selloff is not fundamental. where is the bottom? no surprises from the fed. sticking to the gradual rate hike scenario. reigniteddown fears, worries of weakening global growth weighing on the equity markets. welcome to "bloomberg daybreak," on friday, november 9. david westin has the day off, much-deserved. beautiful day in new york city, chill and chill in the markets after a wild week. off 15 points. euro-dollar weaker. the dollar and the yen taking on the safe haven trade as markets roll over. buy bond a story unless you are italy. 3.21 how we print. 1.5% under $70.

this could be the worst losses for crude on record. the implications we will be discussing throat the next two hours. i am with michael mckee and peggy collins who leads u.s. investment coverage. let's kick off with the fed. nothing happened. that was the takeaway. the balance sheet conversation, what did they really say? guess is they do not feel immediately they need to take action. that they can adjust the reserves level at the december meeting. the argument is about why we are seeing the fed funds rate, the trade bump up against the ceiling? which is the interest on excess reserves level. the fed gave technical reasons, because we are selling so many t

bills, putting upward pressure on short-term paper. markets are saying, know it is you will go too far, and eventually there will be trouble. there is the emergence of opinion between wall street and the fed. the fed will stick to its guns. we will see on november 29. ioer. if anyone says michael: if you can understand what i am saying you are doing better than most. alix: market reaction was interesting. stronger dollar story, following through today, i thought that we already knew this about the fed. i cannot get a handle. peggy: it will be interesting to watch how em reacts to the stronger dollar number in the divergence between wall street and the fed. wall street getting nervous

about overshooting. the fed it seems to be saying -- we are looking at the numbers. wemployment numbers down, feel the u.s. economy is in a position for us to move forward. alix: how do they handle auto sales, the slowing in housing, the fixed investment? they acknowledged that. michael: business fixed investment has nothing to do with the fed. that decision is being made on the basis of trade wars and administration policy. companies got a tax cut. they should be spending that money. cost to capital is negligent even at the race they are charging. housing is negligent. we bought enough cars. is that related to interest rate up? historically they are low but they have been near zero for 10 years, 15 years? when you think about even before the housing crisis?

there is a generation that has grown up thinking 4% mortgages are expensive. there are people who remember 18%. 4%, i got 3.25% i do not want that. china ppi and cpi. nothing revolutionary. it is a global growth conversation. any ripple of that conversation comes into the market and that can hit investors hard. peggy: on the flipside, it seems like the china economy in terms of consumer spending are slowing. it will be interesting to see the allah bobby -- the alibaba singles' day. we will see what happens. there is concern growing that the china economy, the middle class coming up is a slowing on spending. china today came out with news in terms of pushing the banks to provide more credit, especially

to private companies. china has tools they can turn to as a government. that is making banks and investors worried. michael: that did not go over well. thanks in china down 3%. a tough day. you have a government trying to direct credit, it becomes an issue for nonstate owned enterprises. i brought a chart that expands on the one you showed. ppi is seen as a proxy for industrial production in china. they are still growing, rising at more than 3% pace. the trend is down. that is worrying. on the other hand, there are signs there is strength. two days ago we got export numbers, rose 14%. this is strong export growth. exports to the eu grows by over 14%. it is not just trade wars with the u.s. there is evidence they can keep then they found out that the

u.s. was producing record levels of oil, demanding down on a seasonal basis. we had too much oil. you are the expert. alix: there is a school of thought in terms of demand. peggy: they do not use as much oil this time of year, so that could be the inventory issue on the current side. product demand is leading oil lower and that is a totally different story. alix: if gasoline demand is slowing, oil winds up stockpiling. that is a different thing. one interesting thing about the rise and drop in oil prices, the idea of gasoline prices and consumers, we have gotten used to consumers paying higher prices. it does not have much of an impact on spending. you have to go about previous highs, more than four dollars a gallon toward five dollars before people would pullback. they would see prices go up, they know they will go back down again and they go on. alix: yay oil! thanks, guys. all about oil. gtv the charts we used at , save our charts.

more on china inflation. i will be joined by steven englander. this is bloomberg. ♪

♪ >> this is bloomberg daybreak. another setback for the keystone xl pipeline project. a federal judge in montana has blocked construction. transcanada has been trying for a decade. it would go to refineries in the gulf of mexico. u.s. regulators cracking down on e-cigarettes.

the agency will restrict sales of many popular fruit flavors. the fda has said that young people using e-cigarettes is an epidemic. of risking mortgage backed securities. ubs says the claims are not supported by the facts or the law. credit suisse and deutsche bank settled similar claims two years ago. that is your bloomberg business flash. inflation, slowing for a fourth straight month. manufacturing api the slowest since october -- ppi slowing since october. enda, thank you for joining us. walk us through the data and put it in context. yourself.said it well

we see consumer prices icesilize, factory pr slowing and no indication china will take off anytime soon. the idea that the economy is going through a broad slowdown, food prices for example have slowed for five months. i guess that means two things. banktically, the central can focus on stimulus, instead of worrying about inflation. china is not, necessarily going to be a source of inflation near-term. in years past when china has had strong ppi, has exported that to the world economy, that will not be happening this time. alix: i am glad you brought up the pboc. the government is trying to help small and medium-sized businesses by getting banks to

loan more money to them and the market did not take that well. how does the government navigate inflation environment and still try to stimulate? shifted to the progrowth side. they're worried about the trade war, deleveraging, but they are not going to wholesale stimulus. they have target nuance measures. they are trying to get the banks to get more lending to the private sector. tax cuts. rebates for exporters. it is all targeted. within the coming week, we have credit data. that will be important for the read on how much credit is going to the real economy and what sort of demand there is for that credit. we indicated stimulus measures are working, soft numbers against the narrative, there will be more work to be done by china, it will be a healthy reading on the credit numbers in

the weeks ahead, it might suggesting millis measures taken so far are kicking in. in total, they are progrowth. -- suggesting stimulus measures taken so far are kicking and. -- kicking in. alix: joining me now is steven chart,er, you just saw a dollar-yuan. do we breach it? steven: that is quite possible if the dollar keeps rising or if there is exacerbation of the trade conflict. is not as big a line in the sand as the market makes it seem. it is not clear it would stay over seven for a long time. the market is concerned about china. standard chartered has a presence in asia. the word from my colleagues is that it is not so much the trade

