>> suppliers doubts about new iphone demand drag rates lower. apple closes down 5%. oil extends its record losing streak. president trump takes aim at saudi arabia's plan. where live in abu dhabi. theresa may said talks are in their final stages as negotiators work through the nape. -- the night. could we see a deal this week? ♪ francine: hello. this is bloomberg surveillance. i'm francine lacqua. markets. your the stoxx 600, gaining .06% hope

that u.s. china trade gets better. i am looking at the 10 year yield, 3.17. coming up, we speak with the code chief executive of standard life aberdeen. or two tove a thing say about his industry. i'm interested in hearing his thoughts about brexit. here is sebastian say lex. >> brexit negotiators are working through the night to work a deal. theresa may said the final stages proving difficult. in a speech at the city of theon, ms. -- may said negotiations are in an and game but problems remain. both sides said they have until tomorrow to achieve a deal. it may offer -- italy's government may offer a

concession when it submits it final budget. 2019overnment will cut its growth target to as low as 1.3% point 5% previously. italy has until today to send its revised budget to the commission. argentina's credit score has slid deeper to junk. b, rating was lowered to five levels below investment grade. will carry out measures to stabilize the economy over the coming months. president trump has decided to remove kirstjen nielsen. the president canceled a planned trip with her to the border in south texas. he is unhappy with performance on immigration. for democrats in arizona.

she beat out a fellow member of the house. she will be the first openly bisexual senator and the republicans have a 51-47 lead in the senate. another wildfire in california has claimed 42 lives, making them the deadliest in these history. because it is not known. managers say nature and humans share the blame, not force mismanagement as claimed by president trump aired president trump has approved an emergency declaration for funds. stanley has died. his work provide -- stan lee has died. beforerted as a writer rising to editor of marble. he made his mark by creating superheroes with troubled wives

-- lives and temperamental personalities. these include the fantastic four. global news 24 hours a day and at tic toc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am sebastian salek. this is "bloomberg." francine: thank you. following a lower slump on wall street overnight. background, the federal continuing on the path of normalization. said she is not worried about decline saying there was a broad consensus that valuations are higher. ,e are joined by martin gilbert standard life aberdeen. we are always delighted to speak to martin. is volatility back? martin: it is good for active

fund managers. to do what a chance we think we do best which is select stocks. i think it is welcome. valuations get more realistic is good. francine: where do you see the biggest risk? you have china, the possible higher dollar, what is the pitfall for corrections? martin: the risk is the u.s.-china situation and i think the u.s. is being more aggressive behind the scenes then we are seeing or hearing. that is the biggest risk and the knock on effects of that dispute are what are going to hit emerging markets. opportunity for

other emerging markets to step -- into china's shoes and boost their economies because whenever i visit, i will say you've got to grow your economy on your own, not be an export led emerging-market. they are doing that. francine: do you expect a correction? martin: we have seen a correction. francine: is that it? martin: next year is going to be tough. the return to these liquidity fueled markets. i think it is an opportunity to get back to basic stockpicking and picking companies that are realistic valuations. francine: there was a selloff

overnight for tech stocks which was the suppliers of apple. is that where you see opportunity? the valuations there are reasonably high. i would like to see them come back a bit. we would like to see them come back further. a lot of active fund managers, especially value fund managers, who have been caught by being underweight u.s., overweight emerging markets. it is a healthy correction for fund managers. francine: how difficult is it to retain clients or get new clients? blackrock won new investment. how do you make up for that loss? martin: that was a different situation. that is not a normal relationship. that was the subject -- it is the subject of an arbitration

process. i cannot comment on that. what i would term as gross sales for us are healthy. becausee we have got is we have been a value quality house over the last five years, we have had tough times in performance. that has changed dramatically in the last two or three months which is why i should not welcome a market fall but why it is so helpful for us. is when the markets go down that you can value pick. do investors understand that? martin: institutional investors do. investors we of manage for will have a growth house, a value house. balanced roster of

asset managers. hopefully, we deliver what they expect during what i think will be more volatile markets. the markete correcting sharply and going back up. i do see it as being difficult next year as well. window we have policy normalization -- will we go back to the markets we had? martin: i do not think so. morell go back toward normalized markets now, which is stockpicking and looking at earnings growth, dividend growth , all of the things that have not worked over the last five years. francine: if you look at asia, europe, the u.s., where do you find value? martin: the area that is neglected is asean. you should look at it like europe, without the central

government. they have got all the benefits. i like the valuations there. india has been a big call for us. valuations are pretty high there. good quality companies. is still asean dependent on china, right? they are the first hit here in -- hit. i suggestat is why they have got to boost a mystic consumption growth rather than the an export led economy or region. thishave an opportunity if china-u.s. war escalates to step into the shoes. francine: do you worry about oil price? we had president trump tweeting. opec and their allies had to do u-turns. what does it mean? it is good my house,

when we get a high price. areank we are in the right for oil about here. we do not wanted to go up too much. 100. not want it at this is healthy and it has rebounded from lows. francine: i remember speaking to aftero years ago president trump was elected because you knew him. has he been good for stocks? martin: he has done a lot of good things. remarksple preface about him. i do not want to sound too supportive of him but he is doing the right things for the economy. there is no question the tax cuts have helped. he has a point on china. he has a reasonable point on

nato as well, the contributions. think the midterms when as well as he could of expected. francine: some people say he won seats. we will come back to martin gilbert and we will talk about his company and brexit and negotiators worked through the night. prime minister theresa may claims talks are nearing the end game. this is "bloomberg." ♪

francine: economics, finance, politics. i'm francine lacqua in london. let us get to the business flash. energyan: italian

producer has won the right to develop natural gas fields in abu dhabi. it will work with the national oil company in a deal they could be worth $20 billion. it will be the second largest partnership in the industry. it seeks to become a net exporter of gas. it is a temporary situation. i am convinced there is a gap and we need more supply. the $100 barrel. we have to avoid that because it is not good for the consumers. it is not good for the producer. sebastian: goldman sachs shares tumbled after malaysia's government said it one a full refund paid for funding for i want -- 1mdb.

the prime minister in waiting morethat malaysia must be aggressive in pursuing claims against the investment bank. moneyn sachs said the would be used for development projects. -- apple apple phone iphone suppliers have fallen as it is seen weak demand. it slashes forecast for sales. one of its largest buyers as to reduce shipments. apple is the biggest customer. that is the business flash. francine: thank you. a midweeky faces brexit deadline. she believes she is edging toward agreement. conservatives are threatening to vote against her and forced the u.k. to crash out with no deal.

tomorrow seems crucial so the accord can be signed off by both sides. the negotiations for our departure are in the end game. we're working hard through the onht to make progress remaining issues in the withdrawal agreement, which are significant. both sides want to reach an agreement. what we are negotiating is difficult. francine: does getting a good means good for business? you were at that speech where the prime minister was talking and you said the crowd you opted -- erupted in cheers. martin: she got a warmer response. i was surprised at the warmth of the response. it went on and on.

francine: which means what? that she is doing a good job? martin: i think most people think she has got an impossible job and is showing strength trying to do an impossible job was the feeling. francine: i know we are doing an event later at bloomberg headquarters where we will focus on brexit. is it too early to know what kind of brexit we will get? martin: the problem is, none of us know what is going on in the negotiations and no one knows what is going to happen. between got to divided financial service companies and nonfinancial companies. the financial companies have planned for every eventuality because our regulator forced us to.

