an unknowns timeclock, with sophie's time is up, they are up. it has happened before. excited ispeople are that he is just different. merkel has pulled off a really by turningn a way,

the cdu into the social democratic party. that means there are lots of them who think it has not become conservative enough, merits is one. -- mertz is one. everybody knows that, and i think she knows it also. 's let me is more difficult to take the reins here? she has been dubbed many merkel but some parts of the media. john: that's right, and that is her biggest problem. i think she is a wonderful person, but her biggest limitation is that she is seen as the medical follow-up. and we are in the climate where people do not want a continuation. matt: let me ask, one thing i , we been thinking about

heard the future of this coalition questioned. how long do you think this coalition government can't survive? how long can merkel stay in office? john: nobody knows. they are different parties. more american party, a loose affiliation of people who more or less see the world the same way. but the other is a essentially fashioned party. i don't think you will see the make any changes. but at the same time, the rank-and-file is looking at the polls. they did not like going into the coalition to begin with. the coalition will be very accident prone. bill not be a way of predicting if something is going to happen, the foreign policy, internal policy. but at the same time, you might wake up and see that it has fallen.

it would not surprise me if it survives the next three years either. the spddepends on how sees its own interest. and the other thing is on events. matt: ambassador, thank you for coming in. former ambassador to germany here in berlin. look at your mid-cap movers, 48 minutes in what do you see as far as the individual stock soars -- stories? >> we're looking at dialogue gaining, not only after their order beating but a forecast. is 150t is boosting million euros and announced buybacks. on to the ugly, we're looking at next group falling. that is after a greater sales

decline than analysts had expected. look at other brick and mortars, also moving lower. finally, computer center, a big decline. this is after a surprise revenue decline for the quarter, really frightening investors. anna: thanks very much dani burger. our attention to one emerging market that has been capturing headlines. the rupee pared losses after the government such to repair tensions, saying it respects the rbis economy. locked in aen standoff in recent days over bank regulations. it comes at a time when india's currency is asia's worst-performing. joining us from mumbai is our correspondent. thank you for talking to us.

what has led to the latest spat between the r.b.i. and the government? >> it is the banking sector, as you pointed out. what they have done is re-fenced state run banks and has tightened loans which is hit the companies. what that means is that the state run banks, 70% of the banking sector, cannot lend. remember, there are headed into an election. if banks do not lend, growth is under strain. but because oil prices, consumption will get hit. you have banks not lending and a shadow banking crisis, it means that growth, going into the election, is really, really looking bleak. the government is trying to get banksn their side, saying need to let, can we have them

come out of these lending restrictions you have imposed? matt: will of the relationship between the r.b.i. and the government improve? they have been at heads for quite some time. they had a's -- a hard-hitting speech asking for more independence and to regulate and supervised state run banks. we had a story saying the government wrote to the bank, invoking a rarely used can directaid it central banks to take action in the public interest. the government has backed down and said that it respects the r.b.i., so right now, it looks to be a little bit cooler. anna: thanks very much for the

update. joining us with the latest on the standoff between the government. don't forget, bloomberg terminal users can interact with all of the charts we use. use the g tv function. up next, battle of the charts.

matt: welcome back, this is the

european open. 55 minutes into the trading day. it is time for our battle of the charts. dani burger is going head-to-head with alex longley. >> i'm looking at how fear of that weighted -- evaporated from the market. this is the credit suisse barometer, a measure of how much protectionist investors want. has -- it isck, it at its lowest since 2016. however, this measure is looking three months out. this is investors saying we had a really scary october, things are more likely to get right from here. matt: thanks very much. alex, hope you got something scarier. a scary month if you are an oil bull, that's for sure.

we've got crude, monthly drop. that's a massive turnaround from earlier. we lost $10 in a week. what has changed? we've got saudi arabia saying opec is that pump at will mode. on top of that, the latest on tariffs. really big concerns about global oil demand. we've got morgan stanley saying that clouds are growing over the market. city saying volatility is coming up. frightening stuff ahead, but perhaps some winter cheer. iran sanctions fighting from sunday come a that could get oil back in good spirits. matt: i'm not sure who to pick, but i think you are both telling a similar story. danny, i would have to go with you on your halloween theme. it is interesting to see that look out three months from the options market.

dani burger, you win the battle of the charts. anna: no halloween fright for equity market. stoxx 600 at 1.6%. strong earnings coming through from paris. stay with bloomberg tv, up next surveillance. ♪

retreats.morning gold

, andy -- andt the dash to year end is upon us. we consider 2019. the president and mrs. trump visit a somber pittsburgh. it is six days to a very american election. good morning. this is "bloomberg surveillance ." i'm tom keene. francineic, in for lacqua. we are focusing in europe on the very fact we are seeing so much green in these equities after the values we saw in asia overnight and u.s. stocks ended in the green as well. we are bottom fishing. where is the bottom from the selloff? is there a rebound today, or

will it sustain? in european markets, gains of 1% across a lot of the benchmarks. tom: is halloween a big deal in london? nejra: it is, and that is probably down to your influence. republicans are out -- the pumpkins are out. ving a also ha halloween bake-off. tom: here is your first word news is taylor riggs. in the the pmi readings world's second-largest economy fell to 50.2, lower than economists were forecasting and close to the dividing line between expansion and .ontraction has growingrnment

tensions with its central bank. the government and the reserve bank of india have been locked in a standoff in recent days overregulation of banks and tackling bad loans. it comes at a time when india's currency is asia's worst-performing and the economy faces risk from elevated oil prices. price expectations not rising in leads in assetj purchase targets. the central bank framed its inflation forecast for the current and next two fiscal years and said it will remain below 2% target until at least early 2021. apple has overhauled two of its oldest macs after sales of the personal computers fell to the lowest point since 2010. at an event in brooklyn

yesterday, the tech giant debuted a new macbook air with a new screen and a mini desktop. the company also unveiled a new ipad pro model that borrows key features from the latest iphone. 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 taylor riggs. this is bloomberg. tom: thank you. . it is amazing how two laptops in the keene family have broken in the last 48 hours. upift to the market, futures . next screen, if you would. the vix, 22.34. yen gets my attention. a weaker yuan over the last few

days. gold gives way, down six dollars. nejra: it really is showing risk. 600 up.ta, the stoxx i wanted to show the lira and the indian rupee. in rupee has been crucial this session, weakening on this standoff between the central bank and the government. is central bank independence in question? 1.1%, butt crude up overall oil headed for its worst monthly loss since 2013. tom: mexican peso weaker over some domestic policies. to the bloomberg right now, we've got jane foley. anthony dwyer will join us in the next hour. high-yield really quite good.

