officials kickoff. goldman sachs ones that the trade war -- warning of the trade war. pressure on xi. orders and imports drop. economic stress. investors raid deutsche bank. stock hitting record low. david: welcome to "bloomberg daybreak," on friday, november 30. we have been watching president vladimir putin landing in buenos aires. he is leaving the airport. the latest in a series of leaders. chancellor angela merkel had problems with the aircraft, she is flying commercial now, getting there for dinner. alix: i used to be terrified of planes. i cannot imagine being over water and having no communication. david: they had to fly back. alix: it is not like she is in

coach for a 12 hour flight. all about g20 in the next 72 hours. how do you position ahead of a risk event? s&p futures down 5/10 of 1%. rally within the first days of the week. euro-dollar, broadly stronger dollar story. safe haven, with weak china data. go buy bonds. .01 on the 10 year. crude hit again, down 2%. mr. novak, russian energy minister says the oil output looks steady. no cuts. dragging prices down again. mohammad bin salman and vladimir putin will be meeting. david: everyone is focused on g20. our brief is about president

trump's schedule. after the expected signing of the mexico, canada, united arrivingade agreement, and posing for the family photo at 10:00. opening remarks to begin summit at 10:30 a.m. witheral meetings starting shinzo abe. dinner.., g20 leaders first take. luke,, etf reporter, and cross asset reporter. back to g20. the big event is not today but tomorrow, president xi jinping and president trump getting together for dinner. everyone is waiting. what do we expect? movesweekly s&p equivalent to the last 10 weeks.

in and implied volatility, historical levels, fxi, the chinese large-cap etf, two standard deviations above volatility. the exchange rate, what is interesting there is earlier this week, risk reversal. would strengthen against the dollar seems well bid. two sided.en there was a note earlier this week, this will be a binary nightmare to trade. alix: 100%. what were flows telling you about the outcome? >> saying now is not the time to intensive,cap looking to move back to domestic

companies, that has seen inflows. $500 million in the last week. i would have expected more. you're seeing bid for treasuries across duration, particularly longer 10 year funds. volumes are like. flows are light -- volumes are light. alix: are people working sunday? luke: i will be. [laughter] sure some people will be on the desk to react. stay overnight a situation, i don't know. david: second-story on china. back to buenos aires. the hand that president xi is dealing. new pmi disturbing. cusp of50, on the growing or shrinking.

yellow line is chinese pmi, trailing slightly. the white is the u.s. the blue is europe. extent does this affect president xi going in? his economy is showing slowing. luke: if you would look at that data, on the margin, that nudges him to a conciliar tone. we have heard about the tosibility of, do we agree extensive talks later on things we have to change? if the tariffs get delayed, that is something people are looking for. manufacturing data -- there is a huge emergent squeeze or chinese manufacturers. rate, outputess producer prices are tumbling. for indebted companies that have been facing stress, they don't

have much pricing power. david: you are not just talking china. it has been a driver of global growth. three see that in etf flows? -- do we see that? rachel: yes. oil was a pop and .4 em. foil lower. dollar off. $1 billion slow on wednesday into iemg, emerging-market fund, popular with retail investors. interesting, in a chinese context, it has 25% allocation to china. as china slows and em gets attractive again, it is whether there is a hidden risk in em? not necessarily being aware that they have a large chinese exposure. alix: good point. trade is always a risk on monday. third story, deutsche bank. lack of risk availability.

second day prosecutors rating headquarters. record low. the chart is looking at deutsche bank 2014 now and the debt and credit sides. the lower panel is credit, most actively traded bond. top, equity market. are we looking at march 2016? imagine any more bad news coming. something else comes. it is hard for me to pick a bond or a flush or capitulation. alix: interesting in terms of the shift. 2016 -- will the bank survive? equity versus debt now, feels more like equity story. luke: that is something we see around markets. if there is a trend or corollary, the idea that companies are shifting to balance sheet protection rather than shareholder friendly. fewer buybacks, more balance sheet repair.

the fun thing with deutsche bank is when it was getting killed in june, correlation with u.s. banks, was fairly high. that has turned negative. it still seems to be a big weight on european indexes. u.s. has shaken off the cobwebs. david: within the european sphere, is deutsche bank a one-off? are we seeing support for the bonds? regulators made sure there is enough money to pay the debt, even if equities don't do well. rachel: regulators have made it clear they need banks to have the capital buffer. that is the whole point of the crisis. we do not want to see banks getting into trouble like lehman brothers. european banks versus u.s. complex, there is a divide between how european financials perform versus u.s.. it will be interesting to see

how the lower yields, come through from the fed dovish stance, we see it contract or widen. alix: spiderwebs? luke: the transatlantic cobweb. alix: poetic on friday morning. rachel and luke, thank you. find these charts and more on gtv . browse features and save charts. gtv . we are waiting on the signing of the new u.s.-mexico-canada trade agreement. jared kushner got an award moments ago. david: the order of the aztec golden eagle. alix: mexico not happy with that, the population. more on deutsche bank doldrums. this is bloomberg. ♪

♪ david: deutsche bank stock trading record low after a second day of investigation into monitoring laundering problems with the bank. i got to sit down with jeff yesterday. how can he run that bank successfully, taking risk on? this is what he said about managing risk and investment banking. >> the first telephone call i made when i was offered to lead was asking for a chief risk officer. market, has changed precrisis versus now. when we created the non-core

part of barclays, assets we wanted to close down, what we did was we took every single derivative contract written in the bank prior to 2014 into that it-core pool and closed by june last year. our portfolio now is a portfolio constructed with new capital and regulatory environment we face post financial crisis. had 4%007, barclays capital against total risk-weighted assets in the bank. today it is 13%. we are well over three times capital we have against assets on balance sheet. more than that, if you go to made 2007, aaa securities, up of some prime mortgages even, had zero risk. you had no capital against it. today, everything is a risk.

we turn the lights on and have risk assets, even though they are not assets. amount of capital is three times higher, calculation of risk is greater than it was precrisis. banks are bulletproof -- are bulletproof. a deepcker rule has had impact on assets held on the balance sheet. by closing that legacy asset portfolio in june, 2017, that is when we de risked barclays. i feel comfortable we have the proper managers and the relationship between risk management and traders, that make this a safe proposition. david: you can watch the entire interview on bloomberg, big decisions. coming up in january. coming back to deutsche bank, one speculates managers are the challenge.

when he came in, he said he needed a new team to manage risk. that they wered, looking at who they had managing risk at deutsche bank. alix: you can blame individuals for things that went wrong. it is also managerial vibe. how do you structure? mdb, testimony saying it was in line to conceal facts. it is a culture issue. david: the fed is looking into this, what went wrong systemically? you can have a bad apple. where were the checks and balances, procedures? by the way, they were not there. something must have gone wrong. just about not culture.

