cfo arrestedwei's in vancouver. china reacts seriously and fears it could impact the trade war. opec is on the verge of a production cut, and we will get the latest from vienna. brexit on the horizon. why theresa may's crucial vote nears. what it is for the british economy. >> i think the reality is instability will push this economy into much lower growth. that is just the reality. ♪

francine: welcome to "bloomberg surveillance." i am francine lacqua in london. these are your markets. we did see a selloff as a result of the funeral for president bush, sr. markets were closed. meanwhile in europe, stoxx 600 down. a little pressure on the euro-dollar and the 10-year yield at 2.90. moves incouple of big fixed-income. we will bring you that very shortly. we're looking at oil with opec underway. up, we will speak with former you can prime minister tony blair at 11:00 a.m. u.k. time. first, let's get to promote uma. foreign minister says

it can reach a trade deal in the next 90 days. a spokesman says the ultimate joint goal is to remove all tariffs. central bank boss telling bloomberg view is optimistic about the trade moves by president trump and xi at the g20. keen to there escalating tensions, although he warns wider reforms mean well. he expects the u.s. to find some kind of record in the next few weeks. i am optimistic. desire tooth sides a deescalate the trade operations. >> meanwhile, u.k. prime minister theresa may is concessionseighing

in her brexit deal, after losing three house before -- house of commons votes tuesday night, she is eliciting eurosceptics for their votes and is considering backup arrangements. the ceo of rbs this morning a hard brexit could push u.k. into recession. in an exclusive interview, he perceives much slower growth as politicians continue to wrangle over theresa may's deal and says it is already causing a dip in investments. >> it has been a back order deal, but at the moment, i do not see another deal. from a business perspective, we need certainty. it is something you negotiate over a long period of time. youwill not get everything want. you will have to give up something to get something out some as for me, how do we get

some certainty in the marketplace, because what is starting to happen as investment is not being made. >> the market is unlikely to rise in the next two years. in another exclusive interview for bloomberg, the year ahead head of a firm that sees over $3 trillion in savings is japan will continue to see negatives. still hoping to reach deflation's, and the bank of japan is still approaching a kind of qe monetary policy. not a lot will rise, if any at all, and we will keep this policy, so for the next one year, two years, i do not think interest in japan is going to rise at all. >> global news 24 hours a day on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. francine?

francine: thank you so much. has been arrested in violation of potential sanctions on iraq. business days after a treacherous. -- trade troops. joining us -- trade truce. joining us on the phone is scarily. what do we know -- is karen lee. what do we know has happened? hern: china has asked for extradition. trump and xi met in buenos aires. they came to a trade truce that many felt was in the right direction. now this happens, and the timing has raised a lot of eyebrows today. , what is theen background on this investigation and into iranian sanctions violations? karen: this is not the first on

the uss flight concerns over has violatedi sanctions. it has asked in the house whether it is usa technologies to north korea, cuba, syria, and iran, and this is concerns underscored which is chinese theft over intellectual property and technology, and this really underscores how much they have to bridge, even with ancient a truce on trade. francine: what impact will this have on the u.s. china trade? how lovely can this get -- ugly kenneth get? -- can this get? karen: we will see. this is something that even four days ago looked promising. it wanted tod continue with the consensus that

trump and xi reached over the weekend. they want this to be a separate issue from trade negotiations. francine: karen, thank you so much, bloomberg's china editor in hong kong. the hour,s for th luca, thank you for coming in. take two stepse forward, one step backward in the u.s.-china trade war. do you think it will get better? guest: i do not think it will have a huge impact, to be honest, in negotiations. this is really annoys, and i feel that investors are overreacting. now they are overreacting on the other side. situation has not changed significantly. i think the impact will not be long-lasting. francine: are we waiting for the impacts of the first tariffs

that were put in over the summer, and are we waiting for the u.s. to move next? uca: they want to keep the pressure on china pretty high. i think we will not hear too much. ofo not think this specific it change the dynamics of the negotiation significantly. francine: luca, let me bring ,nto my chart, a simple chart it sounds like more than it is, but this is one of the technical things that a lot of people look at in the markets. we saw a huge selloff before the u.s. market was closed. how do you explain that? the treasury moves because of monetary policy, or was it more linked to the g20? i think it was a combination of factors. we tend to blame the fed for

everything. i think there is ongoing concern, which i think is justified about the weakness of global, a combination of factors. any small news can make a big difference these days. francine: luca, if you are a bloomberg customer, just go to mliv, how will it be if we get an ugly opening? is volatilityknow has been going up in the last few months. i do not read too much into the daily moves. , it is getting weaker. i understand investors are very nervous, but i do not think, again, this one day will tell you everything about the direction in the next few months? francine: why, luca?

fundamentals? are they pointing to a slowdown in the u.s., or is it just softness? luca: not only the u.s. it is high in terms of very different growth. if you start to see some weakness, it will be significant. i think it is a global phenomenon. german gdp is negative, italy, sweden, japan -- china is weakening. something has changed. francine: luca, thank you so much, luca paolini from pictet asset management stays with us. opec agreed to cut output but not how much. we are keeping a close eye on what is happening. keep in mind the context. brent touches high for the year in october, but since then, prices have been in a freefall, even dipping below $60.

we will have plenty more on that next. this is bloomberg. ♪ this is bloomberg. ♪

francine: economics, finance, politics, this is "bloomberg surveillance. " i am francine lacqua in london. wti crude is extending losses beyond six sailors a power cut my hours -- $60 a barrel, hours before itws meeting. falls are already at a level. that maybein, i hope

these measures will not be necessary, because, as i already mentioned, the price is where it should be, at my opinion. >> so basically, we are not working with volumes. meanwhile, donald trump is against curving supplies. world does not want to see higher oil prices!" us, luca paolini from pictet asset management. first of all, how can we be so sure it is an oil question, going down, because there is not enough demand from emerging markets. guest: i do not think we can be sure. growth in 2019, you can easily say this is at least as much about future demand and a

aoncern about -- than eigh concern about current changes. we need a wealth for the output of demand to clear. francine: this is a possible slowdown, right? -- here is a lack of demand holger: for oil, what we should not forget is a few months ago, the position was very extended. we started with supply from saudi arabia, stronger dollar, all factors leading to the 25% on the outside. francine: what does that mean for your forecast? is there a sweet spot? inflation,get core it does not make all that difference?

holger: i do like the price of oil. it is quite bearable for consumers, but not too bad for investors to cut back their investment. it makes sense for the central banks. another piece of evidence that the outlook remains subdued enough, central banks are not tighten policy, not enough that central banks could pose a risk to global growth next year. francine: it is extremely difficult to predict, if it goes up or down, how does it impact your portfolio? is it wage growth or your positioning? olger: i like to see it positive, especially in a place where growth has been a little bit weaker. oil pricelowballer will be good. if it is much, much lower, it does not actually tell you something, but for now, i see

this more as a positive than as a negative. francine: a positive except for the countries, emerging markets -- luca: and will producers. francine: and oil producers. not lowthe price is enough to bring instability into emerging markets. countries that have been in the headlines in recent months, this is good. the lower oil price actually reduces, to some extent, the economic risks of 2019. for example, the high price of oil that we had a month or two ago with one reason why eurozone consumer spending has disappointed over the autumn. now with a lower price of oil, there is a little bit of a buffer. even if there is some slowdown in the u.s., as we will see, even if there are trade wars and like, at least consumers

have been real spending power now than they had two, three months ago. francine: thank you for joining us, luca paolini from pictet asset management, holger sch mieding, both stay with us. choosing a new leader. we discuss that next. this is bloomberg. ♪

francine: this is "bloomberg surveillance." i am francine lacqua in london. we are talking about germany.

we are also talking about france. addressingacron is violence that has taken place in the last you must. having -- last few months. having shown perceived weakness, macro tough talk may carryn some weight. ending angela merkel's 18-year stint at the top of the party. a social conservative is in the meeting. still with us, holger schmieding berg and luca paolini from pictet asset management. are we understanding new leadership -- can it really change the direction of europe? holger: i think we are overestimating how much outcome the impact of the leadership can have.

