may's grumbles. markets price out a rate hike. the fed chair says the u.s. economy is strong, but has slowing demand and fading fiscal stimulus. walmart reports earnings. warren buffett exits his shares after 20 years. j.c. penney on deck. day in london. goodness gracious, what has happened to theresa may? alix: the rhetoric yesterday was members will resign. we did not expect the brexit negotiator to resign. david: somebody was crying during it. she comes out, theresa may, in a subdued way saying we have support for the cabinet, then the man who negotiated the deal says he hates it so much that he quit spirit alix: i don't

understand what is going on. he negotiated the deal, then he resigns. david: she has to get approval of the overall deal. ministerwo senior quitting over this. alix: i one of the like, i'm out. you guys work it out. enough with this tantrum. we are also waiting for walmart earnings. if you look at the market action, it is in the fx market and u.k. gilt market. cable rate down over 1%. we could seep 1.18 if the market thinks we will crash out with no deal. that's where we hit in the flash crash a couple of years ago. some modest buying. market having a

big move, down 11 basis points. crude flat, but the move in the fx markets and u.k. banks is staggering. david: also the u.s. treasury went up. everything went up. one exception. alix: when you price out rate thes, and you have a bid in gilt market. walmart earnings of the, $1.08 a share. and boostedmates its full-year eps view. solid numbers. david: they have had 15 quarters to increase traffic. it looks like they have done it again. it looks like encouraging numbers. we will have to look at margins. there are reports there will be some margin squeeze. there are increase costs for wages and things like a.

comparable they see growth of at least 3%. a little bit more optimistic there. it is full-year adjusted earnings, including a $.25 dilution for flipkart. david: that is part of the investment they are making. it is impressive. let's find out what an expert has to say. she is the bloomberg retail opinion columnist. >> this is a strong report for walmart. they have good momentum heading into the holiday season. ,he 43% growth and e-commerce they are calling for 40% growth, so to see them do stronger is a good sign. the narrative has changed around walmart. they seem to have found of their

footing and their battle against amazon me using the stores as an advantage in that fight. alix: what do we still don't know that we have questions on? >> what is driving operating margins. they are clearly making investments, but there are other things looming that are scarier, including the fact that major they will have to raise prices on key items like diapers and toilet paper. we will want to get more color on how walmart is shouldering that and how much it will be able to pass on to consumers. alix: thank you so much. david? david: time now for the bloomberg first take. altuve guess -- our two guest.

this is part of what theresa may had to say today. >> we can choose to leave with no deal, risk no brexit at all, session run --e choose or support the best deal they can be negotiated. david: you have to have sympathy for her. >> i do have sympathy. she has been stuck between a rock and a hard place for a long time. brexiteers and her party pushing for a hard brexit. they make up a solid amount of people who keep her in parliament. then we have heard trying to make this deal with the view that the u.k. has voted on. what we have here is everyone seems exhausted and wants to get on with it to -- with it. alix: it reminds me of what i do

with my daughter. you can have a story or no story. is there a vote of no-confidence? >> we are headed to at least of parliament loss. that would be within the conservative party. they send a letter to the 1922 committee. if they get 15% of the lawmakers , 48, then there would be a leadership vote called on asther to retain theresa may the leader of the conservative party. minister who resigned this morning was just saying he still supports this may, even though he does not support the deal. she canrd to see how remain as leader if she loses this vote. one of the things i am interested in is this choice she laid out.

talk ofmore and more maybe a revote on the referendum. is that just wishful thinking or a real possibility? >> it feels like a step much further down the road. we are mired in the question of will she get this through parliament. have been pushing to see whether we get a public vote on this. unlikely, is probably but a second referendum would be an extreme measure. alix: more headlines coming out. deal threatens the u.k., but still respects theresa may. i am sure she is thrilled about that. david: he raised the issue, i think. alix: undermining your leader that apparently you still respect. let's move on. is up., premarket

the headline says walmart, now down .5% walmart puts amazon on notice. are two aspects. one is how these two giant will fare during the holiday season, and what tactics do they use to draw buyers. there is the overall environment for the holiday season, which is really good with confidence high and wages starting to rise and people feeling good about the way the economy is going. incould see a large increase foril sales, around 5%, so the retailers, it will be an important season. david: it is all about online at this point. what is the real competition between walmart and amazon?

amazon has a huge percentage of the online market. 43% is interesting is that u.s. e-commerce growth is huge. they forecast 40%. they have outdone themselves. we are getting to the stage pushingey could be competitors in the market space. that is huge. alix: more breaking news. david: dell has increase their offer, $120 a share. has is something carl icahn sued over. wasn't it $200? it has boosted its final offer for the buyout to $120 a share. alix: that is substantial, right? byboosts the implied value

$2.2 billion. in one point does carl icahn say, cool. i got it. report is dell is close to winning the support of shareholders. we will keep you updated on any news that crosses on that as well. thank you very much. the divorceore on plan and the turmoil in theresa may's government. our guests is on next. this is bloomberg. ♪

david: the last 24 hours have not been easy for prime minister theresa may.

, followed byg resignations of key cabinet members, including the man responsible for negotiating the deal. she stands before parliament to explain at all. >> we can choose to leave with no deal. we can risk no brexit at all. -- or we canose choose to unite and support the best deal they can be negotiated. david: we welcome now francine lacqua. thank you for being with us. take.s your does theresa may have a chance of getting this deal approved by parliament? >> it is about parliamentary math. if she does get it approved, it will be a thin majority. she will have to get support from labor ministers.

dup votesear how many she will lose. it will be difficult to get it through parliament. i spoke to a couple of people who said if she does not it if around the first vote, we could see a second vote, but it is clear that is divided. this is not what we were told yesterday. she may be weakened them a but she has always come back. for the moment, it is unclear the way parliament will vote. been: until now it has fractions within her own party, but if it goes to parliament and she gets a vote but has to rely on labor to get it down, can she maintain her leadership is prime minister if she gets a narrow vote on something this momentous for the country? >> you could argue she could. thatve heard in the past

others would like to be leader. before that parliamentary vote, we could see no confidence. mp'sneeds to happen is 48 need to say they no longer have confidence in the prime minister. mp's to votes 159 against her. if the deal gets through parliament, it is unclear. it is so fragile here. saying we should have fresh elections because this is unfair. it would be labor they get 10 instead of the conservatives. the conservatives have these internal machinations that they want a harder >> it or another deal, but still want to stay in

power at the same time. david: the one thing that seems certain is we will not get any certainty anytime soon. thank you so much. alix: all the action today is based in the u.k. cable dropping. deal to down 11 basis points. banks and retail getting hit hard on this brexit news. our guest is still with us. of the the news headlines, the reaction, so what do you do? moment. a dull first, take a deep breath. second, no one is happy. third, what a british crisis, very stiff upper lip. in a year where we have had currencies move 10% to 15% in days, this is not a big deal. the key point is the financials. 20% of the market are

financials. if they crash out of the eu, financials will get crushed. all the european financials move out into the continent. from a financial market point of view, you want to watch what those financial stocks do. david: there are also the major banks based in london. a lot of those banks are making plans, it almost doesn't matter at this point. it will not be the same again. >> they are talking about putting 1000 people in paris, amsterdam, or poland. if the u.k. crashes out and there is no deal, who is the winner? the eu. they're saying, italy, you want to leave the eu? take a look at the u.k.. the winner is the eu. in terms of the financials, the big money center banks weigh heavily in the index. if you're looking at the u.k. as

a stock market, 20% financials, big money center banks, if they crash out of the eu, those banks will be massively reprice. alix: the european council president spoke earlier. he was not as optimistic as theresa may. don't share the prime minister's enthusiasm about brexit as such. we have had no doubt since the beginning that brexit is a lose-lose situation. our negotiations are only about damage control. alix: so, what do you have to avoid? what do you want to be buying in case things turn out ok? >> that is tricky, because we will not have certainty. if you don't have certainty, you should not invest. if it wasn't for her exempt this morning, we would be talking about oil, which is down 20% in a month.