we are prepared for whatever outcome. the issue is in the nonfinancial service companies, asset managers. there is a big supply chain issue there if we do not get some sort of agreement. francine: does it have an impact on your business? thein: we speak to companies we are investing in, the drug companies, the food companies, the supermarket companies. i think good management teams adapt to circumstances. they have to find other ways of getting round the supply chain, potential supply chain issues of customs. that is where we see the potential issue. francine: what is priced in at the moment? we do get aink if deal, the pound will rally.

amountt convinced this of downside in the pound-u.s. dollar may go down slightly. it is weak against the dollar at the moment. francine: what is the probability of a crisis? think, one of the isngs we do not see here that in europe, they have got problems of their own. number two or number three on their agenda. they will get around to doing 31st ofg before the march. i think some deal will be cobbled together rather than a hard brexit. francine: martin gilbert stays with us and we will talk about the industry. conversation and we discussed the future of asset

management and colin so -- and consolidation. this is "bloomberg." ♪

francine: this is bloomberg surveillance. still with us, martin gilbert. talked about brexit, the markets. talk to me about your industry. you were one of the biggest players to consolidate. do you see more? martin: we are seeing tough

times in the industry, pressure, we seeing the rise of passive. active has had a tough time. there is pressure on the businesses, especially those caught in the middle ground between the big and the boutiques. we like to think we are ahead of the game in doing this. francine: how is the integration going? martin: it has gone well, very much to plan. we have done it before. it is not difficult. i think, what we have is this strong balance sheet of a of cash and strategic investments sheet, a lot of cash and strategic investments. ,hat we're seeing is the rise

the gain of private markets as people are moving from public equities into the private equity, private debt. when we speak about private markets, the bulk is real estate. we are seeing other areas of from real estate, growing. francine: martin gilbert, thank you so much. , apple supplier shares tumble. this is bloomberg. ♪

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

there are more women in the cannabis business than the average american boardroom. passportsns for irish for northern ireland have risen. talks enter the in game stage.- endgame goldman sachs shares tumbled. we're also getting breaking news out of the u.k. we did have some disappointing data out of the u.k. today, we are just getting wage growth accelerating a touch above estimates. the unemployment rate rises to 4.1%. you can to pound, 12903.

sebastian: italy's government may offer minor concessions when i resubmit this budget to the eu. the government will cut its 2019 growth target to as low as 1.3%. italy has until today to send a revised budget to the commission after its first draft was rejected last month. argentina's credit score has slid further into junk. the rating was lowered by one notch to b. stable. the outlook is president trump has decided to remove homeland security secretary kristen nielsen. he canceled a planned trip to the border in south texas this week. tell aides to this week he wanted her out as soon as possible.

an upset victory for democrats in arizona. should be about a former member of the house and will be the first openly bisexual member of congress. in a recountace is and there will be a runoff in mississippi. wildfires in california have claimed at least 42 lives. the cause of the fire is still unknown. the president has now approved a request from governor jerry brown to declare that fires a major federal disaster. the force behind marvel comics has died. stan lee was 95 and his characters provided lucrative business for hollywood. he made his mark in the 1960's

by creating superheroes with troubled lives and temperamental personalities. his other creations include the x-men and the fantastic four. 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. on sebastian salek. this is bloomberg. francine: thank you so much. major suppliers to apple's iphone fell. momentum trended second-quarter outlook because of reduced shipments. first of all, is this all down to demand for new iphones? alex: absolutely. basically the 3-d sensor in the latest range of iphones, which

is essentially a face id. what we have tended to see in the past is a lot of this news flow. news coming out of asian suppliers say demand for their component isn't as great as has been expected. that happens year in and year out and there is a bit of a debt. perhaps -- dip. often what happens is they will have the base of what apple needs and will set aside more capacity as needed. what has happened here is they have done the invert. the impact on suppliers is clearly more negative than had been expected. francine: what is your take on technology? and is not the first time we have seen tech selloff. >> indeed. on the one side we know that it will be technology where the trade war will be fought. sort of the exchange of goods

and patterns. especially these companies which are at the intersection between technology and consumer discretionary. we are at this stage where growth is beginning to plateau and decelerate, and consumers are beginning to think twice before spending 1000 pounds or which are not necessarily a necessity for them. francine: are all the worries warranted? alex: on the one hand, we have apple, selling fewer iphones. what they have been able to do is up the price on this iphones, so they generate a bigger margin. that is not good news for the suppliers down the line because they are supplying fewer components, but are selling each component to apple for the same price. when apple sells less volume, it is necessarily have an impact on apple's growth, but a huge impact on the supplier's growth.

if you look over all at the markets, how much is the tech selloff a component for something of where to happen in the s&p overall? pau: i think it has been leading markets. in a way, the good behavior of tech has never lately made so that indices went up which prompted more investment flocking into markets. tech, 10 years ago didn't matter that much. basis, it rated constitutes almost 25% of the s&p. it has the ability to propel the s&p. the danger is that in a world where almost 50% of traded equities are the hands of passive investors, that could be the beginning of this noble effect which might not be fundamentally based, but nevertheless, it will not be the first time where you see massive

moves on the way down, that are not necessarily triggered by fundamentals. francine: i think last time you are on, we were talking about emerging markets. what worries you now? more tariffs? the trade wars? something else? pau: in the short-term, the possibility for tariffs, trade wars to extend. triangle of higher rate in the u.s., meaning stronger dollar, less dollar tightening financial conditions around the world. the big issue is at what point this market volatility will begin to spook investors. three months ago, all investors were coming to me saying pau, should i be in the market? the fear of missing out. it is very psychological sometimes.

we are try to look for the catalyst, and the possibility of lack of reassurance that we don't have this comfort blanket from central banks anymore. five years ago we knew that they wouldot ugly, come in. central banks are now more focused on building storages to recessionsinancial there may are to stimulate the economy. the recognition by investors that volatility is here to stay, that investors have made a good amount of money. that is my main concern. the fact that there is a lot of passive money and many investors, like the one you're talking to before, investors are on and off. francine: thank you both.

alex and pau stay with us. plenty coming up, including oil and focus. crude continues its losing streak after trump last saudi's plan -- blasts saudi's plan. looms.eadline italy we must submit its revised budget today, putting for a possible showdown with the european commission. we assess market impact. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i'm francine lacqua here in london. oil sells for 12 consecutive

session. this comes as president trump criticized saudi arabia's plan to cut output. let's head out to abu dhabi or manus is with a guest for us. we have another great guest for you. he is the managing director of an npc. how much are you producing this year and next year in terms of crude oil? we are producing about 2 million barrels of oil. oil atlion barrels of the moment. next her, our prediction is to do 2.2 million barrels. is the ambition.

you have to make it profitable entity that you need good prices. as by the past 48 hours. suggesting that opec needs to reduce production by one million barrels. without stop the rot of oil prices? do you support that moved by the saudi's? >> i think with the saudis have done is what the industry is looking for. there are issues within opec to say that it needs to sacrifice. ist we need in the industry prices about $70 a barrel. manus: you come up as the second -- what was pack

severely threaten those numbers you have just given me? iran,roduction, , also from shale oil. if shale oil comes in heavy, we could have problems. manus: what did you make of donald trump's tweet overnight when he said saudi arabia and opec, he hopes they don't cut because he wants lower gas prices? >> some of the biggest oil producers -- ahead and dond go that because it's his company. also, shareholders. material it has got a

impact at home and united states of america? >> definitely. are we likely to see a little bit more in this field? what next step for you? closed moste have of the volume for next year. keen, but if it will come with a new deal -- manus: you're talking my kind of language. in the newlected traders to get the oil out of the ground? >> definitely. we have the list on our website. manus: who is your top contender? indian andthem are

chinese companies. manus: thank you very much for being with me this morning. you do realize you have joined a very how the club. oil very brave men give me prices and is hollowed halls. francine: good morning. it is a pleasure to have you. certainly very brave men and women that give us oil prices, but it is great because it is helpful for a lot of the oil traders out there. that was manus speaking to the nigerian corporation. are you brave enough man to give me an oil forecast? don't give me a range of like $30. and $100. short-term, the price is going to go down. it can go down -- can't go down below $50.