germany works by consensus. germany has two houses of parliament, the separate majorities, which means whoever is in charge will have to work with the opposition to get anything serious through, and that applies to european changes. potentiallyder must a new chancellor may be able to do a few things differently. he may be able to. if you conservatives with him, but do not expect any revolutionary changes. francine: hold on, you are expecting angela merkel to stay on? holger: angela merkel will try to stay on. if the other wins, the risk will be -- nobody wants to be seen as murdering the queen, risk will be the democratic coalition partner may walk out and thus bring down merkel by bringing down the coalition. francine: in the u.k., i am not

manyif people have so scruples is theresa may is left, right, and center. your was the darling of the world in 2017. what is 2019 going to be like? luca: it is amazing how the perception of europe has changed. two years ago, everything was strong, everything was great. i think now, investors are overreacting the other direction. is obviously -- the situation in italy, we know, i do not think it will get worse, i think it will get better. the elections in germany are quite important. investors are looking for change in europe. be seen, potentially, by investors, as a change. ofncine: what do you make ecb policy right now?

moment, there is very little that can derail the asset purchases. beyond that, i think the ecb will not tell us very much. they will remind us that of course they can keep interest rates low for longer than the autumn of next year. they will remind us that of course long term liquidity investors are possible, but i do not think they will commit to something of that sort. they will keep their options open. francine: what happens to the euro from now want? is it a dollar story, if you look at the currency, or does the ecb control euro? luca: no, i do not think so. the euro is significantly undervalued. it is reacting to a couple of months, the reaction to the budget row in italy. the reaction of the euro will be awful.

in our estimate, it is undervalued, which is actually the most of the european economy. francine: thank you both for joining us. luca paolini from the asset management and holger schmieding from berenburg. both stay with us. we will talk about the brexit deal. ourll also bring you exclusive interview with the rbs executive. he certainly did not mince words when it comes to brexit. coming to power and what it will mean for the dismantling of rbs. more on that next. this is bloomberg. ♪ . this is bloomberg. ♪

francine: welcome to our weekly brexit show. happening.s what is

theresa may now looking over a range of possible concessions to win over conservative rebels and save her sinking brexit deal. this comes after losing three house of commons votes on tuesday. she continues holding talks with skeptics. she is also considering giving lawmakers a future veto on the u.k. entering the irish border backstop arrangement. u.k. house silver shares are now showing extreme value. there could be an upside at least 20% if a smooth brexit deal materializes. the ceo of rbs is warning a hard brexit could push the u.k. into recession. ss an exclusive interview, ro is saying he perceives much and says it is

already causing a dip in investment. >> at the moment, i don't see him another deal -- another deal. you're not going to get everything you want. around, how do we get around the marketplace. uma: the european union's highest court is saying next week whether the u.k. should be allowed to reverse brexit. a ruling will declare whether article 50 can be unilaterally revoked and could offer hope to those who want the country to stay in the block. the ruling will be made at 9:00 on december 10, the day before the u.k. parliament's big vote on the brexit deal. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries.

this is bloomberg. the u.k. prime minister has five days to block the impossible with her party's chief whip attempting to talk skeptical members of parliament into voting for her brexit deal. cabinet ministers are telling her to pull the vote before she loses it. brexit supporting lawmakers have also been told that rejecting the deal risks ushering in a softer brexit, a second referendum or no brexit at all. joining us now is a conservative member of parliament. how will you vote next week? i can't voting for the deal as it stands because the most fundamental problem at the moment, thet the

u.k. has the right to leave the eu. once we sign this, we are in arrangements with our -- which are indefinite and we have no right to leave. that would seem to be giving up control. francine: what a hard brexit be better than this deal? isrnard: that i problematic. didn't suggest it is crashing out, but there will be some industries that will have very big challenges. the government will have to put together packages of support to help his industries to repair, particularly the supply chain industries. it has to be an option.

the government should have been preparing much more for this option. the industry seems to have no confidence that the government is prepared. i think it is the lesser of two evils. the problem is, what is the balance of risks? remain simply is not an option. the idea that you could put this genie back in the bottle is just crazy and will create chaos in politics. that is reflecting on a lot of the debate in parliament. francine: how do you see the timeline? bernard: the law is that we are leaving on the 29th of march. within that timeframe, we have got to decide what to do.

i think the prime minister will lose the vote on tuesday, possibly very heavily, not certainly because it depends on which amendments are brought forward. will havegovernment to return to the negotiating table and sort out what this issue of the irish backstop, which is an unconscionable restriction. francine: if the eu, is intense negotiations does she put it to ? second vote as is there would be very unlikely to be a general election. it is more likely that the leadership of the conservative party and prime minister will change. that becomes a more probable option. very messy, very untidy. between them, there have been

too many politicians in parliament. to eu itself has determined make brexit extremely difficult. we are now and quite a big mess. the idea of reversing this decision would be unconscionable denial of democracy. francine: this means that for money managers, do you have 12 options that brexit could take shape? we have different scenarios, but we have to take a position. what we know is the pound is very cheap. the u.k. market is very attractive, but we just all feel that to make a decision to buy u.k. assets right now is probably correct. it is very difficult to quantify this risk. we have to step back. for next year, i think there will be a lot of upside especially for u.k. equities. you almost want any deal because

if there is no deal, the market would probably correct so much it would be attractive anyway. holger: as long as the hard brexit is avoided. you really have to avoid the no deal, hard brexit which could be a significant hitch to the u.k. economy. depending on whether we get any kind of arrangement to smooth the shock, we could either get a recession or something which is not quite a recession, but it would be a significant blow. on top of that, for the long-term growth outlook for the u.k. crashing out of its biggest market is a long-term significant good.

bernard: the most destructive thing to happen would be tariffs . that would require very big adjustments in some sectors. the banking industry doesn't pay tariffs. the city of london has switched from panic about brexit to thinking, it is going to be quite good not being subject to eu regulations. banks who do retail operations and some wholesale operations are moving up. there is no sign of a mass exodus. the numbers of jobs in the city has continued to grow and will continue to grow because the prospect of a global financial services deal between london and new york is a very big price. the government doesn't

seem to have financial services as a priority. bernard: the financial services piece of brexit has become rather quiet. the big problem is about goods trading. analyststhe economic are far more interested in goods trading. it is mainly a wholesale market. francine: financial services are a big chunk of gdp. bernard: the biggest economic impact is probably migration. does it encourage or discourage the polish plunder? the second thing is goods trade. services, and is less that banks without a lot of people now. itss more, if u.k. loses

special status as a place to serve europe, why should banks be in london rather than new york? it is ultimately the competition between london and new york. once london is out of the special arrangement with the eu, that will be interesting and will be an important thing for the u.k. to watch. if new york he regulates, london orld either have to follow it wouldn't and that means losing out to yield. you see ayou said leadership challenge and the prime minister being replaced. could you think the best candidate would be? bernard: i'm not going to speculate that. the point to make about immigration is actually a separate policy from brexit. a lot of us in favor of brexit do not want to choke off labor markets to the u.k. economy.

it is certainly something we don't need to do in the short term. there are german thinkers and regulators -- bankers and regulators saying we don't want to cut ourselves off from the wholesale market or commercial lending market. we want to be good friends and neighbors after we have left the eu. we are europeans, we just don't want to be in the eu. holger: less privileged than before. bernard: london is still the financial center. francine: getting fired up on brexit. all stay with us. looking at stocks, at the session low. looking at opec, a little bit of

movement at the vienna meeting. this is all are seeing for european stocks, at a session low. next, an exclusive interview with the chief executive of rbs. little bit later today, we will also talk to the former u.k. prime minister. this is bloomberg. ♪

francine: this is our weekly brexit show. let's look at the markets because we are seeing a little bit of decline when it comes to european equity markets. i'm also looking at u.s. equity futures and they are declining. rough,ened a little

setting the tone for this trading today. a lot of focus will be on the mood set by the trade concerns. we were going quite heavily on huawei. between the u.s. and china will get worse before they get better. you were arguing that we need a leadership change. that,d: i'm not arguing i'm just saying that may well be the consequence of the next few days. there comes a point when any prime minister, if they lose a vote in the house of commons on the most central policy of the administration -- it is already evident the prime minister's authority and her party is deeply impaired and her cabinet

-- she is in an incredibly beleaguered position. everyone admires her tenacity, but there comes a point when a prime minister cannot carry on. francine: there is a little bit of breaking news out of opec. to the saudi oil minister, and he is saying that as of now, there is no agreement. it is interesting to look at the price of oil. it did rise a touch on the fact that basically saudi arabia and russia were in agreement that they need to cut production, but we didn't know by how much. they're looking to balance the oil markets, but as of now, there is no agreement. you can see on most of the instant reaction of that 52.02. the price of oil is down.