war, it is that internally confidence has waned. the deleveraging program has gotten the economy a headwind. it is the domestic economy and domestic growth that is the focus. alix: that is what we saw. the dampening of domestic demand. is there a read through to what we are seeing in china irrespective of trade and the global growth story? i will pull up global pmi. you can see, europe not doing great. that rolling over. china rolling over. the u.s. is holding up. does this scenario stick? steven: we think china has stimulus options on fiscal policy. europe where political process prevents you from doing fiscal in any real way. they have the option of stimulating the economy. not just physical. my colleagues came up with a

list of seven possible measures they could take from fiscal and monetary. we do not think there is high-risk the economy will go freefall. we think they will take measures to stabilize. europe is different. we are optimistic that we will bounce back from the lows. there is nothing in europe, except italy and the budget situation, that should be leading to such a slowdown as we are seeing now. alix: the divergence? you don't think we are seeing china versus europe versus the u.s.? steven: that stays but that has been the state of nature for the last five years. that is not a new story. china, with episodes of strong growth around party confidence a couple years ago, has been slowing. europe has had good years. the u.s. has been consistently the strongest economy growth, that is built into the market. womani was talking to a

who runs the money for a hedge fund for em and she said what worries are the most is that china has a current account deficit. all bets are off for the global economy. what is your breaking point? steven: look. is it became a question where he said, the chinese are out of stimulus options, the authorities cannot push ahead -- i would be worried. we are not there. alix: would that look like yields at a certain level? outflows because we're worried about leverage? steven: in that world there would be in tents of occasion -- there would be intensification of bonds and reserves going at a faster pace. we would probably see rates, off in china. dollar-yuan, at how much of that will be the

weakening domestic demand and how much will be dollar as a safe haven strength story? steven: we are not dollar bulls. the positive story is there but it has not been enhanced for the last couple years. the fiscal will come and go and 2.25%s. will still be at economy. it is possible we could see dollar outperformance in the fourth quarter because we still have fiscal in the pipeline. i do not see this as a long-term dollar rally. we could have a short-term move, cny could go about seven. it would not go far if it did. alix: much more on the dollar, coming up. we will talk about the fed staying course. dollar taking a safe haven bid today. more on that, next. this is bloomberg. ♪

♪ bed may say that -- the fed will stay the course despite a critical president. economic activity has been rising at strong rates and job gains were strong. the result was a rally in the dollar. the bloomberg dollar spot index, the white line, highest level so far this year. you said you are not crazy dollar bull. what do you make of the reaction yesterday? i think there are two elements. i say this with perfect 2020 hindsight. alix: of course. steven: there were people who

were bargain hunters. there was no view in the market that the fed would be hawkish. they had no reason to see that. there was view that they would send a love letter to the markets expressing concern about ioer or volatility. there was a segment of the market that came in thinking maybe they could buy at a bargain. in a statement came out, perfectly flat, consistent with the previous one. they said, we want to sell bonds, we just have to go out and do it because the fed did not give us anything but we want to sell the bonds. they were thinking there was going to be a temporary bond rally if the fed gave them something and then they could sell, but then that passed. alix: what is the bigger story we are missing? steven: i don't think the fed sees any reason to change views. had they said something more dovish, we would be debating

whether they were bowing to political pressure, or they were concerned about the slowing of the economy. the unemployment rate in the mid-3%'s. 128.50, they do not see any reason to change their story. strategiche one hand, us shifting money, saying the era of hedge money is over, pointing to a global wave of accommodation in 2019. put that with a stronger economy, with the strength of the u.s.. >> the economy is cooking. on, lowestcy going unemployment rate since the 1960's, the economy is doing nicely. economiesthe world, are getting crushed like bugs.

alix: how do you deal with that in fx? you have to see what is driving the market. done,ur studies we have it looks like a market is looking beyond 2019 saying, is the fed going to keep on tightening beyond? the answer is no. the fact that the market is convinced we are within six months, one year, of the fed actually finishing the tightening cycle, i think that is actually limiting the buying up the dollar. they see europe is beginning. limits of monetary policy signaling they may want to hike. it does not mean the dollar does not go up. based on previous relationships, it is going up a quarter. alix: great point. i wonder how much of that is the deficit in the u.s.

you can see the percentage of gdp. narrative in the midterms is that if this was worse, we would see a red sweep. what is the role? steven: if you go back to reagan, massive deficits at the beginning of the cycle. the markets got five years of high returns because of the fiscal stimulus. we can worry about it five years from now. at this stage, the market says, we get fiscal stimulus for one year and it will wear off. what returns are there to finance the deficit? alix: steven englander sticking with us. trades sharing higher. this is bloomberg. ♪

♪ alix: this is "bloomberg daybreak," i'm alix steel, happy friday. non bang for the equity market. 6/10 of 1% following asian

stocks lower, following euro stocks lower. the biggest loser in europe is the italian market, down by 1.4%. the italy pushing back on eu, pushing back on the budget deficit for 2019. currency market, bond market, safe haven trade. yen and dollar are the winners in g10 space. down 2/10 of 1%. u.k., yields lower three basis points. will we get a deal? optimism in the last 48. it will be a safe haven trade, buying everywhere except the italian bond market. the u.s., 2-10 spread continues to flatten. commodities getting hit hard. copper rolling over on the china weakening factory inflation. brent off over 1%, down below $70. wti in a bear market, how far? we are following that as well.