there are so many things wrong with deutsche bank, how do you fix something like that? they are making changes quickly. there is legacy set to deal with. 2018, this is still an issue. david: every time you make major change at a large institution, you use capital. they have done it so many times. virtual capital, in terms of credibility with staff, markets, shareholders, it gets harder and harder. we will change once again and this time we will get it right. alix: believe us. joining us now, steve, talking about certain banks and risk profile and the culture, where do you stand on u.s. versus europe? steve: we like u.s. banks. u.s., growth next year will be good. rates have risen, removing

pressure from margins. in europe, in addition to issues you are discussing, you have growth weakening significantly. it may push back the ability for central bank to raise rates. that makes it hard to make money. alix: i do not to single out goldman. when something comes up that is a legacy issue, culture issue. deutsche bank for example, paid $18 billion in fines. how do you think about that of yield curve, global economy, health of consumer? steve: for years regulatory risk was high everywhere. when you look at europe is, money laundering is not just one company specifically. we have seen this in danske, deutsche bank. are there other shoes to drop? good news is fines are a percentage of excess capital. they are not crippling.

you have to monitor carefully. it puts you in favor of the u.s. david: we are waiting on the official signing of the u.s.- successor to nafta. basic question. culture and regulatory. it is hard to regulate culture, no matter how much excess reserves you have on balance sheet, if you don't have the culture going, how do investors assess culture in a bank? steve: warren buffett used to say one of the reasons he liked wells fargo was that an idiot could run it. david: [laughter] alix: [laughter] david: how did that work out? alix: not so good. steve: simple business models, you trust more. always, you need to monitor the company. meet with management, watch what

they do, and make assessment. you cannot regulate culture. it is ingrained. it starts at the top. alix: broader market outlook. as techs selling and -- was selling, thanks were not a beneficiary. how do you view value versus growth when global growth is confused? steve: we hate this question. alix: yay! steve: it is so hard. it is true value is cheap relative to growth. we prefer to think about it this way. cyclicals versus defensives. worriedket where we are about growth rolling over, we are projecting gdp next year of 2.8%, cyclicals are priced for worse. whether those are in value or growth, financials, energy, industrials, tech, we want to be

on the side of cyclicals. david: let's talk about growth. a chart coming off the china pmi numbers overnight. yellow is china. trailing off. down to 50. breakeven. blue line, europe. the white is united states. what does this tell you about global growth in 2019? steve: it was key that you heard powell reference global issues in the speech earlier. risingdollar, trade, interest rates have certainly impacted growth outside u.s. we are dealing with minor downshifting growth. internationally, much more significant. david: trade now. we are waiting on the signing of the new north american trade agreement. to what extent is trade, the

headwinds, how much is that affecting global growth rate? steve: i think it will determine how we finish equities this year. this weekend is critical. three things the market set up as key concern. fiscal policy, monetary policy and trade. we have positive resolution on the first two. powell did what he needed to do. elections went good. the meeting between xi -- look -- trade is a small part of the economy. there are multiplier effects. a negative capex has feedback to confidence. getting certainty around trade would be important for markets to move higher next year. alix: for china, it is not all about trade. we can blame it on trade and it is easy to do. there are so many other issues. they are in a state of not being able to ease in the way they want to because they do not want to -- they do not know what will

happen with trade. they need a stable yuan. they need money coming in. they need money coming in. they cannot deal with a lower yuan. that is risk to global growth. steve: you have china slowing and global growth slowing. remember that the dollar is the key element. strong dollar makes it difficult for them to grow the way they would like to when they are export based. that is pressuring them. rates,get relief on weakening of the dollar, that will relieve pressure on em. longer-term? china is in a difficult position. demographics are not what you would want. the reason they have made in china 2025 plan is they need to take the technology that the united dates is dominant in today -- that the u.s. is dominant in today, for demographics. they are trying to negotiate transition. talked about g20.

growth is a problem with investment. >> the trade tensions, you invest to produce, and you produce to sell. if you are not sure that you are going to sell, or at what price, then you don't invest. investment is the seed of tomorrow's growth. what you have basically is a clear axman nation -- clear explanation of why the world economy is decelerating. we are in slowdown. david: people don't invest, you don't get growth. what do you see in terms of capital investment? steve: spot on correct. alix: didn't hate that question. steve: david: years was better. steve: we can argue that later. the whole point of tax reform on corporate side was the idea that you had burgeoning technologies

implemented through the economy and you needed capex cycle. bring down the tax rates so companies can invest. trade has created uncertainty. if i don't know where i need production facility, because i don't of the rules, it makes it harder to invest. capex picking up, then trailing. not that it will be resolved over the course of the weekend but even if there is a cease-fire, it will allow companies to resume a pickup in investment. alix: before we center on g20. on broad level, if risk, fiscal, trade, fed, if we remove the risks, g20, we get a pause, pause on the fed, what kind of upside? we are focused so much on the downside. steve: we are stuck between 1987 and 1998. 1987. market weakening on rising rates. a moment of capitulation.

decline in market. no recession. you wanted to buy the bottom. 98 is the upside. david: we will go to buenos aires. president trump is coming in with counterparts from mexico and canada. they will have the signing of the agreement. this is the successor to nafta. we will go live. occasion, the signing ceremony for a brand-new trade stateshe united -mexico-canada agreement. so important. i am honored to be here with president enrique pena nieto. mexico, great friend of and prime minister justin trudeau, who has also become a great friend. battles sometimes make rate friendships, so it is really terrific. -- rate friendships. nafta, formally replace

, a trulyusmca groundbreaking a treatment -- round making agreement. -- groundbreaking agreement. i want to thank bob lighthizer for the efforts they made throughout the last two years. thank you to jared kushner, secretary of state mike pompeo, secretary of the treasury steve mnuchin and director larry kudlow for their hard work and untiring devotion throughout negotiation process. peter navarro, thank you so much for the work you put in. so many others. largest and the most significant trade agreement and history. all of our countries will benefit greatly. it is probably the largest trade deal ever made, also.

in the united states, the new trade pact will support high-paying manufacturing jobs and promote greater access for american exports across range of sectors including farming, manufacturing and service industries. as part of the agreement, the united states will be able to lock in market access to canada and mexico and greatly expand agricultural exports, something we have been wanting to do for many years. this is an amazing deal for farmers and allows them to use cutting-edge biotechnology and eliminate nonscientific barriers . our nations have agreed to innovate new measures to ensure fair competition and promote high wages and higher wages for u.s. and north american auto workers. the auto workers are tremendous beneficiaries. at least 75% of automobile

content must be manufactured in north america, 45% of automobile content must be manufactured by north american high wage labor in order to gain preferential access to our markets. this will help stop auto jobs from going overseas and it will bring back auto jobs that have already left, many, many jobs are already planning to come back. many companies are coming back. we are very excited about that. this landmark agreement includes intellectual property protection that will be the envy of nations around the world. the usmca contains robust new provisions on digital trade and financial services and the most ambitious environmental and labor protections ever placed into a major trade agreement anywhere at any time. we have dramatically raised standards for combating unfair