we are constructive fund europe. we would continue on that front. european earnings for q3 work out 10% year over year, which are good results. even more important, topline was an6%, so there is opportunity in europe, and it is more on the continent than the u.k. , you if you crash out could see a flash crash low at 1.18. can we handle the stronger dollar? >> the u.s.? alix: the equity markets come yes, the u.s.. >> the real issue for the u.k. is the cross with the euro. 1.18, look, the pound for all the machinations has been relatively stable, 3% off its low.

can we get down to that low? 1.18 is a big move, but not at of the ordinary in the marketplace. it is more likely it goes in that direction. the other thing to keep in mind is that 20% of the uk's stock market is financials, but 25% are energy and materials, which probably means the stock market does better than the currency. a weak sterling helps that energy sector, but if you crash out of the euro, then the financials really get hit come in so i would stay away from the u.k. and look towards continental europe. as far as can we handle a currency move of that nature, the currency market has been tested and can handle it. alix: you are sticking with us. david: banks are among those most affected by brexit, with british banks down at the

turmoil continues. i spoke yesterday with michael corbett about how they are planning given the uncertainty. alonghad no choice all other than to assume a hard exit, meaning no transition type agreements. we have to be prepared on brexit plus one to be fully open and to be able to serve our clients. david: welcome the man who has spent his career advising banks on how to respond to every kind of challenge. welcome. good to have you. there is lots to talk about in the u.s., but let's start in london. he said we planned from the beginning for a hard brexit. we are ready for that. is that true in general for u.s. banks? >> it is true for the major international banks with a substantial presence in the u.k. if there is one fortunate aspect

of the brexit process, there has been a lot of time to plan, and the u.s. banks are prepared for a less any eventuality. turned around and got softer, which you change your plans? >> for most of the banks, they have reached a point where it will be difficult to reverse the course they have taken. david: let's come back to the u.s., the vice chair of the fed responsible for banking supervision, the first day of testimony was yesterday. let's go over the issues pending in washington in terms of bank regulation. let's start with stress tests. >> stress tests are the cornerstone of the financial in 2008, 2009, 2010. they have remained strong and fibrin.

what the vice chairman has indicated is that it is time to transparency.nk the david: there is the issue of leverage and whether that is put on top of the stress tests. maxine waters is not like the idea very much. >> the problem is it is not the mandatory capital ratios that are the basis for capital restraints on bank holding companies. ,t is really the stress tests because the stress is severe. if you assume you take the regular capital ratios, put a further requirement on top of them, and stress all of that, it would result in higher ratios than exist today. david: do they have the power to do that without respect to what congress does? >> absolutely.

there is broad power in the federal reserve. david: do you anticipate that will be changed? >> i don't think it will be. there is a widespread view that the u.s. banking system is well capitalized today and there is no need for any significant incremental change. what has happened over the past few months is that the federal reserve has made a key distinction between the so-called globally important banks and everyone else. the requirement for those will remain high them up but i don't believe there is a need to go beyond where they are today. david: another aspect discussed was the volcker rule. we had the outgoing chair saying we have to change the volcker rule. are they moving forward to simplify it? if not, water down?

>> i don't think it will be watered down. the banks assumed a hard brexit, hard exit. rule,se with the volcker they have gotten out of the proprietary trading that was the issue. you can't water it down. you are either in proprietary trading or not, and nothing proposed would provide a path for reentry into proprietary trading. about i talked yesterday the regulation of the nonbanks. there is private credit stepping in. you have large asset managers doing things that banks used to do. said wey, one guest have been watching it and it does not look like that big of a problem. is that your sense that we are of regulatingnk the nonbank lenders? >> not at this point.

they have individually and collectively a small share of the market. there doesn't seem to be a need to stifle innovation. alix: if you were advising a big bank, would you say it is time to take on more risk? i would say it is pretty much good to go. i don't think it will be totally optional for the banks. i don't think the regulatory system is prepared to provide the access to greater risk than exist today. david: it is always good to have you with us. thank you. future asesa may's well as brexit in the u.k. parliament getting feisty. anna edwards joins us from london. she is monitoring the headlines. what is the latest? now someheresa may is

two hours into a statement to my followed by a question and answer session. she is taking questions from to placatetrying them and win them around for her deal. the comments on the remain side and brexiteers are finding things to reject. theresa may is adamant there won't be another boat. this turnsers say the u.k. into a facile state. vassle state. there, she needs to survive as leader of her party. that looks increasingly unlikely. david: there is this talk about a so-called second vote, a new referendum?

realistic, and what would we have to do to have a new referendum? >> the process is long-winded. the prime minister has always said there will not the another vote. she said the fact we saw one vote, the will of the people should be delivered. at the moment, she is trying to silence those calling for another vote. theould depend on whether decision put to those members of parliament, whether it will be just my deal or no deal, or there will be some other option in their? re.the it is unclear. first you have to survive the next 24 hours. such a binary outcome priced into the market? if things move along ok and we get things through, is there

massive upside you want to be looking at? >> i don't think it will be massive. even if she gets there the next 24 hours, then parliament, there are a number of growing steps. this is very shakespearean. this is like a poison to challenge -- poisoned chalice. to anyopens this up wiggle room, it falls apart. ,uch like nafta in the u.s. this is a 600-page document. you can't change a few pages and make it good to go. this is not really leaving. the ones who stay really wanted to stay. , so are not really staying nobody is happy here. it is unfortunate, but there is a beneficiary here. the beneficiary is the eu broadly and the idea of regional integration, which is a key theme of our hours, that europe

will become more closely integrated. nobody will want to go through this trial if you are italy or another country potentially thinking about leaving the eu. this is a clear message. and the conservatives. there is another party to this negotiation, the eu. they are not particularly excited about letting this process go on forever. the idea of a second vote and referendum, you need to have the eu on the other side say take more time. try to make the process as smooth as possible, so there is some conciliatory language on that from the eu. who would take theresa may's place? let's pretend we have a vote of no-confidence, she loses her leadership, what is the conversation? >> interesting that the drama unfolded this morning when dominic raab resigned.

that is wanting to watch. he said this morning in london it is too early to talk about petersham challenges, but he would not rule himself out. he has certainly talk about himself in the past as being watched in that direction. off-againhe on-again, candidate that ran last time. certainly, that would be something to watch. but will he be offered the brexit job? johnson has been vocal from the sidelines. they could have something to say about her future. michael mckee also joining us here. in the last 24 hours, rate hikes were priced out of the market for 2019, november or september.