, and this is a better perfect high-yield market. this recent leg up gives everyone's attention and a modest pause. the link with equities somewhat tenuous right now. nejra: some people saying credit is the next big drop off. some saying you can hide in high-yield. i want to talk about tech. we got the facebook earnings, but when you look at the equity market for whatever looks bad more broadly has looked worse in the faangs in october. some say this is a sign of extreme risk aversion, and that is when you buy. tom: let us begin our market coverage can. fowler is withy aberdeen with a distinguished

career in derivative analysis, a new wants of the asset markets. wonderful to have you with us. what is the distinction you see from the derivative market as they explain what is going on in the core equity market? guest: i don't think in this particular case like in examples in the past the derivative markets are having a huge impact. there are probably particular days, but this is much more of an interest rate type environment. what we are thinking has been driving this is a myriad of geopolitical factors, whether it is china week this work -- weakness or italian crisis. rate has been flat for six months and now has started rising against, so the world is adjusting to a risk-free rate going up. tom: our michael mckee pointed out to me yesterday.

gerry is the head of the cfa society for the united kingdom. explain the importance of libor in its statement of liquidity. guest: libor is one measure of liquidity. there are others on a cross currency basis. it is really what drives all loan rates around the world, so we could be talking about levered loan rates based on libor. the fed funds rate is only a guide to where markets will price, but libor can have a spread. libor is so important in particular is because it is the global risk-free rate, set by london interbanks. while there is going to be a transition to new systems in the is the essentially it price at which dollars are priced outside the u.s.. with lots of dollar repatriation, the funds had to

go up. what that meant was you essentially got two interest rate hikes in that first quarter , but since we've had effectively no rate hikes from the u.s. that have actually mattered to markets for six months, which is been a nice reprieve, what we are seeing now is those rate hikes from the fed be in priced into global interest rate markets again, and the markets having to adjust to this new yield environment and title look pretty -- title liquidity. global banks need dollar liquidity, but become a nation of rising libor and cross currency basis is putting a floor under the dollar. nejra: great to see you. edinburgh takes my breath away as always on this beautiful day. is this torrid october have seen down to thequities

world adjusting to the risk-free liquiditytening coming why is it you are still prone risk? this is a new paradigm -- still pro-risk? this is a new paradigm we are having to get used to. guest: even though we do see a cyclical slowdown coming, we do see it as only a slowdown. generally market prices have already factored in non-us asset prices far cheaper than equity valuations versus their own domestic bond markets. especially recently, our shorter-term technical indicators are suggesting markets are white heavily oversold. there's a lot of opportunity to be taking tactical risk. in addition, libor will matter for overall yields across markets, but only cause genuine financial stress when it is high enough to impact credit. i heard tom talking about the high-yield market, which has started to see credit spread

expansion beyond the investment-grade spread expansion. but the one i would really point to is the levered loan index. we've been looking at it for a good part of the last six months. froth andite a lot of weakening of confidence in the levered load market, which is now very large. what i am watching for his windows levered loan yields spike away from libor. then you are comparing apples with apples without getting into duration and seeing if there is genuine loan stress in the economy. at the moment that is not the case. i will point -- at which point there will be enough to sustain earnings growth. nejra: let me ask you this question we've been asking all morning. you will have a great view on it with your multi-asset view. what scares you most in markets at the moment? good question for halloween. guest: good question. in the very short-term, we are

most concerned about the continued escalation of trade wars with china. but it actually goes beyond concern about trade and more to strategic con frontations. in the medium-term it is the fed rate hiking path. eunice the world adjusts to this new level of interest rate and the tightening of dollar liquidity and the beginning of growth, all of which we think the market has done a good job of come at the moment fed funds futures are not pricing the rate hike the fed is promising to deliver. someone will need to be right. either the fed will need to pause to allow the credit cycle to smoothly flow through without creating an enormous amount of stress, or they will overdo it, we are going to get credit stress, and have what i might call a credit recession. that is the problem i would see potentially on the horizon if the fed doesn't. you.gerry, thank

discussiona timely on the american automobile industry and the trade war. far more on industrial credit after what we have seen with ge and ibm. stay with us. this is bloomberg.

♪ taylor: this is "bloomberg surveillance." let's get the bloomberg is the/-- the bloomberg is the/-- the bloomberg business flash. santander hase --

exceeded third-quarter forecasts. profit in spain tripled from a year ago, while in brazil, to volatility.ue >> we believe that current conditions recommend having higher capital than just 11%. taylor: that is your bloomberg business flash. nejra: thank you so much. italy's populists are insisting their plans to ramp up government spending will shield the nation from recession. the deputy finance minister has made the case for more public investment as the eu warns italy's debt is a concern for the whole eurozone. we are joined by j foley -- jane

foley. is it still about dollar strength, or are concerns about the eurozone now steepening with italy and the latest political developments in germany? guest: that is exactly what happened. we've had this story of dollar strength in most of the world, but if you look at the summer, we have the issues of italy's budget creeping through, and now i think we do have this issue because we have italy suggesting that after parliamentary elections in the spring there may be more of a populist move coming through from the powers that be in europe. perhaps there will be less push back against populists wanting to spend. if that is the case, that is a big concern for investors. if you associate european parliament with budgetary reform, you're associated really with pushing back on spending,

at least on spending that doesn't raise productivity. at the same time we have merkel's powerbase slackening and uncertainties about who is going to lead germany in three years' time. that increases the unease with the euro. 120a: and the push back to -- will they pushed back to 120 or higher in 2019? guest: we've been dollar bulls and tended to be in the bottom of the bloomberg consensus with respect to that. more now.n seeing that could change in 2019. slack, ford start to instance, and the u.s. with the europe side of the equation, i think the eurozone has for the default. tom: what is an optimal valuation of euro-dollar?