trade practices, confronting massive subsidies for state currently,prises and currency manipulation that hurt workers in all three countries. the currency manipulation from some countries is so intense, so bad, and it would hurt mexico, canada and the united states badly. we have covered it very well in this agreement. these new provisions will benefit labor, technology and development each nation, leading to much greater growth and opportunity throughout countries and across north america. in short, this is a model agreement that changes the trade landscape forever. this is an agreement that first and foremost benefits working people, something of great importance to all three of us here today. i must say, and prime

minister, we worked hard on this, long and hard. we have taken a lot of barbs and abuse. we got there. it is great for our countries. thank you for your close partnership throughout this process. this new agreement will ensure a future of prosperity and innovation for mexico, canada and the united states. i look forward to working with members of congress and the usmca partners. it has been so well reviewed. i do not expect to have very much of a problem. the complete implementation of the agreement. i want to thank you on a personal note and wish you the best. this will be your last day in office. that is an auspicious day, when you can sign something so important. we really appreciate it. i can speak for justin when i say that. [applause]

we both agree he is a special man. he has done a good job. onant to congratulate you ending your term in office on this incredible milestone. it is an incredible way to end a presidency. you don't see that happen often. i look forward to working with president elect lopez, and our relationship will be a good one. we have had great conversations. we will have a great relationship. i would like to invite the president and the prime minister to say a few words and perhaps we can start with justin. we appreciate it. please. [applause]

>> good morning and thank you for being here. thank you to presidents trump and pena nieto. as donald said on your last day in office, it is a wonderful pleasure to see you and be here for this historic moment. [speaking foreign language] french]g

david: we have been watching the ceremony in buenos aires. that is justin trudeau. my french is not that good. accord isng the new modernizing all three countries. we heard president trump saying why it is a good idea. alix: he just translated french. i just want to point that out. david: mike mckee joins us from buenos aires, and steve is still with us here in new york. mike, explain about where we are. you pointed out, i got it wrong. they are not there to sign. they are authorizing the trade ministers to sign. we have ratification issues? reporter: yes. you did not get it wrong. technical issue. trade ministers have to sign. the leaders want credit.

they will sign a piece of paper that says the other people can sign. importantetters are going forward. we have questions about ratification. canadians don't think it will be a problem. it should not be too much of a problem in mexico. for the united states, getting this ratified by the house and senate will be a task. the strategy originally was treating this as a democratic friendly deal, one that benefits workers and the environment, to try to bring enough democrats on board to get it through, assuming republicans would support it. we have heard from republican senators that they do not like the deal. there are members of the house that are in the same boat. does that change ratification strategy? some say this could take 2019 to get solved. it could mean that donald trump goes to the nuclear option.

he would announce a withdrawal from the original nafta and give congress a choice. new nafta or nothing. not falling back on the idea that they would still have the old one. david: we have had democrats in the house -- it is a new house come january 1 -- democrats want to start from scratch. we end up with the president threatening to do away with nafta in order to put pressure on his own congress, rather than mexico or canada. irony. reporter: absolutely. it has been talked of for a long time. latest word from the white house is, they are not planning on doing that. they hold it in reserve. if it looks like it is not going through, it would be a massive failure for the president happening at the end of 2019, going into election year. one thing about donald trump. he is not shy about using a big

stick if he has one. perhaps he would fall back on the idea of withdrawing from original nafta. it will be difficult to get this through. hopefully they can do it. david: we will go back. prime minister trudeau is talking about the gm plant closures, which include canada. [speaking french] i am confident we will get there with hard work. our shared interests, and security demand it. before wrapping up, i would like to personally thank our foreign affairs minister along with u.s. trade representative bob lighthizer and the mexican secretary of economy for their hard work and dedication since the beginning of this process. i would like to thank ambassador david mcnaughton, the chief negotiator and the talented

staff. thank you all for being here today. [applause] >> [speaking spanish] >> president and prime minister, distinguished members of the delegation joining us today, to both i would like to thank you for your generous remarks. this is precisely the last day of my administration. during the last day of my administration as president, i am honored to be here standing

next to the leaders of two countries, friends and partners in this signing ceremony of the new trade agreement between mexico, canada and the u.s., the agreement that we will sign expresses the shared will by our nations to work together toward the well-being and prosperity of each one of our societies. of aday is the culmination long process based on negotiations that allow us to overcome differences and conciliate visions. once assigned, this will be sent to congresses for ratification and it will be then when this innovative instrument bears for i offering a more inclusive -- bears fruit, offering a more inclusive future. allowsotiation of usmca us to reaffirm the importance of

economic integration in north america. for more than a quarter of a century, our three countries have maintained very tight trade relationships, thus trade has transformed mexico. today, our exchanges abroad represent more than 70% of thish domestic product, has contributed to the fact that today benefits of trade with the valued by the mexican society. a new trade agreement was aimed to preserve the view of integrated north america, with a firm belief that together, we are stronger and more competitive. progress that we have seen an trade relationship in the last decades, there was still a long road ahead of us to take advantage of each country's potential. the united states, mexico and

canada agreement gives a renewed face to the process of integration. this process achieved in the first place to modernize trade framework. trade agreements shall not be static. agreements need to move along beh the economy and should according to the needs of our society. the inclusion of new provisions on e-commerce, i.t. and trade enabling practices are now part of the agreement. in fact, one third of the thatment includes topics were not included in the current agreement. the renegotiating process allowed our region to move into a more inclusive integration, a type of integration that listens to the demands of our societies. 24 years ago, nafta set a

benchmark for trade agreements back then. the first trade agreement that incorporates elements that address the social impact of international trade. it enables participation of more sectors in economy, including trade,pation of regional extending protection of workers rights, strengthens protection includesvironment and a review clause that would make ,t easier that the agreement rebounding more constantly. this is a true sign of the will we have put in this agreement, the decisions to provide more and better opportunities to our people. i would like to acknowledge the

work done by the negotiators from the three countries, each team advocating for each countries interests. by doing this, you reached a positive result for the sake of all participants. testimony ofhis is the work of the business community who were present during the process, specifically the new administration that will take office tomorrow. your support and the alignment of visions in the last days contributed to the success of this negotiation process. i would like to say, isaac cearley -- i sincerely acknowledge the president and prime minister for their vision and the vision they have put into the process. thanks to you, president trump and prime minister trudeau, the agreement we are signing today

will allow each country to gain individually but also north america will grow stronger and more prosperous. ladies and gentlemen, currently in the world, each country's future is firmly linked to what happens in other countries. in north america, we understand this clearly. we understand that each society's prosperity will be greater and deeply rooted, if it is based in the prosperity of the region as a whole. this ceremony is a sign that mexico, the united states and canada being close, not only due to geography but on values and expectations. we are ready to begin a new chapter in our shared history. thank you very much. [applause]

♪ david: watching, president trump , and flanked by the mexican president and the prime minister of canada, they

are signing not the agreement itself but they are signing authorization for their trade ministers to sign. there are important side letters they will be signing. this is a modernization of nafta, improving many ways of what has been done, but falling short of radical change predicted by some, including in the administration. we talked to mike mckee. we still have a ratification issue. particularly the united states. [applause] justin trudeau is not showing -- david: you can see president trump, that is for sure. mike, we heard, among other things, justin trudeau talked about the gm plant in canada that will get shut down. this may raise interesting questions about one of the major changes, the origin rules in the new agreement?

