inverts for the first time since 2007. trump says it's fixed, the trump team tries to explain a trade deal as xi stay silent. opec plus, to cut or not to cut. they say it's premature to say they will cut production. it's uncertain how they get any cuts should be. david: welcome to bloomberg daybreak with alix steel. the capital building. the remains of president george herbert walker bush of enlightened state all not long after the service yesterday. this is a live shot. the firsttrump and lady visited last evening. the president saluted the casket as he went into the rotunda. here he comes now. this is from last evening, president trump with malawi it.

-- melania. that is president trump and the first lady last night at the capitol rotunda. this followed the service yesterday evening when they brought the casket up the steps for the bush family and members of bush 41's cabinet. this is the honor guard last night. there is the family. it was a time when all of the members of the leadership of republicans and democrats were there. politics got suspended. there was talked about how long that might last. i will head down to washington

later today. we have coverage of the funeral of george herbert walker bush. our coverage will begin at 10:00 in the morning new york time. they are reassessing the risk on rally we saw from yesterday. dow jones is down triple digits. futures are off by 11. the currency market is a risk on with a weaker dollar. says you canhe eu back out from article 50. you can back out from brexit anytime. david: if you did it, it would be ok with us. points, now we are on 13. the 10 year yield is reaching 3%. what is the implication for that for the broader market?

we are still unclear as to what kind of cuts we will be getting on thursday, if any from opec. it's time for our first take. we are like copies. ies. it happens to me all the time. we are talking about field curb inversion. fives are the yellow. who cares? who cares? luke: i'm not going to be the first person who says they really care. yesterday, he said inasmuch as this inversion has applications or the economy or for risk assets, it's on a timescale so much bigger than the attention span of people paying attention to it. that hit home for me. if you look at what the curve

has been doing since the midterm elections, we've been getting flatter. there are less odds fed tightening in the future. there is a lower discount on equities. that sounds great to me. it's better than apel steepener. will increase its stake in china. their ownership is going up to 65%. they are expanding into china. they own 10% of daimler. they will up their stake in china so they can have more state over the production. also, it'sabout that good to have an increase in china. how does that fit into these reduction shifts? is this just streamlining and cost-cutting?

david: i don't know. we will have to ask daimler. i think it three enforcement that we want to make cars where the biggest growth is. china has been saying we will liberalize and allow people to own more joint ventures in china. they are saying we are open, responding in part to president trump. alix: come and give us your investments. it's -- the story has to be. david: there is a huge commitment to electric vehicles. mr. kudlow said we will pull off those investments here. the u.s. and china are diverging. china needs a lot more electric vehicles. we're going to talk about mr. kudlow. he had something to say after the president said he had a deal. mr. kudlow said we have to move on it quickly. kudlow, they cannot stall

this and meander this. to see confirming results. something of a mystery, what happened at that dinner down and buenos aires. the president said we've got it all set. we have heard silence from the chinese. we are not committing to the things you say. the aides are all over the place. like they were walking back the impression of market had yesterday, that we are in a much better place. though that there is some sizzle coming out of it. it seems like there might be some time for the next 90 days where we might have a status quo that gives people hope that there could be dialing down of attention. alix: what did you make of the price action? >> it was instructive with what happened.

they are off their highs in emerging stocks kept their gains. the dollar comeback was very interesting. it poses a threat to divergent trade through these developments. if i think there is room for this to catalyze. think about the broad backdrop from the chinese economy not doing very well. the trade war is escalating. there is room for that to turn around. oil may be picking up. the backdrop shift could be in the works. alix: let's get to oil. we saw happened the last few days. a stabilization and the best today rally since june, now we are up by 6% heading into that opec meeting. what most of the producers here in the u.s. have budgets for anyway. how much of a sweet spot is this for the economy?

peggy: we hear about the cuts coming. we saw china -- cannot make an unprecedented move. we will see what russia and saudi arabia are following through with. we are unclear about what type of cuts we could get to support prices. alix: we heard just that from the saudi energy minister earlier today. >> it's premature to say what will happen. is an advocate for stable global oil markets. to get together and listen to our colleagues, here about their views. on about their views production. luke: he sounds like a fed official ahead of a meeting. the markets are on tenterhooks.

if you look at what people work certain things were more about oil. the market is awaiting something on this. one place where it's apparent is the credit market. you have high-yield energy debt having its best day since november 2016. people might be running some sort of positive resolution. that's what it looks like to me. we will see if you get the follow-through. alix: let's take a look at some earnings. dollar general is cutting its forecast. the guidance missed the average analyst estimates. the full year is coming in at $6.05 per share. they will be up about 9%. for the quarter, it looked ok. gross margin was higher than expected. sales were higher than expected.

the stock is getting punished, down 6%. i feel with dollar tree it's something similar. autozone the meantime, is out with their earnings. they beat the highest estimate. sales are upe 2.7%. omp store sales are up 2.7%. you can see it looks like the premarket. autozone has good results. coming up, trade confusion. the president's advisers are struggling to flesh out the details. more on that next. this is bloomberg. ♪

david: markets rallied on news of the cease-fire on trade between the u.s. and china. they pullback as it seemed like they might have different views on what was agreed upon in buenos aires. we welcome our chief asian economics correspondent from hong kong. thank you for being with us. we will put up the points of disagreement or two ships passing in the night. the united states said 90 days. the chinese said other things. once the deal? >> there was no mention of buying agricultural goods either. i think there is a disconnect. china's spin machine is not what we have seen from the u.s. side. aesident xi is finishing off global tour. he is due in portugal. until he is back in beijing, they won't have their ducks in a row.