update on outside the business world. the trump administration is moving to restrict asylum claims by migrants from latin america. this would move people from claiming assignment, the rule will be challenged in court. in california, tens of thousands of people have fled from wildfires. people living from paradise, had to evacuate. the town has been wiped out. bank of america has spent $400 million preparing for hard brexit. bloomberg that includes a broker-dealer in dublin and paris. they are renewing contracts so they are ready when the u.k. leave the european union next year. global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm emma chandra, this is

bloomberg.. alix: thank you. u.k. ministers are on standby for a cabinet meeting within days. expectation of no deal ramping up. my least favorite topic is brexit. the currency will fluctuate. no one knows what will happen. >> that is true. recently in the u.k., the feeling among clients was no one knows more than what the newspapers are reporting. there is no edge, no appetite to trade. alix: talking about cable is difficult. you factor in the dollar. what do you do? optimisticare still they will come to a deal at the end of the day. alix: before march 30? the probability is not

as dominant as it was before. 65-35 but it0-40, is still there. things look dire. but then they say a deal is better than no deal so they come up with something. they know the parameters. alix: the other part is what is going on in europe. italy. earlier we heard from the finance minister. in these days, the government is working on response to the criticism of certain sensitive points of the budget law. the government intends to confirm the main pillars of the budget plan. alix: euro-dollar at 1.13. the yield is 3.43%. is that enough risk? steven: probably. short-term. i think it is because the italian government is in a bad situation now. it is not just a conflict with

the european commission. the data is terrible. what is the alternative? the more they argue, -- we are already seeing visible pressure on the italian economy underperforming the rest of europe -- they have incentives to come to a deal. with this confirmation of the main part, the definition of what is the not main part may be flexible and they may discover there is more room to compromise. alix: part of the narrative is when greece was in trouble, the markets that pressure on greece and that brought them to the table. if markets do not put enough pressure on italy, why would they make any compromise? steven: growing at 3%, yes they would have no incentive. the italian pmi is way underperforming the rest of europe. the economic data is weaker.

a combination of market pressure and economic pressure saying, we do not want to put this further, because it is making our situation worse. are: what currency cross you most bullish on for 2018? steven: bad news is priced into china in the market is underestimating the ability to stimulate and a determination to keep the economy even keel. aussie quite a bit. it has catch up to do. re-think the china story will be favorable. re-think there is a broad dollar story. reservee indications managers are shifting away from dollars, smalltime. especially settle, if we discover the u.s. is still at 2% economy, the move away from the dollar in bonds would be more pronounced.

we think it is more 2019. alix: great to catch up with you. good stuff. steven: thank you. alix: disney shares trading higher after beating estimates. bob iger discussed the results in an interview yesterday with david westin. parks and the studios had record years and quarters. they were a big part of the success in the fourth quarter, that is true for the year as well. we had good results at the media networks, particularly broadcasting. it was a great quarter for the company across the board. david: tailwinds into the merger, where are you in the 21st century fox? when do you expect to close? bob: we are still going through regulatory process. progress has been made. we announced a couple days ago we gained approval in the eu.

that was a big deal. that wee some countries are waiting for approval on and we are in the middle of that. in june, we said it could take 12 months to close. we are increasingly more optimistic it will occur meaningfully before that but we are not saying specifically when. as we wait for regulatory approval, we have started to focus on integration. we have made announcements. group,larly, television and the studio. when we talk about integration we are talking mostly planning, not implementation. even though we made announcements about people and structure, nothing can be put into place or operated against until the deal is closed. we feel good. we have gotten a lot done. sorry. david: you are a planner. i know that. i worked for you. how will you justify the price? it is a healthy multiple.

how much is cost savings or revenue growth? bob: these are great assets we are buying. they're doing well today and we believe they can do incredibly well in the combined entity, particularly in the direction of direct consumer businesses, where intellectual property will become critical and brand will become critical. as well as the talent that will be required to make the product that we will need is made, all very important. substantial justification for the price, when it comes to strategy, revenue growth, bottom line growth. there are opportunities for cost savings. when we made a deal, because of the overlapping businesses, this is largely driven by the combined entity having the ability to operate more successfully going forward. when you think about transformation going on in the media landscape, having these kinds of assets, this scale,

these brands, and the people, vital to the success of this company and the ability to grow long-term. alix: he is on the program even when he is not here. disney shares trading higher premarket. , with aus, barton neutral rating on disney shares. going forward, what is the ball ise you can make an -- what the bullish case you can make and the bearish price you can make? barton: disney stock is facing a decisive moments in the quarter when they roll out the disney plus service. that is a development that is disney's answer to secular concerns that have been the dead weight on equity for much of the past couple years. if they roll this out and there is a consumer embrace, concerns about exposure to traditional of the the optimism

ability to grow and the direct to consumer area, increases. that is a make or break moment of the equity. that is still a ways away. alix: fair point. how muchare talking, money they have to spend on that development in marketing and what that does to revenue? have you done estimates for what the cost rises to? barton: we are beginning to get disclosure. million onking $100 sports spending for espn plus service in the december quarter. some of themple of things that will come with disney plus. the net cost and the ramp up will be several hundred million dollars at the beginning, something is certainly going to be estimated, but doable for

disney. the key is, will this by them love from consumers -- buy them love from consumers? that could be a new era for this equity. alix: have you decide what goes in theaters and what goes streaming and what goes on see tv? it will be difficult to justify the multiple the stock is trading at. barton: this is the big question, right? the way they are approaching the service, a particular way -- the road they have chosen is they are developing original content, television focused show content, and they are pulling back some of the shows they put on other services and overtime migrated to their own platform. that is an approach that is an criminal. it is not -- incremental.

it is not, dump all the content on it once approach that people may have thought would be the best way to compete with netflix. they are getting bigger over time, keeping the successful tv business, trying to sidestep over to this. i am not sure that that is enough. that is the question. do they have enough to move the needle to get something big enough to replace the huge business on traditional tv? that is the road they have chosen. ,f they get consumer embrace that could be a good day for the equity. the jury is still out. alix: good stuff. thank you. as long as my daughter gets sophia the first, she is good. coming up, elon musk taking spacex the bank of america to get some money.