sure exactlym not how this will play out. the new agreement contains a provision that 40% of the north american content be made by workers who earn more than $16 per hour. mexican wages are low. that was predicated on the idea a certain amount of production would come from the u.s. and canada where wages are higher. if you take the oshawa plant out and production, you have to wonder if it affects the calculation? it is something people will look at going forward. justin trudeau unhappy about gm closure, inserting it into this ceremony, calling it a gut punch to canada. he also noted that the president has not lifted steel and aluminum tariffs on mexico and canada, and that is not fair, he said. alix: when you look at that, where we are now and where we are going, how do you hedge on

monday morning? steve: you wait. alix: in cash? utilities? steve: wait. we have been in a position at federated, we are overweight equities, 5%. marite turbulence and ket, you have strong fundamentals. but theyry to game, are impossible to call. there is no way you can predict the way the meeting will go between trump and xi. howare positioned fundamentals tell you to be positioned. going forward, this is on things that are predictable. if you have to put odds on, you get something out of the weekend. maybe agreement of cease-fire for a couple months? you have to wait and see. you cannot anticipate. they are not market events. alix: thank you.

michael mckee and steve, great to see you. ande we stand in markets, what will no doubt be an interesting 72 hours and buenos aires -- in buenos aires. futures down. s&p futures off. nice three day rally at the beginning. the best in a month. not able to hold on, headline risk. european stocks down for 10th of 1%. dax underperforming. blame it on deutsche bank, hitting another record low as board members are drawn into the investigation by prosecutors. other asset classes. not a lot of movement. safe haven movement into the dollar. euro-dollar, down to 10th of 1%. inflation eased in europe last month. italian seeing a jump, not reflected in the italian market. vix elevated.

2-10 spread, flat, flat, flat. 10 year treading 3% rush holt. -- threshold. crude up -- down by 1.5%. it is not just trade. oil could be decided this weekend as president vladimir putin and the crown prince will be meeting. oil output in russia staying steady to the end of the year. reverberating. david: everybody is watching buenos aires for the g20 discussions. investors in e.m., latin america and north america will be watching with particular intention. this is what goldman sachs says the most likely results are. the most likely result is continuing on current path of escalation, increasing tariffs 25% on china. the second, is a pause, in which existing tariffs remain in place but the sides agreed to keep

talking. paulo, university of miami business school professor, and former goldman sachs brazil chairman and ceo. thank you for your patience. we have been waiting on that signing ceremony. good to have you with us. what do you think is most likely to come out of this weekend and that dinner with president trump and president xi? >> it is an important opportunity. what we have seen in the markets, every time you put something positive in terms of trade like nafta, it will respond positively, the market needs a floor to sustain. having something on trade this weekend would be important, more so than talking about policy. i tend to be pessimistic in terms of concrete outcomes on the subject of trade and there could be soft language.

in terms of having understanding and impeding protectionist process unfolding, is highly unlikely. alix: is it a pause for a walk back of the trait aggression? -- trade aggression? paulo: things will continue the same. something nice to the press may sound less hostile. in terms of the broader trade agenda of the u.s., including intellectual property, cybersecurity and those issues, i think it is complex. i think the most likely outcome is not to have any understanding or agreement out of this weekend, then continue the process in terms of trade protectionist escalation next year. alix: how does that affect the broad risk-taking appetite? in the minutes from the fed meeting yesterday, trade was mentioned 12 times. all reverberating around trade tensions.

if trade policies and foreign developments could move in directions with significant negative effect on u.s. economic growth, how do you invest with that warning? paulo: that is exactly the message i have for the audience today. if there is anything concrete out of buenos aires, that could be helpful for the u.s. equity markets and global markets and growth, that now it is beginning to slow down, is exactly an indication that at least hostilities. stop andities will they will work out an understanding. it impedes growth in this process of protectionism as trade barriers increase, there could be less in the global economy -- that is already slowing to 3.5% next year -- for the u.s., it is even bigger, close to 1%. instead of having the u.s. administration talking about

monetary policy, it should do something that it can have concrete results, which is to deliver something positive on trade this weekend, which i don't think we will have. david: you ran goldman sachs in brazil. now you are an investor in latin america and e.m.. give us the over and under. if it goes well, what does that do to you? where do you put money in? if it does not, where is the difference? paulo: good question. everything else, right now, i would be reducing risk. reduction in expected returns in u.s. equities with higher volatility is twice the level of volatility we had before, is a duration.harp i would be reducing exposure to u.s. credit markets and increasing cash, treasuries, 3.5% next year in terms of three

months, quite compelling as a rate. i would go for more defensive stocks and higher-quality names. in terms of opportunities, what is cheap today in markets are e.m. as asset classes. it haslook at msci, suffered a large drop this year and in addition, local currency, argentine peso and mexico peso, they are cheap on a real basis. combination of upside with 9.9%t in latin america, 12%, 30%, growth resuming in brazil, growth in mexico at 2%, you have upside in terms of earnings-per-share, higher pe's. dollar --

[no audio] paulo: -- in terms of the most attractive asset classes, valuation next year, it will probably be msci em. david: you mentioned three countries. mexico, brazil, argentina. if you take those, which are best protected against downside in trade? mexico, with the new agreement? which has the biggest upside if things break the right way? mexico.iggest upside is wars have continued trade and further measures in terms of -- [no audio]

paulo: -- most protected against the downside. david: thank you for joining us from miami. it was helpful. alix: more arrivals at g20. the red carpet of the fancy officials. monitoring headlines from buenos aires. coming up, the citigroup chief u.s. equity strategist. his call for the 3100. earnings outlook. we break it down. this is bloomberg. ♪

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geopolitics. g20 officially kicks off. usmca is officially signed. goldman sachs warns of a trade war between u.s. and china. -- on the brink of contraction and the fed mentioned trade 12 times. we will speak to tobias deutsche of citigroup bank hits a record low as -- more than half of board members off david:. welcome to bloomberg daybreak. you are watching dignitaries at the g20, parades of heads of state coming in. an interesting 72 hours to be sure. i wonder how many traders will be in their office around noon on sunday. alix: merkel isn't there yet, right?