does europe, in terms of the oil and the engine, have an optimal pricing of euro? guest: that question isn't easy to answer if you look at very long-term models. if you are looking at values of purchasing parity, you would say the dollar is valued around 1.25. certainly not the levels we are at. but mostly those values have very little relevance in the real world. they are long-term benchmarks, but they don't necessarily give you a value where it is likely to be next month or next year. tom: we are going to do yen and you on later with ms. foley. right now i want to talk about the dynamic of flows between the continent and the united kingdom. obviously that is expressed in eurosterling. what do you see inflows right now or interest-rate differentials in your sterling? the differentials

question is quite interesting. we have a bank of england meeting coming up, and the market is of the view that we in the u.k. this year, but if you look at consumer confidence, for instance, we are beginning to weaken. we've got brexit bearing down on consumer confidence. is that there is real uncertainty out there with regard to brexit. the bank of england may not even hike interest rates. there is a big caveat to that related to sterling. sterling could fall quite heavily if we get a no deal brexit, if we get a labor government in the for seeable future. that means that we would have this inflationary push in the u.k. resulting from a sterling fall. the bank of england could leave the market with a hawkish takeaway, hawkish rhetoric perhaps tomorrow, and an interest rate next year is possible to push away on that

inflationary risk. nejra: jane foley stays with us. exclusive our interview with asset capital management chairman. this is bloomberg.

♪ nejra: i'm there a change in london, with tom keene in new york -- i'm nejra cehic in

london, with tom keene in new york. investors may be underestimated chances of an increase. dollar-yen remaining unmoved after the bank of japan left rates, asset purchases, and guidance unchanged. jane foley is still with us. given what we've heard from the boj today, it is going to think a lot more than the central bank to get the yen to 100, sorely. guest: yes. i would be thinking of a lot of risk aversion. for instance, we know that there is a lot of easing from the bank of japan am a but i think in terms of risk aversion, that is almost irrelevant. we've had a lot of investors buying the dollar when they are under pressure.

in emerging markets this year, we saw a lot of inflow into the dollar. i would still maintain that when investors really are running for the hills, they buy the yen. i would think that in order to ,et from where we are to there we would have to also be seeing a much weaker global environment. perhaps much weaker u.s. growth, that sort of thing. i think that is what we have to be seeing. me, it is fascinating to now maybe the greatest divergence on bloomberg. ofse are two firms' views very weak yen and very strong yen. what is the robber bank call -- rabobank view? guest: i think by the end of next year, we are going to be looking at perhaps weaker u.s. theth, an environment where

market is concerned about the outlook for u.s. growth and perhaps 2020 and 2021. withi think is consistent a plateauing of u.s. rates, perhaps a peak of said rates, and the market no longer wanting to buy u.s. equities and the way they have up until september this year. i think the yen will be stronger with risk appetite lower, but haven't voted down -- haven't penciled it down. tom: that is important, where you see a vector but not a single point. we will get that from jane foley i'm sure in the coming weeks. coming up, nico asset management's john vail.

♪ tom: our midterm election coverage. look for david westin and nejra

doing that all right. what we are looking for a conversation on policy. wedlock is widely assumed will see next tuesday, six days away. nejra: it is really interesting because even here in europe, you ask a lot of people where a turning point for them in markets might be, and they point to the midterms. it is something we are closely watching in europe as well for directionality not only of the dollar, but on equities. we heard that yesterday on this show as well. now let's get the bloomberg first word news. here's taylor riggs. taylor: businesses are getting increasingly nervous about u.k. government pulling off a brexit deal. britain's economy slumped in october to the lowest level this year according to a survey by lloyds bank. it was felt in almost all parts of the country and across small and large companies, also

showing consumer confidence falling. jamie dimon shunning saudi arabia -- says shunning saudi arabia's business conference accomplished nothing after the alleged murder of journalist jamal khashoggi. >> nothing. the issue is that this terrible event took place. we don't know the facts. i've also spoken to the government. i've gotten conflicting facts. we couldn't be seen in any way condoning that behavior. taylor: in indonesia, the lion air jet that crashed may have been found, identifying be possible seabed location of the plane, but not the fuselage and data recorder. the plane had only been delivered in august. cockpit recordings suggest the pilots faced a problem almost

immediately. local media say at least seven people are reported dead as a typhoon swept across the northern philippines. thousands have fled to safety after another typhoon last month. trapped inople are buildings buried by landslides caused by heavy rain from the storm. 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 taylor riggs. this is bloomberg. tom: thanks so much. the tech world are wrought over facebook. we have jane foley with us from rabobank currencies, and alex webb joins us in london. alex, when do they change the name to instagram? [laughter] >> exactly.

it is certainly the thing which is driving the most growth at the moment. they are increasingly taking tools and formats onto the main platform. i heard the ceo of snapchat's girlfriend said he was the chief technology officer for instagram. they are copying that on facebook itself. tom: i am so glad you brought it up. would you explain to those a bit older, like over 38 years old, what in god's name is a story? [laughter] >> in the world of facebook and instagram, it is the videos or photos which appear at the top of your feed. they disappear after 24 hours. ofis sort of a flowing sort manner or you follow from one

friend onto another friend. between those you get small ads of maybe five to 10 seconds. advertisers have been slow on how to use that effectively, and that's what is going to create a bit of a lag in their accelerated revenue growth. tom: one of the things you can do with instagram stories is look for francine lacqua. she really does instagram stories quite well. nejra: guess what, tom? i've actually featured in an instagram story myself. not mine. i don't have one myself, but me dancing to afrobeat. away from yourou morning cup of tea, but we appreciate you being with us has always. we saw shares gain in after-hours as the markets seems to be maybe reassured or at least bought into what mark zuckerberg was telling them. he did warn about more spending, more investment.