could a go down another five dollars? absolutely. we have a significant amount of inventory to work through. stable.as been pretty i don't think you will see a huge change in demand over the next few years. china is not going as much, but that doesn't mean the growth will be stable. it really is all about supply. in particular, when we thought that iran was not going to be allowed to sell oil and some producers like the u.s. pick up the slack, iran is now producing the glut. that will continue for the next three months. it will probably stay at those levels undercover later. maybe a little bit higher than now. but, in three months time maybe a little bit lower. francine: is it going to be stable? pau: below $80 will help.

ran reallyally see i captivating the attention. it is fairly relevant for your average voter in the u.s., whether iran's problems with the u.s. that probably will mean that you will see a slightly tighter range between $55 and $65 over the next several months. francine: does this impact the emerging markets are not so much? pau: not so much. francine: so it makes the difference for emerging markets is back to the dollar? we have had that call for almost six months and we continue to have that. a little bit more expensive and the positioning is a lot of a danger because we are not anymore at the beginning. we were very contrarian because everybody was long developed, and not everybody seems to be in

agreement, and that makes me a little worried. francine: up next, budget showdown. italy will submit a revised budget today after the european commission rejected its first try. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." government may offer a minor concession when it resubmit its budget to the eu, admitting its spending plans will have a smaller economic impact than projected. the italian newspaper says the government will cut its growth target from 1.5% of gdp to as low as 1.3%. italy has until today to send a revised budget to the commission after its first draft was rejected last month. still with us is pau from london. i don't know how you view italy.

pau: i wouldn't touch italy at the moment. i think today's budget proposal will not be dramatically different. for the very same reason the two parties are in power, it makes sort of on flexible when it comes to those requests. on the one side, it appeals to the northern base, if you are the lake and have to appeal to thedisenfranchised, and combination of lower taxes and the north and more expenditure in the south means italy will not change the budget. growth numbers give them a little bit more ammunition. hard and have to play therefore you will see a standoff which will continue and that has the potential for

slightly even higher yields. i think it is catching a falling knife when it comes to trying to btp's.ney off of italian today, we are tied to contribute to the conversation by asking, which assets will win standoff.he eu-italy i also learned what a game of chicken was. who wins? pau: everybody loses. the only people that can win is obviously the politicians, which are treating these more as a platform to establish themselves and looking onto european parliament elections not that far away from now. that is a consideration for them. they might win votes and continue to appeal to the

disenfranchised south and the north that once more growth. growth. more i just don't see how anybody wins because europe knows that is just as important but it is not greece or cyprus or portugal. at some point, it can be good news for the euro. it is large european exporters that could potentially benefit if it continues to be more concerns. luckily for europe, everybody talks about trump, trade wars, but really, things are not particularly attractive, which is why i would stay away from the european government bonds. areas i think some interests are and his european exporters champions what will potentially benefit from a

cheaper euro. what will the implications before the ecb? it probably means it will pause and be reluctant to get on with qe. finalization of i think the pace at which it even gets used will be zoned down. francine: thank you so much. we continue in the next hour. tom keene joined me out of new york. will be speaking to the executive director of the international agency at 11:30 a.m. london time. this is bloomberg. ♪ [ phone rings ] what?!

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doubts about new iphone demand. president trump takes a once again that opec and saudi arabia's plans to cut production. talks are in final stages as negotiators work through the night for brexit. could we see a deal this week? this is "bloomberg surveillance." good morning if you're watching from new york and london, good afternoon if you're watching from asia. tom: look at the markets need to catch a bid. the drop in the dow yesterday. frankly, you wonder, does president trump need to catch a bid as he comes back to washington? a light rain scheduled in washington today. francine: we will have plenty more on that. first, let's get to sebastian. that wildfire and

other california is now the deadliest in the states history. search crews found 13 more bodies. the fire has destroyed more than 7000 homes and other structures. in southern california, firefighters appear to be gaining ground against the blaze. and upset victory for democrats in arizona. the democrat became the first member of the party to be elected to the u.s. senate from the state. out a fellow member and will be the first bisexual member of the senate. the florida race is in a recount and there will be a runoff in mississippi. brexit may says negotiations with her than i to try to reach a deal. the final stage of talks is difficult.ensely negotiators believe they have until tomorrow to secure an agreement if it is to be signed off at a special european summit at the end of this month. abu dhabi is signaling ambitions

to send more oil and gas around the world. we spoke with the ceo of abu dhabi's national oil company. we have announced a $45 billion announcement to invest alongside our partners. wer the next few months, will be making some really big announcements. sebastian: 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 sebastian salek. this is bloomberg. tom: thank you so much. equities, bonds, currencies, commodities. this is a work in action. right now, futures bounce up seven. there are some huge oddities, are correlations of the market. let's begin with oil.

the vix 20.0. there is the dow closed down 602 points. what is so cool now are the odd correlations of bonds and foreign-exchange. francine: i'm looking forward to that and also our conversation. i spoke to martin gilbert of standard life aberdeen. he sing your praises, i had to set him back and tell them the truth. he said what we do here is important because it makes it easier for the active investors. i'm looking at november -24.1.tions at overall stocks are actually climbing. there is hope that trade talks

will progress.the dollar slipping from an 18 month high . tom: this really shows the pullback yesterday. there are eight flavors of the y. down we go. -- you remember the sweat of a near correction. this is the drop yesterday. nowhere near that bottom, but nevertheless, i really abrupt 2 trading days off the recent peak. francine: this is tech centric. this is my chart of the day. thank you to hillary clark for giving us smart charts. apple suppliers under pressure after the iphone sales fell. the tech centric fear is actually here.

stocks, s&p 500 futures have regained ground after yesterday's selloff. the dollar ticking down slightly. this after a touch in an 18 month high. let's get straight to marcus. i'm looking at the markets. overall, one is the correction do? we had such a torrid october that we are into november and it is very hard to get a clear direction. it is quite shaky. italy is much weaker again today. the stock selloff yesterday was quite troublesome because it shows we are not out of the october fear. china is not doing well, the pmi's across the world, but certainly across europe and china are week. -- weak. oil is one thing. oil is such a subjective thing, but it's hard to get away from

the fact that it is a growth indicator. the fact that it is driving sharply shows there are worries. tom: i want to drop in your the banking system. one of the great stories you have identified is the contagion in financial stocks not doing all that well. here's a spectacular chart of goldman sachs and another bank. all you have got to know is this other bank and goldman sachs are really in lockstep. up, goldmanrgan sachs, not so. maybe a little bit of leveling out for jpmorgan for 2018. this isn't about malaysia. there is more going on here in the financial system markets then scandal, isn't it? marcus: yes.