david: the chancellor of germany took off in her air force plane and couldn't communicate with the ground. they had to dump a bunch of fuel , turnaround and land again, she's going to take a commercial flight and get their in time for dinner. we're going to go to the morning briefing, all about president trump's schedule in buenos aires . the signing that we just saw, the united states mexico canadian trade agreement, arriving at 8:30 eastern time, just 29 minutes from now, and posing for the family photo that we love. the argentine president gives remarks to begin the summit officially, then president trump will start his bilateral meetings, the first one with japanese prime minister shinzo abe. then the president and missus the g20ll attend leaders summit. alix: market, -- into the g20 meeting, that's the

question. ae dollar is a little bit of safe haven, inflation was one weighing on the currency pair. there's buying in the bond market, 3.01 is how we put on the 10 year in crude, looking at its worst month since 2006. will opec cut or not? russia, maybe not. we will see during the meetings over the weekend. david: we turn back to deutsche raidnow, after yesterday's at the frankfurt headquarters. reports came out minutes ago that at least five of its managing board members offices have also been rated. the fact that they are searching does not mean necessarily that anything went wrong, but they have searched their offices on reports. joining us with more from frankfurt is bloombergs jan pa trick varner. tell us what is going on. >> sources are telling us that

the offices have been searched in the course of this raid that started yesterday. i want to make clear that deutsche bank has not confirmed, the prosecutors have not confirmed that any top management is accused of doing something wrong in doing the that is all we know so far. david: many of us were surprised, 170 prosecutors, then a second day of it. given your experience, does this seem long or extensive? >> i would say so. that a raid would go over two days is not unusual, but it is also not a common thing. you do it on one day because you typically want that moment of surprise to make sure that no evidence is going away.

but of course, the thing has been going on over years, and a lot of paperwork and files have unco searched and nfiscated, i guess. bankalso say that deutsche has said they are cooperating with the investigators, probably a reason there is a second day. david: i'm not sure they have a lot of choice as a practical matter. are they saying anything other than that? their stock is down to record 9%, 6.2%n two point over the last two days. at some point, they've got to give their side of the story, don't they? jan-patrick: of course, and i'm pretty sure they will, but at the moment, they are saying much. i guess that is the usual behavior when you are under investigation. you wait and see what is going on, then make up your mind. the weekend is coming up now and i guess there will be a lot of calls on the top management level. they make up their mind of what

they want to say and what their next steps will be. david: thank you so much. alix: trade and the fed, the biggest risks for 2019, and banks are coming out with their outlook. views are divergent. the end of next year, morgan stanley -- goldman sachs still a bull, overweight on tech. ,oining us is tobias levkovich he sees the s&p at 500 ending in 2019 at 3100 with earnings growing 6.2%. do you still have that view? tobias: yes. we actually did this in december -- in september. we kind of anticipated that something would happen back then. wasprimary sentiment metric sending the 70% signal of a weakening market. now it is a 90% probability of a higher market.

that is a significant change because of what we've seen so often in october, november. the key issue is that earnings expectations for 2019 were too high. in september, 12 percent earnings growth, now it is just under 9%, probably heading closer to our 6%, navy 7%. stocks don't generally go up when you are missing estimates. they can have traction if you've got meet or beat. it was kind of ridiculous, those 12% numbers. i hate to be that harsh, but the first half of this year, pretax earnings -- before the benefit of the tax cuts, what were the operational direction of the businesses? remember the environment you were in, the global synchronized recovery, we called it. beautiful day, the sun is shining and children are playing, you can almost hear the ice cream truck music.

that was that beautiful scenario and you've got 12% pretax earnings growth. why were we going to get to 12% growth in 2019, an environment where the dollar is stronger, interest rates are higher, problems in emerging markets, europe is sluggish. but that is the risk. now that they come in, it looks ok. the earnings recession fears come from things like wage pressures. this lead- we run margin, looking at what is happening to wage growth, and agree that it will get more extreme. we think 3.5%. but pricing power is also there. companies have started to do so. they aren't going to give it up just because, companies really don't like doing that. i don't think the marginal pressures are going to be there. we could spend a lot of time discussing this and we have since 2011. itx: does that mean that,

feels like a lot of equity analysts are looking for the first half to not be bad, and when it comes to s&p in the back half, you see it slowing. is that not -- what is different in your view? tobias: some people thought they would raise four times, and i think -- took that off the table. they do it in december, two more next year, and that is it. with respect to the great conviction that anybody has for what is going to be going on, nine to 12 months in the future in the economy, i don't think anyone has great conviction. b data look at the mfi for small business hiring, they leadsually a good one year indicator. you can go back 40 years and look at this data, look at the really good lead indication that it provides.

let's now go to the possibility of a really bad storm. watch out for leverage loans, watch out for -- he actually expressed some concern about bbb's and what is happening with credit. a realhere were to be deterioration in credit quality in the united states and europe, and you started having a significant amount of triple b influence in the high yield, the junk market or high-yield market doesn't have the capacity to absorb what is above them in the market, and that is what i think regulators and factors have to be focused on. david: what is the risk of the storm coming, and it might come from credit. stack ishe triple-b not just leverage loans that people are worried about, it is a broader perspective.

high-yield issuances are down 30%. one of the reasons is that leverage loans are floating-rate debt. i think those are fair. there are risks out there, always risks out there. the things we watch are the lending survey from the -- and industrial business lending standards. they continue to ease, banks are still providing liquidity and attractive prices, and as long as that is the case -- alix: the demand isn't there. tobias: that's not true. i love people saying that. that you question to that, that's a terrible question. [laughter] tobias: if you look at what is going on in commercial industrial lending, business lending is up 5% or 6%. lending to commercial businesses is up -- leading business lending by six quarters, so we are likely to see in the first

half of next year, double-digit growth. i hear this, saying there's no demand. then how come bank lending is higher if there is no demand? that is where i find that this kind of uneven perception versus the data that says something different. when we told people in the early part of this year that we would see the bank pickup, they look at us like we've grown horns and tails. it is the six quarter lead that people don't understand, not that loans aren't good. it's one of those issues, but as long as the data says that credit is available, small business credit availability, if you look at the mfi d, questioning small credit, that is the question. david: next, we will give you an outlook on spending for 2019. ♪

>> this is bloomberg daybreak, i'm emma chandra. in one of may be the biggest data breaches ever, marriott is investigating a hack involving unauthorized access to its guest database in 2014. the company believe the database had information on up to 500 million stalwart property guests. there payment information, names, may have been access. -- are confident in their ability to gauge the market of the 21 billion-dollar ipo of the japanese telecom business. in the first for the tokyo stock exchange, the stock will debut without -- the exchange. shares will begin trading on december 19. oil is heading for the biggest monthly decline since 2008. -- york oil futures sale as

comfortable with current policies. -- down 22% this month. -- and opec meet in vienna next week to discuss possible cuts. to come ashappens emp producers in the u.s. are looking at their 2019 capex budget. what will that be, with ramifications on the overall capex emp. s&p year on -- over year growth. you can see what happens when oil prices split in 2015, you also have a slide in capex. in septemberly 2017, picking up as oil prices found more stability. now, the rollover happens. levkovich.tobias if we don't get energy capex, what happens? tobias: we will get some, but just a more limited one. e&p companies are spending close they literally have

to, it is a depleting asset. you drill a hole and take it out, and you have to find another one to replace that production. it's one of these, i wouldn't call it sustainable, because i would get in trouble with environmentalists, but the idea is they have to sustain it to generate cash flow. where we are seeing the real drop-off in energy is we reviewed over 780 companies, nonfinancial, publicly traded companies, and they are telling us about 4% growth next year on top of this year, more than 13%. that's not shocking. when we looked at november last year, 2018, look like it was 23%. strength ing technology, strength in capital goods, strength in retailing. their number of industries are actually doing pretty well. alix: so, the conversation that