more, next. this is bloomberg. ♪

♪ >> this is "bloomberg daybreak," i'm emma chandra. coming up, the global chair of m&a. this is bloomberg. alix: returned to wall street beat. three things. pimco shrugging it off despite the carnage, managing to pull in more than $11 billion in the third quarter. after facingrace,

the worst performance in seven years last month. managers bracing for industry d day. elon musk switches banks. hesing on the goldman offer, goes to bank of america. vincent,e now, strategist for bloomberg. that does not bode well for me. pimco. this was surprising. they did well. $11 billion of flow? the cfo -- we just performed well. understand,e to given the reports about the total reform fund. bond funds are not performing well now. most of them managed to beat the benchmark. this interesting to see amount of money rushing in. we were talking about this before we came on. >> [laughter] >> [laughter] >> they are focused on high net

worth individuals, it seems to be paying off. >> basically they are collecting their rich friends and asking them to give them a lot of money for a longer time. that swells your assets under management. they cannot be doing well overall. bond yields have doubled in the last year. that does not bode well for bond market. part of it could be a rotation into fixed income, as we have not seen great times for equity markets. they have wondered month. we will see how they go forward. -- one good month. >> the strategies they are piling into asset classes, enhanced cash, high yield, investment-grade -- which seems a weird position to take. high yields and investment-grade, there is a risk their given, if you think this will turn. >> we could see an increase in

private asset management. the easiest way to show returns for clients is a vol sell strategy. the spike would make a trade easier and more palatable to sell to clients. back in be the road. -- that could be the road. alix: high investment-grade outperforming commodities. i have been dying to get this story on tv. after october, you would have thought hedge funds would do well because that is the goal. outperform the market when the market stinks. investors have had a difficult time. withdrawals are accelerating. vincent: this is not a good market for hedge funds. alix: shouldn't it be? vincent: not really. the chop you see -- it is based on momentum and trend. it has been a choppy trend. the hedge funds get chopped up. the computer focus cannot keep

pace. there is a quick blip in the markets chased it and you are buying at the high and selling of the lows which does not bode well for pno. they have been able to ride this out, given the track record of underperformance. you are seeing a reversal. alix: they were only down 1.7% so you wound up beating the other benchmarks -- so do we look at the 12 months? vinson: if you look at the trends, you have seen a good trade in emerging markets and equities versus u.s. or any equity base for that matter. if you look at the dollar trend, the dollar has been up, there is chop in between red the bond, yields going higher. on a weekly, daily, monthly basis, not an easy trade to hold

onto if you get in at the wrong levels. alix: this is so fun. elon musk and spacex. spacex wanted to get money. goldman sachs was marketing $500 million of debt. all of a sudden, investors went into the room to talk and bank of america showed up for $750 million. what did you make of this? was this a bank or an elon musk thing? brooke: more elon musk thing. you are seeing concern about the risk. lenders are responding to comments from the federal reserve, saying these covenants are too light. too much risk. this could be a problem. tocex wanted the ability freely continue to raise additional debt. first time issuer, goldman sort of balked. they said we are not interested.

it is interesting that it is bank of america stepping up. they have been backing away from riskier parts of the lending market. alix: i was going to channel, david. take risks! vincent: she makes a perfect point. space, no a intended,, -- no pun this is where goldman loves to be. you talk about the covenants, if they are tight, it is a great risk they could get tripped and loans become an issue down the road, especially investment-grade space, especially with the fed on a go forward rate hike cycle. goldman, the better approach, maybe they're going out on a limb. alix: i do not know what to make of that. thanks very much. vincent: [laughter]

brooke: it is friday. alix: i will see you later. brent job spill a $70. more on what i am watching. look at the , charts and graphics and interactive equity. you can ask me a question. this is bloomberg. ♪

♪ alix: the first thing i am watching today. no surprise. oil. bears are in full force. under $60 for the first time. brent under $70 for the first time since april. broader market context. sara, my first thought is high-yield, equity market. managers,g with fund

they are taking their tactical positions down in oil. but where they really think it will be is in the equity market. they are upping the short position on enp equity markets. the call all year has been energy stocks will take off because there has been such a wide gap between the rise in prices earlier this year and energy stocks. they were still downtrodden. the sector is down 5% on the year, the third worst performing sector. they are catching up in the wrong direction. oil prices coming down. there is a worry this will spread to equity and take down the stocks. that theyite the fact are the value sector if you want to trade value. what about volatility? oil is off the charts. reporter: people believe it will spread. we have been talking about global demand.

that was the conversation earlier in the year and that was bouncing around oil prices. it has turned. we have opec meeting in abu dhabi coming up. the volatility in other markets has been heightened. equity volatility has been higher as well. a lot of people believe eventually asset across volatility catches up. that is what you want to watch. thank you very much. coming up, liz young, joining us. her take on the market in the fed. this is bloomberg. ♪

>> oil there's unleashed. prices sink in the market.

where is the bottom? and markets risk off. worries of a global slowdown bubble up. and the fed keeps it simple. no big surprises from the fed meeting, sticking to its gradual rate hike scenario. it is friday, november 9. david westin is finally taking a day off. it is a beautiful day in new york in terms of news flow, but markets seem to be moving -- points are off their low of the session. a risk off story in terms of equity, a bit in bonds and of it in the dollar. the dollar benefits the most from the trade, and by bonds, except in italy. , the story in my

mind resides in the commodity market. rent down over 1%, could be the worst consecutive selloff for oil on record. how will that ripple through the markets? we will discuss that in the next hour. let's get an update on what is making headlines to us the business world. emma: the trump administration is moving to restrict asylum claims from migrants from latin america. new rules would block people who illegally cross the border in mexico from claiming asylum. it is almost certain to be challenged in court. thehe u.k., a lawmaker for northern irish party that props up theresa may's government says they cannot support the current brexit deal. -- plans to treat northern ireland differently from the rest of the u.k.. in northern california, tens of thousands of people have fled a

wildfire that has destroyed hundreds of structures. all 27,000 people living in the town of paradise had to evacuate. firefighters said the town had been wiped out. 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. alix: the fed stays on course, the fomc city state for a rate hike next month and says the risks are broadly balanced. here is what former richmond fed president said to bloomberg. any imbalance at the moment. you have risk on both sides. if it remains that way, i would expect the fed projection of continued gradual increases in the target fund rate to stay on track. what you are looking for, to give you an example, if you see more signs that housing is weakening further or that business investment will , andnue to soften