we did have one development today. china made a move on ip protection. we know this is essential to the trade war. the u.s. accuses the chinese companies of stealing intellectual property. introducinghina is punishments to target those companies that steel ip. ip. will be -- steal it's not a game changer, it's a micro measure while we wait for more formal wording from the chinese president. david: is this a packaging or marketing issue. the president wants to portray this as we got a lot. the chinese president doesn't want to disagree. days, that's important. according to the president, they will not be tariffs to 25% without a deal in 90 days.

>> this can be interpreted in different ways. everything that is on the table in terms of the complaints the u.s. has made of the offers china have made have been on the table for some time. china said they are ready to buy more american goods. a are willing to do more to protect ip and have open market access. promise the teague it comes to china. there is a lot of skepticism around foreign governments, not just the u.s. they have heard this before. can china do enough to convince the u.s. side that this time they are serious and within 90 days they are ready to roll out these measures. much. thank you so he is reporting from hong kong. alix: s&p futures had an interesting 48 hours. there was a nice gap up. then you had that rally hold up for a little bit and then it

faded yesterday. it's continuing to fade today as well. how long is the risk rally lasting? joining us now is the longview economics ceo. : i thought it was encouraging. i would not be surprised if you see a bump up. nineve been rallying for trading days. we have, quite a long way. deal was as good as we can expected really. i'm not surprised by all the shenanigans that seem consistent with the way china behaves anyway. i'm not discouraged. i think this rally will persist. it's the first two weeks of december that are usually pretty soggy. people forget that. always rebalancing your books at the end of the year. : i think we will do at the

year and into quarter one. days,over the last five is that the playbook? if we take a worsening trade war off the table? chris: it's what spin up the most rallies the most. that is tech and consumer discretionary. they have gotten beaten up quite badly in october and november. that is the pain trade. that is what it is bouncing off hardest. david: let's look at this function for the s&p 500. this is year to date right now. there has been a perceived rotation from cyclicals into defensive's. is that done? : great done. i think we are three quarters of

the way through that. health care looked cheaper. they were unloved. there has been a big rotation into them. i still think there is more downside to markets in q1. will be some lovely rallies in the cyclicals of central banks do what we need them to do. alix: it seems like this narrative that the second half of next year will be the rough part. and is causing margin pressure and outlook rusher. why -- outlook pressure. why are you optimistic? chris: we haven't finished the shakeout yet. what the market has been telling us -- alix: growth and momentum? chris: central banks need to change their stance. ecb can't stop qe. they are putting liquidity back into the market. we need the fed to change.

bankst think the central of spoken enough and said we need more. they have begun. david: that indicates that the central banks have failed in their mission. they are supposed to give us enough sport to get the market to support itself. it is still not there yet, 10 years on and we are still there yet. chris: it's hard for them to be outside and fully objective. they have been doing the job within reasonable ability. there are different monetary policies. i personally think the system is flawed and we need a new international monetary system. i think it's done. we've done that. these things don't last forever. of that. rid

let's try something else. relief, oil sigh of is heading for its best today gain in months. the saudi arabian foreign minister is not as forthright. this is bloomberg. ♪

alix: oil is heading for its biggest today winner since june. they are often session just a touch after the saudi minister told bloomberg it's too early to say anything for certain. >> it's premature to say what will happen. is anarabia of course advocate for stable global oil markets, we need to get together and listen to our colleagues and hear about their views.

this would be on supply and demand and their projections for their own of production. alix: still with us is chris watley. that's a far cry for we are going to go for market stability. what happens thursday? get 1.3 think we will or 1.4. they have signaled that. it sounds like the russians and saudi's will side together. that's what you need. we can create a deficit going into 19. you need about 1.4 million barrels cut. that's great. i like the oil prices. with shale, it's almost a market that maintains itself. part ofit is opec and it response to the price. it's an interesting dynamic. alix: the other half response to president trump. chris: three halves. alix: that is trump.

that is iran. chris: i think that's global politics. alix: how the saudi's cut production without causing christian with the white house? this is a huge problem for them. chris: i think they have made it clear that in to support the price. they can't balance their books. what is your choice western mark do you appease the president of the united states? david: there may also be some demand side as well. president trump may or may not contribute something to that. what about the demand side? chris: unless you are in the global recession camp, the demand is fairly steady year in and year out. it depends on what the emerging markets are up to. i would be nervous about growth in china. that is concerning me. at the moment, i think we can

hedge on that 1.2 next year. i am warming up to it. if we get central banks back into reflate in the global economy, commodities are a must-have for the six to 12 month trade. alix: is one oversold enough? chris: my favorite is gold. i think it's very interesting. americans tend to not like gold. david: she loves goal. that's not true. alix: i used to cover gold. david: how much of that is what is going to happen to the dollar? this -- you have dollar in fede expectations. there has been a six year bear market. it's a lovely place to put some money. liquidity comes back into the

system. look at how well it did in the selloff. if there is a trade resolution that works, is that a different story for copper and soybeans? chris: they are much more mixed up in the straight story. copper is particularly mixed up in what happens in the chinese economy. the most important thing is reflation and china. alix: we will get more into that. chris is sticking with us. the first inversion is a spread. is this part of the feds tightening campaign? we will discuss. this is bloomberg. ♪

. ♪ there's no place like home ♪

argh! i'm trying... ♪ yippiekiyay. ♪ mom.