we are keeping a close eye on vienna. our reporters basically go into a large room and speak to all of , shortly.nisters you were saying that there comes a point when the leader, theresa may, would need to step down if this vote doesn't go through. how was the eu react? idea.d: i have no it would probably have a quiet little glut about it -- gloat. i think the eu should be concerned that the u.k. could leave without a withdrawal agreement because that is the law. that has been the policy of the government and it is likely, if theresa may was replaced, she would be replaced by a leader more committed to brexit, not less.

they should be concerned that they have overplayed their hand. particularly overplaying on the backstop. whichare proposals around .ven michel barnier entertains in northern ireland, there are no customs checks at the moment, but the back-checks are not done at the border. the same could be done for customs checks. francine: if you say we should possibly have a prime minister more committed to brexit, why not go to fresh elections? i don't think the conservatives and the dup want an election. holger: first of all, i don't think any new leader of the u.k. government would get a very

different response from the eu. the eu has the much stronger hand because the u.k. is much more dependent on economic exchanges with the eu than vice versa. predictably, the eu has largely prevailed in the talks. the eu has offered the u.k. a choice of options. theresa may has chosen one option. the u.k. could still say, we take another option, the norway model instead of this, but the eu is not likely to change his position or options very much. looking first of all, at it from our perspective, our eu imports are very much more substantial than exports. the proportion of jobs, dependent on trade with the u.k. is higher than the proportion of jobs dependent on trade in that country.

we make a very substantial net contribution to the eu budget. were we to leave in the middle of this budget cycle and withdrawal our funding from the present economic or financial perspective, the eu would find that difficult and problematic. holger: this is exactly what the u.k. -- bernard: we need to compromise on something. holger: this is exactly what the u.k. has said for the past two years. the eu has not softened its position on any of that. the eu simply sees these things differently. the u.k. has much more to lose and gain from doing it right then what is at stake for the eu. francine: have a disagreement here. we need to do a whole one h our show when the markets are not moving as much.

the saudi oil minister talking at the opec meeting in vienna. he was addressing a most directly the president trump tweeted that said, they don't need any permission from any foreign government to cut. on the back of that, oil is extending some of their losses. -- said russia is willing to cut, but is considering options. we will get more on opec in the next couple of seconds as ministers are now waiting. we are getting brief minute by minute. we are expecting our reporters to go in and speak to the ministers. this is what markets are doing in europe. at a session low. the ftse, 2% lower. this is bloomberg. ♪

francine: economics, finance, politics. this is "bloomberg surveillance." this is what your markets are doing. we are seeing oil dropping on the back of some comments.

also concern about the tray were being back on. we saw the selloff before .arkets were closed yesterday clearly, the saudi oil minister telling us there is no deal at the moment. the price of oil is actually falling 3%. we're back with holger. is this a defiance because of the trump tweet? holger: i can't really speculate on what the motives of this are. they will probably be further negotiations. there may be different headlines, but i would say for the world economy, a fall in oil would not be bad, but ideally, oil prices staying close to current levels are yesterday's levels would be good enough. francine: what kind of level do you want?

is it difficult to say? level, the current possibly slightly higher than where we were a couple of days ago are good levels in the sense that they are bearable for consumers and producers. they would not require significant economic adjustment on either side. francine: that is something we will continue watching very closely. thank you very much. we continue in the next hour. tom keene joins me out of new york. we will be speaking to tony blair at 11:00 a.m. u.k. time. in the meantime, a final check on your markets. they are down, at a two-year low. this is bloomberg. ♪

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arrested in vancouver and there are fears it may intensify the trade war. brexit recession on the horizon as theresa may's crucial vote nears. the rbs chief executive shares his fears for the british economy. good morning in europe and new york. good afternoon if you are watching from asia. this is "bloomberg surveillance." oil.opecoking at ministers ready to talk shortly to our reporters on the ground. a lot of talk about what happens next monday. i'm looking at the markets, frankly, there are following on the back of what we saw in the states on monday. tom: it is the way they are following. with massive correlation this morning. it is a very different market reaction now than what we have seen over x number of days. oil is down.

emphasize the correlation we are seeing, very different than the last few days. francine: very different and also difficult to pinpoint exactly why the market is anxious. i hear from all sides, either on the trading floor or some other researchers saying this has partly to do with trade, also partly to do with monetary policy. there is nothing you can say, this is why markets are freaking out right now. i'm looking forward to speaking to the u.k. former prime minister. that interview is at 6:00 a.m. in new york. tom: let me go to the data right now. that is s&p futures down 46 with a real deterioration in the last 20 minutes. the dow down for 53. -- 453.

what is important here is the spread doesn't move. there is oil. level, the vix out 24 now out to 25.13. to 10 year yield coming in 89. lower yields, higher note prices. all the correlations locked up. this is a theme of mine. the shocks to troubled companies. deutsche bank down 4%. bank, we havesche been talking quite a lot. we're looking at some of the other european banks and they are also down. there is a little bit of a shock wave through stock markets, setting the tone for thursday trading. let's get straight to vienna. toit is the principle for us

exclude from any cut during the imposed. drop inpect demand to the spare capacity we brought on screen and a second half of this year has proven to be not required. demand,ck to the supply we believe there is substantial volumes out there as a result of releasing the capacity that need to be withdrawn. we hope that we come to an andement with oil producers will continue with unequal cut across the board. so far, with my consultations, we have not reached that.

president trump is the president of the largest consuming country of oil. 21 million, that is 20% of global markets. the consumer in the u.s., just like the consumer in india, saudi arabia, wants affordable energy. he has every right to wish for affordability of energy for the citizens of the united states. to use hiswelcome favorite communication tool. we hear him and we take his views seriously. of the take the views prime minister. we just met with him and buenos aires. privately, he made those points

that he does care for indian consumers. i have seen him three times in india at various energy events. importanter is an part of our deliberation, even when they are not physically with us in the room. the fact that president trump tweets about it and reminds us, we take it as one factor. at the end of the day, our most important guiding principle is to bring supply demand into balance. we don't think the u.s. will benefit from an oversupplied market for an extended. of time -- extended period of time. >> prices are falling. >> is 1.3 million barrels in

line with what the market needs today? >> i think 1.3 has a number of assumptions in it. one of them is fixing the 25 countries. we know there is a consensus view that many of our member countries are actually declining. part of the 1.3 will be provided to the market through involuntary declines. the voluntary cuts are somewhat less. this is one of the issues we have to discuss today. how much has to be voluntarily across thejust board, when we know that growth declines are happening as we speak and will continue to happen in 2019.

have seen it in 2017 at 2018 where decliners will continue to contribute to the overall factorsby other reducing their production. >> are you comfortable with the number for credibility as the market goes down coming into this meeting? >> i think to be realistic, 1.3 is expensive if you take into consideration what we saw yesterday from canada or the day before. i think if you take into consideration the involuntary reductions by some of our colleagues and countries, the number we need is going to be less then 1.3. is it one million?

slightly less or more? we have all day today of tomorrow to determine those numbers. is the u.s. exercising undue influence on opec? butaid he has his opinion, is he swaying you to go lower with cuts rather than higher? >> i think at the end of the day, we will make a decision based on the best interest of our own countries as well as our belief of the best interest of our consumers. that includes the united states. we will take his input into consideration like other major like, andand the developing countries who need affordable energy to continue to grow, especially during 2019 were there are many headwinds for the global economy.