what does the boe do? mark: sit and wait. they have not voted yet and we don't know what will happen after that. if it is voted down, does theresa may stay, does she go? we have 134 days to go. the end of march, he have to have your decisions in place. there really isn't much for the bank of england to do except sit and wait as this plays out. david: i want to come back to you, anna, about the timeline. eu summit the 25th of november. do they have to vote in parliament affirmatively on this deal before then, and if so, when would we expect a vote and debate on parliament? >> beginning of december but i

cannot stress enough a lot depends on whether theresa may lasts the next 48 hours. we will be watching to see whether 40 members of her party decide they want to launch a leadership challenge. then there will be this leadership challenge. november 25 is the day that we heard, the european commissioner. he said that is when european leaders will gather and make hopefully not too many changes, in his words. that is the timeline as it is set out. all the other parliaments around europe are set to vote on this. david: i want to clarify about the bank of england. they will be offering an assessment of the deal once there is a deal. we also know mark carney is supposed to speak in parliament

on tuesday. if there is any kind of resolution he can comment on, we would hear from him then. in terms of monetary policy, it is a weight, but they are supposed to give us their view of how this will affect the economy, once we know what it is. david: you mentioned graham brady, anna, and there is a headline crossing, the bbc reporting that he does not plan an announcement as of now. i guess he must not have the letters so far. you are a traitor. how are you trading today? >> probably bet this on an option basis in the days before. it is tough to trade on cash. as the news breaks, the algos take control of it, and you cannot keep up. you can get ahead on an options basis. from my standpoint, this looks bad for sterling, u.k. banks, u.k. bonds in general.

the odds of a no-confidence vote are very high. david: what does it do to the euro? >> probably trade sideways because eurosterling will come in. run, that will drive the euro down as well. alix: when you say bad for bonds, yields are down nine basis points. that is short-term? there?lar, what happens 97.13. if we are dragged up by sterling, what is the implication? >> all of a sudden treasuries become the place to go again. despite what is going on with the fed, treasury are still the place to be, 3.1 on a 10-year, not too shabby yield. alix: anna, you are looking at parliament, as well as businesses. what is the rhetoric this morning? >> this deal is amazing in its

ability to please next to nobody in the house of commons. many of the comments we have been getting have been very negative. one moment of positivity for theresa may was when she was asked by the former home secretary, tell us what business ranks. et up.as a nice shu some cautious welcome to the deal. this really does prioritize frictionless trade, something that business has been shouting about, that needed to be prioritized. she says it prioritizes jobs. in the longer term, many business leaders would suggest this is not a deal they would have signed up for initially, but if they have to choose between this and no deal, many would take this versus what they perceive as chaos, no deal. david: what about the british economy? some retail sales numbers got lost in the numbers this

morning, but this sideways action, this turbulence cannot be good for an economy that needs to keep growing. aboutthere are concerns what happened going into 2019, getting closer to the march date, but to this point, the british economy has been one of the best-performing in the world, to the surprise of many economists. say, whatok at it and would it have been like without the brexit vote? much stronger? the problem with business is uncertainty. in the longer run, it is setting us up for much weaker performance. alix: anna edwards, thank you. we'll be checking in with you to the next hour. michael mckee, vincent cignarella, jay pelosky are sticking around. we know that action is over in the u.k.. here it feels like equities are somewhat immune. european stocks modestly lower but it is the u.k. banks that

are getting hit hard. also want to look at other asset classes, the cable rate, continuing to be at the lows of the session. the guilt getting a bit with bond deals down by 10 basis points. premarket chart of jcpenney. it was bad. a bad quarter. numbers areney's out. they thought they were going to lose $.57 a share, they lost 48. cop store sales were down 47%. the estimate was .8%. they were down 5%. alix: they withdrew their full year earnings. but we are going to see positive cash flow for the year. ok, great. david: to find out what this

means, we have the gordon haskett senior analyst. thank you for being here. interpret these jcpenney numbers. they didn't lose much but comparable store sales were pretty devastating. comps were down 5.4%, we were modeling down 1.3%, so meaningfully down. self-inflicted, the company is going through a management change. when you step back and look at how strong the consumer environment is today, for them to calm down 5.4% is disappointing. david: when is the right time for people to start asking if it is working? >> probably next fall, by the time she puts her mergers and team in, usually a six to nine month lag where you start to make those buys. next fall will be the next time that you'll be able to test. maybe back to school 2019. david: do you agree with the

consensus that it is all about women's apparel? >> it is a huge part of their business, and it got away from the company. it represents a huge opportunity for them but they have some brand damage to try to repair here. bring in michael mckee as well as jay pelosky. j, do you like retail, where? >> not really. we have shifted to a more conservative stance in the u.s. equity space. we think there is a transition going on from growth and momentum to safety, min vol, high dividend yielding stocks. michael was talking about a pretty good christmas season. for us, we are focused on being defensive. we think the market is in a shift from technology led to try to figure out what is leadership. i think that is a key issue in the equity market, what will be leadership, in terms of sectors in the u.s., and more broadly,

globally. the u.s. has been the leader. in the past six week, we have seen a convergence of the u.s. equity market to the rest of the world in terms of selling off. what we are watching for is the ontruments that let us down the first in, first-out basis, emerging markets, europe, japan, if they can bottom the opportunity, may be shifting to the rest of the world in 2019. david: what about leadership within retail? we also had walmart earnings out. on the other hand, they did really well, particularly growth in e-commerce. are we seeing a world where it is all about amazon and walmart and the left -- the rest are left behind? >> i think there are more people in retail but walmart had a good quarter. cons were up 3.4%, more than we expected.

still a pretty healthy number. e-commerce sales, a key focus , uppeople today, group 43% 40% the prior quarter. what walmart is doing well is integrating their brick-and-mortar stores with their digital business. it is clearly working. walmart is off to a great start here in the holiday season. but there are other winners. costco, home depot, dollar stores, five below. a number of people winning in retail, not just walmart. alix: so why do you still have a hold on walmart? >> the stock trades at 22 times, higher than historical average. it is more of a valuation concern. target is at 15 times, we expect them to have an equally good third quarter. it is the valuation premium. when you look at 22 times compared to a low single-digit earnings growth, we think there's a disconnect. it is enough to

drive the stock meaningfully higher. it is a good print, not great. david: that is individual players, what about the overall play? retail has been soft in recent quarters. what are we expecting? mike: some growth in retail, particularly in the control group, the part that goes into gdp, taking out gasoline prices. add to overall retail. car sales were rather than expected last month. generally, this is the season where everyone is putting out the christmas holiday forecast. generally, analysts are bullish that we will see a strong christmas season, some estimates as high as a 5% gain over last year. alix: and a 20% decline in oil. from, jay pelosky, michael mckee, thank you all. and vince cignarella. coming up, a read on retail with

tim boyle, the columbia sportswear ceo. warren buffett bets big on banks. fly from new york, this is bloomberg. ♪

alix: we turn to wall street beat, three things wall street is buzzing about this hour. brexit. the citigroup ceo says they have had no choice but to prepare for a hard brexit. buffett exit, walmart bet on banks. facebook's bad apple, unbelievable story. internal turmoil at facebook reveals mark zuckerberg insisted employees use android devices after tim cook criticize the company's model. david: that is the least critical part. joining us now is vince

cignarella. brexit and with citigroup. i spoke to michael corbat yesterday. i asked what they were planning. he said hard brexit. i said if they backed off, would you change your plans? he said not so much. >> we have had no choice all along to assume a hard brexit, meaning no transition agreement. forave to be prepared basically brexit plus one to be fully open and have the ability to serve our client. david: if it went the other way, would you change? he said it is too late. >> the key is we need to serve our clients. if they are not expecting the worst, they cannot be in a position to do that. the way things are going, looks like you made the right decision. david: the question is what this does to the city of london. >> that is a hard thing to predict. certain things will move out of the city based on the financial transaction parts of it.