critically if consumer spending .hows any sign of slowing today, liz young and michael mckee. michael, let's start with you, with the broader picture. things that could affect the fed. wait are going to have to for the minutes to actually see what they said, but at this moment, they are watching and don't really know what's going to happen. we've seen interest rates rise, and at the same time, housing has slowed. do they draw a connection? they haven't so far. but do they? so far, consumer spending has held up. is that because of the tax cut, or is that the cause we are just seeing a cyclical surge in consumer spending? we don't know how the season

might be important for the fed view going into 2019. it's kind of hard to tell what they think now. -- they know is inflation unemployment rate continues to take lower. they did one thing change is their take on business fixed investment, moderating from a rapid pace earlier in the year. cuts,nd up having tax having businesses spend, what was your interpretation? they didn't talk about just the indicators they always watch. it wasn't just inflation, unemployment. it's good they noticed an indicator that softened a little bit and what the market wants to positive standpoint is into 2019, if they continue to tighten the speed and they put undue pressure on the market, people will see the fed say, hold on, let's hold on a

moment because you don't want to stall a recovery before it should be over. and they should be watching other indicators. alix: good point. one of the indicators, the financial stress, has been all libor,hullabaloo around short-term markets, etc.. how much can we attribute to the rise -- how much can we attribute the rise in libor to the fed? michael: no one really knows why. alix: help me out here. michael: the same reason we are seeing effective trade funds higher, rates all across the short end of the curve, pushing up those indicators as well. there's also the view that perhaps libor is just a broken indicator. they are already trying to replace it. is it really telling us anything about what is happening in the economy? libor has gone up dramatically

in the recent weeks, but is still way below the level it got to at the financial crisis. the fact does bring that what happens in the balance sheet will be reduced. what will be the real implications of what the fed has to monitor? a little come down bit, but not that much. still $4.1 trillion. it is still large. you want to make sure you aren't looking at that as the only force driving all of this. currency is obviously going to be affected. but at this point, we still stay strongollar to until about mid-2019, putting pressure on a lot of different things. it puts pressure on e.m., on oil .rices so watching currency movements, if the dollar stays strong through that, they could unload the balance sheet. michael: you were talking about brexit, that's going to put pressure. alix: oh, brexit?

i'll keep it short. that's going to put pressure on , investments put pressure on the euro. the real question on the balance sheet is, when did they get to the point where reserves get scarce? where the regulatory world, where banks hold a lot of reserves to meet their regulatory requirements, nobody really knows how much they need so there's a collision between some on wall street who think the fed is getting close to that level and the fed, who doesn't think so. it raises the question of data dependency. that you should go by riskier assets. at this pace, the fed will get to 3% in the summer of next year. if they continue at this pace, you don't see pressure on equity markets until halfway between 3%

and 4%. we wouldn't worry about it risking that much on equities, globally. it's working fine. we are expecting a rate hike in december. if they change their minds in december, i think that would be a negative for the market because the market would think that cracks are forming. as long as they keep signaling it and we are showing growth, i think that is ok. the economy can absorb higher rates than the market right now, so that is an important point to remember. alix: i want to take a look at the russell 1000 growth versus value index, you can see again that growth stocks are the best in two years since their values in the 90's. is that why we aren't seeing the value late cyclical trade play out? liz: we've had really low haveunts on earnings and been able to promise more growth

coming off of tax reform this year that was a little more euphoric. moving into 2019, i'm willing to bet that will reverse. it's probably not going to reverse quickly, but three 2019, you will see the nice growth through value trade. alix: you will be sticking with me, liz and michael. signal forlation -- global growth. ♪

emma: this is bloomberg daybreak. it is another setback for the long-delayed keystone xl pipeline project. a federal judge in montana has blocked construction pending further environmental review. transcanada has been trying for decades to build a pipeline from the alberta to -- near the gulf of mexico. u.s. regulators will crack down on e-cigarettes. bloomberg the agency will restrict sales of popular flavors to adult only establishments. useays that young people's of e-cigarettes is an epidemic. semantic expects china to back off of its cyber warfare experts. ceo greg clark spoke to bloomberg. >> china has been attributed to many pieces of what we call advancement of persistent threat malware over the years.

i believe we are in a situation where nationstate espionage will continue and we have to stay diligent on how we protect ourselves against it. alix: thank you so much. chinese factory inflation slowed for eight straight months. slowest since october of 2016. consumer prices are steadying. what does that mean for the pboc in light of potentially weaker consumer demand in the country? joining me is liz young and michael mckee. walk us through what we've learned about resell inflation in china. inflatione are seeing on a consumer level continue to rise at a lower pace, and some are fine for the economy at the moment. -- seen as a proxy for chinese

industrial production. prices are dropping because they are such a big consumers of raw materials that prices are dropping. not dropping, but increasing at a slower pace that suggests a slowdown. alix: then walk me through. slowdown in china. liz: pmi's are also -- alix: ok, here we go, that's what i'm talking about. liz: just barely in expansion territory. the economy in china has slowing down faster than even china expected to. as we are seeing a natural depreciation, they are trying to manage it. they are not necessarily worried about the level it gets too, but the pace of decline. i think we will continue to see that depreciation through the end of the year. i don't think they are afraid to let it hit seven. i think that is a mental threshold for the market. i think that is going to happen and it is ok for them.

i think we will get to seven, we will breach it at some point and it's not going to be that much of an event. michael: i just made this chart , for aou were talking little bit later. this is china's export growth. look on the right side there. this is a country that is slowing down? no it's not. you see the did when donald trump announced tariffs. is everybody buying chinese goods while they can before the tariffs go up, or will they continue to? conventional wisdom. exports from china to the european union, which is not imposing tariffs, were up a significant amount as well, 14%. so, is china going to slow down or not? that's exactly the point. if they have pressure from the u.s. and it is hurting their trade balance, they aren't going to turn over and play dead.