-- gave he give do you feelg --, like you need collective support from opec? >> we appreciate the support the crown prince is coming from many quarters around the world. we just saw the great reception he had at the g20 in argentina and the relationship between the kingdom and the u.s. is not hinged on any single variable or issue. certainly, our freedom to discuss and consider all options ise and within the context not compromised in any way. deal? real is the new

>> we discussed how the energy markets are woven and and thelity of supplies waivers are not renewed. i have said privately what i have said publicly, that we have 12 million barrels, of which 11.1 was being produced. the first week of december. it is ready to come back. -- million is ready to come back on short notice. >> i think given what the decline, and military decline

that will take place, given what has been announced by canada, we are going to need one million or less. in, how muchctor is everybody willing to contribute? i think we need to look at october. francine: that was our very own reporters on the ground doing a great job trying to access the minister. i have done that many times before. i think it is probably the hardest job in journalism because you are fighting to get that quote that could move the markets when it comes to oil. it was a pretty chaotic scene. the saudi oil minister, really pin of opec.

is that because the top administration is supported the crown prince, he wants a little something back, which is oil prices. the rhetoric of the yen and opec has changed over the years, and there is a new tune. i think the thinking is that now it is up to vladimir putin or his oil minister to figure out if they want to continue with the opec deal or not. markets are lower. we are expecting futures in the u.s. to open quite lower, around 2% lower. they are sending a shock wave through stock markets. this has to do with trade, maybe a little bit also with repricing off of that tuesday low on the market. let's get straight to the bloomberg first word news. happening.s what is

those difficult trade talks between the u.s. and china just got more complicated. canada has arrested the cfo of a chinese telecom equipment maker over the potential violations of u.s. agents on -- sanctions on iran. the daughter of the founder now faces extradition to the u.s. embassy and canada is now demanding that they release her. the leading sponsor of the resolution is senator lindsey graham. theresa may looking for a way to avoid a crushing defeat on her brexit deal next week. she has been holding talks on a compromise with opponents in her own conservative party. she says that she is willing to give parliament as say over whether to extend the brexit transition period.

that would avert the need for the so-called backstop arrangement on northern ireland. global news, 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. pemmaraju and this is bloomberg. francine: thank you so much. uwa -- huawei's ceo has been arrested. deal.eels like a very big what do we know so far? tim: this is a huge deal. i want to point out that she is not just of the ceo, she is also the vice chair woman. she is also the daughter of the founder. she is royalty. she is a very important in

china's corporate scene and politically connected. what we knows of far is that she was arrested in vancouver at the request of u.s. authorities because the u.s. is alleging tot huawei sold equipment iran, busting sanctions against iran that the u.s. has had in place for quite a while. they're basically accusing of being busters. francine: in your column, you explicitly say that china is outraged. how much will this escalate tensions between the two countries if she is extradited? tim: the important they to point out is that all of this started well before the trade wars. 2012 that these sanctions supposedly busted.

it really does predate the trade war. it is a bit too simple to say that it is part of the trade war or only tied to the trade war. what we saw with the zte case was that they were wrapped on the knuckles, given a fine, told to fire a whole lot of people involved and lift their game. they agreed and said we will do that. not long after, they went back on that deal in the u.s. gave them a larger fine and let them off. tom: thank you so much for staying with us late in your taiwan night. enough, particularly in america of a careful read of tim's effort. this is a morning must-read. we will do this in the next hour as well. what do we want out of this? states.the united

another example of the transactional nature of the current u.s. administration. this is the previous story. zte was able to wriggle out of paying $1ement ban by million. the message to the world was clear, the u.s. rule of law is for sale. here of an is engineer from the people's liberation army is a little different than zte. how much of the linkage is through those red doors in beijing? tim: you can't understate it. even if you go back and say, it doesn't really matter. this is a very important company to beijing. it is very much a company that effortrt of xi jinping's to project power around the world. uawei is a very important

company and one that is part of the plan to make china technologically independent from the united states and every other country in the world. it is really hard to understate the importance of this company to beijing. if they get in trouble, beijing is why to come to their rescue under whatever it takes. tom: i don't want you to be a legal expert, but i believe she is going to end up in brooklyn, new york was in the eastern district court. when not occurs, what would you suggest will be the response of the chinese leadership? tim: i'm not a lawyer, but i don't expect she will be behind bars of forever or a specifically long time. maybe she will get bail or something like that. the chinese will also have to decide what they will do to react.

are they going to round up western executives in china and put them in prison for supposedly infractions? micron has took a lot of heat since the zte case, accused of antitrust violations. that is a great when the chinese like to poll out. francine: i was going to ask you, if you are a u.s. chief executive, the canadian chief executive, do you think twice about traveling to china? tim: i would be very nervous if i was the ceo of any western company operating in china right now. francine: thank you. tom: one final question in this evolving story. we got the justice department of the trump administration bouncing off treasury and commerce as well. is there a coherent technology policy out of washington? tim: not one that i see. everybody has got their own

ideas. house.mmerce, white i don't see any coherent, if there is one. francine: thank you so much. was a brilliant article on the latest of huawei. when you look at the trade tensions, what does this arrest mean? i know you don't really want to talk about the arrest, but it feels like you're making progress in the trade tensions, and then you always take a step backward. bob: it is a setback. i think what the rest of the markets want to see is some sort of resolution and compromise. all of this seems to be headed in the other direction. francine: what does that mean for your asset management? does it play in renminbi or elsewhere? bob: it means you're going to get more of a flight quality to

treasuries. that does reflect there will be an escalation in trade tensions america deceived the administration raise tariffs on all $550 billion of imports into the u.s., it is going to mean there is going to be less trade, which means less economic activity and the yield curve may be right and we are headed towards recession. tom: oil really coming down in the bit of the morning. we dropped down. as you know, we correlated this morning with your 10 year yield, 2.89%. all of a sudden, it is price up, yielded down, but bond managers cannot be all that happy. what is the carnage going to be like? bob: when i listen to the oil minister, it just struck me that he has an unsolvable riddle, what is the right level of

production cuts which helps to stabilize the energy industry? particularly that part of the equity, but doesn't create another headwind to the u.s. economy, in particular? i think that is a real challenge. it doesn't feel like a one million barrel a day cut is enough. desk thisre at your morning and they go, jamie online two. is the only place to be risk off in cash or do you have a better alternative? bob: i think lots of the bond markets have gotten beaten up. i think you have to look at credit again. when you look at high-yield, the yield is over 7% in the u.s.. it is close to 5% in europe. when you look at the banking sector, although they have spent the last 10 years building reserves, they have come under a lot of pressure.he could get

some compromise , resolution, soft landings in these issues that the market is struggling with, i think you will see that money flowing back in. francine: what is the market struggling with? bob: settlement, there is a wall that looks like it is made out of cinderblocks and not lego blocks anymore. is the trade tensions between the u.s. and china. i think it is the fed continuing to raise rates. your problems in europe with brexit negotiations, the italian budget. you need some of these things to be resolved positively. francine: at the same time, it is not all bad news. is there a feedback loop? if the market latches onto something negative, it takes something pretty extraordinary to get them back on track. bob: the feedback loop looks pretty powerful right now, circling back into risk

aversion. you're going to have to see what corporate behavior looks like. does that cause them to retrench from the things they are doing currently. right now, it looks more like a market correction. you just need some positive news. tom: this is the shock of all of this market turmoil. this is like teaching a math course with a new leg down. i am going to talk to you about the exogenous shocks or within the market. tell us how you frame out how to protect yourself from shocks like a cfo arrested in vancouver, as just one example. importantking is very in owning either cash or government bonds. when francine said, we are in this negative feedback loop -- i

listened to your excellent interview on monday. you did fantastic. as i listened to him and he talked about looking for the cycle, the way he commented on inflation and talked about dots and financial conditions, it occurred to me that he is one of us. i don't mean to badmouth the guy, but he is one of us. firm is a bond manager at on the west coast. to see aou are going dovish hike in the markets will latch onto that. tom: this is crucial, can't they stun markets december 19 by just hikeg no and lose the rate until things clear up? bob: i think it is too much of a shock.