will it devastate the city as a financial center? probably not. there are so many things entrenched in the city of london that i don't think will segue out to the rest of europe. part of that has to do with personnel. people don't necessarily want to leave london to go to other parts of europe to settle. i can tell from personal experience, working at a bank with a headquarters in madrid, had an awful time getting talent from london to madrid because they didn't want to. alix: really? no problem. warren buffett exiting a walmart state after 20 years. also betting on banks, goldmanng its stake in sachs, bank of america, and jpmorgan. how warren wonder buffett feels about the reputation. at thehave to look banking system in 2019. you will have a bit of a turmoil

potentially in washington, maybe difficult to push through tax cuts 2.0. at $17ng credit is billion on a three-month moving average basis, student debt at 1.3 trillion, auto loans at 1.2 trillion, potentially in version of the yield curve. fee based. to what extent will that tail off, and why is he exiting walmart? they have a huge exposure to mexico. they import great deal through mexico. part of it could be that will notthat nafta 2.0 go so well. facebook, this extraordinary piece in the new york times. one of the things in it said there is basically a personal feud between mark zuckerberg and tim cook. we know tim cook when after

facebook on security, saying we are more secure. reportedly, mark zuckerberg urged employees not to use apple devices. >> the interesting thing about facebook, if you drill down into what we do here at bloomberg and other news organizations, we are checked before we publish. when you have a platform like facebook where there are no checks and balances to what goes out there, you need to be a lot more circumspect as to who uses that platform. that has been the main criticism. they don't do that criticism. it is out there before you even know it. alix: honestly, just read article, it is amazing. it talked about what they did when they learned about russian bots, how they wound up hacking

into the election. me, the takeaway is, they probably do need regulation. david: interesting how fast these things turn around. not long ago facebook could not do anything wrong. we want to turn out to brexit, the big story of the morning. may came uptheresa with a deal, took it to her cabinet, took five hours to get approval. at the same time this morning she had two prominent ministers quit the. she says there will be a vote. now we turn to somebody who knows the ins and outs of parliament, a member of the house of lords, who served as pensioner in the house of commons. baroness, thank you for being with us. putting aside the merits and i just explained to us how the process works at this point, canned to resume a the leader of her party and prime minister?

can they have a vote in the near future on this deal? >> there will be, as far as we can tell, a vote on the agreement that theresa may has reached with the eu. this is not a deal as far as our future relationship is concerned . just an agreement as to the terms on which we will leave the eu, and they will give us a transition period so things will stay roughly the same while we try to work through a deal with them. david: what is the process by choose, the parliament, the british people choose, among the three choices that theresa may has out. either take what i have offered, what my cabinet supported, although reluctantly, or don't leave at all, or leave without any agreement. if those are the three choices, what is the process by which the parliament and the british people will make that choice?

is the deal will be put forward through parliament. parliament will vote on whether it except this agreement that the prime minister has reached. thenrliament accepts it, it is likely that will be the basis on which we believe the european union. however, the balance of probability says this may not pass through parliament. , if the choice would be there is not any agreed deal through parliament, next march, aftero years time limit we triggered our article 50 notification to leave, and then we would potentially have to just leave the eu without a deal. the eu has said no other deal on the table. this is it, take it or leave it. decidesver, parliament there is no appetite for no deal -- frankly, no deal would be an utter catastrophe for the

british economy and would be pretty damaging for europe as then actually -- parliament has the opportunity for two things. it could force the government to say we want to withdraw the notification to leave, so we just put in a letter, we would like to withdraw it. that is legally questionable but most people think that would be accessible. -- acceptable. backbenchative is the members of parliament agree we need to put this back to the aitish people and have people's final say on whether this is really what they would like as a majority in terms of whether we should leave the eu or remain in the eu on the current terms we have. that would be another people's opportunity to say whether they , nowy want to leave the eu

they know much more about what leaving the eu might mean. in 2016, they were promised all sorts of things which have not and will not be delivered. is this what the british people want? parliament has been going ahead on the basis of the referendum saying this is what the british people instructed us to do but if parliament cannot be sure that this is what the majority of people want, then i believe we have a democratic duty to just check if this is really the will of the people. david: baroness, let me interrupt you. there was a headline that just richemontying that calls for a leadership challenge. is that a surprise to you at all? >> it is not a surprise. i think they probably do want to try to install somebody more on the page of wanting no deal or threaten no deal. i actually think most of them

feel it is a game of bluff and if they keep threatening no deal until the 28th of march, on the 29th, the eu will cave in and give us what they want. if they want to put in place another prime minister, then that is an option, and we may go for a leadership challenge, but i think the prime minister will actually survive. mann,: baroness ros alt thank you. we are taking a look at the cable rate, having its worst intraday slide since 2017 in june. the implication for the uk's economy and government. this is bloomberg. ♪ this is bloomberg. ♪

alix: may's cabinet crumbles.

the market is pricing in a rate hike for 2019. the cable rate falls. says the u.s. economy is strong but there are hurdles in 2019. walmart wins, jcpenney loses. walmart raises its forecast, jcpenney withdraws its guidance as comp sales dropped 5.4%. david: welcome to bloomberg "bloomberg daybreak." i'm david westin. is huge news this morning brexit. a lot on the retail front as well. walmart having particularly strong online sales. jcpenney doing miserably. alix: down 12%. know if theen do we turnaround plan is working at jcpenney, when they withdrew their forecast? david: down over 5% income store sales, and the answer was next fall.

alix: in the market, it's all about what is happening in brexit, the real action in the gilt and fx market. s&p futures of by three. the cable rate down 2%. mark chandler talking about potentially testing 1.18. that is the flash crash low. would that be the case if the market believes the u.k. will crash out of the eu? in the gilt market, 1.40 is where we print. yields down 11 basis points. crude up .3%. for once, oil is not the story. we will get back to that. last 24 hours has not been easy for theresa may. a cabinet meeting resulting in support for her brexit plan, followed by resignations this morning of key cabinet ministers, including the man responsible for negotiating the deal that the cabinet

reluctantly supported. to leave withse no deal, we can risk no brexit at all, or we can choose -- [indiscernible] unite andan choose to support the best deal that can be negotiated. david: to take us through all of this from london is anna edwards. even within the last 10 or 15 minutes, some announcements with jacob richemont. he leaves the european research group, the brexiteers wing of the conservative party. he has been huddled in a room in the last 20 minutes with like-minded mps from the conservative party who have been deciding whether they want to launch a leadership challenge. it is not entirely within their power to do that, but him