♪ alix: this is bloomberg daybreak: europe. i am alix steel. dow jones features off. 43% of s&p stocks are now below

their 200 day moving average. still looking at the breadth of the market. softer in europe but european auto has taking a big hit, down about 2%. you have a lot of executives from the companies going into the white house today to talk about trade. it is a weaker probably dollar story. -- have cable jumping by .6% 6/10 of 1%. the 210 spread, 13 basis points, following the spread lower and crude jumping about 2%. brett was below -- brent was below. thursday, what they can communicate.

we think the fed has a problem communicating, see how it feels like to be the saudi oil minister right now. saudi oil minister made it clear. let's get an update on the headlines outside the business world with emma chandra who is here with first word news. >> officials and china cannot come up with a response to president trump's claims about the summit in trade with the chinese president. trumpals -- president tweeted that china was willing to cut tariffs on cars imported from u.s., beijing has not confirmed or denied it. the french president trying to appease protest movements, his government announced a suspension of the fuel tax hikes that led to violent demonstrations in paris. they say the tax increases will be suspended for several months. it is a setback for theresa may enter uphill battle to sell the brexit deal to parliament.

the european said the u.k. should be allowed to reverse the notice. if the court agrees, it could help those campaigning to thwart brexit to get a second referendum. 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 am emma chandra. this is bloomberg. fed,: -- alix: dissecting speakers yesterday said they are watching inflation and the neutral rate. >> we have asymmetric objective around 2%, that is not meant to be a ceiling, we have operated below 2% and we could operate somewhat above. wei would be pausing until get clear sequences of inflation numbers above 2% at the minimum, i think 2% is too low of a target but that -- try to make that argument. >> we publish our estimates,

projections of what we think the neutral rate of interest is, and there is a range of that. from 2.5%, 3%. that is a pretty big range and we are coming to the bottom of the range. alix: chris watling is with us. market, you the have the white light and yellow care about thely 3-5 and the 2-5? chris: i would not. 210.ld go keep it simple. it is a fantastic and get her but has not signaled, it does not matter, relevant whether this 13 bits, 25, or 50 david:

it may not signal recession but is it signaling something else? what about what the market is telling us on the login and the prospects for growth? chris: the market is saying the fed needs to go on an extended pause for a long time. and, if i'm bored about q1, the fed death worried about q1, the fed may need to cut. the flattening is saying we know growth -- peak growth has happened. china is under a lot of pressure domestically. it is a very big economy and affects global growth. david: let's look at financial is theons, the blue line united states and the white line is outside of the united states. that is worse. financial conditions are tightening, not surprising because the fed is hiking but why are we not in a position where the economy cannot sustain itself?

why do we need $1.5 trillion in tax cuts every year? economy that is emerging from a difficult 10 years. an economy that is growing a lot on cheap money and the margin of the cheap money counts, whether it is corporate bond issuance and buybacks or shale activity, or credit growth. cheap money counts and it is the changing rates that matter to an economy. alix: 2019 returns, goldman says they expect to the weaker backdrop in 2019 is likely to limit return potential, we see poor risk-adjusted returns in fixed-income, forecasting negative took return for bots and with more upper pressure on yields and credit spreads, still say go overweight stocks and hold cashmore. -- cashmore. attractive. are growth is slowing and the bond market is signaling that the

best of the growth rate is behind us. alix: what is the bottom for you? maybe 255, 260 on the tenure. david: how much of the buying is demographics? straight up, global demographics? if so, is that a good thing because more capital is available for investment? chris: it would be a good thing if investment was happening. what you really want is the savings to go in investment, but we do not have that. demographics is huge but the european demographics are improving. -year-olds are starting to grow as a group. weid: how concerned should be, not just the $1.5 trillion in the stimulus but capital investment. if you will ever get castle -- capital investment up, you think

the administration would do everything necessary. chris: that reflects bigger problems in the global economy back come out of the cheap money. they should be out of the system. as many titans engines more expensive, we will -- not surprising investment has not been good given the cycle. david: what is your be -- alix: what is your view on cash? chris: interesting, you need cash in your portfolio. the yield is attractive. people around the world say to me, this is getting interesting. david: cash is interesting again. alix: not in my bank account, come on. david: chris watling of longview economics, thank you. a brutal, after october, hedge funds are on track for the worst year since 2011. in walldiscuss it next

street beat. this is bloomberg. ♪

daybreak. bloomberg a center for automotive research president and ceo. this is bloomberg. ♪ mercedes-benzof wants more controls over its operations in the was largest daimler has raised the prospect for beefing it stake in a joint venture with a chinese company. daimler when i to increase its