how much longer are investors going to buy into the story he is telling them? guest: i think that they are expecting there to be a recovery in growth perhaps in the second half of next year. we saw a revenue jumped 50% year on year. it is expected to drop in the final quarter. they are expecting more of this kind of content, these videos which they think will attract more advertisers. -- similarilar tory stories what we have seen that amazon and google. investors perhaps seem to be buying the facebook story. facebook had really lowered expectations going into the quarter. drop in this colossal the last quarterly orderings best quarterly earnings, but things are per not -- are not perhaps as bad as they feared.

in terms of public relations, they've made a very big effort to show how they are moderating content more effectively, but we have never quite seen it actually carry on into the user numbers yet. maybe once it becomes a trend that happens repeatedly election after election, it will start to carryover, but it is more about the public dialogue about facebook. tom: one final question. the real issue here is the duopoly of google and facebook taking the marginal advertising dollars. with these tangible challenges at facebook, do they risk that duopoly? do they risk not getting the marginal dollar? issue with the new format is who is placing ads there. facebook has been basing growth

from small and medium-sized enterprises. it is harder to commence -- to convince to advertise on that platform. facebook has been actively going to the midwest and teaching businesses how to do it, but the effectiveness of that pushes something we will see them next few months. so far it is really just big brands. tom: what a fascinating story. thank you so much, alex webb. david kirkpatrick will join "bloomberg surveillance," i believe, in the coming hours on radio. what an update that will be. we are going to continue. jane foley with us, and we will look at chinese yuan. faange will look at the space. this is bloomberg. stay with us.

♪ nejra: i'm nejra cehic in london, with tom keene in london. francine lacqua has the day off. while base metals have taken a hit amid the u.s.-china iron has rallied. let's bring in will kennedy and jane foley as well. will come a what is the story of iron ore diverging from other is thetals -- will, what story of iron ore diverging from other base metals? >> it is the highest it's been in more than a year. that really shows maybe the

impact of china's stimulus program. iron steel mills in china are pumping out very strong volumes of steel, drawing on iron ore from australia. you also look at copper and oil to track the chinese economy in the state of commodities there, and they both had not so good months. extent have the commodity markets been hit by the general feeling of risk that's been driven by equity markets in the month of october? guest: i think it's been quite a strong correlation, actually. at the beginning of the month, oil was near $86 a barrel, the strongest since 2014. as we got the equity markets that came back very strongly, about $10, i think it reflects a nervousness in the market about in thero picture emerging economies. india in early october, oil was

at a record rupees. thea: monthly loss for oil worst since 2016, but are we still looking at a tight market going forward the could give a lift to prices? >> the big event of the oil market is going to be the reposition of iran sanctions sunday night. we seen a lot come out about oil already. we expect more still to be not exported from iran because countries like italy that have been buying until the last minute will have to stop. we will see no oil come to europe, with the exception of turkey, so there will be that oil to cover. people are also looking forward to next year when we likely see a boost in production, so it will be a tight winter followed by a slightly less and more interesting 2019. tom: i have to ask a question which i think a lot of our viewers and listeners aren't aware of. how much oil is out there?

like when you say there is oil from iran -- ok, i get it, but how many days of oil does italy have? the answer is they've only got x number of days of oil on hand, right? >> that's true. we don't have the same strategic petroleum reserves like you have in the u.s. there are stockpiles controlled by the government, and there are private stockpiles. short-term at least, the market is confident they can find the barrels from other places like west africa. but there will be a tightness in the market. we may see that feedthrough over the month of head depending on the macro picture. tom: what is the optimal price for saudi arabia? >> that is extremely important question right now. what we are seeing i think is that they are keen to have

prices between $75 and $85 a barrel. they startedel, getting on the phone with the king very angry. at $75 we are seeing nervousness in saudi arabia because they need or money than that to meet their fiscal demands of the saudi budget. we are really seeing in the last couple of months that range come into focus. tom: and all wrapped around chinese economic growth. jane fully is with us as well from rabobank. here's a cover from the business section of "the new york times" today. it is just a big seven. everybody, even "the new york times," is looking at the seven number. what happens when we get to 7.01? >> we've seen some pushback against that from the pboc just today. they been trying to soak up some

liquidity, sending signals that the perhaps don't want exchange rate to get to that level. markets have been looking at that for quite some time. i think at least for the chinese , they are nervous that politically this could send a signal to trump that could make him pushback even harder on the trade war front. that has become increasingly a political number. that said, when you have an againstwhich is slowing the u.s., which of course is still growing, there is a pressure to push up the value of the dollar on a more broad basis. so china is in the only currency that's been we getting against u.s. dollar. this is a broad-based in dollar strength. chinese authorities are just trying to prolong that moved to seven. nejra: whether the witness is isolated to china or not, the

fact that you on his weakest in close to a decade is putting the spotlight on capital outflows. what is the risk those turn into a flood? tom: china has -- >> china has a managed exchange rate. if they were to stop managing that, the flood would be quite significant. data this morning that was slower -- pmi data this morning that was slower. industrial profitability, gdp is slowing. you don't have to look that hard to see signs of slowing. also something which is coming to my interest recently is there's a lot more mainstream press talking about human rights issues in china. that could feedthrough into politics and potentially business investment. i think there is a story there suggesting that it can weaken a lot further if it were allowed to. tom: let me do this chart for you. thrilled to have you on today.

it is trade weighted chinese currency. this is the whole idea of a stronger chinese yuan over 10 in thef flattening out recent rollover as well. to theou explain president of the united states, who i am sure is watching you on fx, is thisng yuan strengthening over the past 15 years? >> there is this perception that china is minute 11 this exchange rate to weaken it. actually it does the complete opposite. it's controls its currency to keep it firmer. what we've seen from today from the pboc is an example of putting the proper under the value of the currency. this is a message which i think china is quite keen to get out there. nejra: thank you so much. you stay with us. and thank you again to

bloomberg's will kennedy as well for talking us through the commodities sector. remember, you can interact with the charts shown using gtb go -- using tv . forcan download the charts future reference. this is bloomberg.