i think they were problems in third-quarter trading. it was a tough time. i don't think it has been uneasy market to trade from the fourth quarter either. in that context, i don't think the investment banking related stocks are going to do well. that is why a behemoth like jpmorgan is a safer bet. banks, you at u.s. try to look at european banks, they all look great against them. tom: within this contagion that you wrote about, do you see correlation within equities? cus: i can't answer that question and a straightway. there is certainly the ability in the next few weeks that we are not over for the year as far as volatility is concern. i do think there is a decent chance that if we get another sharp selloff, they will start spreading.

moment,aid that, at the a bit of noise. we're certainly unsettled. markets are having a calm moment at the moment. we have seen in mexico that things can tip over. i don't think we can settle into a rally or anything a simple as what we would expect this time of year. how does italy end? who is going to blink first? right now, this is a bit of an opera. people are denying reality. third-quarter gdp was close to zero. fourth quarter not expected to be much higher. for the country to be able to post a 1.5% gdp next year, they

will have to grow and that hasn't happened since 1990. numbers, basically the 1.5%, forget it. one person is a mark realistic number, assuming confidence doesn't collapse. right now, confidence is lowering because most interpreters are pulling back investments. francine: you are talking as a numbers man. this is an uneasy correlation. you have to parties that are trying to make marriage work. they're just tryingto deliver the promises they made to the electorate . davide: the promise they made had a cost. right now, they're playing with 30, it should be around 20. reality.because the you offer your girlfriend a $150

evening. starter. sorry, darling. francine: dinner dynamics. tom: let's go to mcdonald's -- davide: let's go to mcdonald's. tom: i'm china to frame a date at the liverpool station frame a's -- trying to day of the liverpool station mcdonald's. i do have lunch often there. we're going to come back. it is an important show across all of "bloomberg surveillance." today. many banks searching for new lows. us in the next hour. this is "bloomberg surveillance." ♪

sebastian: this is "bloomberg surveillance." the german conglomerate reported higher than expected earnings for the third quarter. we spoke to the company's ceo. executing on the strategy that we communicated back in september 2013. share theng to strategic development, but also operational and inspiration targets we have set ourselves for the next three years to come. italy will be able to

pump 150,000 barrels of oil every day. it is a temporary situation. there is a gap and we need more supply. to buy down because it is not good for the consumers. it's not good for the producer. sebastian: that is your bloomberg business flash. francine: thank you so much. n could sachs' reputatio be facing one of its biggest crisis of a decade. the nation is stepping up pressure against the investment , calling for more aggressive claims against the bank. this comes after the finance minister said the country is seeking a full refund of all the fees paid for one deal.

goldman sachs has previously said it believe money it was 1mbd would be used for -- 1mdb would be is for projects. bring us up-to-date on how the deal is progressing. what does malaysia actually want? heyou already mentioned that wants more aggressive claims. not only do they want the fees, back but they also a -- consolation for what he said is running their image. he said not only did they want the fees, but they also a losses stemming from the interest rate differential, which he is saying that one goldman sold those bonds, they were actually sold at higher interest rates than they would have paid otherwise. conversations of

for consequential losses, which he doesn't elaborate on. all of these things are really raising the pressure on goldman. he earlier had another press conference and said that he is been working closely with the u.s. boj and justice department and the justice department is ready to get back the money, as long as malaysia gets that approved. tom: does malaysia and the government wants goldman sachs to do business in malaysia? yudith: when the prime minister was asked that question, he just said we are watching and still observing what kind of investigation is going on. he is not rolled out whether or not he wants to ban goldman's operations here. they have really diminished over the years. as far as i'm aware, in

malaysia, the main operation asset management. francine: thank you so much. let's get back to davide. put -- if you look at european banks, they are far behind u.s. investment banks, do they catch up at some point or just go for wealth management? davide: i think the key question has to be where rates will be. the issue is, today, if you look rates,bank, u.s. fund assuming the ecb rates or equal to fed fund rates, european banks will have 40% higher rates. people need to pay the clerks. when you get the cash out of the deposits, you lose money. this is not sustainable.

no business can run at a revenue loss, let alone cost. the key question is, when do we see normalization? think already one year too late. i we are seeing unintended consequences. they should have normalized 20. zero. i think the sooner they do, the better. the key point is, 75% of jobs in europe are in sme's and can only borrow from banks. they can't borrow from the bond market. if they want to help the jobs economy, they need to help banks make money. tom: we're talking about goldman sachs, prelude to the importance of europe. as said repeatedly this absolute fiction of negative rates structure. this is deutsche bank right now rolling over, not through the lows of october.

continue. what do they need to do to get this fixed? there are three different issues. in germany, 70% of the banking market is public. that means they don't care about the returns they make. as a result, it is very hard for them to make any money in germany. secondly there are, negative rates. third, over the years, they have been basically not integrating and the backend. they end up something -- having something like a $30 billion revenue. goldman sachs has the same, but 20% of the workforce. basically, the same revenue base, four times as many people. moreb, the issues are existential.

ecb rates matter for the core of the banking system. db has other specific challenges, and not just where ecb rates are going to be. francine: thank you so much. davide stays with us. we are just getting breaking news out of italy. a 5 billiong this euro bonds at auction, matching the target. a great bloomberg story saying with attention focused on italy troubles, the risks around italy's bond, investors may be ignoring opportunity and the better rated spain. we will discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. talking about the difference between european banks and some of the u.s. ones. what they really need to do in europe is focus on the possibility of banks because that would make a stronger economy. that back with davide. if you had to pick one bank and europe, which one? if there is any credit and italy, because of being clobbered by italian risk, it

will be a wealth management played by credit suisse. accommodation of the three gives you a proper disclosure. francine: what has the most potential? davide: in the case of santander, they are one of the highest return on assets in the industry. they lend money. what i think they need to do is have more fees and less pure lending. and the new business model of all majorf your competitive edge is lending cash, you are at a true this advantage. francine: quickly, which bank do you most dislike? davide: deutsche bank. the reason is because the challenges there are humongous. it will take time. it could well be eventually that the u.s. regulators keep asking

from our capital. eventually, the group ends up being short of capital. you're dealing with the regulator that basically wants to kick you out of their own continent. francine: thank you so much. davide stays with us. bloomberg users can also take some of our charts. tom has a good one looking at italian german spreads. i also have a good chart looking at oil after president trump tweeted about saudi arabia. andcan browse recent charts make them better and send them back to tom. this is bloomberg. ♪

francine: this is bloomberg surveillance. is government run

equinox, second partnership for producing gas after signing an agreement. an executive says the company is seeking to transform into an export of gas by 2030. >> our energy ability would continue working on an expansion , which would be something also by us exporting other energy opportunities. >> where could those opportunities take you? >> where the market takes us. companyn investment looking for what makes sense. you have got a target for efficiency. [indiscernible] our content is to advance our

gas portfolio. reservesoking at our and do this because we can and should. we have the resources. we have the technology. we have partners extremely interested in new developments. you, what kind of companies do you want in this journey am i want to be bp manager. i want to be exxon. what do you want this company to be? >> we want to be the company of the future. we want to operate as an international company. we want to be quick and resilient to market dynamics and commercially motivated.

company thatcome a leads in the future. now, first world news. announce it is in new york and northern virginia for its second headquarters. a decision would end amazon's search for supplement terry -- supplementary headquarters. there's never been a wildfire in california like the one in the state. it may go higher from 200 people still unaccounted for from 7000 homes destroyed. high winds appear to be gaining the upper hand against do fires.