announcing that he is going to submit a letter calling for a leadership challenge will be seen as a signal of the pressure theresa may is under. those that being the back to enablell need 48 him to put into process a leadership challenge, leadership contest. we don't know if he has that. he said earlier on he had no plans to make an announcement, but he would not have plans to make an announcement unless he had the numbers. we will see if there are sufficient numbers to trigger that leadership challenge. david: take us through the calculation with conservative members of parliament. given the difficulties of theresa may, you would say, sure, let me submit an issue. who will succeed theresa may, and what are the chances where labor could come to power? >> many from her own party have been pleading with theresa may

turn this question and answer session that is still taking us, we have this difficult decision. we have your plan which we don't necessarily like -- we have heard that from remainders and brexiteers -- but the only alternative you are giving us is no deal. they don't want to be pushed up against them by their decision. whether this comes down to a binary decision is crucial. that is something that we were talking about this morning, before the leadership challenge seem to be getting momentum. if she can get through that, we go back to talking about how she gathers abroad support of her party and others to try to get this through the house of commons. things are moving so fast, that is almost a story for another day. david: thank you very much. alix: joining us now from westminster is guy johnson. here in new york is john authors, breaking through the market reaction.

guy, cable rate, the worst rate since 2017. by the back end of the gilt curve. what reactions are being priced in, what are you hearing? >> the market is pricing in a lot of volatility. very hard to get any directional trade out of what is happening here. traders are struggling with that position. they are buying volatility, that seems like a no-brainer trade. also buying the tales of the option market as well, the trade.e they are finding it difficult in a market to get a direction in. they are turning to the options market, the trade. derivatives to buy some protection around some of this, buying volatility as well. we are seeing a downgrading of expectations regarding bank of england rate cuts. they have been significantly curtailed. 2017 has been taken off the

table. the market is looking to buy protection at this point. it is struggling to get a sense of direction. david: derivatives to buy some what do the markets note today that they did not know yesterday? what is the change? we have known something like this was coming. >> we have known something like this was coming, yes, but the precise waiting -- i agree with theresa may. there are now three options on the table which are no brexit at or what we would call brexit in disorderly fashion, not negotiated fashion, or the deal she is offering, which could be amended somewhat, unlikely enough to change the political dial. we now have a better idea of how she has managed to hold onto people within her own party on the deal she is offering.

that has to mean that the chance for those other two options has increased. , it wasr thing is conceivable that at this point we would be confident that she would have seen off the possibility of a no-confidence vote. at this point, being further away from it, i doubt that jacob rees-mogg would say that he wanted challenge, that they would be confident to deliver on that. the big thing that has protected her all along is this sense that nobody else wanted this job, nobody thought they would be able to deliver. at this point, it is such a horrendous mess, the person who takes over could probably still blame whatever results on theresa may. the challenge becomes that much more likely. has is interesting, nobody

mentioned a second referendum as a possibility in the last 10 minutes, nobody seems to be talking about that in parliament. it is the most logical way to try to get out of this impasse, but the leaderships of both main --ties have dug themselves very hard, or very undemocratic. that let's point out theresa may is still talking, well over two hours, hardly any members left. she is still there defending her position against harsh and sometimes rude criticisms from parliament. i do want to point that out. also joining us is stephanie flanders, senior executive editor. the other part of the market that is pricing out rate hikes for the boe in 2019. if we have the situation where we have a leadership challenged, what does that do to the uk's economy? >> we have to remember, there is

one crucial issue around this decision of trying to force a leadership about. if she survives that, and you need 150 votes to actually depose her, the rules say you cannot have a leadership challenge for another year. that is consequential it some people were thinking they want to get rid of her next summer if you exited the eu in some way or another. that will give quite a few jacob pause even though rees-mogg seems to be going ahead to get the numbers. the bank of england has consistently said this is a two-way issue. if you have a hard brexit, no deal brexit, that would not necessarily mean that right hikes were put on hold. as guy johnson was saying earlier, the markets have ignored that. this morning, they have been reducing the implied probability of rate hikes next year because there is this suspicion that everything that has happened in the last 24 hours has made a no

deal brexit more likely, even though we don't think that is the most likely option. david: guy johnson, we talked to a few minutesnn ago and she raised the possibility that what might happen is the british government, with approval of parliament would go back to the eu and say let's pull back on that article 50 notification and take more time to work on that. is that being talked about in parliament these days? i think all options are being talked about. i take the point about the second referendum not being front and center at this moment in time. all options are there. the question you have to ask is there are people on the other side of the table who may or may not accept those options. will the eu give more time if the u.k. went back to brussels and said we would like to do for this? is that something the eu would be willing to do? at the moment, from a michel

barnier point of view, this is a good deal. i suspect the brussels side of the equation probably would allow more time for negotiation, but as we continue the process, that continues the ambiguity around the british economy, continues the difficulty in predicting from a business point of view where we ultimately end up. economic point of view, that may not end up being a good option. i would say everything is on the table at the moment but we have not talked a great deal about what the other side may or may not allow. at the moment it feels like brussels is in the driving seat. alix: absolutely. they seem to be somewhat ups -- optimistic. today, the rhetoric seems to be a little softer. at whate, do you look has happened in the last 24 hours as another short-term crisis in the brexit process, or a material change that will change the calculus for an agreement?

>> i think we are seeing something play out, which many people would say from the summer onward, was going to be very hard for the deal that was broadly available from the european union to get through parliament. you have now seen the detail of what that deal is but it is not that different from what we knew was going to be possible from the european union side. if anything, slightly better than what you might have thought. but all the constraints, the caveats are there, the thing that trouble the people around and northern ireland border about staying in the customs union, plenty for everybody to dislike, and it was always going to be hard to get something through parliament. let alone hold onto your brexit minister, hold on to those brexiteers who have so many reservations around this deal. i wouldn't say completely different, we are just seeing it happen, as opposed to may be happening. david: what are the costs of

consuming so much time and attention on this issue? i have been in companies that have been acquired. one of the cost of that is you spend no time worrying other than the acquisition. what does the british government have to do besides being distracted with this? >> if you are a british person, it just makes you want to break down and cry. at this point, there is no other issue, even if the labour party has the main opposition, has chosen not to take a particularly strong oppositional stance. britain has the same kind of issues that the states have on , verytructure, the same similar problems with problems of inequality. it is a similar situation with that which is the u.s. plenty of things that could have disappeared,forms,

while all the best and brightest, and that is when you can still call them -- the british establishment -- trying to extricate ourselves from the european union. the opportunity cost is very great. some of the ministers as well. reportedly someonall emotions, tears. david: coming up, fed chair jerome powell says the economy is strong but could face headwinds next year. more on that next. this is bloomberg. ♪

david: fed chair jerome powell says the u.s. economy is strong but could face headwinds next year as policy makers weigh far and fast to raise interest rates. >> our challenges are typical of this point in a cycle. we have to be thinking about how much further to raise rates and the pace at which we will raise rates. the way we will you approaching that is to be really carefully looking at how the markets and the economy and business context are reacting to our policy. is thejoining us now russell investments in your portfolio manager. good to have you here. people took some encouragement out of what jay powell have to say because when he talks about the possible headwinds, maybe they won't keep pressing ahead with the right hikes. what the fed has said they intend to do, and what the markets think they will do, there is a difference. where are you? >> the profit cycle will dictate