♪ taylor: this is "bloomberg surveillance." onndard chartered is working a three-year plan to improve profitability as the shares love this year puts pressure on the letter to boost returns. while operating expenses fell in the third quarter and were below estimates, it's key -- isability is below still lagging. hasof air france klm promised to pursue an ambitious strategy after low earnings under his leadership. despite 15 days of strikes this

year, the ceo praised the company's commercial strength, attractive brand, and staff. margin,through the 18% well ahead of its larger siblings. willberg's francine lacqua be speaking with the former ceo of vodafone about the multibillion dollar split with verizon and how it was discussed over dinner at his home. >> from a decision-making point of view, of course verizon wireless was a bit one. the situation was either we merge the two companies or we split. either we get married or we divorce. i had played with both ideas for evening and then that we had a wonderful discussion, a wonderful dinner, and discussed all the options. and on the way out, he gave me a

hug and said to me, "you have a wonderful family." that is what i understood he meant we are divorcing. taylor: you can see the full interview on "leaders with the clock -- leaders with lacqua." that is your bloomberg business flash. nejra: thank you so much. now let's turn to emerging markets. ise foley with rabobank still with us. the rupee has had a bad year. have been issues with the banks, and now this standoff between the government and the central bank seems to be causing investors concern. the government says today that investors -- says today there is central bank autonomy.

investors don't seem to be buying it. guest: i think we need some sort of positioning from the central bank because there is talk in the market that maybe the central bank is about to resign. i think we need reassurance that isn't going to happen. they are losing their credibility given that there is talk they are no longer as a taunus as the market would like them to be. we need proof that the central bank is going to come out of this with a strong independent position. right now the market is doubting that. nejra: if we do get something from the central bank and investors are convinced of central bank credibility and independence, is that enough to give the rupee a true lift based on fundamentals and valuation? guest: it certainly would give a lift, but when investors are looking at a country they are looking at a whole basket of fundamentals. there would need to be a low bit more than that. turkey, if you like, has been a good example of what could happen for the rupee.

we have seen a big turnaround in confidence in the turkish market and the turkish lira over the last weeks. i think the central bank has to that first move and really clawback that credibility amongst investors to follow suit. tom: let's look at the rupee back over 12 years or so. there has been a mast evaluation, maybe just a -- mass devaluation, maybe just a depreciation. what do you as a pro used to measure when a currency becomes from a global story over to a true domestic story? is it the price of hydrocarbons in that currency, or is it something else? guest: the price of oil is clearly always important for the indian market, the right now i think it is something else. i think it is hinging right now on central bank credibility. i think if we did see a key risk

from the indian central bank, we would see another leg lower in the rupee. the central bank coming out with a statement and policies over the next few weeks and months that really were important in getting back investor credibility, i think we could see a different story beginning to emerge. tom: jane foley, thank you so much. really a great briefing on foreign exchanges. next hour, tony reform --oing to going to reaffirm the bullishness of the equity markets. stay with us. this is bloomberg.

tom: this morning, yields higher, cold retreats, china on

watch for seven yuan per dollar. trick-or-treat. yen,nsider the dollar, the the stock market, and well, the president and mrs. trump. six days to an american election. we are live from our world headquarters in new york. i am tom keene. into the month. the beginning of the dash to the year. what is your market observation now? >> the treats are out. we're seeing gains in europe after the rally in the u.s. yesterday. i'm wondering where is the bottom for this equity market? is it a short-term bounce, more volatility, then lower again? some interesting moves in em

currencies, but equities remain front and center. tom: i'm looking for fear and catharsis. i have not seen it yet. here is first word news. >> a gauge of china's economy shows manufacturing activity continuing to worsen. 50.2,i reading fell to toer than forecast, close 50, which marks the dividing line between contraction and expansion. alsonufacturing pmi worsened from september. is seeking toment defuse growing tensions with its central bank. the reservent and bank of india have been locked in a standoff over regulation of banks and tackling bad loans. it comes at a time when india is

currently asia's worst-performing and the economy faces risks from elevated oil prices. price expectations aren't rising in japan. that, as the boj leaves its policy rates on hold while confirming it will not meet its inflation target for years to come. the central bank trend is inflation forecast for the next two fiscal years, saying it will remain below 2% until early 2021. itse has overhauled computers after sales fell in the quarter to the lowest point since 2010. at an event in brooklyn yesterday, apple debuted a new macbook air with a focus on professional users and a higher price tag. new ipad proveiled models that broke key features

from the latest iphone. 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. thanks so much. equities, bonds, currencies, tomodities right now, i lift the market, a risk on feel. dollar, 113. ,ext screen it showing the vix 22.59. gold south. >> we talk about risk on, equities strong in the european session. some weakness in the lira. withupee under pressure the standoff between the government and the central bank. also looking at brent crude oiler, 76.38, even though

is heading for its worst monthly loss since 2016. tom: very good. you are an equity person and don't follow the bond market, you get in trouble. here is the high gilt market through credit default swaps. down here is the perfect high-yield market. some stability and a little leg up, but most saying hide yield shows a lack of panic within equities. type,you are an equity you are watching to see how far the risk reversion has gone. my chart focuses on tech. this chart showing the nasdaq .00 volatility surging some say this really shows risk aversion at extremes. it is time to buy. tom: very good.

thank you so much. we have anthony dwyer with us. he is going as bradley cooper for halloween. i'm going as lady gaga. you do have that cooper thing going. you know michael. michael knows you. he is in the tony wire camp. -- dwyer camp. news that can be bought. you have to be optimistic before the news flow that gives you that bounce. what is the news that can be bought right now. the election. >> there are three catalysts. the first is the election. the second is you have to hug it out with president xi.