president trump decided to remove secretary kirstjen nielsen. he said he wants her out as soon as possible. the president is unhappy with her performance on immigration. and china's vice president has resumed talks on trade. the two spoke on friday. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am sebastian salek. this is bloomberg. francine: thank you so much. theresa may faces a brexit deadline. she believes she is edging towards an agreement with brussels but conservatives are

threatening to vote against her. by johnoined micklethwait, chief executive and founder. thank you for joining us. do we have any parity on what brexit will get whether we are crushing out -- crashing out. john: we have more clarity on a deal that might be done but no clarity on whether the british will have kept it. my opinion has always been there will be a deal with europe and the first time it gets voted down because there are too many people who put their egos on the as a groupthe losses of hardline brexiteers are not prepared to sign on. there is a growing number of remainders. you have an understanding of u.k. policy. the composition

of parliament, will the conservatives take a chance of going fresh elections? john: we are all guessing. there are enough people who want to vote against the deal for various reasons to cause a problem on a first date. , theyhen you talk to them are nervous about turning that into a no-confidence thing. i suspect if i had to guess what would happen, you have the first deal that gets voted down. you have chaos. that is how they make money and what happens is there is a second traditional european fudge. everyone is guessing. member all used to one being difficult to mrs. may. -- is quieter. he is more thoughtful than his brother. tom: i look at the soap opera of

brexit. i am baffled by it. it is lost in translation for the americans given the stability of american politics. in that, what is the timeline? brick --he timeline on on when brexit comes to a conclusion? we are having translation issues, tom. sometimes the text does not work. tom: he can hear me but he is taking it. francine: everyone can hear you because we have you on loudspeaker. tom is asking about the timeframe. doing need to wait to january or february? till we need to wait january or february? john: it looks as if it is going to go through january.

you look at the history of european deals. has there ever been a deal not made at the last possible moment? francine: it is tradable, right? if there is one thing you have to get right, it is -- is it a pounce call -- pound call? assuming the ecb gets voted down in parliament, which is my base case. what happens on the european side? of --ave the same issue on the european side where they are divided on what to do. is -- has been supporting the people's vote, myself personally and the only true solution will be to have a second referendum because it is a mess. it would be like punches pilot says it is what it is. francine: can you revote?

think heellectually i is right. editorially, you can make the case people, given a choice do you want to stay in the european union, or quit in this wonderful land the other johnson has decried? either stay in the european union or andover most of the power to brussels and stay on in a limp way. you could argue that is something worth a second vote. within the dynamics of the conservative party, there is an overwhelming majority that do not want that to happen. corbyn has never been a fan of that. it is more possible now. i thought it wasn't possible. now it is likely. francine: would we get different results? if it is 51-49, do you have a

third referendum? davide: we are getting data. the easyjet generation realized that on a brexit vote, the next time on roaming, you will be on your cell phone. you will pay compliance. there will be roaming in spain on your holiday. i have seenyouth -- my kids cook. we do not know whether it is going to be france or the u.k. some of the kids say we cannot. we are going to be stuck unless we pay. this is what i think somehow is making the youth think. time, the turnout was low. we will see. francine: can i ask about calls? we have cable.

some of the brexit deals price into that. it shows a premium. what is this? is it dollar moving or pound move? davide: i think it is dollar move because the pound is tacked to the euro because of trade. the euro has implicit potential pricing breakup risk because of the mess and italy and short-term, the dollar because of growth is accumulating strength. deficit,rowth, at 6% eventually the dollar is going to go. trade dollar up. you will see #euro higher. francine: both will stay with us. coming up, the managing director of the united states. we'll ask him about some of the

politics and what that means for the fed and central-bank independence. is bloomberg. ♪

>> we are interested in building a beautiful garden which will be joined by all of the nations in this world. tom: good morning. keene in new york. and 600 points go to cash with us as well john micklethwait. he is editor in chief of bloomberg in transatlantic 2002.ns from 1918 let's go to an emotional opinion on world war i.

this was written before it rained in france. three reasons to fear another great war today. improve communications. international arbitration was making warren necessary and nationalism was being suppressed. here is the emotional part. the economist914, assured its readers of the economic and financial impossibility of carrying out hostilities many more months on the present scale. from a little history magazine and now everybody got it wrong. what are we getting wrong in 2018? john: i think the same. i have always thought -- i was in asia looking at china -- the way china -- and the one regimen i have is i think globalization and economic logic and

technology within the long terms but in the short term you face on his problems. there was a famous bit which you john mccain looks at a londoner in 1914 and the man is lying in bed. he is using the telephone. it is amazing technology and he is ordering goods from around the world. as keynes puts it, this is the age -- it is for your now. you can travel across borders. you had all these things happening at the same time. what keynes says is there is a small headline artist dish -- archduke shot. if you ask how the world is going to change, all he thinks about is the way it in which the world is going to get more global, technological. this is the first age to tie everything together with things

like the economist part of the initial bit. all the way from it and 40 to 1914 you have a world more integrated, more together and you have these things which he paradise with nationalism, religion. those things do not when in the long-term. but they do have moments where they grab hold of things. look at 1914. he is writing this in 1920 looking back and saying what an amazing thing we gave up. the main thing when you look at the first world war, it is total avoid ability. andrew jackson and the oval office interviewing the president, i think he was interview this weekend by the 3m's. macron, may, and angela merkel.

we need to see more rigidity against this unique president of the united states. -- this wask trump not one of his successful outings. physics excuse for not being there on the day when the armistice was signed -- that was attacked by many including winston churchill's grandson as being wrong. i am wary about people going in helicopters and that things happening but his excuses on the surface to europeans did not look good. he seemed isolated and less together than normal. the previous year he has been more on his game. this one did not work. look at all the people you mentioned. emmanuel macron is having a tough time. angela merkel is having a tough time and theresa may -- do not even start. it is not as if there are titans

of europe constraining. francine: talk about angela merkel. coming up, and michael purves. he is from weeden & co. we will talk about suppliers that supply to apple selloffs. is bloomberg. ♪ -- this is bloomberg. ♪

francine: this is bloomberg surveillance. tom, we were talking about europe. we were talking about the future of angela merkel as she will step down from leadership of the ec you. we were talking about italy. let's bring in a piece from our editor john authors. he says the eu is playing chicken with two of its biggest members, the u.k. and italy. the disaster scenario indicates of italy would be much worse on the u.k.. the dissolution of the euro

would affect every economy in the world. we are back with john micklethwait. when you look at the discussion surrounding brexit and italy, if brussels is too hard on italy, and you think the budget does not make sense, but if brussels is hard on italy, d european and italian voters turn? italian voters know they have been betrayed on economy aggression. crossing thents meds, being saved in italy know how to receive and they say where is europe? we have been sitting migrants. job.ve been doing a decent the question of motive is where i do when immigration? immigration?

ask italians, do you want to keep the euro? 70% say yes. if you mix the two, you do not have a clear picture. the solution is brasso helps italy more on migrants and immigration and italians will be happy. i can see the tension rising. francine: i do not know how much longer angela merkel can say. maybe a year. she has been in charge for 13 years. she was one of the leaders most praised. what happens with her departure? to the italians, angela merkel is toxic in italy. they say she is authority. she is one of those leaders

where her ability to keep going has always surprised people. you think there might be one kick which means she managed to go longer. it looks as if she is going. she has run it and she has managed it and there will always be this question whether she saved europe or managed to keep it at a time when it needed greater leadership. that will be something we tell all of our children. we will write essays on this subject. was angela merkel good for europe or not? you had a wonderful conversation with henry kissinger. i spoke with him in support of something he was doing. did he emphasize it was failing structure of europe? angela merkel was a symbol in that photo from ben watt to some in agents french press

yesterday. you have gottrump, an exhausted angela merkel and a young emmanuel macron. are they going on to something new we cannot imagine? the other is steve bannon. you have got him trying to go out to take down the world which you are talking about. with the leak in italy. he is looking in germany. he is close to alban and hungary. his aim is to get a third of the seats in the european elections. there is no resentment against those people at the top and they are all trouble. merkel is not the force she was. theresa may is out of the picture. -- she had the sense of handing off to macron.