that. earning season came in well over growth. what the fed is dealing with and what the economy is dealing with is this peaking of the cycle. the guidance for profit margins continue to be flat into next year. naturally, we expect that could decline. the flipside of that, the fed is seeing a healthy economy and want to keep other directory of raising rates. alix: what is interesting is the lack of leadership in small caps. you can see how they have underperformed in the last couple months. if we were going to be on a you seed sugar high, the dollar index over 97, this doesn't make sense. inthere is robustness spending and adapting to new business challenges. the walmart earnings this morning showed amazon was a threat but corporate america is adapting to that. we are also seeing health on the consumer side. even though we are seeing profit peeking, and these large caps

are hitting all-time highs. consensus that has been wrong. we see more spending and confidence has remained high. even as we see profits lie down, seem to consumer, they have a high trajectory right now. profithow much of the increases are from tax cuts and some repatriation? can you tease out how much is underlying, how much is because of the federal government? >> i think we are getting beyond the tax cuts now. i have heard corporate ceos described if we have our margin declined somewhat, it is because we are spending for growth. higher poll of capital, free cash flow is high. of are seeing the challenges dealing with the competitive marketplace. alix: earnings have been coming down over the last month. it's been primarily in earnings and now sales are starting to trend out. energy was supposed to be the

awesome sector of next year. no doubt those earnings will have to come down. >> energy is a double-edged sword. for the u.s. consumer, it gives more money in their wallets. growth, wearnings use a multi-strategy approach. we don't sit in value or growth. all the things you mention mix you think that perhaps you want to be defensive but you see a procyclical acceleration still underway here in the u.s. economy. alix: then what is going to be the leadership? we can make the argument it is not tech anymore, financials and not step up. >> there was no real rotation in leadership, so the market is going a little sideways. we have seen health care drive out. also in tech, we have thought about it in two ways, retail tech and enterprise tech. that is the long-term secular trend. the retail tech, what hits the consumer, that could be more challenged in the future.

you are sticking with us. looking at specific companies catching our eyes. david: three companies worth watching this morning. credit suisse out with a report today they are considering letting go of hundreds of people , in an effort to get cost controls going. alix: cost cuts are great, but you have to grow. barclays is delivering on that, credit suisse not so much. david: kevin, where are you on financials? >> overweight the traditional banking sector. very much a domestic focus right now. a lot on larger ms. our global players. david: why haven't u.s. financials got the benefit out of interest rates? >> there is concern about the loan growth. smaller banks have had really good loan growth. the traditional business is turning around.

alix: what i'm looking at is apple. day after day, a new supplier comes out and cuts the revenue forecast. apple went under $900 billion in terms of its market cap. what was your take about the apple situation. apple held him relatively well. suppliers come in, and an apple falls like a stone. they made this clear, we knew they were transitioning. >> the market tends to forget that tech companies also mature. all of them are large, mature companies, dealing with a flattening revenue stream and stable profit margins. they are looking like an industrial company in terms of the profit patterns going forward. david: they are a product company, they are not google. >> they are on the retail tech, it is consumption driven. they also have competitive threats. samsung is bigger than them across the world. david: pg&e.

no surprise to any of you. we are joined by brooke sutherland. this is tied to the wildfires in california, and horrific story, certainly or those people out there. pg&e is really in the crosshairs. >> why you keep on seeing the stock slide, lawmakers have said we cannot prioritize you right now. there are still people missing, the fires are not contained. they cannot even broach the subject do what they will do about pg&e. it seems increasingly likely they will have to do something. pg&e and other utilities pushed hard to get california lawmakers to walk back the statute that says utilities are liable for these wildfires, even if found to be not negligible. they were not successful in that. the regulator pass a measure to try to mitigate the impact, including allowing utilities to sell bonds based on customer bills but they did not address the impact of 2018 fires. there is no guidance here. you look at the stoxx and

equities, but what about the bonds, will they run out of money? they saidared people, they had well down there credit lines. this is a company that has already been through bankruptcy because of issues in california. it is kind of crazy to be talking about because it is still graded as investment grade, but people are seriously discussing the possibility of bankruptcy. alix: when they came up yesterday and said that, they said they were trying to issue a plea to california government, saying we need help, and government is silent. they have to take those steps. the new rules put out by the legislature says pg&e has to demonstrate financial duress to be able to use the sort of bond mechanisms to try to mitigate their liabilities. in some ways, it's in their best interest to try to be distressed, you can ge

et help from lawmakers. david: you can see the yields, going straight up. kevin, utilities? >> we have been underweight. we are allocating to higher profit margins. to wonder what these utilities will get at all going forward. essence, who is responsible for climate change, who will pay for it? it feels like the government is tried to back up a bit in terms of california. the company is saying we cannot do it. >> their pushback is this is the new normal. some people take issue with that because pg&e has not always been best when it comes to following regulations -- david: a checkered track record going back. there was the natural gas explosion. >> climate change is definitely a factor but to what degree is ine maybe not as diligent

following these things as much as they should be. alix: thank you so much. coming up, retail sales data on deck. we will get a read on the changing retail environment with tim boyle, the columbia sportswear ceo. as we go to break, take a look at the u.k. cable dropping like a stone. gilt yields down by 11 basis points for the 10-year the. theresa may, parliament will see future framework before voting on the deal, the government negotiating in interest of the united kingdom. it, it's beenying almost three hours and she is still there answering all those questions. much more coming up. this is bloomberg. ♪

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the session. every market taking its tone from what's happening in the u.k., as well as disappointing retail numbers from jcpenney. u.k. banks hit over 1.5%, the future of exit in doubt. stronger dollar story because the cable rate is being dragged down by 1.5%. retail numbers out for the month of october. retail sales month on month up .7%. back at auto and gas, only .3%. david: the headline is a big beat. if you take out the auto and gas, it misses by a 10th of a percent. could be a rounding issue. point 3%, projected to be .4%. up .3%.e control group, september was revised lower from .5% to zero point 3%. interesting read through. david: looks like somebody was

buying a lot of autos and gas. alix: higher oil prices. that was actually a thing. ex-d: also a bead on just auto. .2%. it rose theeless, most in five months on the back of gas and autos. joining us now is paul raqqa donna, kevin disney is still with us. you have been talking about the weather, carl? >> not here, but snow is in the forecast today. do with that what you will. as a look at the report, it does look like fairly well diversified growth. certainly, gasoline prices which have been moving erratically boosted sales, they were up 3.5% in the month alone. that being said, these are strong retail numbers. i think there is a positive outlook for the retail numbers

going through the course of q4. if we go back to last jobs report, aggregate income growth in the economy, employment generated income for households is running at the house -- fastest pace of the economic cycle. inflation is moving sideways. it is not a this is an inflation story, it's really an improvement in household positions. a little bit of a selloff in the due to arket, maybe minor degree, consumer confidence and consumer sentiment is strong. that means this will be a very good holiday shopping season. my team is looking for about 5% growth in nominal terms. david: kevin divney, consumer discretionary? >> we are over with the sector, we are very confident. you have seen wage growth robust at the lower end of the consumer cycle. this report just confirmed that is going on. the wage growth, those people