and you need this since the fed will take its foot off the throat of the market. in september, mid-september, it is opposite of where it was now. we talk about the likelihood of increased volatility, there are fundamental excuses for sure, but this correction really started out as excessive optimism, extreme overbought, and low volatility. inse three things ushered the correction. now it is opposite. you have extreme oversold. tom: when the great moments of my life. -- one of the great moments of my life. privilege of spending serious time with sir john templeton years ago. he had that tennessee accent and he would say shares are on sale.

let's take amazon. i believe the shares are on sale. what do you do with that? >> let's take a look at amazon as a retailer. the retailer is doing poorly at this point in the cycle, eight fed rate hikes, so we should not be surprised. we have been equal weight consumer discretionary because when interest rates go up, things become more expensive. they should not do great. we have been out of the way of the amazon of the world and been underweight. tom: shares are on sale now. when in a correction -- >> i talk to individual stocks. tom: how do you find the courage? gethe only time you sustainably negative and defensive end the stock market is when you have a close proximity of a recession, and

that only comes after an inversion of the yield curve. it shuts down credit and lending. there can be nasty corrections along the way. people remember the 1990's differently than they happen. member 1996 the rational exuberance? aht failure.ai b those were nasty corrections that were also temporary. that is where we have been. we have been in this nasty correction. we will get a retest of the low. when you get that kind of volatility, you get a bounce and a retest, then you want to buy. , if i ask you about tech despite this selloff, price-to-earnings premium is still above the long-term mean. does that mean they have further

to fall before you find the bottom? >> that is a great question. by being default underweight , weunication services remained underweight because we are expecting a pullback from the optimism in september. we are looking to go back to an equal weight at some point, but you will get a bounce. you are getting it. again, you get a bounce, a retest of the low, and that's where you want to buy some of the names. market, we broader are getting bad bounce and you think we've will retest the lows , so should you be trading tactically before taking longer-term positions? to get thehree

next leg higher par the election, fed, and china trade, none of those are imminent. the only reason you are moving around is oversold. the sentiment got so bad and you were so oversold and volatility was so high, you were due for this bounce. , the excuses and reasons always change, but human nature is consistent. panic daynot a pure come but you had enough angst to create an environment for a bounce. what is the indicator of you will watch that will tell you now is the time we have hit the bottom and the market will turn for a sustained rebound? weekly indicator, which is oversold.

as of the 11 times it was oversold as it is now, you got a bounce. same with volatility. you get a low, a bounce. when you see the market retest the low and those things don't get as bad as they are as of yesterday, that is when you can say this is pretty washed out and the next leg is higher. coming up onrilli politics and the debate over the 14th amendment. she is the chief financial officer of the general motors corporation. on will join us later bloomberg across all our platforms at 8:00, an important conversation on more than automobiles. this is bloomberg. ♪ . this is bloomberg. ♪

>> this is "bloomberg surveillance." slumped in late trading. mark zuckerberg said he is betting on the future of video and not the newsfeed. are notd advertisers totally on the scene with the new formats and 20 will be a year of investment. profit came in well ahead of projections. nomura has posted a rare loss. the net loss to the biggest brokerage was a 11 two point billion yen ending in september, marking the second quarter of red ink.

the firm lost money overseas, underscoring the struggle to sustain profitability outside japan. financierpists and michael milken is this week's guest on the david rubenstein show. conversation covers his background, the bond industry, cancer diagnoses and treatment and philanthropy. you can see the full interview on the david rubenstein show at 9:00 p.m. new york time on wednesday. that is short bloomberg business flash. tom: thanks so much. seven yuanked about and the dynamics of china. we have headlines from the politburo of china. say timely steps are needed to counter a slowdown. they say changes are happening in economic conditions. they said they should "pay high

attention to economic pressures." the g20 meeting of presidents trump and xi in november. right now we consider american politics. kevin cirilli with us. thist to bring up acclaimed harvard professor. wellat essay published as by the cato institute. president trump can't use an executive order to deny birthright citizenship to the children of undocumented parents. the key quote throughout feldman and others is "subject to the jurisdiction thereof."

it goes back to an 1890 in ruling on a chinese gentleman born in san francisco. guess what? no one cares. the election. drive it forward. how does the 14th amendment debate change the marginal trump voter? kevin: this is such a plate to the base of his movement. points very quickly. outgoing speaker paul ryan saying to conservative radio he is a constitutionalist. if you read the constitution, it is cut and dry. op-ed ind thing is the the wall street journal today. lastly, this is what the chatter is in washington, senator lindsey graham tweeting he will introduce legislation to try to get this done. senator graham aligning himself with the president. tom: give us an update on

florida, always an important state. it has its own strange north-south dynamics. we have two elections there. kevin: the tallahassee mayor, the democrat, is fighting on twitter with president trump, who is calling him a thief. he is saying he has been exonerated from the fbi investigation. , this is really interesting. the president wants a republican in control heading into the 2020 midterms. nejra: i would like to make the transatlantic link. of there you are aware association of accidental americans in france who agreed with the president. they said they did not even know they are citizens, yet they are being taxed by u.s. law. i want to get back to the

buildup to the midterms. let's talk about the president's approval rating. have the republicans miscalculated with the midterms just a few days away? kevin: big picture when you step from the justice kavanaugh confirmation giving republican some momentum, particularly in senate races. now the president is weighing in , whichhright citizenship threatens some independent voters. you hit the nail on the head. it is the latest flashpoint in the populist, nationalistic rhetoric not just unique to america, but as we have seen play out as a global trend. nejra: thank you so much. kevin cirilli for us in washington.