capex is going to be rolling over and we will have to look at lower capex estimates next year, is that right? tobias: i can't ultimately say that everybody is wrong, that is an arrogant statement. david: you can. alix: we can ask your wife. tobias: my wife has called them every time, and i'm starting to believe her. when you look at the duke university cfo survey, what are they saying? when we look at 780 companies, what are they saying about their capital spending? they are all saying different stories from what we are hearing being generally discussed. they are robust, but we will continue to grow capital spending. at the very least, if companies are worried about labor costs going up, they will be looking at efficiencies and have to buy thee tools, if it is in technology or manufacturing space, it helps them get more efficient. david: we care about capital

investment because it drives productivity. i spoke with the head of barclays and he said that at some point we can't rely on tax cuts. this is what he had to say. jes: ultimately, healthy economic growth is driven by productivity, and you'd think that the investment in technology, the positives of globalization that we would be seeing more productivity than we are seeing, so the growth wouldn't be so dependent on easy monetary policy or tax cuts. david: you would think that, but are we seeing it? seeing the growth of productivity that we thought would be coming at this point? david: i had this conversation with economics professors who know the issue better than i do. to,nding on who you talk different things. we have all of this disparate technology that is advanced, but we haven't pulled it together to work cohesively with each other. we all think of the stuff that we use as more productive, but

have we taken in the full extent of what we can do with it? number two, there is another view that historically, even when they introduced electricity, people were still using steam engines. it just took time for the adoption of it. there's a third group that says the technology shifts we are doing are incremental, not as big. if you went from moving robert gordon, for example, who talks about this, if you talk about moving things by force, then by aircraft, it moves a lot faster. that's a huge productivity leap /. what we are doing now is more incremental. spending more time looking at social media accounts or playing games, not as productive. alix: to that point, if you look at the chart, with dividends in capex and how investors are going use their money, buybacks are obviously the supporter. can capex take the lead?

david: tobias: -- tobias:tobias: two answers. buybacks have been going powerfully. alix: but look at how much it has spiked up. tobias: you have a lot of companies bringing money back from overseas and they can take advantage of that money more readily than before, and that will probably flatten out at very high levels. capex can grow a little bit more than that. the beauty of it, companies have had the ability to do all of that. because of all of the cash flow, because the economy has been good enough, it doesn't have to be superb. it has to be good enough to generate cash flow. i think they are going to spend more money on capex and they are probably going to -- i don't think they will pull back sharply on buybacks, but they will be more moderate in terms of thinking about growth. one last point, we did this study a couple of years back. accounted companies

for 17% to 18% of all the buyback dollars. don't think of it as everybody buying back stock. but on the capex side, companies have to do that to stay competitive. it is a little bit more concentrated on the buyback side. david: please stay with us, because we now turn to the bottom line, the point in the program where we look at three companies worth watching. i'm certainly watching marriott, because they had an announcement of an almost record-setting hack . what was it, 500 million western mark different accounts that were hacked? their stock was down something like 5% in premarket trading downi checked, now it is 3.9. the only one bigger than that was the yahoo!, which was 3 billion. alix: you are right, 500

million. david: it includes things like password numbers, home addresses. you can see what happened to that stock in the news today. down 3.8% in trading. alix: i'm looking at goldman sachs. that story and 1mdb just gets worse and worse. we heard last night that the fed is going to ramp up the investigation into goldman sachs and some of how they account for risk, et cetera. how they were basically able to have these executives involved in 1mdb to dodge the internal risk control, and if the risk controls are actually good enough and how they could short-circuit that. you could see the stocks moving slower today. we talk about the culture of pled guilty, said it was very much in the culture of goldman sachs. it's not criminal, that's doj, but the fed does have oversight

in some ways, like with wells fargo. david: the federal reserve can sanction individual bankers and curtail their operation. they have a lot of clout. they haven't confirmed whether they are investigating or not. alix: i think at this point, you probably have two. that's not going away. david: our third company is softbank. we are joined by brooke sullivan. they took a different tactic. >> they are taking a lot of tactics with this ipo. they are sticking with one single press, rather than a range at this point. that is unusual, you want to dig a buffer so you aren't under buffing the ipo. host of this is going to resale investors and also speaks to the quality of the company that softbank's ipo'ing here in its telecommunications business. they are offering a high

dividend yield which repeals the japanese investors who are yield hungry in this environment. it is a big brand name, has a baseball business. alix: i didn't know that. brooke: they do. they have so many tentacles in different businesses. it's not necessarily a business that will resonate in the same way with institutional investors. given what is happening in the japanese telecom environment, there's a lot of talk of lowering rates. you aren't quite seeing the same amount of demand there, so it is interesting to see the retail base. dividendidends, a payout ratio -- around 5%. is that basically it? buybacks, i give you dividends. brooke: it is, and i think if you are so hungry for yields, you'll take what you get. net income doesn't hold up to the extent that it is currently, given pricing pressures in the

telecom industry. dividend deals will start to look less attractive over time, but right now it seems to be drawing people in. tobias: let me ask you the broad question, does the story tell you more about the sector or the geography of japan, or something about what is going on with equity capital markets now? can't talk about individual companies, i don't know who's even involved, i think that in general, japanese investors are yield hungry. it gone everywhere around the world to find that yield for this older population who needs income, where most of the wealth is concentrated. that demographic is important, which is why they buy u.s. treasuries, instead of jgb's which are yielding almost nothing. it is important for the investor general in japan. david: so the reason they are raising the money for the ipo is

they want to do investments in startups, in tech and things like that. brooke: exactly. he is taking the business that made him rich and said i'm going to ipo this and use the money to pursue new ventures. he has had a lot of success in investing in companies. uber, recently, we work. they want to pay down some debt which they have a lot of, buying back some stock. alix: thank you so much. shotre looking at a live of the g20, kicking off, and world leaders continue the trail in. robert lighthizer and steel and afterum talks will come the usmca signed. ♪

alix: this is bloomberg daybreak. headlines coming from the g20, robert lighthizer talking about aluminum and steel tariffs next week after usmca was signed.