i figured if they could somehow give us a dovish hike that maybe one or two more, getting to 3% by june, the markets could tolerate that.what i would like to see over the next couple of meetings is a discussion on the size of the balance sheet. why do they need to continue to run not down? could we get to june and a positive not as well? tom: thank you so much for these timely comments. can we go very quick. let's do this. oil going down right now to new lows for the day. day,onversation of the without question, the former prime minister in our next half hour. ♪

francine: "bloomberg surveillance this is -- this is "bloomberg surveillance." i'm looking forward to have you next week as we have special coverage of the brexit vote. tom: i am as interested in the day after the vote, some of the conversations we have had say december 12 could be as interesting as december 11. francine: december 11, the vote is in the evening at 7:00 p.m. we are keeping you all the week. tom keene in london next week. the e.u. chief negotiator michelle barnier is in brussels answering questions of 40 members about brexit and article 50, saying they have to prevent the u.k. from undercutting the e.u. economy and he has

reiterated there is an unprecedented deal with the u.k. on offer. this is what the onliamentarians will vote on monday. it looks very difficult, if not impossible for theresa may to get this through unless there are amendments. tom: extraordinary to see what the e.u. conversation will be. the availability is more data checks, that is the value to you. we welcome all of you worldwide. one chart to look at is oil, the intraday chart breaking down right now. annmarie hordern and other reporters speaking on saudi arabia and the price reacts south. west texas intermediate at $50.64. on the center side, let me show you on radio. four or five days ago, we breached $50 a barrel and we are getting there by the time we get

through the first word news. >> thank you very much. here is what is happening, the arrest of a chinese telecom executive will likely make trade talks between the u.s. and china even more difficult. the u.s. convincing canada to the daughter of huawei's founder. demanding both countries moved to release her immediately. france has made it official the planned fuel tax hikes for 2019 that led to violent protests have been abandoned. the french finance minister calling it a "major combing jet -- major calming gesture." of japan, a u.s. marine refueling plane and a

lighter jet colliding in darkness during routine training. rescuers found two crewmembers and five others remain missing. george h. w. bush will be buried .oday in college station, texas his final resting place is a family plot on the grounds of his presidential library. after three days of remembrance, mr. bush was flown to houston for a final service at his church. global news 24 hours a day, on air and tictoc at twitter, powered by more 2700 journalists and analysts in more than 120 countries. this is bloomberg. francine: thank you so much. now to brexit as theresa may fights for westminster. this uncertainty is in helping business. we spoke with the chief executive of rbs who says a hard brexit could push the u.k. into

recession. are in a very tense political moment at the moment with the vote next week on the proposition the prime minister negotiated. it looks like the politicians have got some big decision-making to be made. you are seeing in the equity market off today, there are stocks off 20% this year. that is pretty much on the back end of what will happen to the u.k. i think the uncertainty is the issue we are dealing with. toncine: and you urged mp's actually back this deal. what happens if it doesn't get back? ross: at the moment, i don't see another deal. with any deal where you negotiate long over a longer of time, you are not going to get everything you want. you will get parts that you have

to give up on paris to for me, it is around, how do we get certainty in the marketplace? investment is not being made. larger companies are not investing for the long-term at the moment. they are wanting to seek certainty and that is what i think is important for the u.k. economy, to build certainty and i think it is now in the hands of our mp's to give us a deal on the table. arecine: do you think sme's ready for it if we have a hard brexit? ross: i don't think they are. many business customers are remembering we are the largest lender into the business economy. the bank might be ready, but there are many customers not ready for a hard brexit. they don't understand the ramifications. we have been talking to customers saying what are your contingency plans?

there are very few with sound contingency plans. many have thought about it. in the construction industry and importing things from europe, you are saying, where do i store them? can i store these goods if i need a supply chain extension? these are the issues that many businesses have looked at. francine: do you see a recession coming? ross: i think if we don't get a position that it is a hard brexit, i think there is a chance the economy will go into recession. i know anybody who says that says europe -- remain her, uncertainty -- remainer -- uncertainty will push this into an economy we have had that's much slower. francine: in the last couple of seconds, we are getting breaking

news out of the oil price. this is as opec ministers and opec plus with my -- with russia .eet in brent we wait to see whether they have an agreement. we spoke with the saudi arabian oil minister saying on the table is a convenient way to cut production without communicating a figure that would upset president trump. they are trying to find an elegant solution. prices are really taking a beating when it comes to oil. brent at $59 a barrel. brent -- to $49 on west texas intermediate would be something, the chart we just showed. those keeping score at home, the middle point of four or five days ago is extraordinary. bob michele, you have seen this before. we have tried to memorize failed

correlation functions. i am sorry, bob, it is locking up. what is the things you study in your office that are correlations? do you look at yen? do you look at swiss franc? give me the inside bond baseball. bob: certainly looking at the plunge in oil we are seeing now that is going to, again, reflect right back into inflation expectations and those are going to come down and you are going to see the bond market react to that by breakevens on tips starting to narrow a bit and develop market government bond prices going up. the second thing you have to look at is the input cost into corporations and that will go down. corporate profitability will look a little bit better and consumers should also look a bit better.

tom: what should pros look at this morning in the bond market? give me some esoteric baloney i don't look at. cameron crise looks at this every day. am i looking at five-year, five-year fords or some swap in the indicator? what is it? bob: i think right now, whether you are a pro or an amateur in the bond market, you are looking at the shape of the yield curve. tom: thank you. bob: and you are looking at the differential from the front end. if there is an increasing preference for investors to buy 10 year securities at a lower --ld, they could get in cash that is telling you there is a serial slowdown brewing. --material slowdown brewing. francine: four weeks ago we had a lot of people talking about 2020. is this a mid-2019 story?

bob: made 2019 you will see a lot of recession expectations priced in. there will be a lot of denial when the curve inverts. i think 2020 is more realistic. tom: what does that -- francine: what does that mean for credit overall in 2019? bob: it means you would want to trade up in quality, looking to part company with lower rated credits and go into the onset of a recession with a holler -- higher quality inflation. francine: thank you so much, bob michele stays with us. coming up, we speak to tony blair about brexit. he has been asking for a second referendum and we will ask whether theresa may can stay if she doesn't get the vote through and what needs to happen for a second referendum to take place. mr. blair coming up.

this is bloomberg. ♪

tom: "bloomberg surveillance" from london, from new york. thank you to our washington team for their assistance. we like to bring up our guest's vision as much as we can. this is from bob michele of jpmorgan, the three-month short spread. you can find -- see the leg down is as simple as that. beough this level, it would profound. what does this mean for the december 19 meeting? flat,see further, short,

flattening, what does it signal to the fed? bob: i think they are taking notice of the shape of the yield curve and they do not want repealon expectations to through the market. i would expect dovish rate hikes and some clarity that we are near the end. they talked about being just below what they perceived to be neutral level. i would not mind them throwing in something about the balance sheet. tom: you are a market partition or, michael for only of jpmorgan economics in the dark arts of alchemy, great, are we headed toward a recession? a lot of people francine and i talked to our 2020, the usual blah, blah, blah. do you subscribe to it? bob: i think a lot of it will revolve around trade negotiations between the u.s.

and china. i think, certainly we are headed toward a recession. if something can be resolved, the underlying strength of corporate america looks pretty good. i think we could put off a recession for several more years. francine: -- is arguing credit markets are in a bubble status. bob: i think there are some parts of it -- overall, the credit markets look pretty good. corporate profitability looks pretty happy. debt servicing costs for companies have been historically low. companies have been prudent about the way they use leverage. i understand what he is saying, we are seeing early signs of that behavior. we have seen companies that come to high-yield teams to talk about funding. we tell them this is the spread we need to see from you and they say ok, we will get back to you and we don't hear from them and

two weeks later they issue into the loan markets and those loans get swept into clo's. effectively, no one owns them and they comment much lower yield without the covenants. francine: are you saying without credit, people need to be a little more conservative into 2019? bob: certainly, you are getting into end up cycle, so you should be conservative and really research what you are going to buy. francine: what do you think is mispriced at the moment? bob: i think the banking sector. i know we looked at deutsche bank earlier. when you look at the aggregate banking system weather in europe or the u.s., it has come under ,ressure because, historically as the expectation of recession has risen, everyone thought it would be centered in the banks. the banks have spent the last 10 years building reserves. they have raised capital and invested in largely riskless

government bonds. they don't have the risk they permitted to us, that sector of the market looks particularly over beaten. tom: bring up this chart, we are going to do this right now. in good spirit with bob michele, we can do this. the blue line is bank of america and the white is a bank from germany and london as well. i don't want you to comment on jpmorgan, i am being smart -- snarky and i don't mean to do that. there is something said here about clearing markets. let me take it over to the talking point right now, which is leveraged loans. how are we going to clear the leverage loan that yield hog overbuy? bob: i think what you need for leveraged loans and also for the credit markets in general where leverage is is for economic growth to continue.

you can have a growth slowdown. we can go from, we will print about 3.5% gdp to something .loser to 2%, 2.5% gdp companies will be able to service their debt, it is when we roll into -- where that debt becomes dicey. tom: in our next hour, a conversation with mr. blair. also joining us on all we see in the markets across asset is marvin barth of barclays. if i look at the bloomberg, it is simple, some dollar strength and yen 112.75. stay with us, this is bloomberg. ♪

tom: good morning, everyone. "bloomberg surveillance" from london, from new york. markets on the move, nothing more so than oil. the 10table, 2.89% on year. s&p futures at -48. currencies showing that contagion.