fortinet percent stake to at least 65% and talks are in the early stages. bmw is in talks with people about joining the automated driving group, they have long been an advocate of collaborating with rivals in the race towards self driving cars. their head of development tells us that high research cost and technology encourages partnership. mexico is likely to see multimillion dollar when it sells its presidential airplane. the new president plans to carry out his campaign promise to get rid of the airplane, he thinks it is too often tenacious as a cost mexico $290 million, one aviation consultant says retail may bring $76 million or less. alix: we turn to wall street beat to cover three steve -- three things, hedge funds, harsh 20% of a firm was cut

as losses weigh on the industry and the hedge funds target european telecom, the large -- the idea is to stop running phone networks and hedge funds hit by volatility after citing lackluster returns on low volatility come environment volatility returns as hedge funds heading for the worst year since 2011. david: it is like barbarians at the gate. we will get to that. is jason kelly, our new york bureau chief. it is a big deal. >> hedge fund takeover today on wall street, i love it. it is really about the crisis facing hedge funds. 125 people down. had $11a fund that

billion, now around $7 billion. down dramatically. this is a pretty specific and significant trend with people either cutting back or hanging it up. david: that is the point, how much is a trend because there is more all grid make trading, and a second related story. a 55-year-old analyst for a hedge fund who lost his job and it was hard because the hedge funds are saying we do not need analysts. computers, ourve models, portfolio managers and we are not making as much money. david: customers are saying we will not pay as much for the services. >> this is a story line on the upcoming season of "billions." feels like something this is

people are talking about your. alix: why hire a 55-year-old when you can hire a 24-year-old techie from mikey -- mit? >> surprisingly out of the bloomberg, that almost goes without saying, this is affecting 30-year-olds. 30-year-olds want to go back to school to learn coding. alix: please never fire us. hedge funds getting into european telecoms. telecoms have not been doing well in general as investors big dividende have a nice but u.s. activist investors coming into the market because they want to break them up. >> holsinger being the month -- paul singer being the most notable, going after telecoms, it is radical, break off the types from the consumer facing business.

customerse sense that , i would rather not deal with that annoying, low margin business. they are saying their institutional investors love the infrastructure play because you can invest heavily in it and it throws in cash, it is a nice business for them. we will see if they are successful. this is easier said than that because there are a lot of regulatory obstacles. well. david einhorn as it seems to be a larger trend of breaking up companies, spinning things off. alix: the barbarian label seems extreme. >> we are at the moment. you think about ge. cycleshings do go in where people come together, then they break up. people somehow make money. david: volatility is up and some

think that would help hedge funds that it is not working out that way. ,oining us is fabio savoldelli professor at columbia business school. the piece on the bloomberg, hedge funds are doing badly and that is surprising because volatility is back up but you say not so much. fabio: in general, volatility is too high is the second choice of excuse. the worst choice of excuses volatility is too low. [laughter] fabio: let's look at the chart, you see the performance -- the slowlylowly ride -- vix rising upwards and when it crosses, when the vix crosses the 30's, you start to get negative returns constantly. 25 and 30, and up. , as an article says, we needed more volatility.

that looks like a written option, an old-fashioned hockey stick. you sold volatility come easy to make money until it bites you and you are done. >> one of the interesting questions is across alternatives , private equity tends to do better as far as volatility because it affects violation historically -- valuations historically. fabio: you get the negative reinforcement of flows, you go down and start to get fails. closed, people pulled their money. brexitbal comes and you thought it would fail and i thought -- where are we? nowhere. independent book models are buying and selling stuff to each other. people are not saying, we are going wrong.

brevan howard who has turned it around, alan howard and others are taking a more under control and saying, this is our view, old-school but we will have a view. they are saying keep -- s&p in october, it was down 7%, hedge funds down 1.7%. they are doing their job. they are doing well on a relative basis. they are not supposed to outperform the s&p, this close to protect returns. >> you are a generous investor and i want more of you. [laughter] in particular is supposed to do well in times of volatility. alix: is in a doing well? >> no. interest rates moved a little bit, oil, apparently, that moved a little bit. -- we did not catch

the dollar. would be theo question a love people would be asking macro investors, what are you doing right? they did not catch a whole lot. >> where does this end? are we seeing the slow death of the hedge fund industry as we know it? or is this just a paring back to a much smaller number of managers and going back 10, 20 --rs to a much more focused i like what you say about brevan howard, we have an idea, this is a strategy, this is our bet on the market. fabio: that will be a part of it. one of the easiest factors you have been able to resell is alpha when it is not manager skill a short volatility. if you look at the volatility in all of the various major sectors , volatility in the bond market, it is down. the recent vix,

uptick is completely consistent of what we have seen before. when we look at the move index or jpmorgan fx indices, we are not at any sort of extreme level. we are at the low end of the global ranges. index, the bond index, in the middle of where we have been for quite a while. nothing hysterical has happened to cause people, but they are so short volatility people are getting hurt. some good managers have profited. but they have proven to be the exception and shorting them is the way to pick up dimes. david: is the hedge fund a structure whose time has gone? when you do not get big alpha, a lot of it is beta, is there a reason for a structure for investing? fabio: i think it is strategy whose time is coming. we are counting on alix to give us more money. [laughter] that, and the reality is

when you compete against a straight up bull market, that you cannot compete against. this will give us an opportunity for greater out for going forward. alix: shorts don't win like that. david: thanks to fabio savoldelli of columbia business goal and jason kelly, tune into them every day on bloomberg radio from 2:00 to 5:00 eastern time. herge herbert walker bush, continues to lie in state at the u.s. capitol. and hishis legacy funeral tomorrow. this is bloomberg. ♪