20 --of focus paid on the on g20. s&p pairing is off by seven. the real loser is near germany, the deutsche bank story. another record low driving banks down by point 3%. another asset class has moved to safety on the margin, dollars stronger, buying across the treasury curve. the curve continues to flatten, currently at 20 basis points. what will wind up being the trade if we see a fed because, now that it seems more viable after the minutes and fed chair jay powell spoke. that's not the only thing happening in the g20, also oil, vladimir putin and mohammad bin salman on meeting tomorrow. to 65 for next year, and the deal is, what kind of oversupply are we looking at? david: indications that they

might cut productions, which we haven't seen yet. let's get an update on what is making headlines with emma chandra, here with first word news. g20, speaking with the president trump has hinted there could be a trade agreement with china. for the g20rgentina summit and will meet with china's xi jinping tomorrow. the president says he is very close to, quote, doing something with china, raising expectations of a cease-fire in the trade war. cancel atation to meeting with vladimir putin accomplishes two things. it lets him show disapproval of russia's seizure of ukrainian ships, and avoids the awkward task of delivering a tough message in person. praising robert mueller for obtaining a guilty plea from president trump former lawyer. the chairman of the senate intelligence committee, richard

burr, shows that you cannot lie to congress. to return to answer more questions. michael cohen admitted to lying about the president's business passion 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. david: the g20 summit in argentina is kicking off, watching dignitaries. we saw president xi and prime minister trudeau come in. president trump with the mexican president, as well as trudeau signed the trade deal. ,e turn to michael mckee bloombergs international policy correspondent. what do we have coming up next? in terms of nafta, the u.s. has to get it ratified, as do

the other countries. the real question about what happens with the steel and aluminum tariffs, robert lighthizer saying a short time ago to reporters that they are going to talk about that next week, but the tariffs remain in place right now. justin trudeau noting in the signing ceremony, telling the u.s. president we need to do something about that. as far as the leaders going forward from this ceremony, they meet for a session where they sit around the table and talk about some of the major issues in front of them. various members will speak during that session. others will get up and walk out and hold side meetings, bilateral meetings with other members of the g20. donald trump, at some point, goes back to his hotel and has a couple of bilateral meetings scheduled. one is with angela merkel, and we don't know if she has arrived yet. tomorrow, the issue that

everybody cares about, the meeting between vladimir putin oil,ohammad bin salman on scheduled for tomorrow night. sense, lookinga back to president trump and president xi, this is the hallway where dignitaries come in. do you know,se, are the delegations meetings -- right now? are the officials getting together to figure out? told in thee been days leading up to the summit that u.s. and chinese officials had been holding meetings and talking about a possible deal. the question is, how far did they get? there are varying reports. one story is that the sides of almost agreed to a deal that would see the chinese buying more u.s. goods, the president holding off but not eliminating

the threat of additional tariffs, and the two sides would agree to a negotiating framework going forward to try and have more regular talks and bring the trade wars to a close. robert lighthizer was asked about that and the dinner tomorrow night, and he said he would be very surprised if a dinner was -- surprised if the dinner woul was not a success. he did not define a success, but in terms of what wall street would expect, something along those lines. david: thank you very much, we will be checking with you through the day. alix: some don't agree with that kind of assessment, namely goldman sachs. mostirst and, in our view, likely, continuing on the current path of escalation. tariff rates rise to 20% on all imports currently on tariff, and they continue to extend on chinese imports. harman, a is jane ranking democrat on the homeland

security intelligence committee, and tobias levkovich is still with us. james, do you agree with that potential outcome? know i think it is hard to right now. for a president like ours who loves reality tv, this is reality tv on steroids. i think it is in freefall. interestingly, the signing of usmca,or rather the about one hour ago, is just the beginning of that process. our congress and other legislatures have to ratify it. i think that will give leverage to our congress, the u.s. congress, to insist that trump move forward on helping to end the war in yemen, or at least u.s. military support for that war, and back off of the threat to close our government one week from today that would be excitement to watch, and i think it would be bigger drama than what happens in the g20.

david: you served in the house of representatives and know it well. to a newk forward congress at the end of the year, what are the odds that they get ratification of the usmca? jane: i don't know what the time frames are, but if i were president trump, i would try to get it done right now in a lame-duck session. the democratic majority in the house is not pro-trade. i was a pro-trade democrat, a member of the blue dogs, a group that has shrunk to just a few from 55. there is a large chunk of republicans who are not pro-trade. i think president trump is not pro-trade, frankly. he's doing these binary deals to accomplish a change in what he thinks is our trade deficit, but he sees it very unilaterally and doesn't understand that services should be part of how we measure it. at any rate, i think the longer it goes, the harder it will be

to ratify. i also think part of the reason gm is closing plants is because of the steel and aluminum tariffs, which makes auto parts more expensive, so there's pressure for relief there. i don't understand the president's trade policy. if we are trying to look stronger in asia, i think we should have stayed in tpp, a buffer against china and a way to get a better trade deal with china. i don't know what we would get if we just have a photo op and a promise of negotiation. we did that with korea. just inbias, you were washington. tobias: i agree about the new congress being less pro-trade. there was less whispering about the need for a deal, how easily or not easily that will get past. -- get passed. that would be more challenging. with regard to our trade disputes going away, they aren't. the agenda from robert

lighthizer on where the u.s. should be, i'm not going to make a political statement on whether it is good or bad, because that is what i think it ends up being when i'm there. but this being a discussion of the government shutdown, the big issue is the president wants $5 billion for the wall. democrats have offered, surprisingly, $1.6 billion. will they find a compromise, i don't know. the fact that democrats are even willing to pay partially is a win, and a weird way, for the president. 75% of the budget has been expended, central services won't get cut. -- essential services won't get cut. the impact would be small even if there was a shutdown. david: it makes it almost free for the president, to make a point. jane, is it a trade policy when it comes to china, or is it a national security policy russian ? what about the issue of

technology transfer, national security? does he have a point? understandbut let's that he invoked the national security provision of our trade law against canada, so i'm not sure what he sees as a national security issue. but i think there are national security issues between the u.s. and china, and stealing our ip and the cyber penetration of a number of american businesses and government agencies is not ok. president obama struck a deal with president xi, which has not helped. there's is an opportunity for president trump to do something muscular. but we have to have a policy that is understood and allies who are on the same page. at the moment, i think it is interesting that mbs, who should be, at the moment, a pariah for the united states, given, what i believe is conclusive evidence about his role in the khashoggi

murder, and vladimir putin who is not meeting with president trump for obvious reasons, our meeting together. if the enemy of my enemy is my friend, the reality tv of this will be amazing. alix: i'm glad you brought that up, because it particularly relates to oil. and putin all want something different when it comes to oil. what kind of trading could we see? $60utin is staying firm at for oil, but saudi's need higher prices and president trump is the wildcard, how does that play out? jane: we are back injury politics 101. china is our biggest competitor by far. russia is, i think it was john mccain who said a gas station masquerading as a state, and it is totally dependent on fossil fuels. favor.ds a return to

an enormous,t done aggressive action in ukraine. i could see them lining up more closely together to do some sort of oil deal that benefits both of them, in case putin is cut off from western europe, from oil access to western europe, which was certainly the play until now. i think western europe has to be very afraid of what happened in ukraine, and perhaps concerned that president trump will not be on the same side of the page in a strong enough fashion. david: going back to your 3100 call, are you better off with $40 oil or $80 oil? oil, shale in western texas is a real problem. i don't think it can get there because you already see things coming off the trail for $50 oil. to see 40 unless you are calling recession.