with discretionary spend, has been robust. we are seeing that in the low and admitted retailers. the surpriseen this year. the threat of the amazon affect has started to be overcome by the way these companies have adopted their business models. carl riccadonna, thank you. kevin divney, thank you as well. just to recap, solid retail numbers. retail control group of oil 3%, missing estimates. september revised lower but overall if you added gas, autos, up .8%. you had building material store sales rise 1%. good read through for home depot. david: that means that the two/10 will be flattening. alix: you hate yield curve, and you are bringing that up. look at you. david: for more on the health of the consumer and the read on the retail backdrop, we welcome tim

boyle, lumia sportswear ceo. he joins us from portland, oregon. we all love and where your agreement. on the your perspective retail environment overall in the united states. >> business is pretty good, the consumer is healthy. for our business, when it is snowing in new york city, everything looks good. david: specifically columbia, where do you see the greatest growth opportunities for you? we have a big business and outerwear and winter footwear. that has been what we have been known for. we made a strategic focus in the business to expand our product lines into more sportswear type products that can be used when it is not wintertime. that has been a successful part of our business. i spent last week in south america are working with our distributor's down there. i think the consumer is fairly healthy globally based on what we see. our business has been quite

good. the important thing that we all talk about is making sure that we don't have further tariff impact on the business. apparel and footwear were already one of the most heavily tariffed products of any commodity and additional tariffs would be problematic. alix: how are you mitigating that, what is your margin outlook for next year? >> we don't know what will happen with tariffs. with 40% of our business outside of the u.s., very unlikely that there will be any tariffs on that part of the business. we have a broad sourcing base across the world. about 10% ofnts our products imported into the u.s. it is just the uncertainty of what may happen with some tariff implications. alix: what about unit labor costs, what do they look like for you? >> labor is one of the fastest-growing components of our cost, globally.

it is one of the smallest percentages of our total cost of goods. we want to make sure we have motivated employees in the factories where we are working, so we make sure we have high quality benefits, etc. for the factory workers that work in our subcontract factories. domestically, we have seen some increases asrice it relates to labor, especially in our district vision centers. david: staying on cost, what about freight, shipping, you see that cost rising as well? >> absolutely. logistics, the entire cost of getting the product from the factory floor to the retail store requires tremendous coordination. our efforts have been around core needing what we can do to make the business smoother and run more efficiently. freight costs, especially as it

relates to fuel cost, have been out of control. david: take the flipside, one of pricing power? people are making more money, more employed, are you funny more ability to pass on those costs? >> this is a brand by brandon deal, so we have made focused efforts on increasing our demand creation cost and expenses. we want to make sure that when consumers are looking around, we have the pricing power to compete against other brands that they are looking at for a particular commodity. alix: how do you balance the pressure you are seeing from labor but also the to be competitive on price, are you eating the difference? very try to run a efficient operation, we been in business 80 years, and we have an enormously strong balance sheet. we just spent the last 18 months on a project called connect, taking out some of the

superfluous costs in the business to make ourselves more efficient to drive more funding for demand creation. forsuperfluous costs in the business to make ourselves more us, it's about starting with the product. at the end of the day, consumers are buying actual products. then making sure the brand shares its promise all the way through. this is a typical consumer products exercise. we just have to put the equation together and make sure we have the right variables impacted. alix: as we mentioned, next year, more headwinds, the labor market will get tighter. how many more levers, how much more efficient can you get to offset some of those potential issues? wethere are number of levers can pull, including how much we spend on various products, projects. it is really about a holistic view of how we bring our products from the minds of our designers all the way through to the floor of a store, how it looks when it is at the store. this is not as simple as make it

cheaper. this is about making the products more compelling and giving yourself pricing power. david: how it looks in the store, which raises the question of e-commerce. when we talk about retail, we have to talk about people buying online. how are you taking advantage of that, how do you make sure you don't lose the competitive advantage? >> 10% of our products are sold through our e-commerce business globally. a look and feel of our e-commerce site is just as important as the way products are displayed in a physical retail store. most of our large retail dix, rei, people like amazon, know how to handle and manage the various components of data that make it more efficient to run these businesses. see the we don't businesse, digital

growing too much more than 15, 20 5% of total retail sales of our commodities. david: tim boyle, thank you so much for joining us today. business it is very helpful. to find out what is going on outside the business world, emma chandra has business news. emma: as you been discussing, a pair of resignations has rocked british prime minister's brexit plan and has thrown her government into crisis. aminic raab and esther mcvey quit the cabinet, saying they could not support the plan collectively approved yesterday. it is very helpful. several junior ministers have also quit. may told parliament today she has taken the right choices, not the easy ones. opposition leader jeremy corbyn called the plan half ached and that they should withdraw it. john is trying to resolve a trade war by outlining several concessions to the trump administration. structurall looks at reforms that president has been demanding. it is the first sign of movement

since the summer. the president and the chinese meet later this month at the g20 summit. aimident trump took special at robert mueller today, calling the investigation into russian election meddling a total mess. the president accuses his prosecutors of screaming at people and horribly threatening them to come up with the answers they want. 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. it may be hot inside the white house when it comes to the president and mr. mueller, but outside, it is pretty cold today. snow coming down. would that be surprised if they close down the government today. i lived in washington for a long time and it didn't take much. alix: i made fun of you all the time. one drop of snow, we cannot run the government because it is snowing. david: imagine me moving from

michigan to washington. i could not believe it. alix: i couldn't believe it took you one hour and a half to bring that up. you are looking at jacob rees-mogg, speaking right now. ishas been saying, he getting some insight into if they will have a letter about theresa may. it seems like -- he says there is more support this time. david: john made an interesting observation, speculated that it may not be the case that jacob rees-mogg would go forward publicly with this claim unless he thought there was enough support to bring it about. alix: he said a number of vote of confidence letters is growing. what will happen if they wind up succeeding, who will run the government? david: no one seems to be stepping forward. it's not a surprise at all that

he would take this position. what is surprising is going publicly to actually claim the leadership should change. that may indicate that she is in a good deal of trouble. 12 hours ago, he said he had not called for a confidence vote in theresa may. a very aggressive reaction to the steel that was apparently approved. david: let's listen in a little bit to jacob rees-mogg. >> this is not brexit, a failure of policy. this needs to be rejected. this has nothing to do with personal ambition. >> [indiscernible] the deal risks brexit because it's not a proper brexit. the withdrawal act is in place. therefore, the law is already there for us to leave. [indiscernible] >> i'm not offering my name as

leader. this has nothing to do with me. it's about not having confidence in the current later and believing the deal simply does not work. >> [inaudible] >> we have heard again and again , on and on it goes, but all the aspects, projects up here so far have been wrong. we were promised a punishment budget, that never happened. we were promised unemployment decreasing by a hundred thousand, that didn't happen. we treated with other countries on wto rules. it takes six seconds for good to be cleared at southampton. we don't need to trade on anything other than debbie to your. that will be an economic success , and we are free to determine our economic future. democracy will win.