tony dwyer stays with us. coming up, and exclusive interview at 10:30 a.m. in new york, 2:30 p.m. in london. what black swan's he see now? this is bloomberg. ♪ ♪

tom: good morning. ," tonyerg surveillance

to wire with us. this is important on volatility. .ou need to know when to buy here is the ugliness of february. then you come down. -ness of thisn good feeling. we are down with three days in a row. how do you manage that? >> when you get a spike like we have had, what you notice in february, the yellow circle, was immediate. ,hen you have high volatility it happens right away. it and come back and do it again a few weeks later. signal looking for a that the worst of the volatility is over, which we got a couple of weeks ago. .e have retested that peak

you want to see the market retest the low with lower volatility. in april, when the market retest of the low, the vix was significantly lower. tom: bring up a chart right now. here is the april volatility, which did not get out to this ugliness up here. nejra: you know what i am asking? how short-term volatility is being traded versus longer-term volatility in u.s. equities? are we going to get high volatility now, followed by event risks, or not? that is what i am asking myself. and how we should trade volatility itself. >> that is called an inversion of the vix curve. that typically happens each time you get a stock market panic.

curve has inverted quite a few times. it is telling you you are in a period where you want to be adding to positions, not panicking with the rest of the market. in september, you had historically low volatility, and now a historic run up. tom: we will continue the discussion across all asset classes. , rbc capitaling markets, head of the u.s. equity strategy, john will grill her on use of cash. this is bloomberg. ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools

that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. show me movies a grinch would love. [ bark ] nu uh, i'm picking the movie tonight. [ whimpers ] be sad, i enjoy it. show me grinchy movies. oh, goody. [ whimpers ] mmm, fine! show me movies max would like. see the grinch in theaters by saying... "get grinch tickets" into your xfinity x1 voice remote. [ laughing ] uh oh. something in my throat. tom: good morning. i am tom keene in new york. here is taylor riggs. gettingbusinesses

nervous about the uk's ability to pull off a brexit deal. toimism slumped in october the lowest level this year according to a survey. the drop in confidence was felt in almost all parts of the country and across large and small companies. a separate report showed consumer confidence falling in october. air jeta says the lion that crashed may have been found. seabed location has been identified, but not the main fuselage for data recorder. has only been delivered in august. cockpit recordings suggest the pilot faced a problem almost immediately. local media say seven people are as a typhoon moved across the philippines. the storm hit hearts of the

country already devastated last month by a another typhoon. according to the disaster monitoring agency, 30 people are trapped in buildings where it by landslides caused by heavy rain. michael milken is six weeks guest on the david rubenstein stowe. the conversation covers his background, the bond industry, cancer diagnosis and treatment, and his philanthropy. is thati discovered quite often the future in credit is rated low, and the real risks lies with companies we think of as establishment or have paid dividends for a long time. taylor: you can see the full interview on the david rubenstein show at 9:00 p.m. new york time on wednesday. global news 24 hours a day on air and on tictoc on twitter powered by more than 2700 journalists and analysts in more than 120 countries. i am taylor riggs. this is bloomberg.

nejra: thank you so much. phase work third-quarter revenue jumped 30% with revenue ahead of expectations. isk zuckerberg said he betting the future on video and stories and not the famous newsfeed. he said advertisers are not totally up to speed with the new formats and 2019 will the another year of significant investment. our guest joins us now on the phones. great to talk to you today. you upgraded your view on y, why?k to a bu >> i think the reason could be described in one word, and that is valuation. the stock had fallen substantially from approaching recently $150 a

share. there is no question there was a tremendous change in the fundamental story, but we priced the bad news was into the stock. we have been positive on facebook shares from april 2014 , so we tend to be opportunistic when it comes to our approach on research and recommendations, and we thought this was a nice opportunity for some upside. nejra: mark zuckerberg was trying to sell the stories format to investors yesterday. see the potential related to video and instagram, but when does that potential translate into the numbers, particularly with the challenges around advertising? >> it is an important question

for the company for sure and related investment activity. i think we will see positive benefits from stories in particular as soon as next year. since having followed the company since it became public in may 2012, they consistently, you can call it pessimistic, realistic, and the context of their conference calls. they always say things to make people pause and wonder if this is the right investment. they did that yesterday. tom: you have been doing this for one million years. does this sound like a management that has confidence in what they are doing? >> i think they do. they should. aey have been doing this for long time with a lot of success. there is no question what happened over the last couple of

months has been tremendously disruptive, but the reality is they are making a transition like they have done time and time again. we think these stories format has worked. it seems to be working well for instagram. the question is monetization, when and how much? tom: rip up the script. what about ibm? general electric? what are you saying? fore have had a hold on ge a year-and-a-half. we were positive going back a year or two bank on the stock. at that point it was in the mid-to high 20's. it is something to see in terms of ge, for sure. ibm, we became somewhat positive on the stock within the last six

to 12 months, perhaps earlier this year. we saw a value situation there. makesquisition of red hat sense, but it is a very expensive deal, one of the largest technology transactions in history, and the payback will take some time. tom: and the debt overlay as well. tony dwyer with us. this is really important for global wall street and all of you curious about what equity guys do. bring it up now. this is a bowling on. tony dwyer, equity guy is boeing,at an october the coupon is 3.45%, 67 basis points over treasuries. does an issuance like that

mean to you in terms of what you do in the stock market? >> brian reynolds pointed this out to me. on the day this bond was issued, there were two bank tranches, one for 10 years, one for 30 years. the initial talk was 80 basis points over. then the indication was 70. it came in at 57. tom: this is too complicated. here is where they think the treasury is and they are .80 points out and come in lower. >> so the point of that whole thing, it is hard to have a credit crisis -- a recession happens in the u.s. with a credit crisis. it is hard to have a credit crisis without credit stress. credit stress comes from there

is no demand for bonds. people talk about the liquidity crisis, not boeing, which is the poster child of a company that could get hurt in a trade work only yet they are pricing $700 million in bonds on a horrible stock and a. well.ill not end you cannot fix that with debt. our point is that it is not tell him. -- not time to run for the hills. nejra: i was reading a story on the bloomberg saying the stock market feared banks, the bond market loved them. would you be looking at credit when it comes to banks rather than equity? >> bank stocks this cycle were telling you you are going into recession. sometimes the market is wrong. if you look at home building and banks come they were going up and to the right into the

january peak, where you were set up for a correction because you had extraordinary optimism that was inappropriate. that is what happened in september. now we have done it to the downside. comeve algorithmic trading a very few specialists, market makers have all disappeared, and volcker rule has taken banks away from their proprietary account. who is your buyer, seller? in get the ramp we had january come august, and september, and when it reverses, there is no one at home. sometimes there are market events versus duration events. negative as i have been positive for the last nine and a half years when the credit stress indicator show up. they simply haven't yet.