david: this is what i am watching. that is the casket of tort herbert walker bush, the 41st

president -- george herbert walker bush, the 41st president. we have been watching as individuals go past, it has been open all night. trump and thent first lady come in and pay their respects. trump saluting president george herbert walker bush. a short service with the bush family and members of current congress and leadership who served with president bush. this is last evening in the capitol rotunda. alix: what i found stirring is the speeches, but in the rhetoric that we are hearing from individuals that worked with president bush. het how he valued people and gentleman,nferred a

it was a different time and republican party, that could not be starker now. david: one of the people who will give the eulogy is john meacham, he wrote yesterday that george herbert walker bush was the last president of the greatest generation, the man who came of age and in every uglier arena, the embodiment of a postwar era, that seems remote in our times. we will hear from george w. bush, the 43rd president, and the former prime minister of canada tomorrow. alix: dave will be going there for full coverage tomorrow of the service. this is bloomberg. ♪

president trump team tries to explain a trade deal while president xi states silent. cut.plus the cut or not to it is premature to say opec will cut production and uncertain how big any production cut should be . david: welcome to bloomberg daybreak. shot of the capital where president george herbert walker bush lies in state. he has been there since last evening. president trump with the first lady paying their respects last night. nia wentident and mela in and the president saluted. tomorrow we will be having the

service is down in washington. i'll be heading down for that. coming in on bloomberg television and bloomberg radio. special coverage. markets will be closed and special coverage will begin at 10:00, 3:00 in the afternoon in london. alix: we had the relief rally yesterday. a solid rally last week. down or 10th of 1%.10th of -- down for tenths of 1% opec and the fed, exact same communication dilemma at the

same time. david: today oil is on the way back. let's get an update on headlines outside the business world. emma: in france, president emmanuel macron's government is reversing course in the face of violent protest.

bit. that can be an area, if the expansion continues, that could do very well. generally speaking, the high quality structure product as sovereignsof the both in europe as well as emerging markets, it could be a good credit cycle. we have a big correction that could set us up for good performance. >> i got to talk to jeff from barclays last week he said all of that could fall down and that -- do you agree with his assessment? >> i agree with his assessment. they are very concentrated. they are 50-plus billion dollars, and the higher market is just not that big. when it is downgraded and dropped into the high-yield market, it has to be redistributed. that was part of what

you were seeing in ge. when the stock was in freefall, the spreads were widening. fact of the matter is, people were wearing about the markets. the apostle a cause of what will knock the issuance down, what will sit -- the approximate cause of what will knock the issuance down, not pushing us into a slowdown, that could make basically.eet spot >> if you take a look at the high-yield loans, you can see the performance leveraged loans, make peopleit also take on more risk? there is so much demand for clo path that they were able to -- it is going to be an issue where market. how does that not pose a risk if the fed dials back and stays in

a more chill range? optimistican scenario, let's say the expansion goes on for some time, and the credit cycle generally continues to payoff, you will have winners and losers. youmay have a spot where have a bad blowup in a couple of leveraged loans, and that may impact the markets temporarily. different from 10 years ago, and i think people are wearing the scars. who owns a leveraged loans? is it owned primarily in a livered format that will knock format-- in a levered that will log over a house of cards? the underlying fragility is not there. investors will be skittish and will pound prices, but there is an underground resilience. david: on the one hand, baby the fed the -- maybe the fed should run the economy hotter.

from central bankers around the world, we are watching levered loans and are concerned about that. is there anything the fed can do if they are concerned about leveraged loans that will reduce them without throwing conditions off the side and contracting the economy? on a little bit of a historical into present note, the inflation will priority started in new zealand. that is an economy that tends to oversee -- to overheat. there are two aspects to policy and looking at the economy. one is the overall level of growth, overheating, inflation, and so on. the other one is the guidance to the banks. i think in the current environment, they can advise to the banks, but this is not, you

of 10our loan market years ago. a lot of this is going direct. it is not necessarily going through the banks. that could be very difficult to enforce, but that is something that they can advise on. it is going to be difficult. alix: so tie this up with a bow for me. backdrop inmacro 2019, limiting potential return here and where do you get the return? >> right. i think it has been a confounding environment for taper tantrumhe for five years now. underlying, you have a good economy and you have enough risk premium in the bond market and probably in the credit sectors. i think while people are very anxious, it is an environment where people are supposed to be

acting in strategic ways. equity valuations have corrected back to where they were in 2015 and 2016. you had a big pickup in earnings , a deceleration in earnings growth, but they do not necessarily look expensive. when you look at the credit markets, we have had a big correction, a lot of anxiety over where the hotspots are. they are pretty concentrated. i think this is a good set up actually for next year, that you are going to see the fed slowing down. they are not thinking they will hike four times like this year. it is a question of whether they will go two or three. is,lat as the yield curve at 2.20 on the funds rate, you are almost at 3% and yields are higher than that. this is a good setup. will beobert tipp staying with us. -- we stanley protects