they will reorganize their markets and shift where they send supplies, shift the supply change itself, find other export partners to continue to hold up their trade balance. we would expect that to continue. commentaryre's been in the last couple days about an expectation of a deal with china before the end of the month, we don't think that's going to happen. from companytom on capital, and he and president trump are close friends. they talked about the relationship between president trump and president xi. >> he's president for life. of years for him is the snap a finger. so, for him to bend to the whim of this president, if he wants to rotate, after that, he will. i think the chinese are practical. i think that a victory is a consensus between these powerful presidents that shows some meeting of the minds in the middle. so there is a real deal,

then there is, we aren't you can go farther than here. which one do you think will happen? liz: i don't think a full deal will happen. i think we get closer to imposing .5% tariffs on the chunk that we already -- imposing 25% tariffs on the chunk that we already imposed 10% on. michael: we don't know what donald trump wants. does he want to punish the chinese, which was the narrative last summer, or does he want to strike a deal? he can't strike a full deal because this is complicated, but it could be like his meeting with john paul juncker. remember, he went to meet with the north koreans and came back and announced, we reached a deal , and then nothing has happened since then. do we get that? does he actually hold off on this .5% tariffs question mark -- on 25% tariffs? liz: is that necessarily a bad thing?

will that be enough for the markets? certainly in the short-term, that would be a psychological boost. but if the tariffs stay in place, it is still an economic drag. a lot of companies are already complaining about the additional costs they have to pay because many of the tariffs are on intermediate goods, hurting some companies. that will probably continue to grow, as long as there are terrorists in place, even if they are just 10%. liz: at least there's clarity. the longer-term decisions, to mike's point, companies don't like uncertainty. michael: -- liz: the market doesn't like uncertainty. i think that starts to put pressure into 2019 on earnings, on the market. just to go back to the

conversation that the administration keeps having, that we are making progress, positive conversations are happening with china. it works for about one day. the market gets happy and we as if little relief rally a risk has been removed from the table. but there's a difference between a risk being removed and something positive but on the table. has just been a lot of lip service and we don't expect that to change in 30 days. alix: if you are looking at the u.s. and equity markets, going forward, profit margins are going to have to sink. -- is making that call. don't think you have to rotate completely out of u.s. stocks. we are kind of the best house in a mediocre neighborhood. the u.s. is probably the best place to be. i do believe that the best tech returns are behind us. i believe the tech returned boom has peaked.

there before the rotation takes over so you can benefit from the entire trade. what we are doing is still selling the rally in tech. saidel: what you originally about china slowing down, that's going to hurt other countries in asia, which feeds into their supply chain. so, do you go into emerging markets? we already talked about the dollar's impact. alix: bloombergs michael mckee, thank you very much. , she is sticking with me. coming up, disney's future uses the force. the company outlines its new online platform that includes a new star wars series. ♪ ♪

alix: time now for a bottom line, companies worth watching this morning. i want to talk about disney. bob iger talked about the consolidation with fox and what he would do going forward. we are still going through the regulatory process. a lot of progress has been made there. we announced a couple of days ago that we gained approval in the eu. there are still some markets or countries that are waiting for approval, and we are in the middle of that process. in june, we said it could take as long as 12 months to close. are now increasingly optimistic that it will occur meaningfully before that, though we are saying specifically when. i find this, all about

streaming. where do i go to get my star wars fix? the issuet creates for disney, where do you push that content out and protect what you have already while still building up these streaming projects. i think it really creates a concern for them. it also means they will have to spend more money. there's extra cost to develop this type of product. alix: i also talk about e-cigarettes. the fda says that the sales for e-cigarettes should be limited to adult only stores. you know that the paltry is, the altrias,orris -- the phillip morris, they are saying, yes. the cdc was talking about a 70% rise in e-cigarette use

among high school years, 50% among middle schoolers. i think it is funny to hear tobacco companies now talking about embracing the fda regulation and this was clearly a market they should be looking at, given that it tends to benefit them this time around. you can really see that impetus on why they are cracking down on those fruity flavors. alix: i didn't know that smoking is down to 14% of adults. that's bananas. the third story is ridgemont. make superthey expensive, fancy watches, and they have exposure to china. they blame china for the slump because of trade wars. >> which is interesting because they had comments from burberry before, about how they aren't really seeing a drop off. i think an important point to make is that ridgemont isn't talking about china going to zero. going from double-digit to probably high single-digit revenue growth. so it is still growing, but probably not as robust.

i'm not sure if there is ,omething particular to watches where there is a more steep decline, but that is an interesting dynamic. alix: they said they had to resort to discounts, and there operating margins fell 400 basis points from last year. 40% off sale or something. >> they are having to deal with a glut in the watch market and are picking up higher costs through their acquisition of -- which a lot of analysts think they overpaid for. alix: thank you very much, good to see you. coming up, oil's record retreat. ♪

alix: this is bloomberg daybreak. there a softening of the market, 8, we are just waiting for ppi data in the

u.s.. the safe haven trades, you buy dollars, bonds, and yen. crude is getting hit with its worst losing streak on record. what the implications are, let's get right to the ppi data. if you take a look at ppi, if you back out food and energy, it is a nice job, up .5%. sequentially, up a solid gain. demand almost kissing 3%, coming fort 2.9%, a solid read producer prices jumping. will we see a read through, pass-through when it comes to consumer prices, which we will wind up getting next week? increasing 2.9% from one year ago, jumping .5%, if you back up food and energy. i want to talk to liz young of the ny -- of bny.

does this surprise you? liz: know, we are expecting inflation to slowly move up through 2019. demand and supply our two separate animals. if we still see good demand, it is a healthy economy. if there is oversupply, it means there isn't enough productivity in the economy. alix: producer prices increasing the most since 2012. if you go to ppi next week, what will it look like? liz: i think it will take a little longer, but we will eventually see it come through in cpi numbers. alix: is there any need to react in the market? any real interpretation on a short-term trading basis? liz: i don't think there's anything to do, you don't want to react unless you are a day trader, but if you are an investor in the long term, the

fed has been signaling that inflation is on the rise and this is in line with that expectation. i think you just kind of hold steady. with the be helping rise of inflation is what is happening in the oil markets. oil is entering a bear market. wti falling from the october peak, entering the bear market under $60, all after the opec meeting. liz young is still with us. walk us through what that means for inflation. areirst it seems like we freaking out because oil prices are too high, but now it is too low and it could hurt equities. liz: investors are fickle. iran sanctions issues in early november got water down. thinking there would be all these sanctions on iran, all these pressures on supply.