i am sure you are familiar with the chicago fed national financial conditions indices showing historically low credit stress. on halloween, it is scary as all get out when the market ask like this, and it takes time to recover. 500,a 9% drop in the s&p it takes 71 days to recover a new high in a non-recession environment, which is why we pushed our target into next year. t volatility, a lo but you want the volatility to take stocks. -- pick stocks. tom: futures up 17. dow futures up 127. we will continue with tony to hire. salesforce, with

emily chang at 2:00 p.m. maybe he will play the ukulele? this is bloomberg. ♪ . ♪

their hasnks and tend posted profit that exceeds estimates, enabling the lender to build up capital buffers. the surprise increase of financial strength may feel speculation it could return more excess cash to shareholders. profit almost tripled from a year ago.

down, but profit was due to currency volatility. hasceo of france klm group promised to pursue an ambitious and innovative strategy after lower earnings in the first quarter under his leadership. despite 15 days of strikes this year, ceo ben smith praised the strength and staff. profits fell at air france and klm. remained well ahead of its larger sibling. that is your bloomberg business flash. nejra: thank you so much. let's turn to em and start with india. india has caught my attention today. the rupee has sold off. there is the standoff between the central bank and the government, piling up the w

oes. what is the core of the disagreement? >> yes, the pressure on the indian central banks autonomy is an underrated risk. you have the government facing fiscal pressure because of high oil prices. , 93% of the fiscal deficit target has been crossed, so the government is under pressure from monday. -- for money. they are trying to get the bank to fund the fiscal deficit to some extent. the bank of india is not giving the money. loanther reason is the problem in india's banking system. the bank of india wants to take action and force them to

recognize this problem. the government does not want to do it. this is the election year. the government is keen to push growth and does not want that news to come out. control theing to bank of india's decisions to help them in that objective. nejra: how does this end? the central bank tries to reassure the market they have independence and are credible, or do we see resignations from the central bank? >> if the government backs off now, probably it won't get uglier, but what the bank of india is saying is if the government were to push them harder, they will take a hard stance. going around is the governor is willing to resign if it comes to that.

government, the modi will be worried his reputation international investment community will be affected if this goes on. ideain italy, there is an between liquidity and solvency that wraps around the debt structure of a nation. is india debt encumbered? >> not really. india has taken a policy 20 years ago during the crisis in asian currencies that it will not borrow heavily in foreign currency, definitely not short-term, so india is not burdened with debt. the key for the economy remains oil prices and the pressure oil prices bring on the fiscal

situation and local inflation. that is playing out now, but it is gaining seriousness because we are six months away from the general election, a high-stakes game for the prime minister. nejra: is there any reason to buy the rupee now? >> i am not sure. the bad loan problem in india is not fully recognized yet. it will get uglier by the month. you do not really know how far reformsl pull back on and boost spending in order to win the election. indian now and may 2019, will be very volatile, so be careful. tom: thank you so much. wire --o

do you have any of that since there is value in a global view versus u.s.? >> let's take a simple approach. have you ever seen a global financial crisis without oil prices taking? tom: no, this is an important point. >> it is flat now. dollar-yen is flat. this is an nasty stockmarket event. economiesme emerging will suffer from dollar-denominated debt, but there is no em crisis yet. tom: i'm going to come back with a great chart on general electric. let's come back. good morning. this is bloomberg. ♪ his is bloomberg. ♪

over to ge. boy does it matter. from the crisis 2007. here is ge. here is where he comes in with

the train wreck we have seen. we don't talk individual stocks with anthony dwyer, but we can talk about sectors. one is the industrial sector. management matters. >> that is why you have active management and investing. they can parse through these macro and corporate things and come down to who is the right manager for any company at any given time. to speak to the industrial sector, you had this terrible relative performance because of the china trade tariffs. if you look at january, the industrials were going great, similar to the banks. tom: what do you see technically in the stocks that haven't done at amazon? i amiends always tell me

tough at managing my own expectations. the expectation should not be you will have this bottom and go right back up. when you have this much technical damage, psychological damage, you have to take time to bottoming the bod process. nejra: when you look across assets, it was hard to generate returns in 2018. so many notes have said this is a stock pickers environment. how do you get the returns now with the environment we are in? >> you try to pick the right sectors. which ones are being inappropriately priced given the fundamental backdrop. banks of the best set up for that. to tom's point, the credit guys

are saying by more acres it's going to get really good. the stock guys are saying short them all. they are going to zero. question just ask was a level the level -- cfa five. what is the factor right now that allows people to have courage to be in equities? >> credit. growth. tom: which one? >> credit. the market correlates to the direction of earnings. that is driven by credit. so credit his still in good shape. ultimately until you have a close review of a recession which only happens after the inversion of the yield curve, you can get nasty corrections like the late 1990's with the

asian crisis and the russian debt default. tom: this has been fabulous. tony dwyer, thank you very much. 6:30 is a little late. should we start trick-or-treating at 6:15? somebody in cleveland had their three kids dressed up like me. they went is me for halloween. three kids. >> now you know you have made it. tom: this has been great. thank you so much. we will continue. stay with bloomberg across all our channels today. ♪ ls today. ♪

alix: nightmare on wall street.

global equity markets lose a trillion dollars in october. slowdown, broad services and manufacturing weakness igniting fears of a drop in global growth. focusok shifts its to video and stories. will that be enough to stabilize faang stocks? halloween, after all. facebook. staple it for tech? off theey ripped band-aid like last quarter. i guess it is ok for now. david: the street loves it for now. well, onebrands as dollar -- $1.04 a share. revenue stronger