have the bottom-line, and this is "boo bloomberg. ♪

david: time for the bottom line. this is where we look at three companies worth watching. we are watching glencore. a succession team is being put in place. the big head of copper has been -- has stepped down. he wants to step down in the next three or five years. when asked what the se successor will like, he says i hope it will look like me. alix: and the buyback will that is a huge part of that as well. i am watching apple here. lots of different things going on. 82% of its revenue from apple. down great from hsbc

yesterday, saying apple has to redefine its core, a pretty comprehensive downgrade that analysts will be on with john pharaoh in about an hour. continued negative rhetoric around apple. david: for our third story, i want to take a look at ford, with morgan stanley protecting the automaker's restructuring could result in 25,000 jobs being cut. michael ward is joining us, and he has a hold rating on ford, with an $11 price target. actuallygoing to have that much money in restructuring cost it's got to come out of people at some point. michael cohen thank you for having me. back when ford announced restructuring they did not provide any of the details. they will provide details over the next six months. away they announced it, it tells me most of the restructuring is

going to be overseas. david: it's estimated and negative. why does that make more sense than to sell at the way gm did? michael: ford has been restructuring in europe for several years. they still have more room to go. they are in a have joint relationships going on. ford, case afford, -- of ford has bigger exposure in the eastern european market the general motors did. you will see some in europe but i think the large incentive will be south america. david: michael, when do we think we will get a plan on ford? we had investor day schedule.

when do you think we will know what the plan is? we heard the plan from general motors. michael: that is generally the -- many of talk to the markets you have to give two your notice to the constituents. because of the government situations that are overseas in those markets, and that is why think most of the restructuring will be overseas, you have to give a long lead time to those employees. is thehow much of it softness right now we are seeing? particularly in north america but more generally. how much is a longer-term need to restructure in light of autonomous vehicles and electric? michael: i don't pick it has anything to do with that. i think you are looking at an industry -- the auto industry has been well-managed in downturns.

they take appropriate actions. where they have been poorly managed has been when the companies were strong financially like they are today. they made acquisitions they , that not have made almost put the company into bankruptcy. companies are focusing longer-term where they think they need to be competitively with technologies and whether it's autonomous or electrified vehicles that's where you need to make investments over the next 10 to 20 years. it is smarter management of the business in a good financial period of time which to me is a huge change from industry practice since i followed over the last 35 years. alix: president trump and tariffsl tariffs, auto are a priority.

here's what he had to say. >> there is a need to reduce auto tariffs. a lot of work to be done over the next 90 days. one of the specific issues we talked about was a significant .ncrease big opportunity. alix: talking about the opportunity between residentxi and president trump. our best and worst set up for a tariff rollback and potential more terror threats in europe. michael: in a perfect world you have zero tariffs. when you look at the industries on a global basis general motors is essentially gm and ford positioned with self-funded joint ventures. gm is considered a chinese company. the products sold in china are built in china are they are unaffected by these tariffs. in europe i think it is a 10% tariff for most european markets . you have other taxes you have to

pay which makes vehicles in expensive -- makes vehicles expensive. i would like to see those tariffs come down. europeans already import vehicles to the united states market with minimal duties. if longer-term i don't think you will see general motors take a deep dive into europe again. i don't think you will see a flood of vehicles from ford go over there. it will stabilize the pricing environment which will be a big plus. if you predict the pricing you have a better handle on how profitability will flow. alix: great to get your perspective. michael ward, williams research partners analyst. you have a relief rally yesterday, rally last week as well and a little of that taken off. -- dow jones down a paz in thes

rally as we get some clarity on trade? european stocks also lower. besties downgrading from to discuss auto tariffs and trade. the weaker dollar story. the cable rate outperforming by 6/10 of 1%. there was an individual from the top corridor in europe who says you guys can reverse brexit if you want to. the idea is you can walk it back and i love the fact that investors are buying. it is crazy. david: it makes tony blair a happy man. alix: 100%. the euro gaining steam as well. goldman sachs says overall slowing economic growth means another poor year for risk adjustment. let's see what happens on thursday. david: let's find out what's going on outside the business world. federal reserve chairman

jerome powell says the strong economy has not reached all americans. in remarks powell said statistics tend to mask andarities by income rates geography and warned the u.s. economy faces long-term challenges including productivity and an aging population. president trump paid respects to former president george h.w. bush at the capital. everyday americans look at the chance to do the same. he will lie in state for public visitation through tomorrow. -- the funeral will be held and he will be taken back to texas for burial. mark carney is defending publication of the bank of england's worst case brexit scenarios. carney says they were useful. >> what you should take away from the worst case exit scenarios is that the u.k. banking system, the overall

resilience to withstand that and be part of the solution, not the problem. global news 24 hours a day on air and on tic toc at twitter powered by more than 2700 journalists and analysts in more han 120 countries. i'm emma chandra. david: still with us is robert tipp. subject of brexit and mark carney. an opinion columnist came out and said any deal boris johnson antoni lair things is bad must be pretty bad. the u.k. will end up aggregating it unilaterally. it sounds like mervyn king. what do you make of what's going on? there's a saving grace on the investor side. in terms of the general situation, the probability

spectrum is really wide of what can happen. the outcomes are generally not positive. the idea the european court of justice maybe open the door that they could walk away from the claim of leaving and stay it could be a risk reducer. go back to something that looks more stable. on the market side, sterling is 15% lower versus the euro versus before where it was. the fact for investors, most of the impact of brexit went -- ugh the current there will be good nations of better or worse depending on what kind of deal goes through and what kind of a government is alix:. going forward