>> [inaudible] >> the conservative party is likely to be full of talent. you asked me that on the stairs coming down. who do you want me to start with? davidve boris johnson, davis, dominic raab, esther mcvey a, streams of talent within the conservative party who would be very capable of leading a proper brexit. we have to have the telegraph. we have been listening to jacob rees-mogg who has officially admitted his letter as for leadership change in the conservative party in the u.k. explaining why he thinks there should be new leadership, has some ideas about that. let's bring in our colleague and edwards from london, our resident authority. you heard when he asked to might it be, boris johnson, rhombic rob, david davis.

are these possible names? >> they are all possible names. we have been running about if there is a leadership challenge could be contenders. those names have often been mentioned. early on he was asked the same question and he mentioned dominic raab, said he was an impressive individual. maybe that is of relevance. to put this in context, this is not within the gift of jacob rees-mogg, for the international viewers. he has asked for a challenge, he is one of 48 mps in the conservative party who asked for a leadership challenge. we wait to see if there is enough. jacob rees-mogg says the number of letters asking for that is growing. we will see if they get to the number of 48. if we do, we will then begin to hear about who will put themselves forward. then it becomes something that the conservative party themselves has to vote on. david: is mr. rees-mogg a vote

counter? he has been an opponent of theresa may for many times. now he has decided to go public, submit his letter, a we can see it online. does that indicate his ability to count votes and they think they can unseat her? >> i don't know if he is a good vote counter, he represents the european research group, a specific weighing of the servitor party on the brexit side of the spectrum, so among the harder core brexiteers. he is perhaps influencing opinion within the party, so the fact that he and dominic raab have both put on these public letters stating their objections to with the withdrawal agreement and both cited issues surrounding the backstop for northern ireland as reasons for why they are residing in the or calling for the resignation of theresa may in the case of rees-moog, the fact that they are doing that so badly, does persuade more conservative mps to back them in a leadership challenge.

but it does open up a big vacuum. wrapped up theresa may, speaking for about three hours, defending her stance. is there anything she can do at this point realistically to help walk this vote of confidence back? tried inll -- she those two or three hours to influence the views of many in the house of parliament. she was given a few supportive comments from colleagues, but not many. most of the comments she was receiving from the remain and the brexit side were stating their objections to the policy. mp's on both sides are being put in a difficult situation, being asked to vote -- if we get this far because theresa may's future is now in jeopardy. they will be asked to vote on her deal or no deal. whether there is another option on the table is interesting. one thing she said is the motion would be amendable. a gray that opens up area as to what exactly mps will have to vote on.

that raises future questions. right now the focus is on the leadership challenge. morning we had dominic raab step down, miss vey step down as well. any speculation about further people stepping down from the cabinet, was this orchestrated and they would do this at the same time? >> these things can be orchestrated or not. when we saw the checkers meeting a day or so for the resignations to be revealed. that was when davis resigned earlier this year. now she has lost dominic raab. he was certainly a headline grabber. it was the result of his resignation that we saw the pound fall, bank stocks fall in the u.k., and bank stocks in the european union generally fall because there was a further pricing in of a hard brexit even

, as a result of his resignation. in terms of others, whether we will see further resignations, her,a, sitting behind penny, more of the same. these are names that have been mentioned that could resign who so far have not. alix: you are sticking with us. dominicg to bookies, raab is one of the front runners to take the next prime minister seat. interesting that he resigned today. david: but he really respects her. alix: market reaction is clear. cable rate around the lows of the session. down 13 basis points. some buying coming into the back end of the market. joining us from toronto is mark mccormack. the downside to the cable rate, what is it? >> it depends on where we go from here. seems increasingly likely we

will get a confidence vote on theresa may. from there, we will see what happens. what i would say right now is, downside on the cyclical drivers, things that we look at in terms of short-term valuations, 1.26 is probably a deep pressure point. we are still trading with a major discount. the next move will be contingent on whether or not we get a second referendum, whether they can get this confidence vote through, whether theresa may survives, and whether or not there is any kind of progress toward a hard or soft brexit. probably four new scenarios and play. alix: looking at jacob rees-mogg. saying he will put in a vote of no-confidence letter in. he says that is picking up some steam in parliament. he doesn't want a job, though, just to be clear. how do you hedge this, mark, what are the options market telling you about volatility?

>> this is definitely an options style of play. if people were trying to think through this on the spot, there is too much volatility, too much uncertainty, too much complexity going on. what you get, if you look at the you have a lot of stress is priced in for the next few months, which takes you into next year. , if you probably room think about call spreads, trying to fade the expectations of more uncertainty coming in over the next couple months, from our vantage point, if you look at the scenarios and the probability of another referendum, soft brexit or hard brexit, this is one of the strategies that lines up pretty well with fading volatility over the next three months, trying to price in the upside on a higher probability of a referendum, or a more supportive soft outcome. leaning more toward 1.35.

david: anna edwards, you were just talking about cabinet minister lit some, who was somebody who might step down. as you were talking, we had a headline cross. she had just mentioning been talked about as somebody who might resign in protest, a brexiteer. she is in cabinet now, so it would have been significant, but not as significant as a resignation from dominic raab, but she says i'm staying because there is more work to be done. she is not resigning. in the said that comments, that she is not resigning. that is at least one of the cabinet members who might have intended to resign over this which theresa may has been named to hold onto. alix: how quickly will the market be able to rerate here? if we don't get a catastrophe, a vote of no-confidence comes

through, is there an asymmetric risk to the upside? confidence vote will be the clearest thing. this could happen in the next 24, 48 hours. there is a big component that will focus on michael gove. he is a key player. if he sticks around, there is probably a greater than 50% chance that if there is a confidence vote, theresa may should hold onto it. these kinds of developments are important to think about where the pain comes in when people start looking to catch that falling knife. we are probably at that point 1.27,ere if we get to 1.26, and we get the confidence decente could see a rally that puts us back to more that 1.28, 1.30 move. then the focus becomes whether anything gets done in parliament over the next month. for us, that would key up the tail risk scenario of a second

referendum, which if they decided to stay, puts you in that 1.50 trajectory. or if they want to leave, that puts you in the 1.10 trajectory. i would say the near-term focus is we will see more upside than downside. if theresa may were to lose the no-confidence vote, the next level is 1.20 that would come up quickly. alix: mark mccormack, thank you so much. anna edwards, thank you as well. joining from westminster is guy johnson. a stronger bid in the gilt market, cable rates at the low the session. what is the talk? >> the mood is now the dam has broken. the brexiteers who had been held back from resisting theresa may have now decided that this is the moment that they are going to strike. it's unclear at this point as to whether they have the numbers to make it work. .r the desire to make it work as we were pointing out earlier,

were they to fail, theresa may would be safe for a full year. it has been a chaotic morning. there seems to be a series of options on the table. we are unclear as to when the votes will happen in parliament on the deal in front of us at the moment, or if a vote will happen. but chaos is the name of the story here this morning. as we have been hearing, that is hard to price in, in a directional story for the pound. alix: chaos, not something you want year when it comes to market participants. guy johnson, thank you. very busy day for us here on brexit. coming up, the open with jonathan ferro. tony dwyer will be joining. this is bloomberg. ♪

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

coming up, chairman powell staying the course. to consider concessions that fall short of president trump's demands ahead of g20. prime minister may's future in doubt. sterling plunging. 30 minutes away from the opening bell. 1%ures softer, down 1/10 of on the s&p 500. across asset price action, prime minister may looking lonely in her battle to pursue a brexit deal. >> it is about agreement. >> poor agreement. >> it fails the test. >> the future relationship, important, there is seven pages. >> tt