he has had a tough couple months. tom: thank you so much on bank perspective within the european financial system. thank you so much, the editor in chief of bloomberg news. the down down -- dow down 600 points yesterday. guest will join us. michael purves will join us. strong dollar. the effect on equities. ♪

tom: we place a 600 point plunge in the dow.

perspectives correlate. bonds do not. should you go to cash? jens j. nordvig on weak yen and weak euro. the president returns to washington, pulling a closet full of shoes waiting for the january drop. the fires in california. -- inrecast says california continue. the forecast says rainy week from today. i am john keefe. frankly look watt in london. francine, a lot of interesting news today. jim was wonderful yesterday. is direct moment for me now italy will not go away. news on italyest interpreted by the financial markets in london? it will not go away because they have 13 hours to respond to brussels.

it alisa midday budget to brussels -- italy admitted a budget to brussels. brussels said it is not good enough. it is the will not change it. it is about politics. -- italy will not change it. it is about politics. we will find out if italy gets uglier. tom: we need to go out to news. sebastian: that wildfire, now the deadliest in california history. search crews found 13 more bodies. it has destroyed more than 7000 homes. firefighters appear to be gaining ground against the blaze. democrats in arizona, -- became the first member of the party in three decades to be elected to the u.s. senate. she will be the first openly

bisexual senator. republicans have a 51-47 lead in the senate. it will be a runoff in mississippi. and -- haven resumed talks on trade. they spoke on friday. their conversation did not reveal any results. theresa may says the brexit deal is almost within -- distance. the u.k. and the e.u. held another session in brussels. they believe they have until tomorrow to secure an agreement. global news 24 hours a day, on-air at tictoc on twitter, powered by more than 2700 journalists and analysts, in over 120 countries. i am sebastian salek. this is bloomberg. tom: thank you. widely anticipated, not

technology but two by fours. home depot out with earnings and people were riveted on this forecast for 2019. s fiscal yearost earnings-per-share forecast but that does not discuss where that comp sales number is going. 4.8, 4.7 is a make america great number. a lot of mystery on where that will be. maybe that is part of the gyrations we see in the equity markets. let's go to commodities. i want to get to jens j. nordvig. a tough go. the vix comes back to the 20 average. the dow, 26,000. down. yen in a moment.

francine: there is hope out there for progress in the u.s.-china trade dispute. -- heading for its lowest close this year. i am looking for european stock. there is recouping some of the losses we saw yesterday. tom: within the markets is equities. that is what gets the headlines. we say good morning to all of you streaming on twitter. thank you for the digital participation. asknow what than anything the pros looking correlation, we want to bring somebody to anchor in the 6:00 so with a keen understanding of correlation. a number of years ago, data. what did you see yesterday? what do you see on the tape this morning from subtle correlations back to equities? >> we have correlations of the

last 4-6 weeks. when the u.s. stock market started to correct in a big way, the dollar looked shaky. that was initial washout. there is optimism about the u.s. and the equity markets are going to different way. perhaps we need to stay more cautious on the dollar. that was not the case yesterday. that was interesting. we had a down day in the u.s. equity market and the dollar was strong. tom: the dollar did not move. jens: we had a strong dollar against emerging markets. and decent performance elsewhere. tom: the pros look at dollar-yen and look at euro-yen. bring up the chart now of dollar-yen. we have weaker yen over the 2018. what are the ramifications if the yen goes through 1.16, 1.17?

what does that signal? jens: in japan, there is this believe the yen is in a stable range. range.nge is a small from a big perspective, we came from it is before. there is a believe we are in a stable range. there would be a shock effect if we broke down and broke out of these ranges. .here will be scramble domestic investments will have to do adjustment. thething i will say is administration is watching these range -- this range carefully. if we broke out, it would be another concern for the u.s. administration. there is something going on with the u.s. being disadvantaged. you can argue the dollar should be strong but something that could cause tension if we break out of the range. francine: if the dollar breaks

at of range from here, does it mean the fed pauses for interest rate hikes because a lot is being done for it? jens: we have that dynamic playing out in 2016 where every time there was a tightening of financial conditions, and the dollar was strong, the hallway from the middle of 2014 and up fact 2016, that was the that kept the fed on a slow pace of tightening. that is different. at their target. their mandates have been met. they have inflation targets, a low unemployment rate. even meaningful tightening of conditions does not derail the fed's plans. that is what was interesting about the hiccup we have seen in the equity market over the last two months. a type of financial

conditions but did not generate that much of a move in u.s. interest rates. that is reflective of the notion people expect the fed to deliver at the next several meetings even if there is tension in the equity market. francine: what could derail the fed at this point if anything? jens: the correction in the equity market concerns something nasty feet into the credit market. that will be something more significant to the fed but they are watching the data and the data is convincing telling you story where growth is robust and inflation is at a target rise. the most data points is -- is there any moderation of inflation? i would be surprised but inflation numbers could put the fed on hold. we are not there but that is the thing to watch. the what is important is

discussion of the different correlations, the different items and yet the trauma in the equity market. is it discrete? is the equity market separate from your world? jens: when thing i have spent time on in the last two months is to dig into the detail of the -- when that started to implode, and we had a big correction, what where the correlation structure then and what was interesting was from a flow perspective, which is what i do for a living. -- it tookital flows a while before the flows changed in dramatic fashion. there was a lack between the price action and the big structural flow. now we are in the same environment where some of the tech is changing in value but the broad flows where there is a view of u.s. cyclical outperformance, it is still there. just because apple stock goes

down does not change that relative you from -- view from one basis. -- wee are talking to looking to the rise of the dollar. look for that memorial day, 2020. continue.rdvig will we are thrilled to bring you michael purves. dynamicss linked asian to currency that can do volatility in the market like michael purves. stay with us. this is bloomberg. ♪

sebastian: prior has given the first indication how it is performing after the takeover of monsanto. reported higher-than-expected earnings. still under pressure to revise its share prices. we spoke to the company ceo. in septembercated 2014. the capital markets are upcoming in a few weeks from now. strategicng to share development and operation. the targets we have set ourselves for the next few years to come also. the deer will allow 150,000 oils of -- gallons of oil every day. >> it is a temporary situation.