not so much. i don't want to say panic, but we are locked up. oil moving weaker over a set of things including the huawei shock in vancouver. more so, the annmarie hordern shock. i thought you were brutal in your questions, microeconomics, supply and demand. it is all about supply. who is going to blink first? annmarie: that is right and you are seeing this down pressure on crude and that is what hedge funds are telling me, two big hedge funds with a large presence in oil markets saying anything less than $1.2 billion a day will be seen -- for eight -- 1.2 billion barrels a day for a cut would be bearish. let's take a listen to what he had to say to the press moments ago. >> the number that we need is

going to be less than 1.3. day today and some of tomorrow to determine those numbers. it looks like this is less than the market would need to have a rally going into this .arket the nigerian oil minister said they would cut over one million barrels a day and they will not bear the burden alone. he really wants no exemptions on this cut. the next step is mr. novak taking the plan to his boss, president putin. francine: how bleak is it looking for the oil price? annmarie: the last time i checked, we were down some 4%. that is quite some pressure. if you look at where we were for the -- from the october highs,

that is 40% or more of a collapse on crude. many people thought they would have to act. we had that abu dhabi meeting where they said the market was oversupplied and opec plus what have to cut by at least one million barrels a day. when i spoke to him on tuesday in poland, he said he was really walking that back and saying it was too premature to talk about this, really throwing cold water in here. today it doesn't look like we would have anything more than $1 million a day and that is bearish for crude. francine: thank you so much, annmarie hordern from viena at the opec meeting. what if it is a demand concern and the price is falling because there is not enough demand spelling a significant downturn? bob: that would be a much greater concern because everyone is assuming global economic activity looks pretty good.

sure, it is slowing down a bit, but we are not headed into recessionary territory. if it is a demand problem, that is telling you the slowdown is more severe than we believe it is. you sob michele, thank much. we greatly appreciate the perspective. we have much more to talk about, checks.ta text -- our interview of the day without question is the former prime minister of the united kingdom, tony blair in search of a second referendum. this is bloomberg. ♪

♪ tom: this morning, call it correlation thursday, markets

move in lockstep as canada stuns china with the arrest of the wale ceo. well, stun, oil as equities test lows, the swiss franc too. the prime minister fights for her life. in moments, a conversation with mr. blair. good morning. this is "bloomberg surveillance." i am tom keene. francine lacqua in london. that's grown ♪ oil plunging this morning. francine: brent is still down 5%. if you're looking at the market, for the moment, no output cuts. that is spooking some traders when it comes to oil.

i would also look at what president trump may or may not tweet. yes.yes, i'm glad you brought that up. in thatemarkable interview how he went back time and time again to the communications strategy for the various parties. toncine: it is now up vladimir putin and his oil minister to decide whether russia goes ahead with production cuts with the saudi arabia. , $50.45. here is your first word news. difficult trade talks between the u.s. and china got more complicated. cfo ofhas arrested the huawei.

of the founder faces extradition to the u.s. the chinese embassy in ottawa is demanding the u.s. and canada release her. six u.s. senators introducing a new resolution on capitol hill saying saudi crown prince mohammad bin salman was complicit in the murder of a saudi journalist. it is nonbinding, but would put pressure on president trump to act. japan, a u.s.of marine refueling plane and fighter jet colliding during routine training exercises today. rescuers have found two crew members. five others remain missing as the marines continue the investigation into the accident. theresa may is still looking for a way to avoid rushing defeat on her brexit deal next week. she has been holding talks on a possible compromise.

may also says she is willing to give parliament a say over whether to extend the brexit, if needed. avert the need for the so-called backstop arrangement on northern ireland. 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. tom: thank you so much. more data checks on bloomberg surveillance, radio, televisions. negative 437. what is critical within the lockstep is the curve for has not flattened. 12.78. we have seen the moves of the together.0's

that elevated.ll ,he 10 year yield is stunning 2.98%. good morning for others looking for sustained low yields. that was an outlier call. modest yen strength. not any panic there, as you would expect. bitcoin is an elegant chart with a little bit this morning. i'm watching deutsche bank, which has its own challenges. francine: we are watching deutsche bank. i would suggest the anxiousness , ithe market, the turmoil is now showing signs of renewed momentum. wti below $51 a barrel after a saudi energy minister said opec has not reached a deal on production cuts. we are looking at pound on the onk of brexit and the vote tuesday. theresa may is searching for a

compromise to avoid a crushing defeat on her key vote in parliament. the prime minister sent a theesentative to negotiate way ford with a group of conservative lawmakers that would allow them to support the package she painstakingly negotiated with the eu. the interview of the morning, where delighted to be joined by tony blair, who opposes brexit and has campaigned for a second referendum. thank you for joining us once again. what is the chance now of a no-deal? is it 50-50? >> i think the chances of a no deal are small. what has happened in the past parliament hast taken charge of this process. there was a defeat for the government the other night, which means the parliament has the right to go through the different options on brexit.

it is highly unlikely her deal will pass, because it is being attacked on many different fronts by many different groups, but i think parliament will go through all the potential alternatives, and that will include the possibility that if parliament can't reach agreement and there is a blockage in parliament, that we go back to the people in order for the issue to be resolved finally. there is ank majority in parliament for no deal. on the contrary, there is a big majority against a no deal. the question is if you can't get agreement for anything, go back to the people. francine: have you spoken to the prime minister recently about how to handle brexit? >> no, i'm afraid this is a come althoughhich

i have sympathies for her situation and know how hard it is come and she has been dealt a difficult hand, but we are in fundamental this agreement. she believes the important thing is to do brexit even if we remain tied to europe's rules. ande do that type of brexit it is effectively pointless, and the people who support brexit don't like it, and the people who want to remain don't like it either. the trouble is through this negotiation you either minimize economic damage as a result of brexit because we have been 45 years in the european union, investments, commercial and trading relations, you either state close to europe's rules, minimizing damage, or you break out of those rules, in which case there will be damage, and that is the painful brexit. this is the by limit at the heart of the negotiation.

the dilemma at the heart of the negotiation. the only way you can result this, and we have had 30 months of negotiation, is to go back and asked the people what do you think now? do we carry on with brexit? if we do come it will be the hard brexit that true brexit people want or remain in the european union? francine: you have asked for a second referendum for some time, and it is gathering momentum. what strategy are you implying to get that through? there is a vote next tuesday. it is almost impossible for the promised her to get it through. what is the timeline for a possible second recommendation referendum? >> there are various ways you can get to the boat, but the -- reality isy in people will only go for second referendum if it is clear parliament can't agree with what should happen with respect to brexit. her deald happen is

cannot succeed, then there may well be other types of brexit that could be put forward, either a closer relationship with europe or a less-close relationship with your. i think all of those will fail as well and then it is clear parliament can agree and you go back to the people as the only way of resolution. tom: wonderful to speak to you from america. i am confused american over brexit. we have just seen the passing of the 41st president. there is an existential crisis in the republican party in america, and i would respectfully suggest an existence of crisis in the labour party of the united kingdom. vote, december 11, the opportunity for your labour party to get its act together? , i think it is highly

unlikely that in the event of the prime minister been defeated on brexit that you end up with a general election. party toonservative risk a general election with brexit as an issue in that election would read risk -- re-risk the problem last year. my best guess is that what even though the labour party would like to have a general election, i think the labor leadership's attempts to do so is most likely to be voted down, and you would have a situation where the prime minister's deal fails, an attempt to pass a motion of no-confidence. i would be surprised if that succeeded, then you get into a much more vigorous debate about how you resolve this >> issue.

of march't result 2019, we go out of the european union. tom: could this be an opportunity for the u.k. to find new middle ground in its politics? we are having the same discussion in america. this debate and the polarities and fracturing of the conservative party, is it an opportunity for your nation to find new middle ground? >> right come so what you have in the u.k. today is a conservative party that is deeply split over brexit, which is a debate about national identity, and you have a labour party that is also very divided at the moment between a leadership that has moved fast that areft, then those much more centrist. ,hilst brexit is being resold all those bigger political issues, the future of british

politics and i think those will burner inback a whilst brexit is the issue that gets decided. there will be a vigorous debate about where british politics go no matter what. francine: do you have any private polling for the second referendum? remain?show support for what question would you put in that referendum? >> it does show support for remain, but you have to say it is still very contested within the opinions of the british people, so there is still great addition about it. the people who voted for brexit and were most ardently in favor of brexit, they are not in favor of the british prime minister's deal. they feel that is much too soft. they are in favor of a tougher, harder brexit.