apparently the euro area reached a deal area protests happening that might be squashed in france , italy trying to reduce its budget deficit. what is the trade? robert: i don't know that this is how most people see it. i think in europe they actually have an anchor. designed the system out of nothing 20 years ago, kicked it off, made some mistakes learning as they are going. but the euro area will have a budget deficit of well under 1%. reeling back on the fiscal side. the countries that want to skirt on the edges of the rules are being brought to designed the sf task. the ones abiding by the rules that have had their programs and come back are having really good growth, spain, portugal, cyprus, the ones that have pushed, it has hurt their economies,

dampened business confidence. on the far side of that, what you see in the case of cyprus, greece and italy, they always pullback because they are better off in the system and this government has pulled way back from their initial position. they are caving and it's going -- it is the best approach. they need to make moves. alix: they are buying btb's. robert: i think they are of good value here. is european peripheral debt something the vast majority of these countries have it on ratings upgrades. italy is a nailbiter. they need to not get downgraded to junk. i have outperformed high-yield in the last two months by 50 basis points on spread. the next big one will be france. they have a gigantic government

as a percentage of their economy . they have been released in terms of reducing their budget deficit and the pressure is there. he's finding out how difficult it is. that will be another one on the front line. not as serious situation is italy now, but in the long run, they have a -- they have the most work to do. tip, thank you verruckt -- robert tipp, the thank you very much. brent a little off the highs of the session after saudi energy minister told bloomberg it is too early to say anything for certain. >> it is premature to say what will happen. advocate foris an stable global oil markets.

we need to get together and listen to our colleagues, here abouttheir views -- hear their views and projections of their own country's production. alix: joining us in poland, annmarie hordern. us through what we can expect on thursday. i'm hearing about a cut that we will not say the word cut because we don't want to upset president trump. annmarie: that's right. really putting some cold water on the possibility of big cuts to the market. he seems to be on a different page from the other ministers especially russia. 48 hours from the meeting on thursday and we are still in tight negotiations. does not leave a lot of time and this could come out to possibly a last-minute phone call between the crown prince and president clinton.

that is -- president putin. look at the market reaction. we are 48 hours away to start talking about what the cuts are. .e have not heard him reiterate we are seeing that market reaction. alix: what is the biggest hold out? .he response of iran, russia putin has a lot of running room. annmarie: president putin says they are happy with prices. lower.udget even what i think is overshadowing this market. the saudi's need to be careful with president trump and can't really defy him at the moment given the positive backing he's given to the kingdom following

the killing of jamal khashoggi. a tense and complicated meeting for the saudi's and the saudi's did say they will not cut alone. they bear the burden of these cuts. russian oil companies don't want to cut. alix: great reporting. annmarie hordern reporting from the side of the road on poland. i'm going to make that hit happen. automakers under some pressure the white house trying to whittle down a $30 billion auto trade deficit with germany. we will discuss changes in the auto industry. carla bailo. this is bloomberg. ♪

emma: coming up later today on balance of power, george mitchell, former senate majority leader. this is bloomberg. wells fargo expects to spend $9 billion on technology. about 800 million of that will go to cybersecurity. ceo tim sloan told goldman sachs financial conference the bank is on track to achieve expense targets and net interest income will be up. tri istte maker all

tobacco company into the marijuana industry. the autopilot system of a tesla to stop the car efforts driver fell asleep at the wheel. the driver was not responding so police pulled him to a slowing stop. the driver assist programmed in the same. the driver was arrested for driving under the influence. david: the automobile industry is facing softening demand and trade uncertainties with larry kudlow saying moments ago that a deal to auto tariffs is "coming" but is not done yet. the one certainty is it needs to be investing in a fundamental change to autonomous electric vehicles over the next 10 years. something the new head of vw america told me will require substantial capital from the companies and partnering with

others. ,> some of these investments because of the overwhelming scale and cost do require have -- do require having partnerships. you can still protect your own brand interest but you can start to get some economy scale. that is what the conversations are about. let's see where they lead. is coming tobailo us on the telephone. great to have you here. carla: thank you very much. david: pick up on what scott keogh was talking about. we see gm announce substantial plans. where are the big carmakers in terms of gathering the capital they need to invest in the future? them are in a better situation than others. you have some leaders like gm time to partner

with those companies that bring in the talent that they need to continue to move forward and mobility services. if you look at automakers today they are good at designing, developing, selling cars to dealers. this is a new era in the customer is driving the change. to be able to partner with others to make the right purchases they need to save money out of the day-to-day operations. david: comparing to ford and general motors, general motors cruz than they partnered with honda in that vendor. fto the need to partner with someone? is another auto company orbotech company -- is it another auto company or a tech company?

carla: i think partnerships are required. when you look at the amount of money required to have a portfolio of electrified powertrains needed to provide the mobility services that the customer is demanding, the only way he will change customer behavior is to provide enough mobility solutions that fit seamlessly into the everyday lives. the talent in automakers today is not necessarily well-built in terms of artificial intelligence, machine learning, customer experience. these are things that the i.t. companies understand and know well. partnering with i.t. companies or with other automotive's they can put more cash on the table, looking at some of the things, sharing some of the things that become commodities in the future like powertrains and axles makes a lot of sense.