more is a gap and we need -- of the dollar barrel. it is not good for the consumers. it is not good for the producer. sebastian: shares with goldman sachs, the worst loss 2011. it lost 7.5%. gold bankers have been -- in a criminal enterprise , accused of laundering hundreds of millions. francine: thank you. u.s. china trade talks may beginning traction and bloomberg has learned steve mnuchin and trying the -- the chinese vice premier spoke friday. this comes ahead of a permitting ahead of xi jinping and donald

trump at the end of the month. raising asian currencies rose on the stocks. what is the catalyst or what measure in the markets look at as a kind of trade war proxy? the chinese stock market is important to follow. when we have the phone call between president trump and even pain --xi zins in ping, those are indicators we watch closely. the chinese currency is tricky because it is controlled. it is not like it is free moving where you can watch exactly what is sentiment. you have to track it out all the different levels china pulls to

actually get it to where they want which is something they have been doing aggressively. there one of the peers you look at? now?ere a you would trade trend gohad a dollar on since april. the big question is -- is that trench getting tired? or has it got much further to run? there are two things to watch on that front. that is ok. the idea i mentioned before of u.s. cyclical outperformance is valid. is --her thing to watch are we going to have further escalation on the u.s./china front? if we have escalation, the dollar is going to gain further. this is the key to trading the dollar. that is the key. that is why it is important to

watch this news flow and we can xi/trump meeting happens. expectations have gotten bearish. a deal would be a big market moving event. francine: thank you so much. jens j. nordvig. in the meantime, we're getting breaking news of opec seeing demands from declining faster than expected in 2019. this is because of a slowing global economy hurting demands but they are saying there is rival supplies surging. i think they are talking about shell gas. this is bloomberg. ♪

tom: bloomberg surveillance, your font of wisdom. should you go to cash or load the proverbial correction vote? , john and in london, michael purves. how discrete is this equity drawdown, michael to the technology group or are we missing something? michael: if you are referring to yesterday's violence, largely apple many did, -- emanated, there is a note -- near-term tactical thing you have to consider with apple.

apple relative to the overall market starts getting above that level, the risk to the upside is difficult. problems on earnings or some ,nnouncement can be magnified not as bad but the companies will supply it in a related fundamentals. an essay on a recent institution make on apple shares. they are on sale now. it institution a wall street going to step in on a bid and own market dominance apple -- dominant apple? michael: embedded in your question is are investors going to get out of the tech growth overweight and buy into the late cycle rotation into other things? value stocks? violencediscussed the

related to apple share prices it gets intots as lofty evaluations, the broader tech fame will continue to persist -- theme will continue to persist. the equity market in the u.s. will not go up unless the broader tech growth story can go up with it. i do not think value can lead -- aay into immediately meaningfully constructive -- francine: where is value? is it love stocks? michael: some of the fastest places to go to our financials. you can buy earnings with a 2% dividend yield and are not going to go broke. the valueon is, or stocks, are they going to

accelerate in the the market into some sort of 9% return next year? that comes down to broader questions about where earnings are going to come from. it is not obvious. francine: where do you get this kind of growth? 9% return is a substantial number. michael: if you look at the market and what it has been putting in the last several years, it is right in the middle. you have had earnings growth with pe expansion. what this year what it has been about is earnings growth with pe contraction. -- the tape has been rocky but it is seasonal patterns like we have discussed. it was strong in november and december. even with technical violation, it is possible to see the present before another 4% by the end of the year. the market will be at that level. elevated mix.

a 25 year average, we have enjoyed the complacency of 10, 11, 12 bics. vix. have you sent it to a lower range versus 10 years ago? there are metrics but the move is a good one. despite the big push in bond yields, that is still at lifetime lows. vix -- there was no question that as rates normalize, the volatility surface across fx should normalize as well to more historic levels. do we get the vix it will to 20 by lifetime average of the more steady state going forward? as nothing that happens to the bond market volatility starts shifting into a higher range on a consistent

basis. it is like the 210 kirk. you see the blitz higher and it gets smacked down. that discussion gets to the broader concept of central bank gradualism and in particular where the ecb's heather point is going to be. francine: thank you so much. michael purves, joining us. jens j. nordvig stays with us. we are getting breaking news from opec. fallinging demands are faster than expected in 2019. that is having an impact. this is bloomberg. ♪

. .

tom: "bloomberg surveillance," good morning. the market a lot going on with oil and get to an important conversation in a moment. sebastian salek.

thattian: amazon reported it has chosen new york and northern virginia for its second and third headquarters are in -- headquarters. in decision would and amazon's year-long search for a supplemental headquarters. this never been a wildfire in california like on the burning of the state. the death toll is fortitude, meeting at the state's deadliest fire ever and it may go higher. g v people aren't accounted for and 700 -- 7000 homes have been destroyed. the upper hand against two fires. president trump has decided to --ove homeland secretary security secretary kirstjen nielsen. is that he wants her out as soon as possible. the president is unhappy with her performance on immigration issues.

i would obviously going is ambitious to send more oil and gas around the world and middle eastern producers are bucking .he trend we spoke with the ceo of abu dhabi's national oil company. >> we are progressing extremely well and we announced a $45 billion announcement to invest soonside our partners and over the next few months we will be making some real big announcements. sebastian: 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'm sebastian salek, this is bloomberg. francine: opec says demand for its own group is falling even faster than expected in 2019 is the slowing global economy

crimps demand and rising supply surge. a new report highlights risks the world is becoming too reliant on the rapid growth of u.s. shale oil. this comes as wti crude drops for a 12 day, the longest losing streak on record i'm very pleased to welcome the executive director of the iea, foxy barrel. -- fatih birol. oildo you see the price in falling affecting the world price? the oil prices came from $86 only a few weeks ago to around $70 today. i would say from the global economy point of view, this is a good news, provided conflict to the markets. especially consumers around the this continues for

some time to come. especially at a time when the global economic growth prospects are getting less and less optimistic. thatwe look at a few years from now, we see serious challenges coming in terms of oil markets are -- oil markets. still growsemand significantly, but the supply is a key question. the investmentt appetite today across the world, in middle east, russia, latin america, the investment opportunities are very weak and we cannot expect u.s. shale alone to fill the gap between and projects. u.s. shale is an excellent job and we can't expect everything

from the shale. if there is a supply cut of one million barrels a day in oil, what will i do to demand and supply and what would actually due to the prices? u.s.,rol: i think if the if the investment appetite which is oneak third of the historical averages very low except for u.s. shale, the u.s. shale, in order to avoid a supply crunch is to increase in the next seven years more than 10 million barrels per day, which means you a shale needs to do more than that. this is a tall order and it doesn't happen, this would push the prices up, which is not good news for anybody, for the consumers today but also for the producers tomorrow. the message is clear, in

addition to the growth coming from your shale the oil production growth coming from middle east, russia, and africa and elsewhere, therefore investment, investment, investment, very important. good morning, it's wonderful to speak with you. you see the world energy output, you have the fancy iea research, let want to know is chairing a page out of dr. el-erian's language is what is your unknown unknown right now within the mix of policy, demand elasticity, supply mystery is out there, what is the unknown unknown for you? dr. birol: i think there is a growing uncertainty and volatility in the oil market. this makes the investors hesitating before putting their , for for the new project me the greatest risk today we're

facing is the investments very low.s very we can look at only today. yearse to think a few ahead in front of us and what i see is certainly there is a strong demand growth of the unknown is where will the supply come from? u.s. shale will grow strongly what is expected to grow more than 10 million barrels per day, one single russia is a tall order. it can happen, but it will be a small miracle for me, therefore the biggest unknown is whether or not the convention, the investment comes on the. tom: fatih birol, we remember

world war ii history and the demand for petroleum that we saw in the late 30's and the 1940's, i want you fatih birol, to speao countries like australia that heavily demand imported oil. they don't have their own resources. how confident can australian be on a continuing supply of hydrocarbons? dr. birol: first of all, i should tell you that ,ydrocarbons are here today they will be here tomorrow and they will be even here the day after tomorrow. there two, oil will be for us really other countries, but the question is that which price? if it's very expensive and goes over the roof, it provides new routes for the alternatives to oil. it's very important also for the producers and exporters, talking