from the perspective of big spikes in oil, tending to slow g-7 economies with an 18 month lag, looks a lot better than $80 in the sense of economic growth. david: thank you both for being with us. time now for your bloomberg business flash with emma chandra. emma: shares of general electric fell in free-market trading and analysts from deutsche bank cut their analysis on the stock from one third to seven dollars. there is continuing questions of ge's liquidity outlook. market values have fallen by more than half this year. -- is spending more time in a japanese jail. the prosecutor has extended the detention of the former nissan chairman, facing allegations of financial misconduct. adding an additional 10 days. the u.s., canada, and mexico have capped a year of tense negotiations by replacing nafta.

the agreement still has to be ratified by lawmakers in three countries, but it enacts a number of immediate provisions such as protection from auto tariffs. david: thank you. tomorrow, mexico's president-elect will be sworn into office with a fair amount of doubt about what a man who ran for the left wing will mean for economy and business. our next guest is no stranger to mexico, with more than 7 million moree feet of property and plan for expansion. onre is a lot of speculation what it would mean to have amlo in the office. he ran from the left wing. ?s he going to be chaves >> good question. i think that is not just being asked by the local folks, but

globally. the change in government overall is a reflection of the changes in the region, where -- what we see globally today. in the case of himself, he'll obviously take a different tact bolsonaro inhen brazil. but a populist approach in terms of his politics will be more left, but i think he will be more sympathetic to businesses and the economy than people think. thed: are we worried about initial decision about the air force and the flirting with taxation? joe: there is no question that it is scary to folks with what happened at that flood site. i was particularly concerned about the neighborhoods he chose where he held that vote to make those decisions. it's almost like he wanted to start with a big hammer and send a message that there is a new sheriff in town. i don't think he defaults on the bonds.

the technicalities of what -- while i a default do believe that is an ugly message he sent to the markets in general, he realizes he's got four important campaign agendas. one of them is infrastructure. without supporting markets and acting in a logical way that is friendly to the business community, he will never be able to achieve his other goals. at the same time, he's got the challenges from up north. the u.s. embassy that was fined just today. we've still got to get that ratified in the u.s. i hope jane harman is wrong. i have a lot of respect for her. i personally see g20 and politics a little differently than she does. ow, asl call it a beep-sh she is expecting it to happen, but i expect it to be a lovefest.

we have so much polarization in our country and globally, i think president trump and the other leaders are looking for an opportunity to dial things down a little bit and have a little bit more love going on, et cetera. --coming in as president tomorrow, he will want to be pro business create jobs and more positivity. alix: -- has followed mexico closely, particularly am low. things -- populist playbook and blame foreigners, a neighboring power that is firing tear gas over the border and calling mexicans rapist might help him do this. populist.just go uber- >> that's the risk, and we have people saying that about our president and the problems he bumps into. my short version of that is that aamlo did support the

agreement. as president-elect, people underestimate what his disagreements were -- believe it or not, he is supportive of going back to the general message. i'm not sure if you're familiar with the golden eagle award. they are giving at to jared kushner. they are giving it to the president's son-in-law, because he really did make a deal that they felt, at the time, was fair for both sides. i think our own politics is going to be more of a challenge. will the democrats seize on this to throw the kitchen sink in terms of other issues to approve and ratify. david: we will keep an i various heads of state as they come in, there we see prime minister theresa may of the united kingdom, we've already seen the president of turkey and mohammad bin salman, crown prince of saudi arabia. we want to hear of what investors think. rua buyer?

-- are you a buyer? joe: yes, because there is so much pain in the market -- i am bullish on latin america, i think the timing of g20 was great. verytina, you've seen the difficult environment they've had in the last four months in terms of their market and currency and economies. the challenges that brazil has had, as well as all of these negative expectations from obrador and what is happening in mexico. i think this could be a turning point of positivity, shedding light, result of the expectation of g20. stabilizing in terms of currency, the long-winded answer to your question is yes, i feel like we bottomed in mexico. and i say that, i could be off by a couple of months, but we look at the stock prices and of foric companies, fibres

real estate, as well as some of the companies, it is hard to look at some of these companies and the ratios they are trading at and not look at it as a great time and great opportunity. sitt, you'll be staying with us. we just saw a hug between macron and macri. they are into that conversation. we will take a look at the look at the changing real estate market with the upcoming rivals. amazon's h2 headquarter, more on that next. ♪ 2 headquarter, more on that next. ♪

alix: what i'm watching is definitely what is gonna go on in the g20 as leaders arrive at buenos aires. i'm also looking at amazon in new york, their decision to york andto between new

virginia. has some yards and now it is about long island city. how is that changing the landscape of manhattan real estate? joe: people are worried about the overheating of the market, like in seattle, increasing housing prices. i think people fail to realize the benefit of the timing of the selection of new york and virginia. in new york, what happened is that new york, like washington, has been the last to go down and the first to come back, historically. but because we are the first to come back from the great recession, we got too drunk and overdid the punch bowl at the party. city, look to new york brooklyn, long island city, the amount of cranes you see is like nothing you've seen before.

you look at the commercial side of, say, the office market. you always bounce back through recessions and see 4 million, five million, 6 million square feet. we just added 27 million square feet to new york. at the same time, the amount of units, 19,000 units destined to hit the new york city market meant that we overdid it. we overbuilt and thought there was more depth to the market than there actually was. generalame time, the economy pivoted from being an industrial, finance-based economy in terms of what is successful, to a more technology-based economy, with tech 3.0, as i call it. we've had so much pain here that them coming into the market is just creating a floor of activity to fill back some of those performers. and i don't think it is creating overheating -- i think psychological dynamics around

markets, mainly i think you will have other technology companies looking to do the same thing. david: you know how many square feet, how many people coming in or going out? what is the term inflow and o utflow of occupants? joe: you hit one of the points that people are failing to see. where are people coming from? markets, or will there be a redistribution, a marketplace created in new york city with people competing for the same folks for the jobs in the same places? is 50-50 oncamp whether or not we will have the influence of people from other places or people moving from one company to the other. either way, it may be a little tough on businesses, but positive to the citizens of new york city, of that competitive pressure, driving -- compensations a little bit higher.

very always been the successful side of the coast here in the united states. better salaries, better pay, better this and that. we sort of overshifted the other way. this might bring a little bit of balance, so to speak. at the same time, google is doing the same thing. alix: such a pleasure to catch up with you. that does it for bloomberg daybreak: americas, though i feel like the next 72 hours is going to be fascinating as global leaders continue to arrive in buenos aires. ferro, and an bloomberg opinion colonist will be joining him. a little bit of risk off as we head into g20. ♪\

>> from new york city, to our viewers worldwide, i'm jonathan ferro. the countdown to the open starts now.

jonathan: coming up, the u.s. raising the bar ahead of the g20, expecting dinner with president xi to be a success. and the federal reserve facing a world of uncertainty, reclaiming optionality. in the markets, 30 minutes from the opening bell. we are down one quarter of 1%, but in the fx market, euro-dollar weaker, treasury yields coming in two basis points at 3.01%. g20 agenda hijacked by the leaders of two nations. >> president trump and president xi. >> president trump and president xi. >> it is saturday evening dinner. >> i'm optimistic they will agree to keep up talking. i'm not sure we will see much more. >> i'm not sure we will geso