you have that division with the british people. as for the question and this is a big debate what question you ask, but in the end, the british people want either to have a proper brexit or stay. i don't think there is support amongst the british people for a half in, half out solution. at least you are tied to europe's rules -- it leaves you tied to europe's rules, a result you'rebein unable to do the things brexiteers want to do them a butcher out of the european union decision-making apparatus. the weirdest thing would be we still remain anchored in europe's rules in a customs union and partially in a single market, but lost our say over those. in the end two, the question has got to address the propositions -- the two propositions that have overwhelming support,

either a clear state or a clear leave. francine: how many people in the cap and support a second referendum? >> at the moment, the cabinet would be against the second referendum, but here is the problem. for example, i understand from a business point of view. many business people say theresa may's deal is not a good deal, but the only deal we have got. at least it settles the situation. let's just go with it. the point you raise about the , the truth is this deal won't settle anything because some members of the cabinet don't agree with the deal, but just agreed tactically it is better to get britain out of the european union, post march 2019, then carry on the debate, where as other members would generally support her deal and so the problem is that even within the cabinet, there is not cohesion or agreement as to what the weure holds, and that is why

will continue over the next couple of weeks, maybe slightly younger, to debate around which version of brexit should prevail. my instinct is that when each version is put before the house of commons, none will command the majority. there will be enough votes against each one of them to create this blockage, and therefore even if the cabinet at the moment is singly don't want another referendum, if you in-depth with this stalemate, this gridlock in parliament, it does become the only sensible way of resolving this. tom: one final question, if i may. newcastlef your united can be upsid upset from time to time. days ago, three days ago, if the u.k. parliament supports prime minister may's plan, it

will never be forgiven. more the result of incompetence of a high order, governor king goes on to say the worst of all worlds not facing an economic crisis. the nation is confronting a deep political crisis. then he quotes the poet from states do not go gently into that good night. they rage. we are we see our rage in the u.k. them and what will be the character of it looks a goes through? what he has done is put his finger on the problem, which is the deal satisfies no one. this is one of the reasons you have to go back to the people. if it doesn't satisfy the people who most vigorously campaigned for leave and the people who want to remain, then, and by the way when you look at the detail, it

is not a good deal, then yes, your risk is that rather than settling this issue and combing lmingone down, you -- ca everyone down, both sides remain angry. improbable it sounds , and the only way actually of reuniting the country is to say we have had 30 months of negotiation. our knowledge of this issue is vastly enlarged. hartman can reach an agreement, so let's go back and each side say this is it, this will determine it. if there is a narrow vote one way or the other, that is it for a generation. both sides can make their case with the knowledge of what has happened in the negotiations, and this deal which comes from a good place. let me say this, the prime

minister has genuinely tried to do her best with this issue, but what governor king has put his finger on his the central weakness of the deal. it is not a good deal and does not please anyone. that is why it will struggle to pass the house of commons. francine: thank you so much. the former u.k. prime minister, tony blair. we will have special coverage on bloomberg tv all week. tom keene will be joining me at westminster from monday. , we will talk about business sentiment and a little bit about treasuries and what the fed does next at 10:00 a.m. in new york at 3:00 p.m. london. this is bloomberg. ♪

tom: good morning. let us get back to the markets. the data that are in the last 20 minutes off a difficult morning. futures negative, -44 on s&p futures, negative 47 earlier. our guest this with barclays, head of foreign-exchange strategy. i see a correlation, but i don't see big moves and currencies that lock in that correlation, something you knew at san diego years ago. how correlated are we and what are you observing in foreign-exchange is? , we are note g10

seeing a lot of movement. there does seem to be this tenuous tension between overvaluation on one side of the dollar and the u.s. pulling away from everyone on the other side of providing much higher kerry. --carry. that is why do not seeing water volatilities in equities and bonds translate to g10, but you do see it in emerging markets. tom: i want to go narrow right now. this is the backstory of every conversation i am having. i haven't shown this chart in ages, mexican peso, a political transformation there, weaker peso over time. out to this peak of 23.24, and now curbing up again -- curving up again here it is at the proverbial bird in the coal mine? >> receipt dollar-peso going higher. the peso weaker over the next year.

a lot of this is continuing to price in the concerns over the of the country, the effect on growth, how it will affect capital spending, but it is not doing as poorly as other emerging markets when the background is connected to the one economy jet is sustaining strong growth, the u.s.. leon black says credit markets are in a bubble status. do you agree? >> i don't think that is true right now. the adjustment we have had in credit spreads recently, that seems to be consistent with some atcing of increasing risks this stage of the cycle, but overall leverage of u.s. corporates in particular in investment grade, yes, it seems

high, but that is because the profit share is much higher than the past. from that perspective, actually, the u.s. is not the degree over not particularly over levered. francine: it seems markets are pricing in worse than expected rate of from the u.s. and figures worldwide. >> i think you hit on an important issue. the global economy is doing ok in the background, and the u.s. is doing fabulously well. the base case for markets, i would vehemently disagree. you ask can things go catastrophically bad. we have a lot of different potentially bad things going on in the world. we have trade talks between the u.s. and china, plenty of room

for that to derail significantly. oil price risks, all those things. you haven't had any slow news days this year and usually. is that a function of all the different geopolitical risks we have? one of the things markets mispriced was the tail risks. that's what a guy from san diego would say. more on brexit. how do you like that? we will continue. looking at the data right now, -42 on futures. stay with us. this is bloomberg. ♪

tom: good morning. inextraordinary moment history. francine and i will be here for the vote. thely the follow-on to vote. i thought mr. blair's conversation was fascinating. the did you take away from immediate idea of the vote on december 11? francine: that the people who have always asked for a second referendum are doubling down, saying this is the only way. the country is divided. it is unclear to me how you get rid of the impasse. i will look at the numbers with the vote, starting tuesday night. if she loses by a big number, unclear what happens next. ,f she loses by a small number she could go to a second vote in parliament and try to push it through that way. tom: one of the many stories. the number one story is huawei.

here is first word news. as theprice of oil lower opec meeting in vienna begins. the saudi energy minister was downbeat. he says there is no deal to cut output. he says any reduction should not be large. meanwhile, opec second-largest producer, iraq, said it will be part of the deal if an agreement is reached. the arrest of the chinese telecom executive is likely to make trade talk between the u.s. and china more difficult. to u.s. convincing canada arrest the huawei cfo in connection with violating sanctions against iran. china has reacted with outrage and is demanding that both countries move to release her immediately. those planned fuel tax hikes for 2019 that led to violent

protests have been abandoned, and not just proponent. financech prime minister calling it a major gesture. the protesters say the protest will go on because the government has not met their other demands. bloomberg issue of business week is out with the second annual bloomberg 50, our look at those people in business, finance, and entertainment and other fields whose accomplishments were particularly noteworthy. among them was a california attorney general, the ceo of go of canopythe ceo growth. 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. tom: thank you so much. it is the nature of every

capital of every nation. washington is no different. pageantry, emotion, and indeed the sears we saw yesterday. kevin cirilli is with us in washington. there is an arrest in vancouver this morning. how will congress after zte, now with huawei, how will they respond to the trump administration? there could be hearings and investigations on capitol hill. this is a period of transfer and democrats will be able to use the gavel. you made the zte comparison. this administration will have to take a hard look and face questions, not just from the democrats, but republicans as well. tom: our expert in taiwan, kazakhstan --kevin cirilli makes

it clear zte was transactional. huawei is different. kevin: there is pressure to look at the current geopolitical landscape and face the reality here. number two, in contrast to zte, huawei has not had an aggression push on capitol hill looking for jobs and pushing behind the scenes in the halls of congress about the domestic jobs that are impacted by the supply chain here in the u.s., most notably california. aancine: i heard it from number of quarters that if you are a canadian or u.s. chief executive, you will probably think twice about whether you want to go on chinese soil. this or the administration can do to help with that? i think what is really

different is this pertains directly to iran. you are hard pressed to find any lawmaker on capitol hill who thinks that doing business with tehran is in the u.s. best interests at all, so i think this is very different in the sense that you had with zte some questions, some bubbling's over with respect to north korea that were squashed and pushed back against heavily. i think i ran, you will not find any friends on capitol hill with iran. thank you for your coverage outside the national cathedral yesterday. locomotive 4141, with all the emotion of the early 20's and back to abraham lincoln, we will see a train to texas and college station.