from abu dhabi now, for them to know that they are high oil prices are not good news, even for exporters and consumers look for other options which may be expensive today, but in a very high oil price context, they may be profitable. australia and other countries will definitely find oil to buy, but the question is at which price. it's the reason why i underline this looming supply problem early 20 twentieths from the and in investments today many countries around the world, u.s. shale will grow very strongly but he was shale alone may not be able to solve the problems to give the prices at reasonable levels. much,ne: thank you so that was the international energy association executive director fatih birol. still with us is yen's nordea

jens norton make -- jens nordvig. mr. nordvig: the word that i would say is from my seat where i want to a least of her currency moves on the fact we have the drop in oil prices over the last couple of months as of in this potentially very important. it are very difficult dynamic for number of currencies like the indian currency that was suffering both from the high oil prices and the strong dollar at the same time. this is a dynamic that's very unusual and puts a very unusual degree of pressure on the specific markets of the facts that we've had this relaxation creates a bit of a breather and it's very important in with the opec responses. if we have opec response to this moderate klein in price in the big scheme of things, it will add pressure to that's what

we're watching the headlines on that so carefully. looking at west texas intermediate, american oil, $58.63 off the bloomberg. it's another investigation of the chief executive officer, this is flip card, he's 36 years old, 77% of flip card taken out by walmart this year. ,he headlines are from walmart they have very simply put an investigation into allegations of personal misconduct and the strongly denies allegations, the headline from walmart as well. he is resigning due to the investigation. and much morehat out of bloomberg asia and bloomberg technology through the day. extraordinary new slow out of washington where the president returning from europe.

kevin cirilli will join us and kim wallace will join us with eurasia group. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance." don'tns in italy, which i understand, francine explained them to me. oil headlines as well as -- out almost and oil down solid $1.43 on brent crude, well under $69 a barrel. after the news and now washington, we do our chief washington correspondent kevin cirilli. the present we heard earlier on interview looked somber in europe. he returned somber to a rainy washington.

what does the president do today to regroup? kevin: first and foremost, there's a lame-duck session that will be interesting to see what -- what republicans try to look in a lame-duck. they have to pass the stopgap budget or the government shuts down that could be wrapped up in security bolstering along the u.s. mexico border. whether or not president trump double stabbing the issue of immigration in the short-term and have a lame-duck really good set the stage for the type of relationship is going to have democratic house when they take over. and let's not forget, matt whitaker acting attorney general will face testimony in january and he will face tough questions on a host of different things. idea of a gop in search of quote the new ohio. i guess is not arizona, mark sanford ready in the new york times today, the former governor of south carolina, district in south carolina they did not go

republican. there are some shifts going on out here. where is president trump's new ohio? his calculus and the calculus he made the midterm elections is that essentially he believes that if folks did not embrace his candidacy during the midterms, that they lost. but for the district you just mentioned, katie erickson blasted mark sanford and she is a republican the rate of that district and she lost it is conservative district in south carolina to joe cunningham, who was a young rising star democrat , a 36-year-old democrat. we are shifting demographics thatthat republicans are also looking at other certain portions of the state, particularly on the issue of trade and they think the issue of trade perhaps might help them more than immigration.

we onne: where where trade in traffic? isare learning the treasury putting a report out or gathering evidence to possibly impose tariffs on cars. i think if you think that, francine, several months ago where we have these glimpses of deal or no deal, that the season we are in again ahead of the g20, i think the administration is it onto front, good cop, bad cop in terms of how they are trying to press china is a you look at the longer term forecast or the short-term and energy 20 is also what we're going to see. they're giving a little to get a little there are also threatening additional tariffs with regard to china. tom: kevin cirilli, thank you. i have no idea what the news flow will be by 4:00 or five are today. it's more than timely to speak with kim wallace of eurasia group are policy within the

beltway. it's wonderful have you with us today. how do you define a lame-duck washington? mr. wallace: that's when the winners and losers come back and find out what the bare bones they can do to keep the machine running. to your question to kevin earlier, i think the first glimpse will be the house leadership race in which mr. mccarthy of california and mr. jordan of ohio, both of them were reelected by 65% of their districts will head off. certainly mccarthy has a personal relationship with the president for jim jordan's politics are closer to the president's politics and that will be the first thing to watch in the slingback session. that will be tomorrow. tom: if republicans are more trumpian because the moderate lost, how will they be a different minority from what kim wallace has witnessed over the decades? mr. wallace: they have to do a deep analysis of that because moderates got hurt but

conservatives were hurt also. in response to your question about ohio, the new ohio maybe the old ohio. a congressional delegation did not change. 12 republicans, four democrats. the republican governor. ohio is what you want a bellwether's going to 2020 at the marriott -- very may well be where the president draws a line in the concrete for his reelection. what impact to the midterms have for businesses and foreign policy? is it too soon to tell? it's too soon to know a certainty but fiscal policy is stretched, trade policy is stretched, it will congress divided, it's very likely that the house democrats will want to share power of decisions both physical and trade and that will be a difficult adjustment for the president if he is able to make it at all. early on, relationship building

and the efficacy of those relationships, trump, mcconnell, pelosi more than likely will tell you as possible on the agenda. in terms of the must do agenda, most of that is physical and start in the first quarter of next year. francine: does this agenda need a weaker dollar? mr. wallace: great question. the president's politics would benefit greatly from a weaker dollar. the policies of their term are deleting in that direction. network economics, the fundamentals of the world may eventually catch up to the dollar but for the perceivable future, it is still king. kim wallace with eurasia group, thank you and smart comments on the tone of a lame-duck congress. we continue with jens nordea bank -- jens nordvig. he is beyond fired up about something no politician is talking about and that is the

debt in the growing deficit of america. stan colander in the caught our. this is bloomberg. ♪

tom: good morning. "bloomberg surveillance," francine lacqua and tom keene, nordvig.rt of -- jens paper data or not? -- pay for nato or not? emmanuel macron suggests but itg its own army, was germany in world war ii, how did that work out? for france? they were starting to learn german. pay for nato or not. that's possibly the rudest europe.t i have read on what does europe do about a

president who's saying it was germany in world war i or two, how that work out for france? is not the most polite. if you look at what's going on it's tried to create and we've achieved very little in terms of concrete steps to deliver something. we have the right wing parties in italy and hungary and so we have centrist forces that are trying to tell a part of the narrative that they don't have anything concrete to hang the narrative on the think that's a real problem into the european parliamentary election next year. what is the partisan narrative to be told? we something specific to say

we've accomplished something and not there yet. a common european army, andthing in that direction that's why the narrative is being pushed forward. francine: bring netsuite up, we've been following in europe what emmanuel macron is one of students as we the european army, this is exactly what we did not have during world war i and to come over they have the french army of the german armies right, this is the first president saying he wants one army so europe feels more democratic and more united, more sovereign. tom: i got the tweet right here. just extraordinary as well. how did that work out for france? we see that after remembrances of world war i as well, much of this is getting towards a united europe. back?s mr. mccro

mr. nordvig: the eu was a political project. motions all put in the was terrible memories of world war i and world war ii in and away way, having a common army would be like the final climax of that cooperation really finally bearing some fruit. the problem is that we have had such a negative sentiment around ,urope because of recession because of immigration, that we don't have the support. ens, honored to have you here. , thank you. this is bloomberg. ♪

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the third selloff in six weeks inglobal stocks believe defense out -- bleed in defenses performed. how do you like them apples? minutes for apple shares a nosedive that apple has other sources of revenue and smart phone makers, not so much. arabia.rsus saudi president trump pushing back against opec cuts, iea and opec disagree on demand. we started retail earnings, exciting. home depot out. alix: they were good. david: across the board, looking forward to the rest of the year. if you have