but we also have other forces. you have to remember that in the oil market, there is a supply force, demand force, and a currency force. there is oversupply, a lot of inventory. the u.s. is building inventory. we will continue to be a producer there. we have lower demand from china and as china continues to slow, that demand will probably continue to slow. we have a strong dollar and oil is denominated in dollars, which makes it less attractive to anyone who's not denominated in dollars. even if something comes out of this opec meeting this weekend and they decide to turn off the , even forittle bit temporary reasons, that's great and prices will rebound, but that doesn't take all of the bearishness off the table. alix: what i've been asking the blog, is at what point does the slide in oil trickle into the energy market and when does it trickle through to equities? liz: some of it got worked out

already. in the credit market, that happened a couple of years ago. but i think it has to drop further. for some reason, the market has these 10 benchmarks in it. we dropped below 70, 60. if we drop below 50, people will streak out. bond markets tend to know things before equity markets do. if we see an actual equity problem, i think -- reacts first but i wouldn't expect it to happen for a while. alix: when we talk about value and growth, talking about next ahead of it, to be but with something like this where energy stocks are no doubt one of the greatest value leaders, does that disrupt your thesis? you have to be discerning. if there is a rotation into value, the winners are some of the big banks, and u.s. banks are in a healthier position than european banks or international banks. we went through a lot of stress in the financial crisis and came

out better. i think if the consumer stays strong here, we still have a strong consumer stable to play, still likers dividends, even in the face of rising rates, it is nice to have the dividend return and press return. alix: for more oil, we are joined by harry tchilinguirian, global head of commodity markets and strategy. we are talking about the oil implication for the credit market and equity market. within the oil market specifically, how much of the selloff is fundamental versus sentiment? harry: i think you have a bit of both. the initial correction happens with -- and equities, followed by developments linked to fundamentals. particularly, saudi arabia has moreindicating far aggressively on its production capacity, and with the implementation of u.s. sanctions on iran, there were waivers that case, butsn't the

that is nonetheless the interpretation. however, we are looking at a picture going into the first quarter next year that we will get losses in sanctions in iranian supplies, compounded by losses in venezuela. then with the winter season, on that basis, -- prices will recover. downdraftstart of the , the countries that employ iranian oil got waivers. the indian and china market work necessarily expecting it. have we hit the bottom, based on all of that? harry: i think we are fairly close. it is obviously difficult when there is momentum in the market, -- wti is now trading below on a similar downward correction. i would think that as the market begins to stabilize with to stabilize,ning and people reevaluating what these waivers mean, these

waivers are not exemptions. they are given to countries that have already taken steps to reduce their oil uptake from iran. considering their crude oil experts, in particular shale, 500,000 barrels per day in the first week of november, even if we get a bounce back thanks to losers, we will probably between one million barrels at 2 million barrels per day of iranian oil. and i think that saudi arabia, despite all of -- will be able to compensate for iran, venezuela, and potential outages in countries that face concerns like libya. is now surpassing russia, record production level. you really see that in the market. we were exporting so much oil, winding up in the north sea, which is why we are seeing short-term weaknesses for brent, for example. how do we factor that into the

weaker iranian export regime? harry: the u.s. is seeing exceptional growth in supply thanks to shale. forecast, ined its particular for next year. , the impactour view of u.s. oil is really going to be felt by the end of 2019, because that is when we will have the build up of the pipelines connecting -- to the u.s. gulf coast, particularly to corpus christi. the capacity to export more oil from the u.s. to international markets will double. harry, the market is forward-looking. is it already starting to price that in? harry: those physical barrels available by 2019 are not yet available. yes, markets are forward-looking, but if you think of the volumes that will come out of the u.s., as they stand currently, they are important. but the real big impact is when

the u.s. gets connected to international markets as the logistics build up and oil terminals handle larger capacity carriers like botc's. the other issue becomes, how do you wind up having a constructive view on oil when president trump does not want higher oil prices? and i go back to what he says in the press conference wednesday after midterms, he took a swipe at opec again and higher prices. here's what he had to say. if you look at oil prices, they've come down substantially over the last couple of months. that's because of me. because you have a monopoly called opec. , ion't like that monopoly don't like it. oil price has been coming down. against then't bet fed, can you bet against president trump, who doesn't want higher oil? trump hassident called upon opec producers on multiple occasions to increase

reduction to contain the rise in and president trump is indeed against higher oil prices. certainink there are entities in the world that perhaps even mr. trump cannot completely contain. we were speaking about declines in venezuelan oil production, possible outages in countries that face and then economic security problems like nigeria and libya. and if we were to see countries saudi, i'm not sure that they could single-handedly combinedll of those outages. so, inasmuch as oil prices have come down in a number of factors we discussed, we still think that with the loss of iranian oil, seasonal increase in demand, and again, the question marks about whether saudi effectively has the capacity to build everything it has promised.

as much as i understand the rationale for keeping oil prices contained to not derail economic recovery, the fact is that the market has these supply issues. -- thank you so much -- let's get an update on what is making headlines. emma chandra is here with first word news. emma: the trump administration is coming out with new rules aimed at choking outmigration from latin america. people who illegally cross the border from mexico into the u.s. would be restricted from claiming asylum. president trump has blamed asylum rules for loring thousands of immigrants per year through central american countries. -- stabbing attack linked to terrorism. they say a man got out of a pickup truck, which then caught fire. he stepped three people before being shot by a police officer. the attacker died, as did one of his victims.

his truck contained several barbecue gas cylinders. in california last night, thousands gathered for the visual to honor those killed in the latest mass shooting. a former marine veteran who may have had ptsd entered a country music bar and killed 12 people, then apparently killed himself. no word yet on what the motive may have been. authorities don't think the shooter targeted anyone. 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 emma chandra. this is bloomberg. recapping what happened with the ppi, the biggest jump in october for producer prices since 2012. out food and back energy. moving the market dollar at the highest session, euro dropping, gold dropping behind the safe haven by trade.