david: handicap the race between silicon valley and detroit on the other hand. goodness knows google has a lot of capital. they don't have to lay anybody of. does that give them an waymo is onearla: of the leaders. one thing google does not know how to do is told cars. they can purchase whatever they want so that may happen, but again, why trying to build something from the ground up? it makes a lot of sense to partner with those who doing it for years. we've seen what happened with tesla and some of the growing pains of trying to start manufacturing from the beginning. it makes a lot of sense to work with those who know how to do that. david: thank you so much. , center fora bailo automotive research president and ceo. one of the most interesting

estimates ties conversion to the explosion on e-commerce and the need to deliver those packages to us. we welcome gary silberg, take tmg america's head of automotive's. giving specific numbers on what we might expect. fascinating report. give us the overview of where you think we are going in terms of autonomous vehicles and delivery. gary: we think of thomas delivered is the next market -- we think autonomous delivery is the next market. some of the sophisticated radar, all the sensory supercomputers within the vehicle, all those technologies are not only apropos, but applicable to the specific delivery vehicles. you today are probably pushing the button to get amazon prime. you just wait until it is practically free. this market will be massive.

delivery systems to people, can only imagine how big is going to be. david: according to report we are seeing some affect -- seeing some affects. the use of vehicles the vote of the shopping has been going down -- devoted to shopping has been going down. about -- my think household, we are a bunch of foodies. if you shop you would like to go every day you could and i would love to go every day and have delivered. now, you can push the button and have same-day delivery. the same with clothing and all of that. people, instead of going to the stores, are having thinks come to them. i think once you have this availability in you can get in

every hour it will explode and it is happening like you said. david: to 2016 there's a substantial diminishing in the use of vehicles for individual shopping. 2040 androjecting to you've got a couple different possibilities, 30%, using 50% is more likely. a good have a substantial effect on the number shopping trips. gary: the number of shopping trips will plummet. retail side will have to think of experiences. the amount of shopping is going to soar because it is free, almost free to get it delivered to you. the amount and types of shopping available. if you like to shop for clothes, i hate shopping for clothes, the bloomingdale's lady is to love me. i would show up twice a year and spend a fortune. now i just aggregate it and probably shop 15 or 20 times a

year and i push the button. fornumber of miles traveled these delivery vehicles, drones, is going to soar but gary going to the store, not very often, i don't need to anymore. that is the dichotomy we talk about why we see this massive market going forward for the delivery of goods. the decline of the actual shopping mission. .avid: that makes sense an important take on autonomous vehicles i had not focused on. in your report you have specifics and charts and graphs. thanks for being with us. automotive.'s a story on goldman sachs. it is not very pretty. it turns out there's a small bank in switzerland that had been in some trouble before goldman got involved with them. they already had some problems

with authorities in asia and the question is what did goldman it, and when did they know to borrow from watergate. .lix: falcon being a key player apparently the issue is weeks after falcon was implicated in money laundering issues they entered into a trained and that was at the urging of a businessman, large wind horse -- lars wind horse. proposed a deal naming securities prices buyers and sellers according to an emailed bloomberg has seen. talkingwound up and a scapegoat after that. a lot of drama implicated. involved in some traits with goldman. that firm dealing with some potential money laundering issues. singapore coming down on falcon. aside from goldman i'm watching where we go with the s&p.

the chart shows the s&p. joining us to break down a -- where do you go from here, jc? >> we like to look at what the average stock is doing in the s&p. when you do a bottom-up analysis it looks much healthier than the overall market. one way we look at this is where the stocks are versus their 50 day moving average. if you go back to the prior lows of the s&p come at the end of october we had only 10% of the s&p 500 constituents above their 50 day moving average. historically anything above 20% is considered oversold. over the next month going into november the s&p made a lower low. the amount of stocks under their 50 day moving average increased. so while the market was weakening the average stock

underneath the market was improving in trend. .e see a positive divergence average stock looks better but the market is not showing that being reflected. as friday, the average -- 55% of the stocks were above their moving day average for the s&p was still below it. that told us the underlying readings -- we saw that signal as a leading indicator first. alix: in terms of rotation what sector is that best for on a technical basis? jc: we are starting to see a rotation into the most beaten-down areas of the market. health care has been a great place to hide. great offensive and defensive characteristics. you see some of the most down areas even within consumer discretionary.

home builders act pretty well. some of the same names slowly start to rebound. ,emiconductors left for dead slowly starting to see some money inflows. --t we are looking for is the majority of the selling had taken place. we are looking for those as potential by opportunities. alix: we really appreciate that. jc o'hara. david will be heading down to washington for the general of george h.w. bush. david: covering it at 10:00 eastern. skelley, coming up. this is bloomberg.

jonathan: the countdown to the open starts right now.

fading.ty markets are investors are rated in austin is some -- optimism. the auto deal remains silent. the curve is resurfacing. for the first time in a decade. we are 30 minutes away from the opening bell. futures are down by six on the s&p 500. it is to 96 this morning. for many investors, feel curve -- the yield curve obsession comes again. >> they have not inverted. >> .2 and version means recession. >> the minimum lead time is 10 months. >> that is a signal that the markets are thinking the fed has gone too far. >> we could still