tell us about the events for the bush family today. today, formers president george herbert walker bush will have the second some ceremony at st. martin's episcopal church in houston, where barbara bush was laid to rest and had her memorial ceremony. be laidre and he will to rest at his presidential library outside of houston. you mentioned this in your coverage, the historic nature of the national cathedral. i was struck to see the former frontents sitting in the row, putting aside politics for a brief moment as they mourned. namedshocked by someone mike lovejoy. there were presidents, but also to the bush family. mike lovejoy has worked in can you on board, maine, the bush , maine,- kennebunkport

the bush family estate, for decades, and he was there to mourn the loss. tom: extraordinary to see senator portman of ohio with secretary of state rice having a quiet tomato juice, may be a vignette of what we saw yesterday. these are live images from the national cathedral in washington. we now turn back to the markets. we have in doing this. within the markets is a new correlation today. we have been speaking with marvin from barclays. what are the screens telling you this morning? how correlated are we? >> it is more of the same that we have had. the equity market looks terrible. the dollar doesn't know -- a 2.89 on 10 year yield, 99.9% of people four, eight

weeks ago were wrong, right? >> absolutely. a month ago, we were pricing in 55 basis points, now 27. tom: we have come down to every increase. >> one rate increase. bps away from0 looking good to take the other side of this. takingw would you affect the other side this morning? >> he points out one of the best ways is to in the front end of the u.s. rates curve. it is ridiculous to think you are the get one rate hike out of the fed, when the u.s. economy is growing a percentage point above trend with a three handle on unemployment. we have unemployment down to almost 3% by the end of the year here. what will disrupt this?

the rest of the global economy is not doing that badly, frankly. in the u.s., the momentum is immense. we still have taxes coming through. you look at the savings rate in the u.s., the highest since the 1980's. tom: you sound like the vice-chairman. you're giving me the richard clarida line. >> it is true. he is spot on the facts. what disruption do you think would be to this big recession at the end of this year or next to be theh seems direction that equity markets and bond markets are going through right now? >> i think there was a small hint in the beige book yesterday, where there was talk, basically corporates are feeling margin pressure on the labor cost side and because of the .isruptions of the tariffs shrinking margins is something equity operators have been expecting for a while, but it is

not a good thing for the stock market. >> it is very different. i totally agree. francine: let me jump in. >> it doesn't look fantastic. francine: go ahead. finish your thought. >> i am in absolute agreement with that. are wide, sogins there is plenty of room for compression, allowing for a more expansive recovery, higher rates , to your point, not a great outlook for the stock market. tom: we need to be on speaking terms of monday next week. can we go to francine in london? francine: this is the deal. when you look at the yield curve inversion, why does the not spell something ugly? it has in the past. you look at housing in the u.s. and concerns about that, and let us not forget about trade? >> in terms of the yield curve, it is like a cruise ship.

or a not a speedboat standup paddleboard. it takes a long time for trends to develop. they need to be interpreted in sort of geologic time rather than twitter time. an inversion of the yield curve tells you we are in a late cycle, but if you want to talk about recession, it is the re-steepening of the yield curve that raises the alarm bell, and we are nowhere near that. tom: i don't care. cameron didn't get the memo. sowill give this to cameron -- do you know how the tie a bow tie? back, we will help them tie a bowtie. this is bloomberg. ♪ this is bloomberg. ♪

francine: this is "bloomberg surveillance." tom and francine from london and new york. as markets9 a barrel disagree with the saudi oil minister, who said output cuts from opec and its allies were adequate for the markets. need is goingwe to be less than 1.3 million, slightly less, slightly more. we have all day today to determine those numbers. francine: that was the saudi oil minister speaking at the opec meeting, basically backing a modest opec plus agreement that does not shock the markets. joining us from vienna is our

guest. will we get a cut? is the question everyone is asking. the saudi oil minister was downbeat, saying a deal is not done until all ministers meet. he did say one million barrels a day would be adequate. why we are seeing this market selloff following this comments is because hedge funds with the massive preference in the markets, anything below 1.2 will be bearish. it doesn't seem like enough to get prices to rally. tom: behind you are all the opec worthies. how strong is the cartel? >> a good question.

the qatari oil minister today. he is leaving the group. , butid it is due to gas many speculated it was due to the political atmosphere and the cartel. it is clear this group is just about opec. tomorrow will be opec plus plus. they will not cut without russia on board. they are just as strong as they are with their partners, so different from when the group was formed in the 1960's. francine: thank you so much. great job on the ground. the opec meeting in vienna. a little bit later on at 8:30 a.m. in new york. this is bloomberg. ♪

tom: good morning.

we are always about the conversation in america, around the world. the conversation this morning with mr. blair in london i thought was absolutely extraordinary. let's listen to a quick snippet of tony blair. >> in parliament, if they can't reach an agreement, then we go back to the people in order for the issue to be resolved and result finally. but i don't think there is a majority in parliament for no deal. on the contrary, there is a big majority in parliament against no deal. tom: just amazing. francine, but to have in london off of this? francine: if you look at the fact that a lot of people are asking for a second referendum, the crucial question is what question they will ask. do you go back to the people in the hope of getting a different vote if you asked the same question as last time? do you do it differently talk

about a hard brexit? that is probably the key point as we get to the parliamentary vote on december 11. tom: we have two esteemed guests .ith us francine, you were brought to tears over the idea of a u.k. bowtie. what you have in london? francine: i need you to cover this at westminster. i gave you that bowtie. it along to larry the cap. the cap at number 10 downing street. this is why we are getting you back next week. he wants his bow tie back. tom: there we go. we are questioning now the political affiliation of the cat. we will have to give it back to the beast. we see the breaking news on

lyft. this is hugely followed in america from a car service against uber and others. they have drafted legislation for an ipo. we will have more through the morning. right now, our single best chart. it must be mr. blair's sterling. fromis a short-term view 4.80 down to two point half and two-point-whatever. it's a rollover, isn't it? what does it signal to you to see sterling weakness? tom: not a big deal? >> we are getting to the lows we had near the referendum itself. that ultimately will provide some support.

if we do get no deal, this is one of the key points. you have heard other people say we will go down to parity in cable. i don't think that is possible. when you get to these levels, yes, the u.k. will suffer a shock in a no-deal scenario, but this is still a highly educated, high rule of law, highly capitalize country, far away, so people will buy. tom: i am frankly on the same page, a high rule of law is a growing concern. this is not a banana republic. what are the inside baseball things where you know to go long sterling? more jaundiced view. take it from that. i think there is a fair amount of complacency that some deal will be achieved.

i think there is a tale risk do get a hard brexit, then you get a discontinuous move in the currency markets. sustained,won't be but if you are a buyer of sterling here and the type of operator that has to put a stop loss in, it doesn't matter whether it is over a one-year horizon, it doesn't matter, you might get that tap on the shoulder. we did have aet sterling flash crash in singapore a couple of years ago. market structures are different. tom: thank you so much. we thank you so much. breaking news on the technology front, and also banking. this could be a large transaction. lyft of san francisco filing a draft legislation for their ipo on the back of the competition

and the cash burn of this industry. we are all familiar with the , then therer uber is the competition, both in the u.s. and globally, from lyft and a few others as well. it is an interesting sport to see when you get to some form of profitability on lyft. more on that across all our platforms this morning. , weloomberg television speak with colonial capital at 10:00 this morning. please state with us. this is bloomberg. ♪

i am a family man. i am a techie dad. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience.

my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. ♪ there's no place likargh!e ♪ i'm trying... ♪ yippiekiyay. ♪ mom. ♪ ♪ alix: saudi says equal cuts across the board.

the saudi oil minister says cuts have to be equal. it is helping oil to find some support. fo of huawei arrested. investors gut global equities. where to hide when nothing gives you positive returns? david: i am david westin. t is filing a registration statement for an ipo. it is not a surprise. we thought it would happen in early 2019. they have moved that date up, which i find puzzling. alix: the best day for the s&p last week since 2011, but a lot of volatility. david: you