up by just two basis points, versus three earlier in the day. coming up, m&a and a new congress. will the appetite for -- under a democratic house? we will talk to bob profusek. ♪

emma: this is bloomberg daybreak. i'm here in the hewlett-packard enterprise greenroom. this is bloomberg. ♪ alix: the lead house democrat on antitrust issues signaled his party will ramp up scrutiny of large corporate mergers when it

takes control of the house. telling bloomberg, unfortunately i don't think there has been a robust role when it comes to antitrust policy. we have a responsibility to understand these transactions to understand that the statutes are working. shy away fromnot big deals in the run-up to the election, -- announced in the five weeks before the votes, making this year the third busiest election season since the millennium. joining us now is bob profusek and ed hammond. thank you for joining me. new house democrats, what is going to change for the m&a world? taylor: -- not much. it could have consequences and large transactions that attract political attention, regardless of who is in power. that could have a marginal effect, think of the aol deal recently, that sort of thing.

but the fundamental drivers of mna, and the fact that it has been such a terrible five or six globalization, technology, and fuel. , by not accelerating really the incredibly low capital cost we had, but it is globalization and technology, that's not changing. some of the biggest transactions, will there be pushed back in the politics? sure, remember candidate trump. alix: oh, right. ed hammond picking up on that a much more hawkish view of any deal that potentially involves a chinese player. is that going to ramp up with this? there does seem to be support for that kind of push. bob: that is a strong collateral headwind. it's not just the u.s.. one of the things for a guy in , it'senches like me

pretty remarkable how much nationalism is involved in mna. there used to be going into an emerging country and there's some protectionism, but there's a lot of it. slightly fewer than 200 countries in the world? there are 120 three merger clearance mechanisms. so, a big deal. and often,e 30, 45, you see countries that are not critical, but taking a bite out of the deal for their own interest, including, but by no means limited, to the united states. alix: one of them is -- and one of them is antitrust. take a look at some of the movement, you might see more investigation into technology and pressure on big tech. where is the opportunity? which sectors can see more action? i think mergers where you

are merging within a particular geography, will continue to happen. yesterday, all four companies of -- came out and said we won't need chinese approval. i think people will be more focused on deals where you don't have a ton of cross-border stuff happening. it is a broader charge, what is and is not considered critical infrastructure. in technologyhing or hard, fixed asset structure, like oil and gas, food and lights. it will be interesting to see certain things we don't expect to fall into this, do. the democrats are by no means less hawkish than republicans. hank paulson on bloomberg, just a few days ago, talked about the potentially long-winded between the chinese and united states -- potential falling of the iron curtain again. the economic iron curtain,

that's no joke. we spoke to the evercore president and ceo and talked about what economies are looking at when it comes to uncertainty. >> uncertainty is the enemy of m&a activity. there is a huge amount of uncertainty as to how most chinese regulators and the u.s., through the city is processed, process wille -- react to larger m&a transactions. alix: where is the easy antitrust road? think you are exactly right, domestic things are where it is mostly domestic or single country, or eu and u.s.. but the eu is getting tougher as well. bob: but people aren't going to shy away. i go back to where i started.

technology and globalization is what is driving the bus. that's not changing. if anything, it will continue to accelerate, so companies that just stand still and count on their asset race, they are going out of business day by day, you could argue. alix: does that mean we will see smaller deals that add on, or will it be the big guys? more ofink we will see what they call the bolton acquisitions. outside the market for a big game changing transaction by ibm, by far the biggest deal they've ever done. it's interesting, shareholders earlier were reporting companies -- a rare bump in the share prices. that seems to have caught up, whether or not that tempers big, gamed these changing transactions, remains to be seen. the ones that lower the risk spectrum, i think will drive. alix: let's talk about energy

companies not getting rewarded for announcing acquisitions. what is the biggest uncertainty for company ceos to prevent them from pulling the trigger? bob: i think the biggest uncertainty is volatility. that is one thing that the congressional change might impact, if we have government shutdowns or guys bringing out their guns at high noon, brinksmanship on the budget. also, it's bad. third quarter was a big falloff. now, that is whatever. but october was really bad with volatility. so, if politics just produces all sorts of bad stuff in the marketplace, that could have an effect. alix: thank you guys very much. coming up, singles' day. retail earnings, retail sales, oh my. ♪

>> here's what else i'm looking at, next week. a busy week when it comes to retail. sunday is alibaba singles' day, monday is the -- deadline for sanctions. i have the bloomberg asset kawa.er with me, luke >> it's interesting we get to start it with the strength of the chinese consumer. obviously alibaba is trying to make singles' day go more global, and i think the more we think about the possibility of a convergence trade to resume, you need names like alibaba to lead it, or else it's not going to happen and all of the conversions we've seen in u.s., asia, have been false starts to date. on the u.s. side, i wonder if the bar is a little higher for retailers because we have xrt, kind of the market non-cap

waited for retailers. what we have seen his short interest ramp up during the recent selloff, then it also came down pretty nicely and quickly during this recovery. i'm wondering if it is not enough to not be killed by amazon right now, if you have to show a little more strength, and i wonder how much they will be affected by labor costs when these companies should be on the front line for that. alix: if there is anything to pass through on that level. thank you very much, that's it for bloomberg daybreak: americas. --ing up, ♪

>> from new york city, the countdown to the open starts now.

jonathan: counting up, china's growth worries increasing. the government pushing lending quotas on banks. record -- reaching 20% in just a few weeks, but the federal reserve is not concerned, maintaining expectations for the december rate hike. closing out the week, the market looks like this. stocks are down 1.5% in the s&p 500. mild dollar strength and a bit goes to treasury, yields are a little bit lower following api, which we will discuss in a moment. your yield, 323 on the u.s. 10 year. the investor once again waking up to concerns about global growth. >> there is a bending down taking place. >> suddenly, europe is going to pick up. >> europe is slowing down. >>